HB2426 94TH GENERAL ASSEMBLY

LRB094 08971 BDD 39192 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB2426

Introduced 2/17/2005, by Rep. Dan Reitz

SYNOPSIS AS INTRODUCED:

30 ILCS 350/3	from Ch. 17, par. 6903
30 ILCS 350/9	from Ch. 17, par. 6909
30 ILCS 350/10	from Ch. 17, par. 6910
30 ILCS 350/11	from Ch. 17, par. 6911
30 ILCS 350/16.5
30 ILCS 350/17	from Ch. 17, par. 6917
30 ILCS 350/17.5

Amends the Local Government Debt Reform Act. In a Section concerning definitions, provides that public corporations are included within the definition of "governmental unit", and deletes provisions that a bureau, board, commission, university, or similar agency of the State is a "governmental unit". Provides that the proceeds of bonds may be used to provide for the payment of interest upon such bonds for a period not to exceed the greater of 3 years (now, 2 years) or a period ending 6 months after the estimated date of completion of the acquisition and construction of the project or accomplishment of the purpose for which such bonds are issued. Provides that bonds must become due within 30 years (now, 40 years unless limited by law). Provides that a refunding bond issue may authorize the use of the proceeds to pay interest on the refunding bond issue during the period of time from delivery of the issue to the redemption date of the bonds being refunded. Provides that bonds that have been wholly refunded or provided for with qualifying securities shall not be included as debt for the purposes of any calculation or limitation. In a Section concerning referenda for bonds, provides that no action may be brought by any person in any court or other tribunal seeking in any way to challenge or contest the validity of an election outcome based upon the wording set forth in any election notice or the ballot after a period of 30 days after the canvass of such election. In a Section concerning lease and installment contracts, provides that certificates evidencing the indebtedness incurred under a lease or agreement may be refunded under certain provisions of the Act. In a Section concerning bond authorization by referendum, provides that bond approval subject to a backdoor referendum expires after 5 years (now, 3 years). Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning finance.

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

Section 5. The Local Government Debt Reform Act is amended by changing Sections 3, 9, 10, 11, 16.5, 17, and 17.5 as follows:

(30 ILCS 350/3) (from Ch. 17, par. 6903)

Sec. 3. Definitions. In this Act words or terms shall have the following meanings unless the context or usage clearly indicates that another meaning is intended.

(a) "Alternate bonds" means bonds issued in lieu of revenue bonds or payable from a revenue source as provided in Section 15.

(b) "Applicable law" means any provision of law, including this Act, authorizing governmental units to issue bonds or relating to any procedure, including any notice, hearing, meeting, referendum, or backdoor referendum, to be taken in the course of actions to issue bonds.

(c) "Backdoor referendum" means the submission of a public question to the voters of a governmental unit, initiated by a petition of voters, residents or property owners of such governmental unit, to determine whether an action by the governing body of such governmental unit shall be effective, adopted or rejected.

(d) "Bond" means any instrument evidencing the obligation to pay money authorized or issued by or on behalf of a governmental unit under applicable law, including without limitation, bonds, notes, installment or financing contracts, leases, certificates, tax anticipation warrants or notes, vouchers, and any other evidences of indebtedness.

(e) "Debt service" on bonds means the amount of principal, interest and premium, if any, when due either at stated maturity or upon mandatory redemption.

(f) "Enterprise revenues" means the revenues of a utility or revenue producing enterprise from which revenue bonds may be payable.

(g) "General obligation bonds" means bonds of a governmental unit for the payment of which the governmental unit is empowered to levy ad valorem property taxes upon all taxable property in a governmental unit without limitation as to rate or amount.

(h) "Governing body" means the legislative body, council, board, commission, trustees, or any other body, by whatever name it is known, having charge of the corporate affairs of a governmental unit.

(h-5) "Governmental revenue source" means a revenue source that is either (1) federal or State funds that the governmental unit has received in some amount during each of the 3 fiscal years preceding the issuance of alternate bonds or (2) revenues to be received from another governmental unit under an intergovernmental cooperation agreement.

