PRIOR PRINTER'S NOS. 1183, 1513, 1735
PRINTER'S NO. 2233
THE GENERAL ASSEMBLY OF PENNSYLVANIA
INTRODUCED BY FOLMER, TEPLITZ, EICHELBERGER, BLAKE, BOSCOLA, BROWNE, YUDICHAK, WOZNIAK AND SOLOBAY, JUNE 7, 2013
SENATOR CORMAN, APPROPRIATIONS, RE-REPORTED AS AMENDED, JULY 1, 2014
1Amending Title 53 (Municipalities Generally) of the Pennsylvania
2Consolidated Statutes, in municipal authorities, providing
3for interest rate risk and interest cost management; and, in
4indebtedness and borrowing, further providing for
5definitions; and expanding the scope of provisions relating
6to interest rate risk and interest cost management to include
<-7first class counties and cities and authorities.
12§ 5608.1. Interest rate risk and interest rate cost management.
13Notwithstanding any other provision of this chapter,
14municipal authorities shall be subject to the provisions of
15Subchapter F of Chapter 82 (relating to interest rate risk and
16interest cost management).
20§ 8002. Definitions.
1* * *
2(c) Other definitions.--Subject to additional definitions
3contained in subsequent provisions of this subpart which are
4applicable to specific provisions of this subpart, the following
5words and phrases when used in this subpart shall have the
6meanings given to them in this section unless the context
7clearly indicates otherwise:
8* * *
12(1) A schedule listing the amount of debt outstanding
13for each outstanding debt issue of the local government unit
14and the expected annual debt service on that debt. In the
15case of variable rate debt, the schedule shall set forth the
16estimated annual debt service thereon and annual debt service
17on the debt calculated at the maximum rate specified for the
18variable rate debt.
22(3) A schedule [listing] illustrating the following:
23(i) In dollars, all consulting, advisory, brokerage
24or similar fees, paid or payable by the local government
25unit in connection with the qualified interest rate
26management agreement, and [a schedule of] any finder's
27fees, consulting fees or brokerage fees, paid or payable
28by the other party in connection with the qualified
29interest rate management agreement.
30(ii) The maximum counterparty margin or spread to be
3(4) A schedule listing the estimated and maximum
4periodic scheduled payments to be paid by the local
5government unit and to be received by the local government
6unit from the other party in each year during the term of the
7qualified interest rate management agreement.
8(5) An analysis of the interest rate risk, basis risk,
9termination risk, credit risk, market-access risk and other
10risks of entering into the qualified interest rate management
11agreement. This paragraph includes schedules of the estimated
12and maximum scheduled periodic payments which would be due
13under the qualified interest rate management agreement.
14(6) An analysis of the interest rate risk, basis risk,
15termination risk, credit risk, market-access risk and other
16risks to the local government unit of the net payments due
17for all debt outstanding and all qualified interest rate
18management agreements of the local government unit. This
19paragraph includes schedules of the estimated and maximum net
20payments of total debt service and scheduled, periodic, net
21payments, which would be due under all of the qualified
22interest rate management agreements.
23(7) The local government unit's plan to monitor interest
24rate risk, basis risk, termination risk, credit risk, market-
25access risk and other risks. This paragraph includes the
26valuation of the market or termination value of all
27outstanding qualified interest rate management agreements.
28* * *
1district or any similar, general or limited purpose unit of
2local government or any unit created by joint action of two or
3more local government units which is authorized to be created by
4law. [The<-] term does not include a city or county of the first
5class. Except as otherwise provided under Subchapter F of
6Chapter 82 (relating to interest rate risk and interest cost
7management) the term does not include <-[a city or county of the
8first class,<-] an authority as defined in this section or any
9unit created by joint action of two or more local government
10units which have not been granted by statute the power to issue
11bonds. The term includes school districts of the first class
12presently operating under a home rule charter or home rule
13charter supplement, and the provisions of this subpart shall
14govern over inconsistent charter provisions.
15* * *
20§ 8281. Qualified interest rate management agreements.
21(a) General rule.--
22(1) Except as set forth in paragraph (4),
23notwithstanding any other law to the contrary, a local
24government unit may negotiate and enter into qualified
25interest rate management agreements consistent with the
26provisions of this subchapter. A local government unit may
27only authorize a qualified interest rate management agreement
28under this subchapter.
29* * *
30(5) No payments shall be made to or on behalf of a local
4(6) Periodic scheduled payments on a qualified interest
5rate management agreement must commence not later than <-one
6year after the effective date of the qualified interest rate
7management agreement. <-three years after the date of execution
8of any confirmation associated with the qualified interest
9rate management agreement.
