PRIOR PRINTER'S NO. 995
PRINTER'S NO. 1496
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
884
Session of
2019
INTRODUCED BY MIHALEK, RYAN, GAYDOS, GLEIM, LEWIS, BERNSTINE,
GROVE, ROTHMAN, ZIMMERMAN, MOUL, KEEFER AND WHEELAND,
MARCH 19, 2019
AS REPORTED FROM COMMITTEE ON LOCAL GOVERNMENT, HOUSE OF
REPRESENTATIVES, AS AMENDED, APRIL 17, 2019
AN ACT
Providing for requirements for interest rate management
agreements entered into by a city or county of the first
class.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the First Class
City and County Interest Rate Management Agreement Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Contracting authority." Any of the following that enter
into an interest rate management agreement under this act:
(1) A city of the first class.
(2) A county of the first class.
(3) A municipal authority created under 53 Pa.C.S. Ch.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
56 (relating to municipal authorities) by an entity listed
under paragraph (1) or (2).
"Department." The Department of Community and Economic
Development of the Commonwealth.
"Interest rate management agreement." An agreement,
including a confirmation evidencing a transaction effected under
a master agreement, entered into by a contracting authority in
accordance with and fulfilling the requirements of section 3,
which agreement in the judgment of the contracting authority is
designed to manage interest rate risk or interest cost of the
contracting authority on any debt or other debt-related
obligations a contracting authority is authorized to incur,
including, but not limited to, swaps, interest rate caps,
collars, corridors, ceiling and floor agreements, forward
agreements, float agreements and other similar arrangements
which in the judgment of the contracting authority will assist
the contracting authority in managing the interest rate risk or
interest cost of the contracting authority.
Section 3. Interest rate management agreement requirements.
(a) General rule.--Notwithstanding any other law to the
contrary, any interest rate management agreement entered into by
a contracting authority shall comply with the provisions of this
section.
(b) Requirements.--The following requirements shall apply:
(1) A contracting authority shall authorize and award by
resolution each interest rate management agreement or any
confirmation of a transaction. THE RESOLUTION IS SUBJECT TO
53 PA.C.S. ยง 8003(A) AND (B) (RELATING TO ADVERTISEMENT AND
EFFECTIVENESS OF ORDINANCES) BUT MAY BE VALID AND EFFECTIVE
FOR ALL PURPOSES IMMEDIATELY UPON ADOPTION OR AS OTHERWISE
20190HB0884PN1496 - 2 -
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
PROVIDED IN THE RESOLUTION. THE RESOLUTION AUTHORIZING AND
AWARDING A QUALIFIED INTEREST RATE MANAGEMENT AGREEMENT OR
AUTHORIZING A TRANSACTION UNDER THE AGREEMENT MUST INCLUDE IN
THE RESOLUTION OR AS AN APPENDIX TO THE RESOLUTION ALL OF THE
FOLLOWING:
(I) A COPY OF THE QUALIFIED INTEREST RATE MANAGEMENT
AGREEMENT OR CONFIRMATION OF THE TRANSACTION UNDER THE
QUALIFIED INTEREST RATE MANAGEMENT AGREEMENT IN
SUBSTANTIALLY THE FORM TO BE EXECUTED PURSUANT TO THE
RESOLUTION.
(II) AN INTEREST RATE MANAGEMENT PLAN MEETING THE
REQUIREMENTS UNDER 53 PA.C.S. PT. VII SUBPT. B (RELATING
TO INDEBTEDNESS AND BORROWING):
(A) ADOPTED BY THE CONTRACTING AUTHORITY; OR
(B) IF THE CONTRACTING AUTHORITY IS INCURRING
INDEBTEDNESS WHICH HAS OR WILL BE ISSUED TO A PUBLIC
AUTHORITY THAT HAS ENTERED INTO OR WILL ENTER INTO AN
INTEREST RATE MANAGEMENT AGREEMENT MEETING THE
REQUIREMENTS OF THIS ACT, ADOPTED BY THAT PUBLIC
AUTHORITY.
(III) A STATEMENT OF THE MANNER BY WHICH THE AWARD
OF THE INTEREST RATE MANAGEMENT AGREEMENT IS COMPLETED.
(2) No payments shall be made to or on behalf of a
contracting authority by the other party to an interest rate
management agreement except periodic scheduled payments,
termination payments and attorney fees and other consultant
fees incurred in connection with entering into an interest
rate management agreement.