(i) "Governmental unit" means a county, township, municipality, municipal corporation, unit of local government, school district, special district, public corporation, body corporate and politic, forest preserve district, fire protection district, conservation district, park district, sanitary district, public corporations, as defined in the Bond Authorization Act, and all other local governmental agencies, including any entity created by intergovernmental agreement among any of the foregoing governmental units, but does not include any office, officer, department or , division, bureau, board, commission, university, or similar agency of the State.

(j) "Ordinance" means an ordinance duly adopted by a governing body or, if appropriate under applicable law, a resolution so adopted.

(k) "Revenue bonds" means any bonds of a governmental unit other than general obligation bonds, but "revenue bonds" does include any debt authorized under Section 11-29.3-1 of the Illinois Municipal Code.

(l) "Revenue source" means a source of funds, other than enterprise revenues, received or available to be received by a governmental unit and available for any one or more of its corporate purposes.

(m) "Limited bonds" means bonds, excluding leases, notes, installment or financing contracts, certificates, tax anticipation warrants or notes, vouchers, and any other evidences of indebtedness, issued under Section 15.01 of this Act.

(Source: P.A. 92-879, eff. 1-13-03.)

(30 ILCS 350/9) (from Ch. 17, par. 6909)

Sec. 9. Provisions for interest.

(a) The proceeds of bonds may be used to provide for the payment of interest upon such bonds for a period not to exceed the greater of 3 2 years or a period ending 6 months after the estimated date of completion of the acquisition and construction of the project or accomplishment of the purpose for which such bonds are issued.

(b) In addition it shall be lawful for the governing body of any governmental unit issuing bonds to appropriate money for the purpose of paying interest on such bonds during the period stated in subsection (a) of this Section. Such appropriation may be made in the ordinance authorizing such bonds and shall be fully effective upon the effective date of such ordinance without any further notice, publication or approval whatsoever.

(c) The governing body of any governmental unit may authorize the transfer of interest earned on any of the moneys of the governmental unit, including moneys set aside to pay debt service, into the fund of the governmental unit that is most in need of the interest. This subsection does not apply to any interest earned that has been earmarked or restricted by the governing body for a designated purpose. This subsection does not apply to any interest earned on any funds for the purpose of municipal retirement under the Illinois Pension Code and tort immunity under the Local Governmental and Governmental Employees Tort Immunity Act. Interest earned on those funds may be used only for the purposes authorized for the respective funds from which the interest earnings were derived.

(Source: P.A. 92-879, eff. 1-13-03.)

(30 ILCS 350/10) (from Ch. 17, par. 6910)

Sec. 10. General provisions. Bonds authorized by applicable law may be issued in one or more series, bear such date or dates, become due at such time or times within 30 years, notwithstanding any other limit in 40 years, except as expressly limited by applicable law, bear interest payable at such intervals and at such rate or rates as authorized under applicable law, which rates may be fixed or variable, be in such denominations, be in such form, either coupon, registered or book-entry, carry such conversion, registration, and exchange privileges, be subject to defeasance upon such terms, have such rank or priority, be executed in such manner, be payable in such medium of payment at such place or places within or without the State of Illinois, make provision for a corporate trustee within or without the State with respect to such bonds, prescribe the rights, powers and duties thereof to be exercised for the benefit of the governmental unit and the protection of the bondholders, provide for the holding in trust, investment and use of moneys, funds and accounts held under an ordinance, provide for assignment of and direct payment of the moneys to pay such bonds or to be deposited into such funds or accounts directly to such trustee, be subject to such terms of redemption with or without premium, and be sold in such manner at private or public sale and at such price, all as the governing body shall determine. Whenever such bonds are sold at price less than par, they shall be sold at such price and bear interest at such rate or rates such that either the true interest cost (yield) or the net interest rate, as may be selected by the governing body, received upon the sale of such bonds does not exceed the maximum rate otherwise authorized by applicable law. Except for an ordinance required to be published by applicable law in connection with a backdoor referendum, any bond ordinance adopted by a governing body under applicable law shall, in all instances, become effective immediately without publication or posting or any further act or requirement.

