093_SB1601sam002

 










                                     LRB093 02811 MKM 13413 a

 1                    AMENDMENT TO SENATE BILL 1601

 2        AMENDMENT NO.     .  Amend Senate Bill 1601, on  page  1,
 3    immediately below line l, by inserting the following:

 4        "WHEREAS,   The   General   Assembly   takes   note  that
 5    governmental units in the State  must  borrow  funds  in  the
 6    current  bond  market,  and  the  issuance  of bonds or other
 7    obligations as what are commonly referred to as variable rate
 8    demand bonds, auction bonds, or  commercial  paper  bonds  is
 9    ever  increasing,  and  is  frequently the most advisable and
10    economic means of borrowing; and

11        WHEREAS, It is sometimes most advantageous in  connection
12    with  such  borrowings  to  enter  into cap, collar, swap, or
13    other derivative  transactions  relating  to  interest  rates
14    which  serve to hedge interest rate risk and it is frequently
15    necessary to procure credit enhancement in the forms commonly
16    referred to as municipal bond insurance, letters  of  credit,
17    lines  of credit, standby bond purchase agreements, or surety
18    bonds,  and  the  like,  in  such  demand  bond  and  similar
19    transactions; and

20        WHEREAS, Existing law authorizes such  transactions,  but
21    it  is  advisable  for  the  law  to  be more fully stated to
22    accommodate same, expressly  permitting  certain  aspects  of
 
                            -2-      LRB093 02811 MKM 13413 a
 1    such transactions; therefore"; and

 2    on  page  1,  by  replacing  lines  4  through  22  with  the
 3    following:

 4        "Section  5.   The  Bond  Authorization Act is amended by
 5    changing Section 7 as follows:

 6        (30 ILCS 305/7) (from Ch. 17, par. 6607)
 7        Sec.  7.  Interest  rate  swaps.  For  purposes  of  this
 8    Section, terms are as defined in the  Local  Government  Debt
 9    Reform  Act.    With  respect to all or part of any currently
10    outstanding or proposed issue of its  bonds,  a  governmental
11    unit  public  corporation whose aggregate principal amount of
12    bonds  outstanding  or  proposed  exceeds  $10,000,000   may,
13    without   prior   appropriation,  enter  into  agreements  or
14    contracts with  any  necessary  or  appropriate  person  (the
15    counter party) that will have the benefit of providing to the
16    governmental  unit:  (i)  public corporation an interest rate
17    basis, cash flow basis, or other basis  different  from  that
18    provided  in  the  bonds  for the payment of interest or (ii)
19    with respect to a future delivery of bonds, one or more of  a
20    guaranteed  interest  rate,  interest  rate  basis, cash flow
21    basis, or purchase price.     Such  agreements  or  contracts
22    include  without  limitation agreements or contracts commonly
23    known as "interest rate  swap,  collar,  cap,  or  derivative
24    agreements",   "forward   payment   conversion   agreements",
25    interest  rate  locks, forward bond purchase agreements, bond
26    warrant agreements, or bond purchase  option  agreements  and
27    also  include  agreements or contracts providing for payments
28    based on levels of or changes in interest rates, including  a
29    change in an interest rate index, to exchange cash flows or a
30    series  of  payments,  or  to  hedge payment, rate spread, or
31    similar exposure (such agreements or contracts, collectively,
32    being "swaps").  Without limiting other permitted terms which
 
                            -3-      LRB093 02811 MKM 13413 a
 1    may be included in swaps, the following provisions may or, if
 2    hereinafter so required, shall apply:
 3        (a) Payments made pursuant to a swap (the swap  payments)
 4    which  are to be made by the governmental unit may be paid by
 5    such governmental unit, without limitation, from proceeds  of
 6    the bonds, including bonds for future delivery, identified to
 7    such  swaps,  or  from  bonds issued to refund such bonds, or
 8    from  whatever  enterprise  revenues   or   revenue   source,
 9    including  taxes  pledged  or to be pledged to the payment of
10    such bonds, which enterprise revenues or revenue  source  may
11    be increased to make such swap payments, and swap payments to
12    be  received by the governmental unit, which may be periodic,
13    up-front, or on termination, shall be  used  solely  for  and
14    limited  to  any lawful corporate purpose of the governmental
15    unit.
16        (b)  Up-front or periodic net swap payments to be paid by
17    the governmental unit under  the  swaps  (the  standard  swap
18    payments)  such  agreements  or contracts shall be treated as
19    interest for the purpose of  calculating  any  interest  rate
20    limit  applicable  to  the bonds, provided, however, that for
21    purposes of making such standard swap payments only (and  not
22    with  respect  to  the  bonds so issued or to be issued), the
23    bonds shall be deemed not exempt from income  taxation  under
24    the  Internal  Revenue  Code  for  purposes  of State law, as
25    contained in this Bond Authorization  Act,  relating  to  the
26    permissible  rate  of  interest  to  be  borne  thereon, and,
27    provided further, that  if  payments  of  any  standard  swap
28    payments  are  to  be  made  by the governmental unit and the
29    counterparty on different  dates,  the  net  effect  of  such
30    payments  for purposes of such interest rate limitation shall
31    be determined using a true interest cost (yield) calculation.
32        (c)  Any such agreement or contract and the swap payments
33    to be made thereunder shall not be taken  into  account  with
34    respect to any debt limit applicable to the governmental unit
 
