1. A municipality that has issued or proposes to issue municipal securities in the amount of $10,000,000 or more may enter into an agreement for an exchange of interest rates as provided in this section if it finds that such an agreement would be in the best interests of the municipality.
2. A municipality may enter into an agreement to exchange interest rates only if:
(a) The long-term debt obligations of the person with whom the municipality enters the agreement are rated "A" or better by a nationally recognized rating agency; or
(b) The obligations pursuant to the agreement of the person with whom the municipality enters the agreement are either:
(1) Guaranteed by a person whose long-term debt obligations are rated "A" or better by a nationally recognized rating agency; or
(2) Collateralized by obligations deposited with the municipality or an agent of the municipality which would be legal investments for the State pursuant to NRS 355.140 and which have a market value at the time agreement is made of not less than 100 percent of the principal amount upon which the exchange of interest rates is based.
3. A municipality may agree, with respect to securities that the municipality has issued or proposes to issue bearing interest at a variable rate, to pay sums equal to interest at a fixed rate or rates or at a different variable rate determined pursuant to a formula set forth in the agreement on an amount not to exceed the principal amount of the municipal securities with respect to which the agreement is made, in exchange for an agreement to pay sums equal to interest on the same principal amount at a variable rate determined pursuant to a formula set forth in the agreement.
4. A municipality may agree, with respect to securities that the municipality has issued or proposes to issue bearing interest at a fixed rate or rates, to pay sums equal to interest at a variable rate determined pursuant to a formula set forth in the agreement on an amount not to exceed the outstanding principal amount of the municipal securities with respect to which the agreement is made, in exchange for an agreement to pay sums equal to interest on the same principal amount at a fixed rate or rates set forth in the agreement.
5. The term of an agreement entered into pursuant to this section must not exceed the term of the municipal securities with respect to which the agreement was made.
6. An agreement entered into pursuant to this section is not a debt or indebtedness of the municipality for the purposes of any limitation upon the indebtedness of the municipality or any requirement for an election with regard to the issuance of securities that is applicable to the municipality.
7. Limitations upon the rate of interest on a municipal security do not apply to interest paid pursuant to an agreement entered into pursuant to this section.
8. A municipality which has entered into an agreement pursuant to this section with respect to those securities may treat the amount or rate of interest on the securities as the amount or rate of interest payable after giving effect to the agreement for the purpose of calculating:
(a) Rates and charges of a revenue-producing enterprise whose revenues are pledged to or used to pay municipal securities;
(b) Statutory requirements concerning revenue coverage that are applicable to municipal securities;
(c) Tax levies to pay debt service on municipal securities; and
(d) Any other amounts which are based upon the rate of interest of municipal securities.
9. Subject to covenants applicable to the securities, any payments required to be made by the municipality under the agreement may be made from money pledged to pay debt service on the securities with respect to which the agreement was made or from any other legally available source.
(Added to NRS by 1991, 356)