(a) enter into interest rate exchange or similar agreements with any
person under such terms and conditions as the dormitory authority may
determine, including provisions as to default or early termination and
indemnification by the dormitory authority or any other party thereto
for loss of benefits as a result thereof; and
(b) procure insurance, letters of credit or other credit enhancement
with respect to agreements described in paragraph (a) of this
subdivision; and
(c) provide security for the payment or performance of its obligations
with respect to agreements described in paragraph (a) of this
subdivision from such sources and with the same effect as authorized by
applicable law with respect to security for its bonds, notes or other
obligations; and
(d) modify, amend, replace, or enter into new agreements, for the
purpose of reducing or eliminating a situation of risk or exposure under
an existing agreement, including, but not limited to a counterparty
downgrade, default, or other potential economic loss.
2. Any interest rate exchange or similar agreement entered into
pursuant to subdivision one of this section shall be subject to the
following limitations:
(a) any such agreement shall be in the form of a written contract with
a counterparty to provide for an exchange of payments based upon
interest rates, and shall be for exchanges in currency of the United
States of America only; and
(b) the counterparty thereto shall have credit ratings from at least
two nationally recognized statistical rating agencies that are within
the three highest investment grade categories, or the payment
obligations of the counterparty shall be unconditionally guaranteed by
an entity with such credit ratings; and
(c) the written contract shall require that, should the rating of the
counterparty, if its payment obligations are not unconditionally
guaranteed by another entity, or should the rating of the entity
unconditionally guaranteeing the payment obligations of the
counterparty, if so secured, fall below the rating required by paragraph
(b) of this subdivision, that the obligations of such counterparty shall
be fully and continuously collateralized by direct obligations of, or
obligations the principal and interest on which are guaranteed by, the
United States of America, with a net market value of at least one
hundred two percent of the net market value of the contract to the
dormitory authority, and such collateral shall be deposited with the
dormitory authority or an agent thereof; and
(d) the total notional amount of such interest rate exchange or
similar agreements entered into by the dormitory authority shall not
exceed an amount equal to twenty per centum of the total amount of
bonds, notes or other obligations outstanding or to be issued on behalf
of a participating municipality pursuant to section sixteen hundred
eighty-b of this chapter; provided, however, that such total notional
amount shall not include the notional amount of interest rate exchange
or similar agreements entered into for the purpose of reducing or
eliminating a situation of risk or exposure under an existing agreement,
including, but not limited to a counterparty downgrade, default, or
other potential economic loss; and
(e) the total notional amount of such interest rate exchange or
similar agreements entered into by the dormitory authority shall not
exceed an amount equal to twenty per centum of the total amount of
bonds, notes or other obligations outstanding or to be issued on behalf
of a participating municipality pursuant to paragraph (b) of subdivision
one of section eight of section one of chapter three hundred ninety-two
of the laws of nineteen hundred seventy-three; provided, however, that
such total notional amount shall not include the notional amount of
interest rate exchange or similar agreements entered into for the
purpose of reducing or eliminating a situation of risk or exposure under
an existing agreement, including, but not limited to a counterparty
downgrade, default, or other potential economic loss.
3. (a) Prior to authorizing the approval of any contract for interest
rate exchange or similar agreement pursuant to subdivision one of this
section, the board of the dormitory authority shall adopt written
guidelines addressing the following:
(i) the conditions under which such contracts can be entered into;
(ii) the methods by which such contracts are to be solicited and
procured;
(iii) the form and content such contracts shall take;
(iv) the aspects of risk exposure associated with such contracts;
(v) standards and procedures for counterparty selection;
(vi) the procurement of credit enhancement, liquidity facilities, or
the setting aside of reserves in connection with such contracts;
(vii) collateralization or other requirements for securing the
financial interest in such contracts;
(viii) the methods to be used to reflect such contracts in the
dormitory authority's financial statements;
(ix) financial monitoring and periodic assessment of such contracts by
the dormitory authority; and
(x) such other matters relating thereto as the board of the dormitory
authority shall deem necessary and proper.
(b) The dormitory authority shall issue a report to the director of
the budget, the chairpersons of the senate finance committee and the
assembly ways and means committee, and the state comptroller, on or
before March first in any state fiscal year in which it enters into or
continues to be a party to a contract for interest rate exchange or
similar agreement. Such report shall list all such contracts entered
into pursuant to this section, and shall include, but not be limited to,
the following information for each such contract, as applicable:
(i) a description of the contract, including a summary of the terms
and conditions thereof and the method of procurement;
(ii) any amounts which were required to be paid and received, and any
amounts which actually were paid and received thereunder;
(iii) any credit enhancement, liquidity facility or reserves
associated therewith including an accounting of all costs and expenses
incurred, whether or not in conjunction with the procurement of credit
enhancement or liquidity facilities;
(iv) a description of each counterparty;
(v) an assessment of the counterparty risk, termination risk, and
other risks associated therewith.
4. The dormitory authority shall not enter into any interest rate
exchange or similar agreement pursuant to this section unless the lease,
sublease, or other agreement between the participating municipality and
the dormitory authority:
(a) expressly authorizes the dormitory authority to enter into such
agreements with respect to bonds, notes or other obligations outstanding
or to be issued in connection with court facilities and combined
occupancy structures or health facilities for that participating
municipality; and
(b) further obligates the participating municipality to pay to the
dormitory authority any and all amounts payable by the authority under,
or as a result of, such interest rate exchange or similar agreement.
Structure New York Laws