State of Illinois
91st General Assembly
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[ Engrossed ][ Senate Amendment 001 ]

91_SB1876

 
                                              LRB9113130JMdvA

 1        AN ACT to amend the Illinois Farm Development Act.

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

 4        Section  5.  The Illinois Farm Development Act is amended
 5    by changing Sections 7.2, 12.1, and 12.2 and  adding  Section
 6    12.6 as follows:

 7        (20 ILCS 3605/7.2)
 8        Sec. 7.2.  Interest-buy-back program.
 9        (a)  The  Authority  shall establish an interest-buy-back
10    program to subsidize the interest cost on  certain  loans  to
11    Illinois farmers.
12        (b)  To  be  eligible an applicant must (i) be a resident
13    of Illinois; (ii) be a principal operator of a farm or  land;
14    (iii)  derive  at  least  50%  of  annual  gross  income from
15    farming; and (iv) have a net worth of at least $10,000.   The
16    Authority  shall  establish  minimum  and  maximum  financial
17    requirements,  maximum  payment  amounts, starting and ending
18    dates for the program, and other criteria.
19        (c)  Lenders may apply on behalf of  eligible  applicants
20    on  forms  provided  by  the  Authority.   Lenders may submit
21    requests for payment on  forms  provided  by  the  Authority.
22    Lenders  and  applicants shall be responsible for any fees or
23    charges the Authority may require.
24        (d)  The Interest Buy-Back Fund is created as  a  special
25    fund  outside  the State treasury.  The State Treasurer shall
26    be custodian of the Fund.  Unexpended appropriations  to  the
27    Authority  for the purpose of this Section shall be deposited
28    into the Interest Buy-Back Fund.  Amounts  in  the  Fund  not
29    currently needed to meet the obligations of the Fund shall be
30    invested  as  provided  by  law, and all interest earned from
31    those investments shall  be  deposited  into  the  Fund.  The
 
                            -2-               LRB9113130JMdvA
 1    Authority  shall  make payments to lenders under this Section
 2    from  the  Interest  Buy-Back   Fund   and   from   available
 3    appropriations from the General Revenue Fund.
 4    (Source: P.A. 91-281, eff. 7-23-99.)

 5        (20 ILCS 3605/12.1) (from Ch. 5, par. 1212.1)
 6        Sec. 12.1.  State Guarantees for existing debt.
 7        (a)  The   Authority   is   authorized   to  issue  State
 8    Guarantees for farmers' existing debts held by a lender.  For
 9    the purposes of this Section, a farmer shall be a resident of
10    Illinois,  who  is a principal operator of a farm or land, at
11    least 50% of  whose  annual  gross  income  is  derived  from
12    farming  and whose debt to asset ratio shall not be less than
13    40%, except in those cases where the applicant has previously
14    used the guarantee program there shall be no  debt  to  asset
15    ratio  or  income  restriction.   For  the  purposes  of this
16    Section,  debt  to  asset  ratio  shall  mean   the   current
17    outstanding  liabilities of the farmer divided by the current
18    outstanding  assets  of  the  farmer.   The  Authority  shall
19    establish the maximum permissible debt to asset  ratio  based
20    on criteria established by the Authority.
21        Lenders  shall  apply  for  the State Guarantees on forms
22    provided by the Authority and certify  that  the  application
23    and  any other documents submitted are true and correct.  The
24    lender or borrower, or both  in  combination,  shall  pay  an
25    administrative  fee  as  determined  by  the  Authority.  The
26    applicant shall be responsible for paying any fees or charges
27    involved  in   recording   mortgages,   releases,   financing
28    statements,  insurance  for  secondary  market issues and any
29    other similar fees or charges as the Authority  may  require.
30    The application shall at a minimum contain the farmer's name,
31    address,  present credit and financial information, including
32    cash flow statements, financial statements,  balance  sheets,
33    and  any  other information pertinent to the application, and
 
                            -3-               LRB9113130JMdvA
 1    the collateral to be used to secure the State Guarantee.   In
 2    addition, the lender must agree to bring the farmer's debt to
 3    a  current status at the time the State Guarantee is provided
 4    and must also agree to charge a fixed or adjustable  interest
 5    rate  which  the  Authority determines to be below the market
 6    rate of interest generally available  to  the  borrower.   If
 7    both the lender and applicant agree, the interest rate on the
 8    State  Guarantee  Loan  can  be converted to a fixed interest
 9    rate at any time during the term of the loan.
10        Any State Guarantees  provided  under  this  Section  (i)
11    shall not exceed $500,000 per farmer, (ii) shall be set up on
12    a  payment  schedule  not to exceed 30 years, and shall be no
13    longer than 30 years in duration, and (iii) shall be  subject
14    to  an  annual  review  and  renewal  by  the  lender and the
15    Authority; provided that only one such State Guarantee  shall
16    be  outstanding  per  farmer  at  any  one  time.   No  State
17    Guarantee  shall be revoked by the Authority without a 90 day
18    notice, in writing, to all parties.  In those cases were  the
19    borrower  has  not previously used the guarantee program, the
20    lender shall not call due any loan during the first  3  years
21    for any reason except for lack of performance or insufficient
22    collateral.  The  lender  can review and withdraw or continue
23    with the State Guarantee on an annual basis after the first 3
24    years of the loan, provided a 90 day notice, in  writing,  to
25    all parties has been given.
26        (b)  The   Authority  shall  provide  or  renew  a  State
27    Guarantee to a lender if:
28             (i)  A fee equal to 25 basis points on the  loan  is
29        paid to the Authority on an annual basis by the lender.
30             (ii)  The application provides collateral acceptable
31        to  the  Authority  that is at least equal to the State's
32        portion of the Guarantee to be provided.
33             (iii)  The lender  assumes  all  responsibility  and
34        costs  for  pursuing  legal action on collecting any loan
 
