The Massachusetts House yesterday passed a bill to extend the state’s general obligation pledge to five Massachusetts Turnpike Authority swaps and removed an amendment that would have banned independent state authorities from entering into swap agreements.
The measure passed in a 134 to 19 vote. The bill now heads to the Senate for final approval.
Rep. Joseph Wagner, D-Hampden, who co-chairs the Joint Committee on Transportation, said a prior amendment that Sen. Mark Montigny, D-New Bedford, attached to the measure would limit all independent and quasi-public agencies from potentially benefitting from derivatives.
Wagner filed a new amendment that replaces Montigny’s alteration. The assemblyman’s amendment would require the state’s Finance Advisory Board to review and sign off on swap agreements for independent authorities.
“We tried to look at this and say 'It’s not a one-size fits all,’ ” Wagner said on the House floor. “Some of these swaption arrangements make sense for public entities. They’ve been used for many years [and] they’ve been used successfully ... so they are arrangements which have worked. We have provided through the Finance Advisory Board an appropriate level of oversight and they’re either going to sign off or not give a sign off.”
Allowing MassPike to use the state’s double-A GO credit rating to five floating-to-fixed-rate swaps that total $800 million will help the authority avoid a $350 million to $400 million termination payment to UBS Securities LLC. A termination event would occur if Standard & Poor’s downgrades Ambac Assurance Corp., the insurer on the swaps, by one notch. The bill extends the GO pledge until June 30.
Like Montigny’s amendment, Wagner’s alteration stipulates that the Executive Office for Administration and Finance must consult the state treasurer if a termination event were to occur.