SB3097 93RD GENERAL ASSEMBLY

LRB093 18171 SJM 46518 b

93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
SB3097

Introduced 2/6/2004, by Christine Radogno - Dave Syverson - Steven J. Rauschenberger - Pamela J. Althoff

SYNOPSIS AS INTRODUCED:

25 ILCS 50/1	from Ch. 63, par. 42.31
25 ILCS 65/4	from Ch. 63, par. 42.74
30 ILCS 330/8	from Ch. 127, par. 658
30 ILCS 330/9	from Ch. 127, par. 659
30 ILCS 330/11	from Ch. 127, par. 661
30 ILCS 330/16	from Ch. 127, par. 666
30 ILCS 330/21 new

Amends the Fiscal Note Act and the State Debt Impact Note Act. Provides that if a bill authorizes the issuance of bonds, the Governor's Office of Management and Budget shall prepare a fiscal note specifying certain principal and interest payments required to be made by the State. Amends the General Obligation Bond Act. Provides that no more than 0.25% (now, 0.50%) of the principal amount of the proceeds of sale of each bond sale is authorized to be use to pay reasonable costs of issuance and sale of the bonds. Removes language authorizing the bond sale order to provide for a portion of the proceeds of the bond sale, up to 12 month's interest on the bonds, to be deposited directly into the capitalized interest account of the General Obligation Bond Retirement and Interest Fund. Provides that Bonds must be offered for sale with principal or mandatory redemption amounts in substantially equal amounts, with the first maturity offered for sale occurring within the fiscal year in which the Bonds are offered or within the next succeeding fiscal year, with bonds offered for sale maturing or subject to mandatory redemption each fiscal year thereafter up to 25 years. Provides that if more than half of the proceeds of an issue of Bonds to be offered for sale are expected to be used for refunding purposes or if more than half of the principal amount of bonds are offered for sale with a variable rate, the entire issue of the Bonds may be sold pursuant to notice of sale and public bid or by negotiated sale. Provides that all bonds in an issue that include refunding bonds must mature no later than the final maturity date of Bonds being refunded. Requires certain "truth in borrowing disclosures" upon the issuance of bonds and refunding bonds. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning bonds.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Fiscal Note Act is amended by changing Section 1 as follows:

(25 ILCS 50/1) (from Ch. 63, par. 42.31)

Sec. 1. Every bill, except those bills making a direct appropriation, (1) the purpose or effect of which is (i) to expend any State funds or to increase or decrease the revenues of the State, either directly or indirectly, or (ii) to require the expenditure of their own funds by, or to increase or decrease the revenues of, units of local government, school districts or community college districts, or to revise the distribution of State funds among units of local government, school districts, or community college districts, either directly or indirectly, or (2) that amends the Mental Health and Developmental Disabilities Code or the Developmental Disability and Mental Disability Services Act shall have prepared for it prior to second reading in the house of introduction a brief explanatory statement or note which, for a bill under item (1), shall include a reliable estimate of the anticipated change in State, local governmental, school district, or community college district expenditures or revenues under its provisions and, for a bill under item (2), shall include a reliable estimate of the fiscal impact of its provisions upon community agencies. For purposes of this Act, indirect revenues include, but are not limited to, increased tax revenues or other increased revenues resulting from economic development, job creation, or cost reduction. The statement or note shall also include an explanation of the methodology used to determine the estimated direct and indirect costs or estimated impact on community agencies. Any notes for bills having a fiscal impact on units of local government, school districts or community college districts shall include such cost estimates as may be required under the State Mandates Act.

If a bill authorizes capital expenditures or appropriates funds for capital expenditures, a statement shall be prepared by the Governor's Office of Management and Budget Bureau of the Budget specifying by year any principal and interest payments required to finance such capital expenditures.

If a bill authorizes the issuance of bonds, a statement or note shall be prepared by the Governor's Office of Management and Budget specifying the estimated total principal and interest payments (assuming interest is paid at a fixed rate) if all of the bonds authorized were issued. The statement or note shall include estimated principal and interest payments to be made by each fiscal year over all years that the proposed bonds would be expected to be outstanding and total principal and interest payments to be made by each fiscal year on all other then-outstanding bonds of the State.

These statements or notes shall be known as "fiscal notes".

(Source: P.A. 92-567, eff. 1-1-03; revised 8-23-03.)

