Please wait while the document is loaded.

A00722
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
320
Session of
2019
INTRODUCED BY RYAN, KEEFER, PICKETT AND ROTHMAN,
FEBRUARY 1, 2019
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, FEBRUARY 1, 2019
AN ACT
Amending Title 53 (Municipalities Generally) of the Pennsylvania
Consolidated Statutes, in general provisions, further
providing for definitions; in miscellaneous provisions,
repealing provisions relating to qualified interest rate
management agreements, further providing for financial
reporting, providing for application of subchapter, for
definitions, for qualified interest rate management
agreements and for interest rate risk and interest cost
management in first class cities and counties; and making
editorial changes.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definitions of "independent financial
advisor," "interest rate management plan" and "qualified
interest rate management agreement" in section 8002(c) of Title
53 of the Pennsylvania Consolidated Statutes are amended to
read:
§ 8002. Definitions.
* * *
(c) Other definitions.--Subject to additional definitions
contained in subsequent provisions of this subpart which are
applicable to specific provisions of this subpart, the following
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
words and phrases when used in this subpart shall have the
meanings given to them in this section unless the context
clearly indicates otherwise:
* * *
"Independent financial advisor." A person or entity
experienced in the financial aspects and risks of interest rate
management agreements who is retained by a local government unit
to advise the local government unit with respect to a qualified
interest rate management agreement. The independent financial
advisor may not be the other party or an affiliate or agent of
the other party on a qualified interest rate management
agreement with respect to which the independent financial
advisor is advising a local government unit. For purposes of
[sections 8281(b)(2)] section 8288(b)(2) and (e)(5) (relating to
qualified interest rate management agreements), the independent
financial advisor may be retained by a public authority.
"Interest rate management plan." A written plan prepared or
reviewed by an independent financial advisor with respect to a
qualified interest rate management agreement, which includes:
(1) A schedule listing the amount of debt outstanding
for each outstanding debt issue of the local government unit
and the expected annual debt service on that debt. In the
case of variable rate debt, the schedule shall set forth the
estimated annual debt service thereon and annual debt service
on the debt calculated at the maximum rate specified for the
variable rate debt.
(2) A schedule listing the notional amounts outstanding
of each previously executed qualified interest rate
management agreement which is then in effect.
(3) A schedule [listing] illustrating the following:
A00722 - 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
(i) In dollars, all consulting, advisory, brokerage
or similar fees, paid or payable by the local government
unit in connection with the qualified interest rate
management agreement, and [a schedule of] any finder's
fees, consulting fees or brokerage fees, paid or payable
by the other party in connection with the qualified
interest rate management agreement.
(ii) The maximum counterparty margin or spread to be
included on the qualified interest rate management
agreement and a calculation of the present value of the
counterparty margin or spread.
(4) A schedule listing the estimated and maximum
periodic scheduled payments to be paid by the local
government unit and to be received by the local government
unit from the other party in each year during the term of the
qualified interest rate management agreement.
(5) An analysis of the interest rate risk, basis risk,
termination risk, credit risk, market-access risk and other
risks of entering into the qualified interest rate management
agreement. This paragraph includes schedules of the estimated
and maximum scheduled periodic payments which would be due
under the qualified interest rate management agreement.
(6) An analysis of the interest rate risk, basis risk,
termination risk, credit risk, market-access risk and other
risks to the local government unit of the net payments due
for all debt outstanding and all qualified interest rate
management agreements of the local government unit. This
paragraph includes schedules of the estimated and maximum net
payments of total debt service and scheduled, periodic, net
payments, which would be due under all of the qualified
A00722 - 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
interest rate management agreements.
(7) The local government unit's plan to monitor interest
rate risk, basis risk, termination risk, credit risk, market-
access risk and other risks. This paragraph includes the
valuation of the market or termination value of all
outstanding qualified interest rate management agreements.
