Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 273 (2015GS)

Sponsor

Rep. Knotwell, J.

Final action

Governor Signed 3/25/2015

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• requires the Utah Housing Corporation or a public treasurer to receive approval from the state treasurer when entering into an interest rate contract.

Every vote on this bill

Bill text

INTEREST RATE SWAP AMENDMENTS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: John Knotwell
Senate Sponsor: 
Wayne A. Harper
LONG TITLE
General Description:
This bill amends provisions related to an interest rate contract.
Highlighted Provisions:
This bill:
▸ requires the Utah Housing Corporation or a public treasurer to receive approval
from the state treasurer when entering into an interest rate contract.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
35A-8-712
, as renumbered and amended by Laws of Utah 2012, Chapter 212
51-7-17
, as last amended by Laws of Utah 2014, Chapter 307
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
35A-8-712
 is amended to read:
35A-8-712.
Corporation -- Additional powers.
(1) To accomplish the declared purposes of this part, the corporation has the following
powers:
(a) to purchase mortgage loans originated by mortgage lenders or local public bodies
made for the purpose of financing the construction, development, rehabilitation, or purchase of
residential housing for low and moderate income persons;
(b) to make mortgage loans and to provide financial assistance to housing sponsors for
the purpose of financing the construction, development, rehabilitation, or purchase of
residential housing for low and moderate income persons;
(c) to make mortgage loans and provide financial assistance to housing sponsors for the
purpose of financing the operations of a housing development that are necessary or desirable to
enable the housing development to remain available as residential housing for low and
moderate income persons, whether or not the housing development has been financed by the
corporation;
(d) to provide financial assistance to any housing authority created under Part 4,
Housing Authorities, which housing authorities may enter into commitments for and accept
loans for a housing project as defined in Section 
35A-8-401
; and
(e) to make mortgage loans and to provide financial assistance to low and moderate
income persons for the construction, rehabilitation, or purchase of residential housing.
(2) The corporation may issue bonds to purchase loans under Subsection (1)(a) only
after a determination by the corporation that the loans are not otherwise available upon
reasonably equivalent terms and conditions from private lenders.
(3) Loans for owner-occupied housing made under Subsection (1)(a) may not include a
penalty for prepayment.
(4) The corporation shall make rules or adopt policies and procedures to govern the
activities authorized under this section, including:
(a) procedures for the submission of requests or the invitation of proposals for the
purchase and sale of mortgage loans and the making of mortgage loans;
(b) rates, fees, charges, and other terms and conditions of originating or servicing
mortgage loans in order to protect against a realization of an excessive financial return or
benefit by the originator or servicer;
(c) the type and amount of collateral, payment bonds, performance bonds, or other
security to be provided for construction loans made by the corporation;
(d) the nature and amounts of fees to be charged by the corporation to provide for
expenses and reserves of the corporation;
(e) procedures allowing the corporation to prohibit persons who fail to comply with the
rules of the corporation with respect to the operations of a program of the corporation from
participating, either directly or indirectly, in the programs of the corporation;
(f) the terms and conditions under which the corporation may purchase and make
mortgage loans under each program of the corporation;
(g) the terms and conditions under which the corporation may provide financial
assistance under each program of the corporation;
(h) the terms and conditions under which the corporation may guarantee mortgage
loans under each program of the corporation; and
(i) any other matters related to the duties or exercise of powers under this section.
(5) (a) (i) The trustees of the corporation shall elect the directors, trustees, and
members, if any, of each subsidiary.
(ii) Service by a trustee of the corporation in any of these capacities does not constitute
a conflict of interest for any purpose.
(iii) The corporation may delegate any of its powers and duties under this part to any
subsidiary.
(iv) Subsidiaries shall constitute legal entities separate and distinct from each other, the
corporation, and the state.
(b) A note, bond, and other obligation of a subsidiary shall contain on its face a
statement to the effect that:
(i) the subsidiary is obligated to pay the note, bond, or other obligation solely from the
revenues or other funds of the subsidiary;
(ii) neither the corporation nor the state nor any of its political subdivisions is obligated
to pay the note, bond, or other obligation; and
(iii) neither the faith and credit nor the taxing power of the state or its political
subdivisions is pledged to the payment of principal, or redemption price of, or the interest on
the note, bond, or other obligation.
(c) Upon dissolution of a subsidiary of the corporation, any assets shall revert to the
corporation or to a successor to the corporation or, failing this succession, to the state.
(6) (a) The corporation may
, with the approval of the state treasurer
:
(i) enter into interest rate contracts that its trustees determine are necessary, convenient,
or appropriate for the control or management of debt or for the cost of servicing debt; and
(ii) use corporation funds to satisfy its payment obligations under those contracts.
(b) An interest rate contract may contain payment, security, default, termination,