Section 10. The State Debt Impact Note Act is amended by changing Section 4 as follows:

(25 ILCS 65/4) (from Ch. 63, par. 42.74)

Sec. 4. The State Debt Impact Note shall be factual in nature and as brief and concise as possible. For bills which would appropriate from bond funds, the note shall provide a reliable estimate of the impact of the bill on the State's debt service requirements; a description of the estimated useful life and intended use of the project; and maintenance and operating costs associated with the project. For bills which would add new or increase existing bond authorization levels the note shall assess current outstanding, unissued, and retired bond authorization levels and make reasonable projections of the cost associated with the retirement of the additional bonds. The estimated costs shall specify the estimated total principal and interest payments (assuming interest is paid at a fixed rate) if all of the bonds authorized were issued. The statement or note shall include estimated principal and interest payments to be made by each fiscal year over all years that the proposed bonds would be expected to be outstanding and total principal and interest payments to be made by each fiscal year on all other then-outstanding bonds of the State. A brief summary or work sheet of computations used in arriving at State Debt Impact Notes shall be attached.

(Source: P.A. 81-615.)

Section 15. The General Obligation Bond Act is amended by changing Sections 8, 9, 11, and 16 and by adding Section 21 as follows:

(30 ILCS 330/8) (from Ch. 127, par. 658)

Sec. 8. Bond sale expenses; capitalized interest. (a) An amount not to exceed 0.25% 0.5 percent of the principal amount of the proceeds of sale of each bond sale is authorized to be used to pay the reasonable costs of issuance and sale of State of Illinois general obligation bonds authorized and sold pursuant to this Act. (b) The Bond Sale Order may provide for a portion of the proceeds of the bond sale, representing up to 12 months' interest on the bonds, to be deposited directly into the capitalized interest account of the General Obligation Bond Retirement and Interest Fund.

(Source: P.A. 93-2, eff. 4-7-03.)

(30 ILCS 330/9) (from Ch. 127, par. 659)

Sec. 9. Conditions for Issuance and Sale of Bonds - Requirements for Bonds.

(a) Except as otherwise provided in this subsection, bonds shall be issued and sold from time to time, in one or more series, in such amounts and at such prices as may be directed by the Governor, upon recommendation by the Director of the Governor's Office of Management and Budget Bureau of the Budget. Bonds shall be in such form (either coupon, registered or book entry), in such denominations, payable within 25 30 years from their date, subject to such terms of redemption with or without premium, bear interest payable at such times and at such fixed or variable rate or rates, and be dated as shall be fixed and determined by the Director of the Governor's Office of Management and Budget Bureau of the Budget in the order authorizing the issuance and sale of any series of Bonds, which order shall be approved by the Governor and is herein called a "Bond Sale Order"; provided however, that interest payable at fixed or variable rates shall not exceed that permitted in the Bond Authorization Act, as now or hereafter amended. Bonds shall be payable at such place or places, within or without the State of Illinois, and may be made registrable as to either principal or as to both principal and interest, as shall be specified in the Bond Sale Order. Bonds may be callable or subject to purchase and retirement or tender and remarketing as fixed and determined in the Bond Sale Order. Bonds must be offered for sale with principal or mandatory redemption amounts in substantially equal amounts, with the first maturity offered for sale occurring within the fiscal year in which the Bonds are offered or within the next succeeding fiscal year, with bonds offered for sale maturing or subject to mandatory redemption each fiscal year thereafter up to 25 years.

In the case of any series of Bonds bearing interest at a variable interest rate ("Variable Rate Bonds"), in lieu of determining the rate or rates at which such series of Variable Rate Bonds shall bear interest and the price or prices at which such Variable Rate Bonds shall be initially sold or remarketed (in the event of purchase and subsequent resale), the Bond Sale Order may provide that such interest rates and prices may vary from time to time depending on criteria established in such Bond Sale Order, which criteria may include, without limitation, references to indices or variations in interest rates as may, in the judgment of a remarketing agent, be necessary to cause Variable Rate Bonds of such series to be remarketable from time to time at a price equal to their principal amount, and may provide for appointment of a bank, trust company, investment bank, or other financial institution to serve as remarketing agent in that connection. The Bond Sale Order may provide that alternative interest rates or provisions for establishing alternative interest rates, different security or claim priorities, or different call or amortization provisions will apply during such times as Variable Rate Bonds of any series are held by a person providing credit or liquidity enhancement arrangements for such Bonds as authorized in subsection (b) of this Section. The Bond Sale Order may also provide for such variable interest rates to be established pursuant to a process generally known as an auction rate process and may provide for appointment of one or more financial institutions to serve as auction agents and broker-dealers in connection with the establishment of such interest rates and the sale and remarketing of such Bonds.