* * *
"Qualified interest rate management agreement." An
agreement, including a confirmation evidencing a transaction
effected under a master agreement, entered into by a local
government unit in accordance with and fulfilling the
requirements of section [8281] 8288 (relating to qualified
interest rate management agreements), which agreement in the
judgment of the local government unit is designed to manage
interest rate risk or interest cost of the local government unit
on any debt a local government unit is authorized to incur under
this subpart, 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 local government unit
will assist the local government unit in managing the interest
rate risk or interest cost of the local government unit.
* * *
Section 2. Section 8281 of Title 53 is repealed:
[§ 8281. Qualified interest rate management agreements.
(a) General rule.--
(1) Except as set forth in paragraph (4),
notwithstanding any other law to the contrary, a local
government unit may negotiate and enter into qualified
interest rate management agreements consistent with the
A00722 - 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
provisions of this subchapter.
(2) The local government unit must authorize and award
by resolution each qualified interest rate management
agreement or any confirmation of a transaction. The
resolution is subject to section 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 provided in the resolution.
(3) A local government unit has the power to contract
for insurance covering the risks of nonpayment of amounts due
under qualified interest rate management agreements.
(4) The authority granted in this subchapter shall not
apply to any local government unit which has been declared
distressed by the Department of Community and Economic
Development.
(b) Requirements for 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:
(1) 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.
(2) The interest rate management plan meeting the
requirements under this subpart:
(i) adopted by the local government unit; or
(ii) if the local government unit is incurring
indebtedness under this chapter which has or will be
issued to a public authority that has entered into or
A00722 - 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
will enter into an interest rate management agreement
meeting the requirements of a qualified interest rate
management agreement under this subpart, adopted by that
public authority.
(3) A statement of the manner of the award of the
qualified interest rate management agreement under subsection
(e).
(c) Contents of qualified interest rate management
agreements.--In addition to other provisions approved by the
local government unit, a qualified interest rate management
agreement must contain all of the following:
(1) The covenant of the local government unit to make
payments required by the qualified interest rate management
agreement and the covenants authorized by section 8282
(relating to covenant to pay amounts due under qualified
interest rate management agreements).
(2) The notional amount of the qualified interest rate
management agreement and the principal amount of bonds or
notes or lease rental debt, or portions of the notional or
principal amounts, issued or to be issued by the local
government unit under this subpart or guaranteed by the local
government unit under this subpart, to which the agreement
relates.
(3) The term of any qualified interest rate management
agreement, which must not exceed the latest maturity date of
the bonds or notes referenced in the qualified interest rate
management agreement.
(4) A provision requiring the termination of the
agreement if all debt to which the qualified interest rate
management agreement relates is no longer outstanding.
A00722 - 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
(5) The maximum annual interest rate which the local
government unit may pay thereunder.
(6) A provision that the maximum net payments by fiscal
year of a local government unit shall not exceed the maximum
interest rate specified in the qualified interest rate
management agreement for:
(i) periodic scheduled payments, not including any
termination payments, due under the qualified interest
rate management agreement; and
(ii) the interest on the bonds or notes to which the
qualified interest rate management agreement relates.
(7) The source of payment of the payment obligations of
the local government unit, which must be either general
revenues or revenues specifically identified in the
agreement.
(8) A provision addressing the actions to be taken if
the credit rating of the other party changes.
(9) A provision that periodic scheduled payments due
under the qualified interest rate management agreement and
debt service due on the related bonds or notes or payments
due under the related instrument evidencing lease rental debt
or guaranty of the local government unit shall be senior in
right and priority of payment to termination payments due
under the qualified interest rate management agreement.
(d) Other provisions of the qualified interest rate
management agreement.--The qualified interest rate management
agreement may include:
(1) A covenant to include any termination payment or
similar payment for a qualified interest rate management
agreement in its current budget at any time during a fiscal
A00722 - 7 -
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
year or in a budget adopted in a future fiscal year.
(2) A provision that the following shall be equally and
ratably payable and secured under the applicable covenants
authorized in section 8282:
(i) Periodic scheduled payments due under the
qualified interest rate management agreement; and
(ii) Any of the following to which the agreement
relates:
(A) the debt service due on the bonds or notes;
(B) payment under an instrument evidencing lease
rental debt; or
(C) payment under a guaranty of the local
government unit.
