Arizona Laws 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 that are to be effective at a future date or that 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 that 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.
Terms Used In Arizona Laws 35-1002
- Governmental entity: means this state, any county, city, town, municipality or other political subdivision of this state or any department, agency, board, commission, authority, political subdivision, public corporation or other public entity of any of the foregoing or controlled by any of the foregoing, provided that each of the foregoing must comprise a geographical area with a population of at least three hundred thousand persons according to the most recent United States decennial census or special census. See Arizona Laws 35-1001
- including: means not limited to and is not a term of exclusion. See Arizona Laws 1-215
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Obligations: means bonds, notes, bond anticipation notes, commercial paper or other evidences of indebtedness or lease, installment purchase or other agreements or purchasing programs or certificates of participation. See Arizona Laws 35-1001
- Swap agreement: means an agreement, between a governmental entity and a financial institution, including an insurance company, bank indemnity company or a company related to a financial institution, pursuant to which payments are to be made by the governmental entity to the financial institution and are also to be made by the financial institution to the governmental entity, and which is entered into in order to manage interest rate risk, investment risk, or commodity prices or is entered into in connection with carrying or securing of obligations of a governmental entity. See Arizona Laws 35-1001
B. A governmental entity shall not enter into a swap agreement other than to implement its investment policy or 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 that 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.