(Source: P.A. 90-306, eff. 8-1-97.)

(30 ILCS 350/11) (from Ch. 17, par. 6911)

Sec. 11. Refundings and redemption premiums. Bonds may be refunded or advance refunded upon such terms as the governing body may set in accordance with this Act, for such term of years, not in excess of the maximum term of years permitted by applicable law for the bonds to be refunded, and in such principal amount, all as may be deemed necessary by the governing body. A refunding bond issue may authorize the use of proceeds of such issue to pay interest on the refunding bond issue during the period of time from delivery of such issue to the redemption date of the bonds being refunded. Revenue bonds may be issued to refund general obligation bonds or alternate bonds issued under this Act. General obligation bonds shall not be issued to refund revenue bonds or alternate bonds except as expressly permitted by applicable law. Any redemption premium payable upon the redemption of bonds may be payable from the proceeds of refunding bonds which may be issued for the purpose of refunding such bonds, from any other lawfully available source or from both proceeds and such other sources. Bonds that have been wholly refunded or provided for with qualifying securities shall not be included as debt for the purposes of any calculation or limitation under applicable law. "Qualifying securities" means securities or investments that are lawful for a governmental unit under State law and that have, at the time of purchase, a rating in the highest general classification established by a rating service of nationally recognized expertise in rating securities. "Wholly refunded" or "provided for" means that the interest on and principal of the qualifying securities, when due, which are set aside to pay debt service on the bonds, shall be sufficiently timely to pay the debt service on such bonds.

(Source: P.A. 90-306, eff. 8-1-97.)

(30 ILCS 350/16.5)

Sec. 16.5. Proposition for bonds. For all elections held after July 1, 2000, the form of a proposition to authorize the issuance of bonds pursuant to either a referendum or backdoor referendum may be as set forth in this Section as an alternative to the form of proposition as otherwise set forth by applicable law. The proposition authorized by this Section shall be in substantially the following form:

Shall (name of governmental unit) (state purpose for the bond issue) and issue its bonds to the amount of $ (state amount) for the purpose of paying the costs thereof?

If a school district expects to receive a school construction grant from the State of Illinois pursuant to the School Construction Law for a school construction project to be financed in part with proceeds of a bond authorized by referendum, then the form of proposition may at the option of the school district additionally contain substantially the following language:

(Name of school district) expects to receive a school construction grant from the State of Illinois in the amount of $ (state amount) pursuant to the School Construction Law for the school construction project to be financed in part with proceeds of the bonds, based on (i) a grant entitlement from the State Board of Education and (ii) current recognized project costs determined by the Capital Development Board.

No action may be brought by any person in any Court or other tribunal seeking in any way to challenge or contest the validity of an election outcome based upon the wording set forth in any election notice or the ballot after a period of 30 days after the canvass of such election.

(Source: P.A. 91-868, eff. 6-22-00; 92-879, eff. 1-13-03.)

(30 ILCS 350/17) (from Ch. 17, par. 6917)

Sec. 17. Leases and installment contracts.

(a) Interest not debt; debt on leases and installment contracts. Interest on bonds shall not be included in any computation of indebtedness of a governmental unit for the purpose of any statutory provision or limitation. For bonds consisting of leases and installment or financing contracts, (1) that portion of payments made by a governmental unit under the terms of a bond designated as interest in the bond or the ordinance authorizing such bond shall be treated as interest for purposes of this Section (2) where portions of payments due under the terms of a bond have not been designated as interest in the bond or the ordinance authorizing such bond, and all or a portion of such payments is to be used for the payment of principal of and interest on other bonds of the governmental unit or bonds issued by another unit of local government, such as a public building commission, the payments equal to interest due on such corresponding bonds shall be treated as interest for purposes of this Section and (3) where portions of payments due under the terms of a bond have not been designated as interest in the bond or ordinance authorizing such bond and no portion of any such payment is to be used for the payment of principal of and interest on other bonds of the governmental unit or another unit of local government, a portion of each payment due under the terms of such bond shall be treated as interest for purposes of this Section; such portion shall be equal in amount to the interest that would have been paid on a notional obligation of the governmental unit (bearing interest at the highest rate permitted by law for bonds of the governmental unit at the time the bond was issued or, if no such limit existed, 12%) on which the payments of principal and interest were due at the same times and in the same amounts as payments are due under the terms of the bonds. The rule set forth in this Section shall be applicable to all interest no matter when earned or accrued or at what interval paid, and whether or not a bond bears interest which compounds at certain intervals. For purposes of bonds sold at amounts less than 95% of their stated value at maturity, interest for purposes of this Section includes the difference between the amount set forth on the face of the bond as the original principal amount and the bond's stated value at maturity.