10(7) The index or basis used for calculating the periodic
11scheduled payments receivable by the local government unit on
12a qualified interest rate management agreement shall be a
13fixed or variable rate of interest determined using either an
14index published by the Securities Industry and Financial
15Markets Association or an index that references the London
16Interbank Offered Rate. <-Periodic scheduled payments based
17upon a London InterBank Offered Rate index or other index are
18not permitted unless the interest rate on the associated debt
19is also based on the same index or the index is based on the
20same type of debt as the associated debt.
21(8) At the time a qualified interest rate management
22agreement is entered into, the sum of the notional amount
23thereof and all other qualified interest rate management
24agreements entered into or guaranteed, and then in effect of
25a local government unit, shall not exceed 50% of the total
26principal amount of the aggregate nonelectoral debt plus
27lease rental debt capacity of the local government unit then<-
1rate management agreement shall be deposited in a payment
2account to pay periodic swap payments or to pay principal and
3interest on the debt related to the qualified interest rate
5(10) The scheduled expiration date of a qualified
6interest rate management agreement shall not exceed ten years
7from the date of the related confirmation unless the
8qualified interest rate management agreement contains a
9provision allowing the local government unit to terminate the
10same at any time after ten years from the date of the related
11confirmation without making a termination payment.
12(b) Requirements for resolution.--The resolution authorizing
13and awarding a qualified interest rate management agreement or
14authorizing a transaction under the agreement must include in
15the resolution or as an appendix to the resolution all of the
17* * *
23(ii) if the local government unit is incurring
24indebtedness under this chapter which has or will be
25issued to a public authority that has entered into or
26will enter into an interest rate management agreement
27meeting the requirements of a qualified interest rate
28management agreement under this subpart, [adopted]
29approved by that public authority not less than ten days
30prior to the date of the adoption of the resolution.
1* * *
2(c) Contents of qualified interest rate management
3agreements.--In addition to other provisions approved by the
4local government unit, a qualified interest rate management
5agreement must contain all of the following:
6* * *
10* * *
14(i) Acknowledges and agrees that the local
15government unit which is entering into the qualified
16interest rate management agreement under this subpart is
17a political subdivision of the Commonwealth.
18(ii) Acknowledges that it has read this subpart.
19(iii) Acknowledges and agrees that a local
20government unit may only enter into a qualified interest
21rate management agreement to manage interest rate risk or
22interest cost of the local government unit on debt of the
23local government unit.
<-24(iv) Certifies that the information provided to the
25local government unit, whether in solicitations or in
26response to requests for information from the local
27government unit as to potential positive or negative
28impacts of entering into the qualified interest rate
29management agreement, is mathematically correct and
30conforms to Title VII of the Dodd-Frank Wall Street
<-3(iv) Certifies that in executing the transactions
4under the qualified interest rate management agreement,
5it has complied in all material aspects with the
6applicable rules and regulations of the Commodity Futures
7Trading Commission, the Securities and Exchange
8Commission and the Municipal Securities Rulemaking Board
9to which it is subject.
<-14(vi) Believes that the interest rate management
15agreement is consistent with the policy of the
16Commonwealth that a local government unit not enter into
17the agreement if it involves unreasonable speculation.
<-22(vi) Represents and warrants that the rate or rates
23used to calculate amounts payable by the local government
24unit pursuant to the qualified interest rate management
25agreement is comparable to the rate or rates that it
26would have quoted to receive from or pay to, as
27applicable, a similarly situated counterparty to enter
28into a reasonably comparable qualified interest rate
29management agreement taking into full account the terms
30and conditions of the qualified interest rate management
<-2(ix) <-(vii) Acknowledges and agrees that it will
3notify the department, in writing, promptly upon the
4payment to the other party <-its receipt of a termination
5payment by the local government unit, including the date
6and amount of the payment and the identity of the
7qualified interest rate management agreement under which
8the payment was made.
9* * *
18* * *
23§ 8283. Remedies.
24* * *
29§ 8284. Notice and retention of records.
30* * *
5Section 5. Section 8285 of Title 53 is amended to read:
6§ 8285. Financial reporting.
7(a) General rule.--A local government unit which has entered
8into a qualified interest rate management agreement shall
9include in its annual financial statements information with
10respect to each qualified interest rate management agreement it
11has authorized or entered into, including any information
12required pursuant to any statement issued by the Governmental
13Accounting Standards Board.
14(b) Quarterly report.--A local government unit that
15authorizes a qualified interest rate management agreement shall
16report on the performance of the qualified interest rate
17management agreement quarterly at a public meeting. At a
18minimum, the reporting shall include a current mark to market
19valuation of the agreement.
<-24Section 6. Applicability.
25The following shall apply:
10(2) Shall not apply to any amendment, termination or
11novation of an interest rate management agreement where the
12interest rate management agreement was entered into prior to
13the effective date of this section as long as the term of the
14interest rate management agreement is not extended.
15Section 7. This act shall take effect in 60 days.