2005 Legislation
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HOUSE BILL NO. 213 – Idaho health facilities authority

HOUSE BILL NO. 213

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Bill Status



H0213......................................................by STATE AFFAIRS
IDAHO HEALTH FACILITIES AUTHORITY - Adds to existing law relating to public
securities of health institutions to authorize interest rate exchange and
other hedge agreements to be used in connection with the indebtedness and
lease obligations of the Idaho Health Facilities Authority, county and
district hospitals in the manner and under the conditions specified.
                                                                        
02/14    House intro - 1st rdg - to printing
02/15    Rpt prt - to St Aff
02/28    Rpt out - rec d/p - to 2nd rdg
03/01    2nd rdg - to 3rd rdg
03/07    3rd rdg - PASSED - 65-0-5
      AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
      Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Bradford, Chadderdon,
      Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge,
      Field(18), Field(23), Garrett, Hart, Harwood, Henbest, Henderson,
      Jaquet, Kemp, LeFavour, Loertscher, Martinez, Mathews, McGeachin,
      McKague, Miller, Mitchell, Moyle, Nielsen, Nonini, Pasley-Stuart,
      Pence, Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sali, Sayler,
      Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30),
      Smith(24), Smylie, Snodgrass, Trail, Wills, Wood
      NAYS -- None
      Absent and excused -- Cannon, Jones, Lake, Stevenson, Mr. Speaker
    Floor Sponsor - Snodgrass
    Title apvd - to Senate
03/08    Senate intro - 1st rdg - to St Aff
03/22    Rpt out - rec d/p - to 2nd rdg
03/23    2nd rdg - to 3rd rdg
03/24    3rd rdg - PASSED - 34-0-0, 1 vacancy
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst,
      Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce, Richardson,
      Schroeder, Stegner, Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- (District 21 seat vacant)
    Floor Sponsor - Little
    Title apvd - to House
03/24    To enrol
03/28    Rpt enrol - Sp signed
03/29    Pres signed
03/30    To Governor
04/05    Governor signed
         Session Law Chapter 270
         Effective: 07/01/05

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 213
                                                                        
                                 BY STATE AFFAIRS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO PUBLIC SECURITIES OF HEALTH  INSTITUTIONS;  AMENDING  CHAPTER  14,
  3        TITLE  39,  IDAHO  CODE,  BY THE ADDITION OF A NEW SECTION 39-1447A, IDAHO
  4        CODE, TO AUTHORIZE INTEREST RATE EXCHANGE AND OTHER HEDGE AGREEMENTS TO BE
  5        USED IN CONNECTION WITH THE INDEBTEDNESS  AND  LEASE  OBLIGATIONS  OF  THE
  6        IDAHO HEALTH FACILITIES AUTHORITY AND COUNTY AND DISTRICT HOSPITALS IN THE
  7        MANNER AND UNDER THE CONDITIONS SPECIFIED.
                                                                        
  8    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  9        SECTION  1.  That  Chapter  14,  Title 39, Idaho Code, be, and the same is
 10    hereby amended by the addition thereto of a NEW SECTION, to be known and  des-
 11    ignated as Section 39-1447A, Idaho Code, and to read as follows:
                                                                        
 12        39-1447A.  PUBLIC  SECURITIES  OF HEALTH INSTITUTIONS -- INTEREST EXCHANGE
 13    AGREEMENTS. (1) As used in this section:
 14        (a)  "Authorized entity" means any of the following entities: the  author-
 15        ity,  a  county  that has created a hospital board under chapter 36, title
 16        31, Idaho Code, and that owns and operates a  county  hospital  or  health
 17        facility,  or  a  hospital  district  created  and  existing under section
 18        39-1331, et seq., Idaho Code, that owns and operates a hospital or  health
 19        facility.
 20        (b)  "Public  securities" means bonds, notes, debentures, interim certifi-
 21        cates, bond anticipation notes, commercial paper, or  other  evidences  of
 22        indebtedness, or lease, installment purchase, or other agreements, or cer-
 23        tificates of participation therein, issued or entered into by or on behalf
 24        of  an authorized entity in accordance with applicable law for the purpose
 25        of  financing  health  institutions,  and  including  specifically  leases
 26        between the authority and counties authorized  by  section  31-836,  Idaho
 27        Code;  and between the authority and hospital districts authorized by sec-
 28        tion 39-1339, Idaho Code.
 29        (2)  An authorized entity that has issued or entered into, or proposes  to
 30    issue  or  enter  into,  public  securities may enter into an agreement for an
 31    exchange of payments based on interest rates or for a hedge of interest  rates
 32    as provided in this section if the authorized entity finds that such an agree-
 33    ment would be in the best interest of the authorized entity.
 34        (3)  An authorized entity may enter into an agreement to exchange payments
 35    based on interest rates or to hedge interest rates only if:
 36        (a)  The  long-term debt obligations of the person or entity with whom the
 37        authorized entity enters into the agreement are rated in either of the two
 38        (2) highest rating categories of a nationally  recognized  rating  agency,
 39        without regard to any modification of the rating; or
 40        (b)  The  obligations  pursuant  to  the agreement of the person or entity
 41        with whom the authorized entity enters into the agreement are either:
 42             (i)   Guaranteed by a person or entity whose long-term  debt  obliga-
 43             tions are rated in either of the two (2) highest rating categories of
                                                                        