(b) In connection with the issuance of any series of Bonds, the State may enter into arrangements to provide additional security and liquidity for such Bonds, including, without limitation, bond or interest rate insurance or letters of credit, lines of credit, bond purchase contracts, or other arrangements whereby funds are made available to retire or purchase Bonds, thereby assuring the ability of owners of the Bonds to sell or redeem their Bonds. The State may enter into contracts and may agree to pay fees to persons providing such arrangements, but only under circumstances where the Director of the Governor's Office of Management and Budget Bureau of the Budget certifies that he or she reasonably expects the total interest paid or to be paid on the Bonds, together with the fees for the arrangements (being treated as if interest), would not, taken together, cause the Bonds to bear interest, calculated to their stated maturity, at a rate in excess of the rate that the Bonds would bear in the absence of such arrangements.

The State may, with respect to Bonds issued or anticipated to be issued, participate in and enter into arrangements with respect to interest rate protection or exchange agreements, guarantees, or financial futures contracts for the purpose of limiting or restricting interest rate risk. The arrangements may be executed and delivered by the Director of the Governor's Office of Management and Budget Bureau of the Budget on behalf of the State. Net payments for such arrangements shall constitute interest on the Bonds and shall be paid from the General Obligation Bond Retirement and Interest Fund. The Director of the Governor's Office of Management and Budget Bureau of the Budget shall at least annually certify to the Governor and the State Comptroller his or her estimate of the amounts of such net payments to be included in the calculation of interest required to be paid by the State.

(c) Prior to the issuance of any Variable Rate Bonds pursuant to subsection (a), the Director of the Governor's Office of Management and Budget Bureau of the Budget shall adopt an interest rate risk management policy providing that the amount of the State's variable rate exposure with respect to Bonds shall not exceed 20%. This policy shall remain in effect while any Bonds are outstanding and the issuance of Bonds shall be subject to the terms of such policy. The terms of this policy may be amended from time to time by the Director of the Governor's Office of Management and Budget Bureau of the Budget but in no event shall any amendment cause the permitted level of the State's variable rate exposure with respect to Bonds to exceed 20%.

(Source: P.A. 92-16, eff. 6-28-01; 93-9, eff. 6-3-03; revised 8-23-03.)

(30 ILCS 330/11) (from Ch. 127, par. 661)

Sec. 11. Sale of Bonds. Bonds,except as otherwise provided in this Section, shall be sold from time to time pursuant to notice of sale and public bid or by negotiated sale in such amounts and at such times as is directed by the Governor, upon recommendation by the Director of the Governor's Office of Management and Budget Bureau of the Budget.

If more than half of the proceeds of an issue of Bonds to be offered for sale are expected to be used for refunding purposes or if more than half of the principal amount of bonds are offered for sale with a variable rate, the entire issue of the Bonds may be sold pursuant to notice of sale and public bid or by negotiated sale. In the case of a any Bonds, including refunding Bonds, are to be sold by negotiated sale, the Director of the Governor's Office of Management and Budget Bureau of the Budget shall comply with the competitive request for proposal process set forth in the Illinois Procurement Code and all other applicable requirements of that Code.

If Bonds are to be sold pursuant to notice of sale and public bid, the Director of the Governor's Office of Management and Budget Bureau of the Budget shall, from time to time, as Bonds are to be sold, advertise the sale of the Bonds in at least two daily newspapers, one of which is published in the City of Springfield and one in the City of Chicago. The sale of the Bonds shall also be advertised in the volume of the Illinois Procurement Bulletin that is published by the Department of Central Management Services. Each of the advertisements for proposals shall be published once at least 10 days prior to the date fixed for the opening of the bids. The Director of the Governor's Office of Management and Budget Bureau of the Budget may reschedule the date of sale upon the giving of such additional notice as the Director deems adequate to inform prospective bidders of such change; provided, however, that all other conditions of the sale shall continue as originally advertised.

Executed Bonds shall, upon payment therefor, be delivered to the purchaser, and the proceeds of Bonds shall be paid into the State Treasury as directed by Section 12 of this Act.

(Source: P.A. 91-39, eff. 6-15-99; revised 8-23-03.)

