HB 320 — 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.

PRIOR PRINTER'S NO.

299 PRINTER'STHE NO.GENERAL ASSEMBLY OF PENNSYLVANIA HOUSE BILL Session of No.

1494320 THE2019 GENERALINTRODUCED ASSEMBLYBY OFRYAN, PENNSYLVANIAKEEFER, HOUSEPICKETT BILLAND SessionROTHMAN, ofFEBRUARY No.1, 2019 REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, FEBRUARY 1, 2019 AN ACT AmeConsolidated Statutes, in general provisions, furthersylvania providing for definitions;

320in 2019miscellaneous INTRODUCEDprovisions, BYrepealing RYAN,provisions KEEFER,relating PICKETT,to ROTHMAN,qualified GLEIM,interest MULLINSrate ANDmanagement WHEELAND,agreements, FEBRUARYfurther 1,providing 2019for ASfinancial REPORTEDreporting, FROMproviding COMMITTEEfor ONapplication LOCALof GOVERNMENT,subchapter, HOUSEfor OFdefinitions, REPRESENTATIVES,for ASqualified AMENDED,interest APRILrate 17,management 2019agreements ANand ACTfor Amendinginterest Titlerate 53risk (Municipalitiesand Generally)interest ofcost themanagement Pennsylvania Consolidated Statutes, in generalfirst provisions,class furthercities providingand forcounties; 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 formaking interest rate risk and interest cost editorial changes.tchanges. class cities and counties;

and making The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows:

20190HB0320PN1494 - 2 - (3) A schedule [listing] illustrating the following:

20190HB0320PN0299 - 2 - (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.

This paragraph includes schedules of the estimated and maximum net payments of total debt service and scheduled, periodic, net 20190HB0320PN1494 - 3 - payments, which would be due under all of the qualified 20190HB0320PN0299 - 3 - 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 20190HB0320PN1494 - 4 - interest rate management agreements consistent with the 20190HB0320PN0299 - 4 - provisions of this subchapter.

or (ii) if the local government unit is incurring indebtedness under this chapter which has or will be 20190HB0320PN1494 - 5 - issued to a public authority that has entered into or 20190HB0320PN0299 - 5 - 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.

(4) A provision requiring the termination of the agreement if all debt to which the qualified interest rate 20190HB0320PN1494 - 6 - management agreement relates is no longer outstanding.

20190HB0320PN0299 - 6 - (5) The maximum annual interest rate which the local government unit may pay thereunder.

(1) A covenant to include any termination payment or similar payment for a qualified interest rate management 20190HB0320PN1494 - 7 - agreement in its current budget at any time during a fiscal 20190HB0320PN0299 - 7 - year or in a budget adopted in a future fiscal year.

The qualifications shall include a rating for the other party of at least the third highest rating category from a nationally 20190HB0320PN1494 - 8 - recognized rating agency.

20190HB0320PN0299 - 8 - (3) A qualified interest rate management agreement must be awarded by public sale, private sale by negotiation or private sale by invitation.

(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 20190HB0320PN1494 - 9 - respect to each qualified interest rate management agreement it 20190HB0320PN0299 - 9 - has authorized or entered into, including any information required pursuant to any statement issued by the Governmental Accounting Standards Board.

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.,supplement. <-- A POLITICAL SUBDIVISION OR HOME RULE MUNICIPALITY OR OPTIONAL PLAN MUNICIPALITY.

(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 20190HB0320PN1494 - 10 - interest rate management agreements consistent with the provisions of this subchapter.

A local government unit may only authorize a qualified interest rate management agreement 20190HB0320PN0299 - 10 - under this subchapter.

(7) At the time a qualified interest rate management agreement is entered into, the sum of the notional amount and 20190HB0320PN1494 - 11 - all other qualified interest rate management agreements entered into or guaranteed, and then in effect of a local government unit, may not exceed 50% of the total principal 20190HB0320PN0299 - 11 - amount of the aggregate nonelectoral debt plus lease rental debt capacity of the local government unit then outstanding.

Periodic 20190HB0320PN1494 - 12 - scheduled payments based upon a London InterBank Offered Rate index or other index are not permitted unless the interest rate on the associated debt is also based on the same index 20190HB0320PN0299 - 12 - or the index is based on the same type of debt as the associated debt.

(c) Contents of qualified interest rate management 20190HB0320PN1494 - 13 - agreements.--In addition to other provisions approved by the local government unit, a qualified interest rate management agreement must contain all of the following:

20190HB0320PN0299 - 13 - (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).

(i) periodic scheduled payments, not including termination payments, due under the qualified interest 20190HB0320PN1494 - 14 - rate management agreement;

20190HB0320PN0299 - 14 - (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.

20190HB0320PN1494 - 15 - (iv) Certifies that, in executing the transactions under the qualified interest rate management agreement, the other party has complied in all material aspects with 20190HB0320PN0299 - 15 - 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.

(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 20190HB0320PN1494 - 16 - made.

(d) Other provisions of the qualified interest rate management agreement.--The qualified interest rate management 20190HB0320PN0299 - 16 - agreement may include:

(e) Award of qualified interest rate management agreements.-- (1) The local government unit shall establish a process 20190HB0320PN1494 - 17 - for selecting other parties before entering into a qualified interest rate management agreement.

(2) The local government unit shall establish 20190HB0320PN0299 - 17 - qualifications for other parties before entering into a qualified interest rate management agreement.

(ii) In connection with the incurring of debt under subparagraph (i), the local government unit will become 20190HB0320PN1494 - 18 - obligated for all or a portion of the public authority's costs under an interest rate management agreement.

Chapter 82 of Title 53 is amended by adding a 20190HB0320PN0299 - 18 - subchapter to read:

20190HB0320PN1494 - 19 - "Department." The Department of Community and Economic Development of the Commonwealth.

"Interest rate management agreement." An agreement, 20190HB0320PN0299 - 19 - including a confirmation evidencing a transaction effected under a master agreement, that:

THE(2) RESOLUTIONNo ISpayments SUBJECTmay TObe <--made SECTIONto 8003(A)or ANDon (B)behalf (RELATINGof TOa ADVERTISEMENTcontracting ANDauthority 20190HB0320PN1494by -the 20other -party EFFECTIVENESSto OFan ORDINANCES)interest BUTrate MAYmanagement BEagreement VALIDexcept ANDperiodic EFFECTIVEscheduled FORpayments, ALLtermination PURPOSESpayments IMMEDIATELYand UPONattorney ADOPTIONfees ORand ASother OTHERWISEconsultant PROVIDED20190HB0320PN0299 IN- THE20 RESOLUTION.- fees incurred in connection with entering into an interest rate management agreement.

THE(3) RESOLUTIONPeriodic AUTHORIZINGscheduled ANDpayments AWARDINGon Aan QUALIFIEDinterest INTERESTrate RATEmanagement MANAGEMENTagreement AGREEMENTmust ORcommence AUTHORIZINGnot Alater TRANSACTIONthan UNDERthree THEyears AGREEMENTafter MUSTthe INCLUDEdate INof THEthe RESOLUTIONconfirmation ORassociated ASwith ANthe APPENDIXinterest TOrate THEmanagement RESOLUTIONagreement. 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 THIS SUBPART:

(A) ADOPTED BY THE CONTRACTING AUTHORITY;