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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 - 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
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