(30 ILCS 330/16) (from Ch. 127, par. 666)

Sec. 16. Refunding Bonds. The State of Illinois is authorized to issue, sell, and provide for the retirement of General Obligation Bonds of the State of Illinois in the amount of $2,839,025,000, at any time and from time to time outstanding, for the purpose of refunding any State of Illinois general obligation Bonds then outstanding, including the payment of any redemption premium thereon, any reasonable expenses of such refunding, any interest accrued or to accrue to the earliest or any subsequent date of redemption or maturity of such outstanding Bonds and any interest to accrue to the first interest payment on the refunding Bonds; provided that all Bonds in an issue that includes such refunding Bonds shall mature no later than the final maturity date of Bonds being refunded, and further provided that no refunding Bonds shall be offered for sale that are expected to refund Bonds under a refunding plan that would have the effect of decreasing the State's principal payments on all Bonds in the fiscal year in which the refunding Bonds are offered or in the next succeeding fiscal year by a total of more than 5% of the principal or redemption amounts due on all then-outstanding Bonds in the fiscal year next succeeding the fiscal year in which the refunding Bonds are offered.

If more than half of the proceeds of an issue of Bonds to be offered for sale are expected to be used for refunding purposes, those Refunding Bonds may be sold from time to time pursuant to notice of sale and public bid or by negotiated sale in such amounts and at such times, as directed by the Governor, upon recommendation by the Director of the Governor's Office of Management and Budget Bureau of the Budget. The Governor shall notify the State Treasurer and Comptroller of such refunding. The proceeds received from the sale of refunding Bonds shall be used for the retirement at maturity or redemption of such outstanding Bonds on any maturity or redemption date and, pending such use, shall be placed in escrow, subject to such terms and conditions as shall be provided for in the Bond Sale Order relating to the Refunding Bonds. Proceeds not needed for deposit in an escrow account shall be deposited in the General Obligation Bond Retirement and Interest Fund. This Act shall constitute an irrevocable and continuing appropriation of all amounts necessary to establish an escrow account for the purpose of refunding outstanding general obligation Bonds and to pay the reasonable expenses of such refunding and of the issuance and sale of the refunding Bonds. Any such escrowed proceeds may be invested and reinvested in direct obligations of the United States of America, maturing at such time or times as shall be appropriate to assure the prompt payment, when due, of the principal of and interest and redemption premium, if any, on the refunded Bonds. After the terms of the escrow have been fully satisfied, any remaining balance of such proceeds and interest, income and profits earned or realized on the investments thereof shall be paid into the General Revenue Fund. The liability of the State upon the Bonds shall continue, provided that the holders thereof shall thereafter be entitled to payment only out of the moneys deposited in the escrow account.

Except as otherwise herein provided in this Section, such refunding Bonds shall in all other respects be subject to the terms and conditions of this Act.

(Source: P.A. 91-39, eff. 6-15-99; 91-53, eff. 6-30-99; 91-710, eff. 5-17-00; revised 8-23-03.)

(30 ILCS 330/21 new)

Sec. 21. Truth in borrowing disclosures.

(a) Within 10 days after the issuance of any Bonds under this Act, the Director of the Governor's Office of Management and Budget shall publish a truth in borrowing disclosure that discloses the total principal and interest payments to be paid on the Bonds over the full stated term of the Bonds. The disclosure also shall include principal and interest payments to be made by each fiscal year over the full stated term of the Bonds and total principal and interest payments to be made by each fiscal year on all other outstanding Bonds issued under this Act over the full stated terms of those Bonds.

(b) Within 10 days after the issuance of any refunding bonds under Section 16 of this Act, the Director of the Governor's Office of Management and Budget shall publish a truth in borrowing disclosure that discloses the estimated present-valued savings to be obtained through the refunding, in total and by each fiscal year that the refunding bonds may be outstanding.

(c) The disclosures required in subsections (a) and (b) shall be published by posting the disclosures for no less than 30 days on the web site of the Governor's Office of Management and Budget and by providing the disclosures in written form to the Illinois Economic and Fiscal Commission. These disclosures shall be calculated assuming Bonds are not redeemed or refunded prior to their stated maturities. Amounts included in these disclosures as payment of interest on variable rate Bonds shall be the maximum amounts of interest that may be payable during each fiscal year, after taking into account any credits permitted in the related indenture or other instrument against the amount of such interest for each fiscal year. Amounts included in these disclosures as payment of interest on variable rate Bonds shall include the amounts certified by the Director of the Governor's Office of Management and Budget under subsection (b) of Section 9 of this Act.

Section 99. Effective date. This Act takes effect upon becoming law.