(3) A provision that the qualified interest rate
management agreement may be terminated at the option of the
local government unit without cause but that the qualified
interest rate management agreement may not be terminated at
the option of the other party to the qualified interest rate
management agreement without cause.
(e) Award of qualified interest rate management
agreements.--
(1) The local government unit shall establish a process
for selecting other parties before entering into a qualified
interest rate management agreement.
(2) The local government unit shall establish
qualifications for other parties before entering into a
qualified interest rate management agreement. The
qualifications shall include a rating for the other party of
at least the third highest rating category from a nationally
recognized rating agency.
A00722 - 8 -
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
(3) A qualified interest rate management agreement must
be awarded by public sale, private sale by negotiation or
private sale by invitation.
(4) The local government unit shall select the qualified
interest rate management agreement which the local government
unit determines is in its best financial interest. The
qualified interest rate management agreement selected must
contain financial terms and conditions which in the opinion
of the independent financial advisor to the local government
unit are fair and reasonable to the local government unit as
of the date of award.
(5) The local government unit may satisfy the
requirements of paragraph (4) by obtaining a finding from an
independent financial advisor to the public authority that
the financial terms and conditions of the agreement are fair
and reasonable to the public authority as of the date of the
award if all of the following apply:
(i) The local government unit is incurring
indebtedness under this chapter which has or will be
issued to a public authority.
(ii) In connection with the incurring of debt under
subparagraph (i), the local government unit will become
obligated for all or a portion of the public authority's
costs under an interest rate management agreement.]
Section 3. Section 8285 of Title 53 is amended to read:
§ 8285. Financial reporting.
(a) General rule.--A local government unit which has entered
into a qualified interest rate management agreement shall
include in its annual financial statements information with
respect to each qualified interest rate management agreement it
A00722 - 9 -
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
has authorized or entered into, including any information
required pursuant to any statement issued by the Governmental
Accounting Standards Board.
(b) Quarterly report.--A local government unit that
authorizes a qualified interest rate management agreement shall
report on the performance of the qualified interest rate
management agreement quarterly at a public meeting. At a
minimum, the reporting shall include a current market-to-market
valuation of the agreement.
Section 4. Subchapter F of Chapter 82 of Title 53 is amended
by adding sections to read:
§ 8286. Application of subchapter.
Only a local government unit may enter into an interest rate
management agreement, unless otherwise authorized to do so in
Subchapter G (relating to interest rate risk and interest cost
management in first class cities and counties).
§ 8287. Definitions.
As used in this subchapter, the term "local government unit"
means an authority as defined in section 8002 (relating to
definitions) and a school district of the first class presently
operating under a home rule charter as defined under section
2902 (relating to definitions) or home rule charter supplement. ,
a political subdivision or home rule municipality or optional
plan municipality.
§ 8288. Qualified interest rate management agreements.
(a) General rule.--
(1) Except as set forth in paragraph (4),
notwithstanding any other law to the contrary, a local
government unit may negotiate and enter into qualified
interest rate management agreements consistent with the
A00722 - 10 -
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
provisions of this subchapter. A local government unit may
only authorize a qualified interest rate management agreement
under this subchapter.
(2) The local government unit must authorize and award
by resolution each qualified interest rate management
agreement or any confirmation of a transaction. The
resolution is subject to section 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 provided in the resolution.
(3) A local government unit has the power to contract
for insurance covering the risks of nonpayment of amounts due
under qualified interest rate management agreements.
(4) The authority granted in this subchapter shall not
apply to a local government unit that has been declared
distressed by the d epartment .
(5) No payments for consulting, advisory, brokerage or
similar fees incurred to enter into the interest rate
management agreement may be made to or on behalf of a local
government unit by the other party to a qualified interest
rate management agreement and termination payments, unless
the payments are disclosed in conformity with this chapter
and are acknowledged by the local government unit.
(6) Periodic scheduled payments on a qualified interest
rate management agreement must commence not later than one
year after the date of execution of a confirmation associated
with the qualified interest rate management agreement.