                                           2
                                                                        
  1             a  nationally recognized rating agency, without regard to any modifi-
  2             cation of the rating; or
  3             (ii)  Collateralized by obligations  deposited  with  the  authorized
  4             entity  or  an  agent  of  the authorized entity which would: (A)  be
  5             legal investment for such authorized entity and is in either  of  the
  6             two  (2)  highest rating categories of a nationally recognized rating
  7             agency, without  regard  to  any  modification  of  the  rating;  and
  8             (B)  have  a  market value at least equal to the amount the person or
  9             entity would be required to pay  to  the  authorized  entity  if  the
 10             agreement was terminated before its final payment date, excluding any
 11             costs, legal fees or consequential damages.
 12        (4)  An  authorized  entity  may  agree, with respect to public securities
 13    that the authorized entity has issued or entered into, or proposes to issue or
 14    enter into, bearing interest at a variable rate, to pay sums equal to interest
 15    at a fixed rate or rates or at a different variable rate  determined  pursuant
 16    to a formula set forth in the agreement on an amount not to exceed the princi-
 17    pal  amount  of  the  public securities with respect to which the agreement is
 18    made, in exchange for an agreement to pay sums equal to interest on  the  same
 19    principal amount at a variable rate determined pursuant to a formula set forth
 20    in the agreement.
 21        (5)  An  authorized  entity  may  agree, with respect to public securities
 22    that the authorized entity has issued or entered into, or proposes to issue or
 23    enter into, bearing interest at a fixed rate or rates, to pay  sums  equal  to
 24    interest  at a variable rate determined pursuant to a formula set forth in the
 25    agreement on an amount not to exceed the outstanding principal amount  of  the
 26    public securities with respect to which the agreement is made, in exchange for
 27    an  agreement  to pay sums equal to interest on the same principal amount at a
 28    fixed rate or rates set forth in the agreement.
 29        (6)  An authorized entity may, with respect to public securities that  the
 30    authorized  entity  has  issued or entered into, or proposes to issue or enter
 31    into, bearing interest at a fixed rate or rates  or  at  a  variable  rate  or
 32    rates, or with respect to securities with respect to which it has entered into
 33    an  interest  rate exchange agreement as described in subsection (4) or (5) of
 34    this section, enter into an interest rate  hedge  agreement  to  hedge  future
 35    interest  rates including, without limitation, an interest rate cap agreement,
 36    an interest rate floor agreement or any combination thereof,  on  a  specified
 37    principal sum in exchange for a sum of money or an agreement to pay sums equal
 38    to  interest on the same principal amount at a fixed rate or rates or variable
 39    rate or rates set forth in the agreement.
 40        (7)  The term of an agreement entered into pursuant to this  section  must
 41    not  exceed the term of the public securities with respect to which the agree-
 42    ment was made.
 43        (8)  An agreement entered into pursuant to this section is not a  debt  or
 44    indebtedness  or  liability  of  the authorized entity for the purposes of any
 45    limitation upon the debt or indebtedness or liability of the authorized entity
 46    or any requirement for an election with regard to  the  issuance  of  debt  or
 47    indebtedness or liability that is applicable to the authorized entity.
 48        (9)  Limitations  upon  the  rate  of interest on a public security do not
 49    apply to interest paid pursuant to an agreement entered into pursuant to  this
 50    section.
 51        (10) An  authorized entity which has entered into an agreement pursuant to
 52    this section with respect to those public securities may treat the  amount  or
 53    rate  of  interest  on the public securities as the amount or rate of interest
 54    payable after giving effect to the agreement for the purpose of calculating:
 55        (a)  Rates and charges of a revenue-producing  enterprise  whose  revenues
                                                                        
                                           3
                                                                        
  1        are pledged to or used to pay public securities of the authorized entity;
  2        (b)  Statutory  requirements concerning revenue coverage that are applica-
  3        ble to public securities of the authorized entity;
  4        (c)  Tax levies to pay debt service on public securities of the authorized
  5        entity; and
  6        (d)  Any other amounts which are based upon the rate of interest of public
  7        securities of the authorized entity.
  8        (11) Subject to covenants applicable to the public  securities,  any  pay-
  9    ments  required to be made by the authorized entity under the agreement may be
 10    made from money pledged to pay debt service  on  the  public  securities  with
 11    respect  to  which  the agreement was made or from any other legally available
 12    source.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE

                             RS 14859

Interest rate exchange agreements are contracts under which an issuer
of bonds can convert its interest payments from a fixed rate to a
variable rate, or vice-versa.  Such contracts can be advantageous to
a bond issuer by reducing borrowing costs and reducing risk.

Because such contracts are an obligation related to debt, political
subdivisions require specific statutory power from the legislature in
order to enter into such contracts.  Section 501(C)(3) hospitals are
not political subdivisions, and therefore can enter into interest rate
exchange agreements under existing nonprofit corporation law.  This
legislation will level the playing field by allowing the county-owned
and hospital district hospitals to avail themselves of this financial
tool.


                           FISCAL NOTE

This legislation will have no impact on the general fund.  Implementing
individual interest rate exchange agreements will enable political
subdivisions that operate health care facilities to reduce their
interest costs on debt and thereby lower the cost of health care.


Contact
Name:  Neil P. Moss, Idaho Health Facilities Authority 
Phone: 208-342-8772
Name:  Patrick V. Collins
Phone: 208-388-4828

STATEMENT OF PURPOSE/FISCAL NOTE                       H 213