remedy, and other terms and conditions that the trustees consider appropriate.
(c) An interest rate contract and funds used in connection with an interest rate contract
may not be considered a deposit or investment.
Section 2. Section 
51-7-17
 is amended to read:
51-7-17.
Criteria for investments.
(1) As used in this section:
(a) "Affiliate" means, in relation to a provider:
(i) an entity controlled, directly or indirectly, by the provider;
(ii) an entity that controls, directly or indirectly, the provider; or
(iii) an entity directly or indirectly under common control with the provider.
(b) "Control" means ownership of a majority of the voting power of the entity or
provider.
(2) (a) A public treasurer shall consider and meet the following objectives when
depositing and investing public funds:
(i) safety of principal;
(ii) protection of principal during periods of financial market volatility;
(iii) need for liquidity;
(iv) yield on investments;
(v) recognition of the different investment objectives of operating and permanent
funds; and
(vi) maturity of investments, so that the maturity date of the investment does not
exceed the anticipated date of the expenditure of funds.
(b) A public treasurer shall invest the proceeds of general obligation bond issues, tax
anticipation note issues, and funds pledged or otherwise dedicated to the payment of interest
and principal of general obligation bonds and tax anticipation notes issued by the state or a
political subdivision of the state in accordance with:
(i) Section 
51-7-11
; or
(ii) the terms of the borrowing instrument applicable to those issues and funds, if those
terms are more restrictive than Section 
51-7-11
.
(c) A public treasurer shall invest the proceeds of bonds other than general obligation
bonds and the proceeds of notes other than tax anticipation notes issued by the state or a
political subdivision of the state, and all funds pledged or otherwise dedicated to the payment
of interest and principal of those notes and bonds:
(i) in accordance with the terms of the borrowing instruments applicable to those bonds
or notes; or
(ii) if none of those provisions are applicable, in accordance with Section 
51-7-11
.
(d) A public treasurer may invest proceeds of bonds, notes, or other money pledged or
otherwise dedicated to the payment of debt service on the bonds or notes in investment
agreements if:
(i) the investment is permitted by the terms of the borrowing instrument applicable to
those bonds or notes or the borrowing instrument authorizes the investment as an investment
permitted by the State Money Management Act;
(ii) either the provider of the investment agreement or an entity fully, unconditionally,
and irrevocably guaranteeing the provider's obligations under the investment agreement has
received a rating of:
(A) at least "AA-" from S&P or "Aa3" from Moody's for investment agreements
having a term of more than one year; or
(B) at least "A-1+" from S&P or "P-1" from Moody's for investment agreements
having a term of one year or less;
(iii) the investment agreement contains provisions approved by the public treasurer that
provide that, in the event of a rating downgrade of the provider or its affiliate guarantor, as
applicable, by either S&P or Moody's below the "A" category or its equivalent, or a rating
downgrade of a nonaffiliate guarantor by either S&P or Moody's below the "AA" category or
its equivalent, the provider must, within 30 days after receipt of notice of the downgrade:
(A) collateralize the investment agreement with direct obligations of, or obligations
guaranteed by, the United States of America having a market value at least equal to 105% of
the amount of the money invested, valued at least quarterly, and deposit the collateral with a
third-party custodian or trustee selected by the public treasurer; or
(B) terminate the agreement without penalty and repay all of the principal invested and
the interest accrued on the investment to the date of termination; and
(iv) the public treasurer receives an enforceability opinion from the legal counsel of the
investment agreement provider and, if there is a guarantee, an enforceability opinion from the
legal counsel of the guarantor with respect to the guarantee.
(3) (a) As used in this Subsection (3), "interest rate contract" means interest rate
exchange contracts, interest rate floor contracts, interest rate ceiling contracts, or other similar
contracts authorized by resolution of the governing board or issuing authority, as applicable.
(b) A public treasurer may
, with the approval of the state treasurer
:
(i) enter into interest rate contracts that the governing board or issuing authority
determines are necessary, convenient, or appropriate for the control or management of debt or
for the cost of servicing debt; and
(ii) use its public funds to satisfy its payment obligations under those contracts.
(c) Those contracts:
(i) shall comply with the requirements established by council rules; and
(ii) may contain payment, security, default, termination, remedy, and other terms and
conditions that the governing board or issuing authority considers appropriate.
(d) Neither interest rate contracts nor public funds used in connection with these
interest rate contracts may be considered a deposit or investment.
(4) A public treasurer shall ensure that all public funds invested in deposit instruments
are invested with qualified depositories within Utah, except:
(a) for deposits made in accordance with Section 
53B-7-601
 in a foreign depository
institution as defined in Section 
7-1-103
;
(b) reciprocal deposits, subject to rules made by the council under Subsection
51-7-18
(2); or
(c) if national market rates on instruments of similar quality and term exceed those
offered by qualified depositories, investments in out-of-state deposit instruments may be made
only with institutions that meet quality criteria set forth by the rules of the council.