New York Laws
Title 4 - Local Obligations: Terms, Form and Contents Thereof; Sale and Issuance Thereof
54.90 - Issuance of Bonds or Notes With Variable Rates of Interest.

(i) enter into interest rate exchange or similar agreements with any
person under such terms and conditions as the mayor and comptroller may
determine, including provisions as to default or early termination and
indemnification by the city or any other party thereto for loss of
benefits as a result thereof;
(ii) procure insurance, letters of credit or other credit enhancement
with respect to such agreements;
(iii) provide security for the payment or performance of its
obligations with respect to agreements described in item (i) of this
subdivision from such sources and with the same effect as is authorized
by applicable law with respect to security for its bonds, notes or other
obligations, provided, however, that any payment or performance of
obligations with respect to agreements described in item (i) of this
subdivision in connection with debt obligations which carry the full
faith and credit of the city shall be subject to appropriation; and
(iv) modify, amend, or replace such agreements.
2. For the purposes of this paragraph:
(i) "Interest rate exchange or similar agreement" shall mean a written
contract entered into in connection with the issuance of city debt, or
in connection with such city debt already outstanding, with a
counterparty to provide for an exchange of payments based upon fixed
and/or variable interest rates, and shall be for exchanges in currency
of the United States of America only.
(ii) "Excluded agreements" shall mean the total 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 interest rate exchange or similar agreement, including, but
not limited to a counterparty downgrade, default, or other actual or
potential economic loss.
(iii) Interest rate exchange; limitations. Any interest rate exchange
or similar agreements entered into pursuant to item (i) of subdivision
one of this paragraph shall be subject to the following limitations:
(A) the counterparty thereto shall have credit ratings from at least
one nationally recognized statistical rating agency that is within the
two highest investment grade categories and ratings which are obtained
from any other nationally recognized statistical rating agencies shall
also be 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;
(B) the written contract shall require that should the rating: (I) of
the counterparty, if its payment obligations are not unconditionally
guaranteed by another entity, or (II) of the entity unconditionally
guaranteeing its payment obligations, if so secured, fall below the
rating required by clause (A) of this item, 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, or any agency thereof with
a net market value of at least one hundred two percent of the net market
value of the contract to the authorized issuer and such collateral shall
be deposited with the authorized issuer or an agent thereof;
(C) the total notional amount of all interest rate exchange or similar
agreements shall not exceed an amount equal to twenty-five percent of
the limit prescribed by section 104.00 of this chapter; provided,
however, that such total notional amount shall not include any excluded
agreements;
(D) no interest rate exchange or similar agreement shall have a
maturity exceeding the maturity of related city debt; and
(E) each interest rate exchange or similar agreement shall be subject
to an independent finding that its terms and conditions reflect a fair
market value of such agreement as of the date of its execution,
regardless of whether such agreement was solicited on a competitive or
negotiated basis.
3. (i) Prior to authorizing the approval of any contract for interest
rate exchange or similar agreement pursuant to subdivision one of this
paragraph, the finance board of the city shall adopt guidelines for the
use of interest rate exchange or similar agreements which shall include,
but not be limited to the following:
(A) the conditions under which such contracts can be entered into;
(B) the methods by which such contracts are to be solicited and
procured;
(C) the form and content such contracts shall take;
(D) the aspects of risk exposure associated with such contracts;
(E) standards and procedures for counterparty selection;
(F) standards for the procurement of credit enhancement, liquidity
facilities, or the setting aside of reserves in connection with such
contracts consistent with the limitations of section 168.00 of this
chapter;
(G) provisions for collateralization or other requirements for
securing the financial interest in such contracts;
(H) the long-term implications associated with entering into such
agreements, such as costs of borrowing, historical trends, use of
capacity for variable rate bonds and related credit enhancements, and
any potential impact on the future ability to call bonds, including

opportunities to refund related debt obligations, and similar
considerations;
(I) the methods to be used to reflect such contracts in the city's
financial statements;
(J) financial monitoring and periodic assessment of such contracts by
the city; and
(K) such other matters relating thereto as the finance board shall
deem necessary and proper.
(ii) The city shall issue a quarterly report to the director of the
budget, the chairs of the senate finance committee and the assembly ways
and means committee, and the state comptroller, on or before the
fifteenth day of each month following the end of each such quarter in
which it enters into or continues to be a party to a contract for
interest rate exchange or similar agreement, which 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:
(A) a description of the contract, including a summary of the terms
and conditions, rates, maturity, the estimated market value of each
agreement, and other provisions thereof and the method of procurement;
(B) any amounts which were required to be paid and received, and any
amounts which actually were paid and received thereunder;
(C) 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;
(D) a description of each counterparty;
(E) an assessment of the counterparty risk, termination risk, and
other risks associated therewith; and
(F) such report shall include a copy of the guidelines required by
item (i) of this subdivision in the quarter after they are adopted or
subsequently modified.