[§356D-27]  Arbitrage provisions; interestrate.  (a)  Notwithstanding any other law to the contrary, neither theauthority nor the director of finance shall make loans or purchase mortgageswith the proceeds of general obligation bonds of the State or from a revolvingfund established or maintained from the proceeds of bonds, at a rate ofinterest or upon terms and conditions that would cause any general obligationbond of the State or any bond to be an "arbitrage bond" within themeaning of that term as defined in the Internal Revenue Code of 1986, asamended, and the regulations of the Internal Revenue Service adopted pursuantthereto.

(b)  The rate of interest on loans made underthis chapter from the proceeds of general obligation bonds of the State shallbe established by the authority, with the approval of the director of finance,after each sale of general obligation bonds of the State, the proceeds of whichare to be used for the purposes of making loans or purchasing mortgages underthis chapter.  If no sale of general obligation bonds of the State intervenesin a twelve-month period after the last rate fixing, the authority may reviewthe then existing rates on loans or mortgages made under this chapter from theproceeds of general obligation bonds of the State and retain the existing rateor, with the approval of the director of finance, establish different rates.

(c)  The director of finance shall approvethose rates so as to produce up to, but not in excess of, the maximum yield tothe State or the authority permitted under the Internal Revenue Code of 1986,as amended, and the regulations of the Internal Revenue Service adoptedpursuant thereto, on the assumption that the general obligation bonds of theState, the proceeds of which have been or are to be used for the purposes ofmaking loans or purchasing mortgages under this chapter, would otherwise be"arbitrage bonds" under the Internal Revenue Code of 1986, asamended, and the regulations of the Internal Revenue Service adopted pursuantthereto, were the maximum yield to be exceeded.  The establishment of the ratesof interest shall be exempt from chapter 91. [L 2006, c 180, pt of §2]