(7) At the time a qualified interest rate management
agreement is entered into, the sum of the notional amount and
all other qualified interest rate management agreements
A00722 - 11 -
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
entered into or guaranteed, and then in effect of a local
government unit, may not exceed 50% of the total principal
amount of the aggregate nonelectoral debt plus lease rental
debt capacity of the local government unit then outstanding.
(8) Scheduled periodic payments and termination payments
received by a local government unit on a qualified interest
rate management agreement shall be deposited in a payment
account to pay periodic swap payments or to pay principal and
interest on the debt related to the qualified interest rate
management agreement.
(9) The scheduled expiration date of a qualified
interest rate management agreement may not exceed 10 years
from the date of the related confirmation unless the
qualified interest rate management agreement contains a
provision allowing the local government unit to terminate the
agreement at any time, or at periodic intervals as shown in
the confirmation, after 10 years from the date of the related
confirmation without making a termination payment.
(10) No payments may be made to or on behalf of a local
government unit by the other party to a qualified interest
rate management agreement except periodic scheduled payments
and termination payments.
(11) The index or basis used for calculating the
periodic scheduled payments receivable by the local
government unit on a qualified interest rate management
agreement shall be a fixed rate or variable rate of interest
determined using either an index published by the Securities
Industry and Financial Markets Association or an index that
references the London Interbank Offered Rate. Periodic
scheduled payments based upon a London InterBank Offered Rate
A00722 - 12 -
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
index or other index are not permitted unless the interest
rate on the associated debt is also based on the same index
or the index is based on the same type of debt as the
associated debt.
(b) Requirements for 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:
(1) 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.
(2) The interest rate management plan meeting the
requirements under this subchapter:
(i) approved by the local government unit not less
than 10 days prior to the date of the resolution; or
(ii) if the local government unit is incurring
indebtedness under this subpart 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 a qualified interest rate
management agreement under this subpart, approved by that
public authority not less than 10 days prior to the date
of the resolution.
(3) A statement of the manner of the award of the
qualified interest rate management agreement under subsection
(e).
(c) Contents of qualified interest rate management
agreements.--In addition to other provisions approved by the
A00722 - 13 -
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
local government unit, a qualified interest rate management
agreement must contain all of the following:
(1) The covenant of the local government unit to make
payments required by the qualified interest rate management
agreement and the covenants authorized by section 8282
(relating to covenant to pay amounts due under qualified
interest rate management agreements).
(2) The notional amount of the qualified interest rate
management agreement and the principal amount of bonds or
notes or lease rental debt, or portions of the notional
amounts or principal amounts, issued or to be issued by the
local government unit under this subpart or guaranteed by the
local government unit under this subpart, to which the
agreement relates.
(3) The term of a qualified interest rate management
agreement that must not exceed the latest maturity date of
the bonds or notes referenced in the qualified interest rate
management agreement.
(4) A provision requiring the termination of the
agreement when all debt to which the qualified interest rate
management agreement relates is no longer outstanding.
(5) The maximum annual interest rate that the local
government unit may pay.
(6) A provision that the maximum net payments by fiscal
year of a local government unit may not exceed the maximum
interest rate specified in the qualified interest rate
management agreement for:
(i) periodic scheduled payments, not including
termination payments, due under the qualified interest
rate management agreement; and
A00722 - 14 -
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
(ii) the interest on the bonds or notes to which the
qualified interest rate management agreement relates.
(7) The source of payment of the payment obligations of
the local government unit, which must be either general
revenues or revenues specifically identified in the
agreement.
(8) A provision addressing the actions to be taken if
the credit rating of the other party changes.
(9) A provision that periodic scheduled payments due
under the qualified interest rate management agreement and
debt service due on the related bonds or notes or payments
due under the related instrument evidencing lease rental debt
or guaranty of the local government unit shall be senior in
right and priority of payment to termination payments due
under the qualified interest rate management agreement.
(10) A certification by the other party to the qualified
interest rate management agreement in which the other party
does all of the following:
(i) Acknowledges and agrees that the local
government unit that is entering into the qualified
interest rate management agreement under this subchapter
is a political subdivision of the Commonwealth.
