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Substitute Senate Bill No. 595

Public Act No. 02-108

AN ACT CONCERNING REQUIREMENTS FOR ISSUANCE OF MUNICIPAL REFUNDING BONDS AND CERTAIN INTEREST RATE AGREEMENTS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 7-370b of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

[Any] In connection with or incidental to the carrying or selling and issuance of bonds or notes, any municipality, as defined in section 7-369, may obtain from a commercial bank, [or] insurance company or subsidiary of such bank or insurance company, authorized to do business within or without this state a letter of credit, line of credit or other credit facility upon such terms and conditions as shall be approved by the [municipal body empowered to authorize the issuance of bonds, notes or other obligations by such] municipality, for the purpose of providing funds for the payment of such bonds [required by the holder thereof to be] redeemed, [or] repurchased or defeased prior to maturity or for providing additional security for such bonds, notes or other obligations. In connection therewith, such [municipal body] municipality may authorize the execution of reimbursement agreements, remarketing agreements, standby bond purchase agreements, interest rate swap agreements [for the purpose of moderating interest rate fluctuations] and any other necessary or appropriate agreements. If such municipality is required to draw upon any [such] credit facility to redeem bonds prior to maturity, such municipality shall repay the amount of each loan made pursuant to such credit facility within one year from the date it is incurred from the proceeds of refunding bonds, notes or other obligations or from any other available funds. Interest rate swap agreements may include such contracts as the municipality may determine to be necessary or appropriate to place the obligation of the municipality, as represented by the bonds or notes, in whole or in part, on such interest rate or cash flow basis as the municipality may determine, including without limitation, insurance agreements, forward payment conversion agreements, futures contracts, contracts providing for payments based on levels of, or changes in, interest rates or market indices, contracts to manage interest rates risk, including without limitation, interest rate floors or caps, options, puts, calls and similar arrangements. Agreements entered into by any municipality under this section shall contain such payment, security, default, remedy and other terms and conditions as the municipality may deem appropriate and shall be entered into with such party or parties as the municipality may select on the basis of negotiation or competitive bid, after giving due consideration, where applicable, to the creditworthiness of the counter party or counter parties, including any rating by a nationally recognized rating agency, the impact on any rating on outstanding bonds or notes and any other criteria as the municipality may deem appropriate, provided the unsecured long-term obligations of the counter party shall be rated in a category no lower than AA by at least one nationally recognized rating agency. Such municipality may pledge its full faith and credit to its payment obligations, including netting payments, under any agreement entered into pursuant to this section to the extent the full faith and credit of the municipality is pledged to secure the applicable bonds or notes, or to pledge all or any part of the collateral that secures the applicable bonds or notes to the extent permissible under its contracts with bondholders.

Sec. 2. Section 7-370c of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

Any municipality, as defined in section 7-369, which has issued bonds, notes or other obligations pursuant to any public or special act may issue refunding bonds for the purpose of paying, funding or refunding prior to maturity all or any part of such municipality's bonds, notes or other obligations, the redemption premium, if any, with respect thereto, the interest thereon, the costs with respect to the issuance of such refunding bonds and the payment of such refunded bonds, notes or other obligations. Such refunding bonds shall mature not later than (1) in the case of a single series of bonds, notes or other obligations being refunded, the final maturity date thereof; and (2) in the case of multiple series of bonds, notes or other obligations being refunded, the final maturity date of any such series last to occur. Notwithstanding the provisions of the general statutes or any special act, local law or charter governing the authorization and issuance of bonds, notes or other obligations and the appropriation of the proceeds thereof, such refunding bonds shall be authorized, and the proceeds appropriated for the purposes permitted [for] under this section, by resolution of the legislative body of the municipality, and shall be subject to the same limitations and requirements as bonds issued pursuant to this chapter, provided the provisions of section 7-371 regarding limitations on the date of the first maturity, or on the amount of any principal or on any principal and interest installments on any bonds, shall not apply to refunding bonds issued under this section which shall achieve net present value savings after comparing total debt service payable on the refunding bonds to the total debt service payable on the refunded bonds, after accounting for costs of issuance and underwriters' discount. As used in this section "legislative body" means (A) the board of selectmen in a town that does not have a charter, special act or home rule ordinance relating to its government, (B) the council, board of aldermen, representative town meeting, board of selectmen or other elected legislative body described in a charter, special act or home rule ordinance relating to government in a city, consolidated town and city, consolidated town and borough or a town having a charter, special act, consolidation ordinance or home rule ordinance relating to its government, (C) the board of burgesses or other elected legislative body in a borough, or (D) the district committee or other elected legislative body in a district, metropolitan district or other municipal corporation.

Approved May 29, 2002