This subsection may be made applicable to bonds issued prior to the effective date of this Act by passage of an ordinance to such effect by the governing body of a governmental unit.

(b) Purchase or lease of property. The governing body of each governmental unit may purchase or lease either real or personal property, including investments, investment agreements, or investment services, through agreements that provide that the consideration for the purchase or lease may be paid through installments made at stated intervals for a period of no more than 20 years or another period of time authorized by law, whichever is greater; provided, however, that investments, investment agreements, or investment services purchased in connection with a bond issue may be paid through installments made at stated intervals for a period of time not in excess of the maximum term of such bond issue. Each governmental unit may issue certificates evidencing the indebtedness incurred under the lease or agreement. The governing body may provide for the treasurer, comptroller, finance officer, or other officer of the governing body charged with financial administration to act as counter-party to any such lease or agreement, as nominee lessor or seller. When the lease or agreement is executed by the officer of the governmental unit authorized by the governing body to bind the governmental unit thereon by the execution thereof and is filed with and executed by the nominee lessor or seller, the lease or agreement shall be sufficiently executed so as to permit the governmental unit to issue certificates evidencing the indebtedness incurred under the lease or agreement. The certificates shall be valid whether or not an appropriation with respect thereto is included in any annual or supplemental budget adopted by the governmental unit. From time to time, as the governing body executes contracts for the purpose of acquiring and constructing the services or real or personal property that is a part of the subject of the lease or agreement, including financial, legal, architectural, and engineering services related to the lease or agreement, the governing body shall order the contracts filed with its nominee officer, and that officer shall identify the contracts to the lease or agreement; that identification shall permit the payment of or reimbursement to another fund of previous payments made on the contract from the proceeds of the certificates; and the nominee officer shall duly apply or cause to be applied proceeds of the certificates to the payment of the contracts. Certificates evidencing the indebtedness incurred under any such lease or agreement may be refunded under Section 11 of this Act, which certificates may be designated "refunding debt certificates" and need not evidence participation in the original lease or agreement, may be issued on any terms set forth in Section 10 of this Act, and shall be payable from the same sources of funds as the certificates refunded. The governing body of each governmental unit may sell, lease, convey, and reacquire either real or personal property, or any interest in real or personal property, upon any terms and conditions and in any manner, as the governing body shall determine, if the governmental unit will lease, acquire by purchase agreement, or otherwise reacquire the property, as authorized by this subsection or any other applicable law.

All indebtedness incurred under this subsection, when aggregated with the existing indebtedness of the governmental unit, may not exceed the debt limits provided by applicable law.

(Source: P.A. 91-493, eff. 8-13-99; 91-868, eff. 6-22-00; 92-879, eff. 1-13-03.)

(30 ILCS 350/17.5)

Sec. 17.5. Bond authorization by referendum. Whenever applicable law provides that the authorization of or the issuance of bonds is subject to either a referendum or backdoor referendum, the approval, once obtained, remains (i) for 5 years after the date of the referendum or (ii) for 3 years after the end of the petition period for a backdoor referendum. This Section applies only to a referendum or a backdoor referendum held after August 13, 1999 the effective date of this amendatory Act of the 91st General Assembly.

(Source: P.A. 91-493, eff. 8-13-99.)

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