(ii) Acknowledges that the other party has read this
subchapter.
(iii) Acknowledges and agrees that a local
government unit may only enter into a qualified interest
rate management agreement to manage interest rate risk or
interest cost of the local government unit on debt of the
local government unit.
(iv) Certifies that, in executing the transactions
A00722 - 15 -
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
under the qualified interest rate management agreement,
the other party has complied in all material aspects with
the applicable rules and regulations of the Commodity
Futures Trading Commission, the Securities and Exchange
Commission and the Municipal Securities Rulemaking Board
to which the other party is subject.
(v) Certifies that the other party acted in good
faith and made full and fair disclosure of all required
material facts and any conflicts of interest regarding
the qualified interest management agreement as required
by the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Public Law 111-203, 12 U.S.C. § 5301 et
seq.) .
(vi) Represents and warrants that the rate or rates
used to calculate amounts payable by the local government
unit pursuant to the qualified interest rate management
agreement are comparable to the rate or rates that the
other party would quote to receive from or pay to, as
applicable, a similarly situated counterparty to enter
into a reasonably comparable qualified interest rate
management agreement taking into full account the terms
and conditions of the qualified interest rate management
agreement.
(vii) Acknowledges and agrees that the other party
will notify the department in writing promptly upon the
other party's receipt of a termination payment by the
local government unit, including the date and amount of
the payment and the identity of the qualified interest
rate management agreement under which the payment was
made.
A00722 - 16 -
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
(d) Other provisions of the qualified interest rate
management agreement.--The qualified interest rate management
agreement may include:
(1) A covenant that includes a termination payment or
similar payment for a qualified interest rate management
agreement in the other party's current budget at any time
during a fiscal year or in a budget adopted in a future
fiscal year.
(2) A provision that the following shall be equally and
ratably payable and secured under the applicable covenants
authorized in section 8282:
(i) Periodic scheduled payments due under the
qualified interest rate management agreement.
(ii) Any of the following to which the agreement
relates:
(A) the debt service due on the bonds or notes;
(B) payment under an instrument evidencing lease
rental debt; or
(C) payment under a guaranty of the local
government unit.
(3) A provision that the qualified interest rate
management agreement may be terminated at the option of the
local government unit without cause but that the qualified
interest rate management agreement may not be terminated at
the option of the other party to the qualified interest rate
management agreement without cause.
(e) Award of qualified interest rate management
agreements.--
(1) The local government unit shall establish a process
for selecting other parties before entering into a qualified
A00722 - 17 -
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
interest rate management agreement.
(2) The local government unit shall establish
qualifications for other parties before entering into a
qualified interest rate management agreement. The
qualifications shall include a rating for the other party of
at least the third highest rating category from a nationally
recognized rating agency.
(3) A qualified interest rate management agreement must
be awarded by public sale, private sale by negotiation or
private sale by invitation.
(4) The local government unit shall select the qualified
interest rate management agreement that the local government
unit determines is in the best financial interest. The
qualified interest rate management agreement selected must
contain financial terms and conditions that, in the opinion
of the independent financial advisor to the local government
unit, are fair and reasonable to the local government unit as
of the date of award.
(5) The local government unit may satisfy the
requirements of paragraph (4) by obtaining a finding from an
independent financial advisor to the public authority that
the financial terms and conditions of the agreement are fair
and reasonable to the public authority as of the date of the
award if all of the following apply:
(i) The local government unit is incurring
indebtedness under this chapter that has been or will be
issued to a public authority.
(ii) In connection with the incurring of debt under
subparagraph (i), the local government unit will become
obligated for all or a portion of the public authority's
A00722 - 18 -
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
costs under an interest rate management agreement.
Section 5. Chapter 82 of Title 53 is amended by adding a
subchapter to read:
SUBCHAPTER G
INTEREST RATE RISK AND INTEREST COST MANAGEMENT
IN FIRST CLASS CITIES AND COUNTIES
Sec.
8291. Scope of subchapter.
8292. Definitions.
8293. Interest rate management agreement requirements.
8294. Notice and retention of records.
8295. Financial reporting.
§ 8291. Scope of subchapter.
