Section 2926. Interest rate exchange or similar agreements for court facilities and combined occupancy structures and health facilities

1.  In  connection  with the issuance of bonds, notes, or other obligations,
  or in connection with such bonds, notes, or  other  obligations  already
  outstanding,  for  court  facilities  and  combined occupancy structures
  pursuant to section sixteen hundred eighty-b of this chapter, and health
  facilities 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, the dormitory authority shall have the
  power to:
    (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.