35-1002. Swap agreements; provisions;
purposes; credit enhancement
A. A governmental entity may enter into, modify, amend and terminate one or more
swap agreements that it determines to be necessary or desirable in connection with, or
incidental to, the conduct of its activities including in connection with the issuance,
carrying or securing of obligations or the acquisition or carrying of investments. A
governmental entity may enter into swap agreements which are to be effective at a future
date or which constitute an option to enter into swap agreements. Swap agreements
entered into by a governmental entity shall contain such provisions, including payment,
term, security, collateralization, termination penalty, default and remedy provisions,
and shall be with such parties as the governmental entity determines to be necessary or
desirable after due consideration to the creditworthiness of the parties. If the party
to the swap agreement which is not the governmental entity is not rated by a nationally
recognized rating agency in one of the top two rating categories of the rating agency at
the time the swap agreement is entered into, the party shall collateralize its
obligations under the swap agreement with securities or cash acceptable to the
governmental entity. Swap agreements may be payable from revenues of a utility
undertaking, excise taxes, ad valorem taxes, street and highway revenues, monies that may
be pledged to pay debt service on any bonds or other long-term obligations relating to
the swap agreements, or any other legally available monies, as determined by the
governmental entity.
B. A governmental entity shall not enter into a swap agreement other than for the
purpose of managing an interest rate, commodity price, investment or similar risk that
arises in connection with, or incidental to, the activities of the governmental
entity. A governmental entity shall not carry on a business of acting as a dealer in
swap agreements.
C. In connection with entering into any swap agreement a governmental entity may
enter into agreements which enhance the governmental entity's credit in the swap
agreement or enhance the liquidity of the swap agreement, including a line of credit,
letter of credit, insurance policy or other security.
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