                            -4-               LRB9113130JMdvA
 1        that is delinquent or in default.
 2             (iv)  The lender is responsible for the first 15% of
 3        the outstanding principal of the note for which the State
 4        Guarantee has been applied.
 5        (c)  There  is  hereby  created  outside  of  the   State
 6    Treasury   a  special  fund  to  be  known  as  the  Illinois
 7    Agricultural Loan Guarantee Fund.  The State Treasurer  shall
 8    be  custodian  of  this  Fund.   Any  amounts in the Illinois
 9    Agricultural Loan Guarantee Fund not currently needed to meet
10    the obligations of the Fund shall be invested as provided  by
11    law,  and all interest earned from these investments shall be
12    deposited into the Fund until the Fund  reaches  the  maximum
13    amount  authorized  in  this Act; thereafter, interest earned
14    shall be deposited  into  the  General  Revenue  Fund.  After
15    September  1,  1989, annual investment earnings equal to 1.5%
16    of the Fund shall remain in the  Fund  to  be  used  for  the
17    purposes established in Section 12.3 of this Act.
18        The  Authority is authorized to transfer to the Fund such
19    amounts  as  are  necessary  to  satisfy  claims  during  the
20    duration of the  State  Guarantee  program  to  secure  State
21    Guarantees  issued  under this Section. If for any reason the
22    General Assembly fails to make an appropriation sufficient to
23    meet  these  obligations,  this  Act  shall   constitute   an
24    irrevocable   and   continuing  appropriation  of  an  amount
25    necessary to secure guarantees  as  defaults  occur  and  the
26    irrevocable  and  continuing authority for, and direction to,
27    the State Treasurer and the Comptroller to make the necessary
28    transfers to the Illinois Agricultural Loan  Guarantee  Fund,
29    as directed by the Governor, out of the General Revenue Fund.
30        Within 30 days after November 15, 1985, the Authority may
31    transfer  up to $7,000,000 from available appropriations into
32    the  Illinois  Agricultural  Loan  Guarantee  Fund  for   the
33    purposes of this Act.  Thereafter, the Authority may transfer
34    additional   amounts  into  the  Illinois  Agricultural  Loan
 
                            -5-               LRB9113130JMdvA
 1    Guarantee Fund to secure guarantees for defaults as  defaults
 2    occur.
 3        In  the  event of default by the farmer, the lender shall
 4    be entitled to, and the Authority shall  direct  payment  on,
 5    the  State  Guarantee  after  90  days  of  delinquency.  All
 6    payments by the Authority shall be  made  from  the  Illinois
 7    Agricultural  Loan  Guarantee  Fund to satisfy claims against
 8    the  State  Guarantee.   The   Illinois   Agricultural   Loan
 9    Guarantee  Fund shall guarantee receipt of payment of the 85%
10    of the principal and interest owed  on  the  State  Guarantee
11    Loan by the farmer to the guarantee holder.
12        It  shall  be the responsibility of the lender to proceed
13    with the collecting and disposing of collateral on the  State
14    Guarantee within 14 months of the time the State Guarantee is
15    declared delinquent; provided, however, that the lender shall
16    not  collect  or dispose of collateral on the State Guarantee
17    without the express written prior approval of the  Authority.
18    If  the  lender  does not dispose of the collateral within 14
19    months, the lender shall be liable  to  repay  to  the  State
20    interest  on the State Guarantee equal to the same rate which
21    the lender charges on the State Guarantee; provided, however,
22    that the Authority may extend  the  14  month  period  for  a
23    lender   in   the   case   of   bankruptcy   or   extenuating
24    circumstances.  The  Fund shall be reimbursed for any amounts
25    paid under this Section upon liquidation of  the  collateral.
26    The  Authority,  by  resolution of the Board, may borrow sums
27    from the Fund and provide for repayment as  soon  as  may  be
28    practical  upon receipt of payments of principal and interest
29    by a farmer. Money may be  borrowed  from  the  Fund  by  the
30    Authority  for  the  sole  purpose of paying certain interest
31    costs for farmers associated with selling a loan subject to a
32    State Guarantee in  a  secondary  market  as  may  be  deemed
33    reasonable  and  necessary  by  the  Authority.  Money may be
34    borrowed from the Fund by the Authority  in  accordance  with
 