                            -4-      LRB093 02811 MKM 13413 a
 1    public corporation.
 2        (d)  Swap  payments  upon the termination of any swap may
 3    be paid to a counterparty upon any terms customary for swaps,
 4    including,  without  limitation,  provisions   using   market
 5    quotations  available  for giving the net benefit of the swap
 6    at the time of termination to the  persons  entitled  thereto
 7    (viz.,   the   governmental  unit  or  the  counterparty)  or
 8    reasonable fair market value determinations of the  value  at
 9    termination made in good faith by either such persons.
10        (e)  The  term  of  the swap shall not exceed the term of
11    any currently outstanding bonds identified to such  swap  or,
12    for  bonds to be delivered, not greater than 5 years plus the
13    term of years proposed for such bonds to be delivered, but in
14    no event longer than 40 years, plus, in each case,  any  time
15    period necessary to cure any defaults under such swap.
16        (f)  The choice of law for enforcement of swaps as to any
17    counterparty  may  be  made  for  any  state  of these United
18    States, but the law which shall apply to the  obligations  of
19    the  governmental  unit  shall  be  the  law  of the State of
20    Illinois, and jurisdiction to enforce the  swaps  as  against
21    the  governmental units shall be exclusively in the courts of
22    the State of Illinois or  in  the  applicable  federal  court
23    having jurisdiction and located within the State of Illinois.
24        (g)  Governmental  units, in entering into swaps, may not
25    waive any sovereign immunities from time  to  time  available
26    under  the  laws of the State of Illinois as to jurisdiction,
27    procedures, and remedies, but such swaps shall  otherwise  be
28    fully  enforceable  as  valid and binding contracts as and to
29    the extent provided herein and by other applicable law.
30    (Source: P.A. 87-1176.)

31        Section 10.  The Local Government Credit Enhancement  Act
32    is amended by changing Sections 2 and 3 as follows:
 
                            -5-      LRB093 02811 MKM 13413 a
 1        (50 ILCS 410/2) (from Ch. 85, par. 4302)
 2        Sec.  2.  For  the  purposes  of  this  Act, terms are as
 3    defined in the Local Government Debt Reform Act.  unless  the
 4    context requires otherwise:
 5        (a)  "Unit  of  local  government" shall have the meaning
 6    ascribed to it in Article VII,  Section  1  of  the  Illinois
 7    Constitution.
 8        (b)  "School  district"  means any public school district
 9    organized under the School Code or prior law and includes any
10    dual or unit school district, high school  district,  special
11    charter  district  and  non-high  school  district.   "School
12    district" also means any community college district organized
13    under the Public Community College Act or prior law.
14        (c)  "Governing board" means the corporate authorities of
15    the municipality, county board, board of trustees,  board  of
16    education, board of school directors, or other governing body
17    of the unit of local government or school district.
18    (Source: P.A. 83-1536.)

19        (50 ILCS 410/3) (from Ch. 85, par. 4303)
20        Sec. 3.  In connection with the issuance of its bonds and
21    notes,  a  governmental  unit  of  local government or school
22    district  may  enter  into  agreements  (credit   agreements)
23    arrangements to provide additional security or and liquidity,
24    or both, for the bonds and notes.  These may include, without
25    limitation,  municipal  bond  insurance,  letters  of credit,
26    lines of credit, standby  bond  purchase  agreements,  surety
27    bonds,  and the like, by which the governmental unit of local
28    government or school district may  borrow  funds  to  pay  or
29    redeem or purchase and hold its bonds and a governmental unit
30    may  enter into agreements for the purchase or remarketing of
31    bonds (remarketing agreements) arrangements for  providing  a
32    mechanism  for  remarketing  bonds  tendered  for purchase in
33    accordance  with  their  terms.  The  term  of  such   credit
 