Notwithstanding Subchapter F (relating to interest rate risk
and interest cost management), this subchapter shall apply to
interest rate management agreements in cities and counties of
the first class.
§ 8292. Definitions.
The following words and phrases when used in this subchapter
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
subchapter:
(1) A city of the first class.
(2) A county of the first class.
(3) A municipal authority created under Chapter 56
(relating to municipal authorities) by an entity listed under
paragraph (1) or (2).
"Department." The Department of Community and Economic
A00722 - 19 -
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
Development of the Commonwealth.
"Interest rate management agreement." An agreement,
including a confirmation evidencing a transaction effected under
a master agreement, that:
(1) is entered into by a contracting authority in
accordance with and fulfilling the requirements of section
8293 (relating to interest rate management agreement
requirements);
(2) in the judgment of the contracting authority, is
designed to manage interest rate risk or interest cost of the
contracting authority on a 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;
and
(3) 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.
§ 8293. Interest rate management agreement requirements.
(a) General rule.--Notwithstanding any other law to the
contrary, an 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
confirmation of a transaction.
(2) No payments may be made to or on behalf of a
contracting authority by the other party to an interest rate
A00722 - 20 -
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
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
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 of the
agreement, 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 may not exceed 30% of the
total principal amount of the aggregate general obligation
debt and other debt-related obligations payable from or
supported by the contracting authority's 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
A00722 - 21 -
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
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
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
all other obligations of the contracting authority.
(7) The scheduled expiration date of an interest rate
management agreement may 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 agreement 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 does all of the
following:
A00722 - 22 -
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
(i) Acknowledges that the contracting authority that
is entering into the interest rate management agreement
under this subchapter is a political subdivision of this
Commonwealth or a municipal authority created under
Chapter 56 (relating to municipal authorities) by a city
of the first class or a county of the first class.
(ii) Acknowledges that the other party has read this
subchapter.
(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.
(iv) Acknowledges and agrees that the other party
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.
§ 8294. 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 an appendix to the
resolution, together with an itemized statement of all attorney
fees, consultant fees and other costs expected to be paid on
behalf of a contracting authority by the other party to
the interest rate management agreement.
(b) Records.--The department shall keep copies of all
A00722 - 23 -
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
documents filed with the department under this section as long
as an interest rate management agreement is in effect.
§ 8295. Financial reporting.
A contracting authority that has entered into an interest
rate management agreement shall include in the contracting
authority's annual financial statements information with respect
to each interest rate management agreement the contracting
authority has authorized or entered into, including information
required pursuant to a statement issued by the Governmental
Accounting Standards Board.
Section 6. The following shall apply:
(1) The amendment or addition of 53 Pa.C.S. §§ 8002(c),
8286, 8287 and 8288:
(i) Shall apply to all qualified interest rate
management agreements entered into on or after the
effective date of this section.
(ii) Shall not apply to an amendment, termination or
novation of a qualified interest rate management
agreement where the qualified interest rate management
agreement was entered into prior to the effective date of
this section, unless the term of the qualified interest
rate management agreement is extended and the qualified
interest rate management agreement continues to be in
effect on or after the effective date of this section.
(2) The addition of 53 Pa.C.S. Ch. 82 Subch. G:
(i) Shall apply to all interest rate management
agreements entered into by a contracting authority on or
after the effective date of this section.
(ii) Shall not apply to any amendment, termination
or novation of an interest rate management agreement if
A00722 - 24 -
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
the interest rate management agreement was entered into
prior to the effective date of this section or if the
term of the interest rate management agreement is not
extended.
(iii) Notwithstanding any other provision of law,
shall apply to an interest rate management agreement
entered into by any of the following:
(A) A city of the first class.
(B) A county of the first class.
(C) A municipal authority created under 53
Pa.C.S. Ch. 56 by an entity listed under clause (A)
or (B).
Section 7. This act shall take effect in 60 days.
A00722 - 25 -
1
2
3
4
5
6
7
8
9
10
11
12
13