1. Authorized issuer; powers. In connection with the issuance of State-supported debt, or in connection with such State-supported debt already outstanding, an authorized issuer shall have the power to:

1. (a) enter into interest rate exchange or similar agreements with any person under such terms and conditions as the authorized issuer may determine, including provisions as to default or early termination and indemnification by the authorized issuer or any other party thereto for loss of benefits as a result thereof;
2. (b) procure insurance, letters of credit or other credit enhancement with respect to agreements described in paragraph (a) of this subdivision;
3. (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 is authorized by applicable law with respect to security for its bonds, notes or other obligations, provided, however, that any payment or performance of obligations with respect to agreements described in paragraph (a) of this subdivision in connection with debt obligations which carry the full faith and credit of the state shall be subject to appropriation;
4. (d) the state, acting through the director of the budget or other state officials who are so authorized by applicable law with respect to such bonds, notes or other obligations, shall also be authorized to enter into or amend agreements related to such State-supported debt to provide for payment, subject to appropriation, to such authorized issuer of any amounts required to be paid by such authorized issuer under any such interest rate exchange or similar agreement;
5. (e) if such funds are available, provide collateral for its own obligations under any such interest rate exchange or similar agreement; and
6. (f) modify, amend, or replace, such agreements.

2. Interest rate exchange; limitations. Any interest rate exchange or similar agreements entered into pursuant to subdivision one of this section shall be subject to the following limitations:

1. (a) the counterparty thereto shall have credit ratings from at least one nationally recognized statistical rating agency that is within the two highest investment grade categories and ratings which are obtained from any other nationally recognized statistical rating agencies shall also be 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;
2. (b) the written contract shall require that should the rating: (i) of the counterparty, if its payment obligations are not unconditionally guaranteed by another entity, or (ii) of the entity unconditionally guaranteeing its payment obligations, if so secured, fall below the rating required by paragraph (a) 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 authorized issuer and such collateral shall be deposited with the authorized issuer or an agent thereof;
3. (c) the total notional amount of all interest rate exchange or similar agreements for all authorized issuers to be in effect shall not exceed an amount equal to fifteen percent of the total amount of state-supported debt outstanding as of the initial date of entering into each new agreement; provided, however, that such total notional amount shall not include any excluded agreements.
4. (d) no interest rate exchange or similar agreement shall have a maturity exceeding the maturity of the related State-supported debt;
5. (e) each interest rate exchange or similar agreement shall be subject to an independent finding that its terms and conditions reflect a fair market value of such agreement as of the date of its execution, regardless of whether such agreement was solicited on a competitive or negotiated basis; and
6. (f) each interest rate exchange or similar agreement, including the modification or termination thereof, shall be subject to the approval of the director of the budget, the governing board of such authorized issuer, and shall not be considered a project for the purposes of article one-A of the public authorities law.

3. Guidelines and reports. (a) Prior to authorizing the approval of any contract for interest rate exchange or similar agreement pursuant to subdivision one of this section, the authorized issuer's governing board shall adopt guidelines for the use of interest rate exchange or similar agreements which shall include, but not be limited to the following:

1. (i) the conditions under which such contracts can be entered into;
2. (ii) the methods by which such contracts are to be solicited and procured;
3. (iii) the form and content such contracts shall take;
4. (iv) the aspects of risk exposure associated with such contracts;
5. (v) standards and procedures for counterparty selection;
6. (vi) standards for the procurement of credit enhancement, liquidity facilities, or the setting aside of reserves in connection with such contracts;
7. (vii) provisions for collateralization or other requirements for securing the financial interest in such contracts;
8. (viii) the long-term implications associated with entering into such agreements, such as costs of borrowing, historical trends, use of capacity for variable rate bonds and related credit enhancements, and any potential impact on the future ability to call bonds, including opportunities to refund related debt obligations, and similar considerations;
9. (ix) the methods to be used to reflect such contracts in the authorized issuer's financial statements;
10. (x) financial monitoring and periodic assessment of such contracts by the authorized issuer; and
11. (xi) such other matters relating thereto as the governing board shall deem necessary and proper.
12. (b) The guidelines to be adopted pursuant to paragraph (a) of this subdivision shall be developed in consultation with and subject to the approval of the director of the budget.

13. (c) The authorized issuer shall issue a monthly report to the director of the budget, the chairs of the senate finance committee and the assembly ways and means committee, and the state comptroller, on or before the fifteenth day of each month 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, which 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:

    1. (i) a description of the contract, including a summary of the terms and conditions, rates, maturity, the estimated market value of each agreement, and other provisions thereof and the method of procurement;
    2. (ii) any amounts which were required to be paid and received, and any amounts which actually were paid and received thereunder;
    3. (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;
    4. (iv) a description of each counterparty;
    5. (v) an assessment of the counterparty risk, termination risk, and other risks associated therewith; and
    6. (vi) such report shall include a copy of the guidelines required by paragraph (a) of this subdivision in the month after they are adopted or subsequently modified.
14. (d) In addition, the director of the budget shall issue and make public on or before October thirtieth of each year an annual performance report for the prior state fiscal year on interest rate exchange and similar agreements to the chairs of the senate finance committee and the assembly ways and means committee, which shall list all such interest rate exchange or similar agreements entered into pursuant to this section and in effect, and shall include, but not be limited to their annual and cumulative performance, including the net impact of the related variable rate debt instruments, support and related costs, and, for any excluded agreement entered into during such state fiscal year, an independent finding on how it reduced or eliminated a situation of risk or exposure under an existing interest rate exchange or similar agreement. The authorized issuers shall be required to provide such information in a timely manner on their respective interest rate exchange and similar agreements as the director of the budget determines necessary for the purpose of producing such annual performance report.