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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
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature First Regular Session - 2005IN 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 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