(i) enter into interest rate exchange or similar agreements with any person under such terms and conditions as the mayor and comptroller may determine, including provisions as to default or early termination and indemnification by the city or any other party thereto for loss of benefits as a result thereof;

(ii) procure insurance, letters of credit or other credit enhancement with respect to such agreements;

(iii) provide security for the payment or performance of its obligations with respect to agreements described in item (i) of this subdivision from such sources and with the same effect as is authorized by applicable law with respect to security for its bonds, notes or other obligations, provided, however, that any payment or performance of obligations with respect to agreements described in item (i) of this subdivision in connection with debt obligations which carry the full faith and credit of the city shall be subject to appropriation; and

(iv) modify, amend, or replace such agreements. 2. For the purposes of this paragraph:

(i) "Interest rate exchange or similar agreement" shall mean a written contract entered into in connection with the issuance of city debt, or in connection with such city debt already outstanding, with a counterparty to provide for an exchange of payments based upon fixed and/or variable interest rates, and shall be for exchanges in currency of the United States of America only.

(ii) "Excluded agreements" shall mean the total notional amount of interest rate exchange or similar agreements entered into for the purpose of reducing or eliminating a situation of risk or exposure under an existing interest rate exchange or similar agreement, including, but not limited to a counterparty downgrade, default, or other actual or potential economic loss.

(iii) Interest rate exchange; limitations. Any interest rate exchange or similar agreements entered into pursuant to item (i) of subdivision one of this paragraph shall be subject to the following limitations:

(A) the counterparty thereto shall have credit ratings from at least one nationally recognized statistical rating agency that is within the two highest investment grade categories and ratings which are obtained from any other nationally recognized statistical rating agencies shall also be within the three highest investment grade categories, or the payment obligations of the counterparty shall be unconditionally guaranteed by an entity with such credit ratings;

(B) the written contract shall require that should the rating: (I) of the counterparty, if its payment obligations are not unconditionally guaranteed by another entity, or (II) of the entity unconditionally guaranteeing its payment obligations, if so secured, fall below the rating required by clause (A) of this item, that the obligations of such counterparty shall be fully and continuously collateralized by direct obligations of, or obligations the principal and interest on which are guaranteed by, the United States of America, or any agency thereof with a net market value of at least one hundred two percent of the net market value of the contract to the authorized issuer and such collateral shall be deposited with the authorized issuer or an agent thereof;

(C) the total notional amount of all interest rate exchange or similar agreements shall not exceed an amount equal to twenty-five percent of the limit prescribed by section 104.00 of this chapter; provided, however, that such total notional amount shall not include any excluded agreements;

(D) no interest rate exchange or similar agreement shall have a maturity exceeding the maturity of related city debt; and

(E) each interest rate exchange or similar agreement shall be subject to an independent finding that its terms and conditions reflect a fair market value of such agreement as of the date of its execution, regardless of whether such agreement was solicited on a competitive or negotiated basis. 3. (i) Prior to authorizing the approval of any contract for interest rate exchange or similar agreement pursuant to subdivision one of this paragraph, the finance board of the city shall adopt guidelines for the use of interest rate exchange or similar agreements which shall include, but not be limited to the following:

(A) the conditions under which such contracts can be entered into;

(B) the methods by which such contracts are to be solicited and procured;

(C) the form and content such contracts shall take;

(D) the aspects of risk exposure associated with such contracts;

(E) standards and procedures for counterparty selection;

(F) standards for the procurement of credit enhancement, liquidity facilities, or the setting aside of reserves in connection with such contracts consistent with the limitations of section 168.00 of this chapter;

(G) provisions for collateralization or other requirements for securing the financial interest in such contracts;

(H) the long-term implications associated with entering into such agreements, such as costs of borrowing, historical trends, use of capacity for variable rate bonds and related credit enhancements, and any potential impact on the future ability to call bonds, including opportunities to refund related debt obligations, and similar considerations;

(I) the methods to be used to reflect such contracts in the city's financial statements;

(J) financial monitoring and periodic assessment of such contracts by the city; and

(K) such other matters relating thereto as the finance board shall deem necessary and proper.

(ii) The city shall issue a quarterly report to the director of the budget, the chairs of the senate finance committee and the assembly ways and means committee, and the state comptroller, on or before the fifteenth day of each month following the end of each such quarter in which it enters into or continues to be a party to a contract for interest rate exchange or similar agreement, which shall list all such contracts entered into pursuant to this section and shall include, but not be limited to, the following information for each such contract, as applicable:

(A) a description of the contract, including a summary of the terms and conditions, rates, maturity, the estimated market value of each agreement, and other provisions thereof and the method of procurement;

(B) any amounts which were required to be paid and received, and any amounts which actually were paid and received thereunder;

(C) any credit enhancement, liquidity facility or reserves associated therewith including an accounting of all costs and expenses incurred, whether or not in conjunction with the procurement of credit enhancement or liquidity facilities;

(D) a description of each counterparty;

(E) an assessment of the counterparty risk, termination risk, and other risks associated therewith; and

(F) such report shall include a copy of the guidelines required by item (i) of this subdivision in the quarter after they are adopted or subsequently modified.