(3) Periodic scheduled payments on an interest rate
management agreement must commence not later than three years
20190HB0884PN1496 - 3 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
after the date of the confirmation associated with the
interest rate management agreement.
(4) The index or basis used for calculating the periodic
scheduled payments receivable by the contracting authority on
an interest rate management agreement shall be substantially
similar to the index or basis used for calculating the
interest due on the associated debt or other debt-related
obligations of the contracting authority.
(5) At the time an interest rate management agreement is
entered into, the sum of the notional amount thereof, without
duplication for the notional amount of any offsetting
transactions, and all other interest rate management
agreements entered into or guaranteed, and then in effect of
a contracting authority, shall not exceed 30% of the total
principal amount of the aggregate general obligation debt and
other debt-related obligations payable from or supported by
its general fund then outstanding. If an interest rate
management agreement is payable from or supported by another
specified fund or revenues, the limitation shall apply based
solely on interest rate management agreements and debt and
other debt-related obligations payable from or supported by
the specified fund or revenues.
(6) Scheduled periodic payments and termination payments
received by a contracting authority on an interest rate
management agreement shall be deposited in a payment account
to:
(i) Pay periodic swap payments or to pay principal
and interest on the debt or debt-related obligations
related to the interest rate management agreement.
(ii) If the interest rate management agreement
20190HB0884PN1496 - 4 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
described under subparagraph (i) has been terminated and
none of the related debt or debt-related obligations are
outstanding, pay periodic swap payments on interest rate
management agreements or principal and interest on debt
or debt-related obligations payable from or supported by
the same fund or revenues as the interest rate management
agreement described under subparagraph (i).
(iii) If all of the interest rate management
agreements described under subparagraph (ii) have been
terminated and no debt or debt-related obligations
described under subparagraph (ii) are outstanding, pay
any other obligations of the contracting authority.
(7) The scheduled expiration date of an interest rate
management agreement shall not exceed 10 years from the date
of the related confirmation unless the interest rate
management agreement contains a provision allowing the
contracting authority to terminate the same at any time after
10 years from the date of the related confirmation without
making a termination payment.
(8) An interest rate management agreement shall contain
a certification by the other party to the interest rate
management agreement in which the other party:
(i) acknowledges that the contracting authority
which is entering into the interest rate management
agreement under this subpart is a political subdivision
of this Commonwealth or a municipal authority created
under 53 Pa.C.S. Ch. 56 (relating to municipal
authorities) by a city of the first class or a county of
the first class;
(ii) acknowledges that it has read this act;
20190HB0884PN1496 - 5 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(iii) acknowledges that a contracting authority may
only enter into an interest rate management agreement to
manage interest rate risk or interest cost of the
contracting authority on debt or other debt-related
obligations of the contracting authority; and
(iv) acknowledges and agrees that it will notify the
department, in writing, promptly upon the payment to the
other party of a termination payment by the contracting
authority, including the date and amount of the payment
and the identity of the interest rate management
agreement under which the payment was made.
Section 4. Notice and retention of records.
(a) Notice.--Within 15 days following the adoption of a
resolution authorizing an interest rate management agreement, a
contracting authority shall file with the department certified
copies of the resolution, including any appendix to the
resolution, together with an itemized statement of all attorney
fees, consultant fees and any other costs expected to be paid on
behalf of a contracting authority by the other party to
such interest rate management agreement.
(b) Records.--The department shall keep copies of all
documents filed with the department under this section as long
as an interest rate management agreement is in effect.
Section 5. Financial reporting.
A contracting authority which has entered into an interest
rate management agreement shall include in its annual financial
statements information with respect to each interest rate
management agreement it has authorized or entered into,
including any information required under any statement issued by
the Governmental Accounting Standards Board.
20190HB0884PN1496 - 6 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Section 6. Applicability.
The following shall apply:
(1) This act shall apply to all interest rate management
agreements entered into by a contracting authority on or
after the effective date of this section.
(2) This act shall not apply to any amendment,
termination or novation of an interest rate management
agreement if the interest rate management agreement was
entered into prior to the effective date of this section if
the term of the interest rate management agreement is not
extended.
(3) Notwithstanding any other provision of law, this act
shall apply to an interest rate management agreement entered
into by any of the following:
(i) A city of the first class.
(ii) A county of the first class.
(iii) A municipal authority created under 53 Pa.C.S.
Ch. 56 (relating to municipal authorities) by an entity
listed under subparagraph (i) or (ii).
Section 7. Effective date.
This act shall take effect in 60 days.
20190HB0884PN1496 - 7 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21