                            -6-      LRB093 02811 MKM 13413 a
 1    agreements  or  remarketing  agreements  shall not exceed the
 2    term of the bonds, plus any time period necessary to cure any
 3    defaults under such agreements assuring the ability of owners
 4    of the issuing local government's or school district's  bonds
 5    to  sell  or to have redeemed their bonds.  The unit of local
 6    government or school district may enter  into  contracts  and
 7    may agree to pay fees to persons providing such arrangements,
 8    including from bond proceeds.
 9        Without  limiting  the terms which may be included in any
10    such  credit  agreements  or  remarketing   agreements,   the
11    ordinance  The  resolution of the governing board authorizing
12    the issuance of the bonds may or, if hereinafter so required,
13    shall provide as follows:
14        (a) that Interest rates on the bonds may vary  from  time
15    to  time depending upon criteria established by the governing
16    body board, which may include,  without  limitation:  (i),  a
17    variation  in  interest  rates  as  may be necessary to cause
18    bonds to be remarketed remarketable from time to  time  at  a
19    price  equal  to  their  principal  amount  plus  any accrued
20    interest; (ii) rates set by auctions; or (iii) rates  set  by
21    formula. and may provide for appointment of,
22        (b)  A national banking association, bank, trust company,
23    investment  banker  or  other  financial  institution  may be
24    appointed to serve as a remarketing agent in that connection,
25    and such remarketing agent may be delegated authority by  the
26    governing body to determine interest rates in accordance with
27    criteria  established  by the governing body.  The resolution
28    of the governing board authorizing the issuance of the  bonds
29    may provide that
30        (c)  Alternative  interest  rates  or provisions may will
31    apply during such times as the bonds are held by the a person
32    or persons (financial providers) providing a credit agreement
33    or remarketing agreement letter of  credit  or  other  credit
34    enhancement  arrangement  for  those  bonds  and  during such
 
                            -7-      LRB093 02811 MKM 13413 a
 1    times, the interest on the bonds may  be  deemed  not  exempt
 2    from  income  taxation  under  the  Internal Revenue Code for
 3    purposes of State law, as contained in the Bond Authorization
 4    Act, relating to the permissible rate of interest to be borne
 5    thereon.
 6        (d)  Fees  may  be  paid  to  the  financial   providers,
 7    including  all  reasonably  related  costs, including therein
 8    costs of enforcement and litigation (all such fees and  costs
 9    being  financial  provider  payments)  and financial provider
10    payments may be paid, without limitation,  from  proceeds  of
11    the bonds being the subject of such agreements, or from bonds
12    issued  to  refund  such  bonds,  or from whatever enterprise
13    revenues or revenue source, including taxes, pledged  to  the
14    payment  of  such bonds, which enterprise revenues or revenue
15    source may be  increased  to  make  such  financial  provider
16    payments,  and such financial provider payments shall be made
17    subordinate to the payments on the bonds.
18        (e)  The bonds need not be held in physical form  by  the
19    financial providers when providing funds to purchase or carry
20    the   bonds   from   others   but   may   be  represented  in
21    uncertificated form in the credit agreements  or  remarketing
22    agreements.
23        (f)  The  debt  or  obligation  of  the governmental unit
24    represented by a bond tendered for purchase to  or  otherwise
25    made   available  to  the  governmental  unit  and  thereupon
26    acquired by either such  governmental  unit  or  a  financial
27    provider  shall not be deemed to be extinguished for purposes
28    of State law until cancelled by the governmental unit or  its
29    agent.
30        (g)  The choice of law for the obligations of a financial
31    provider  may  be  made for any state of these United States,
32    but the law which shall  apply  to  the  obligations  of  the
33    governmental  unit shall be the law of the State of Illinois,
34    and  jurisdiction  to  enforce  such  credit   agreement   or
 
                            -8-      LRB093 02811 MKM 13413 a
 1    remarketing  agreement as against the governmental unit shall
 2    be exclusively in the courts of the State of Illinois  or  in
 3    the  applicable federal court having jurisdiction and located
 4    within the State of Illinois.
 5        (h)  The governmental unit may not  waive  any  sovereign
 6    immunities  from time to time available under the laws of the
 7    State  of  Illinois  as  to  jurisdiction,  procedures,   and
 8    remedies,  but  any  such  credit  agreement  and remarketing
 9    agreement shall otherwise by fully enforceable as  valid  and
10    binding contracts as and to the extent provided by applicable
11    law.
12        (i)  Such  credit  agreement or remarketing agreement may
13    provide for acceleration of the principal amounts due on  the
14    bonds,  provided,  however,  that  such acceleration shall be
15    deferred for not less than 18 months from the time  any  such
16    bond is acquired pursuant to any such agreement.
17    (Source: P.A. 83-1536.)".