SCRANTON TIMES-TRIBUNE: A Senate panel voted Tuesday to restrict the use of complicated financial transactions known as interest-rate swaps by local governments and school districts, but not to eliminate them.
Swaps, which depend on local governments issuing variable-rate bonds and notes to finance projects, have been in the spotlight in recent years because of state audits highlighting their risky nature and documenting taxpayer losses from swaps and the mounting debt tied to a Harrisburg incinerator project.
The Local Government Committee that has been addressing municipal debt issues amended a bill that sought to ban swaps completely for local governments, school districts and municipal authorities. The amendment is designed to eliminate some risky practices associated with swaps such as up-front payments designed to make the transactions more attractive to local officials, senators said. Other provisions would limit the size of swaps in relation to debt, set a maximum 10-year expiration date, provide more disclosure on deals and require that outside financial advisers on swaps be free of conflicts of interest… (more)
EDITOR: Too late in two ways for the Convention Center. Had a swap not been made, interests rates on its bonds would be much lower today. But if they had not made the SWAP deal, they would not have been able to obtain sufficient financing to build the project.