                            -6-               LRB9113130JMdvA
 1    subsection (d) of Section 12.6.
 2        (d)  Notwithstanding  the provisions of this Section 12.1
 3    with respect to the farmers and lenders who may obtain  State
 4    Guarantees,  the  Authority may promulgate rules establishing
 5    the eligibility of farmers and lenders to participate in  the
 6    State   guarantee  program  and  the  terms,  standards,  and
 7    procedures that will apply, when  the  Authority  finds  that
 8    emergency conditions in Illinois agriculture have created the
 9    need  for  State Guarantees pursuant to terms, standards, and
10    procedures other than those specified in this Section.
11    (Source: P.A. 90-325, eff. 8-8-97; 91-386, eff. 1-1-00.)

12        (20 ILCS 3605/12.2) (from Ch. 5, par. 1212.2)
13        Sec. 12.2.  State Guarantees for  loans  to  farmers  and
14    agribusiness; eligibility.
15        (a)  The   Authority   is   authorized   to  issue  State
16    Guarantees to lenders  for  loans  to  eligible  farmers  and
17    agribusinesses  for  purposes  set forth in this Section. For
18    purposes of this Section,  an  eligible  farmer  shall  be  a
19    resident  of Illinois (i) who is principal operator of a farm
20    or land, at least 50% of whose annual gross income is derived
21    from farming, (ii) whose annual total sales  of  agricultural
22    products,  commodities,  or  livestock  exceeds  $20,000, and
23    (iii) whose net worth does not exceed $500,000.  An  eligible
24    agribusiness  shall  be  that as defined in Section 2 of this
25    Act.
26        The Authority may approve  applications  by  farmers  and
27    agribusinesses  that  promote  diversification  of  the  farm
28    economy  of  this State through the growth and development of
29    new crops or livestock not customarily grown or  produced  in
30    this  State or that emphasize a vertical integration of grain
31    or livestock produced or raised in this State into a finished
32    agricultural product for consumption or use.  "New  crops  or
33    livestock  not  customarily  grown or produced in this State"
 
                            -7-               LRB9113130JMdvA
 1    shall not include corn, soybeans, wheat, swine,  or  beef  or
 2    dairy  cattle.  "Vertical  integration  of grain or livestock
 3    produced or raised in this State" shall include  any  new  or
 4    existing grain or livestock grown or produced in this State.
 5        Lenders  shall  apply  for  the State Guarantees on forms
 6    provided by the Authority, certify that the  application  and
 7    any  other  documents submitted are true and correct, and pay
 8    an administrative fee as determined by  the  Authority.   The
 9    applicant shall be responsible for paying any fees or charges
10    involved   in   recording   mortgages,   releases,  financing
11    statements, insurance for secondary  market  issues  and  any
12    other  similar  fees or charges as the Authority may require.
13    The application shall at a minimum contain  the  farmer's  or
14    agribusiness'  name,  address,  present  credit and financial
15    information,  including  cash  flow   statements,   financial
16    statements,   balance   sheets,  and  any  other  information
17    pertinent to the application, and the collateral to  be  used
18    to  secure the State Guarantee.  In addition, the lender must
19    agree to charge an interest rate, which may vary, on the loan
20    that the Authority determines to be below the market rate  of
21    interest  generally  available  to  the borrower. If both the
22    lender and applicant agree, the interest rate  on  the  State
23    Guarantee  Loan  can be converted to a fixed interest rate at
24    any time during the term of the loan.
25        Any State Guarantees  provided  under  this  Section  (i)
26    shall  not  exceed  $500,000  per  farmer  or  an  amount  as
27    determined  by  the  Authority on a case-by-case basis for an
28    agribusiness, (ii) shall not exceed a term of 15  years,  and
29    (iii) shall be subject to an annual review and renewal by the
30    lender  and  the Authority; provided that only one such State
31    Guarantee shall be made per farmer  or  agribusiness,  except
32    that  additional State Guarantees may be made for purposes of
33    expansion of projects financed in part by a previously issued
34    State Guarantee.  No State Guarantee shall be revoked by  the
 
                            -8-               LRB9113130JMdvA
 1    Authority  without  a  90  day  notice,  in  writing,  to all
 2    parties.  The lender shall not call  due  any  loan  for  any
 3    reason   except   for   lack   of  performance,  insufficient
 4    collateral, or maturity.  A lender may review and withdraw or
 5    continue with a State Guarantee on an annual basis after  the
 6    first  5  years  following closing of the loan application if
 7    the loan contract provides for an interest  rate  that  shall
 8    not  vary.   A lender shall not withdraw a State Guarantee if
 9    the loan contract provides for  an  interest  rate  that  may
10    vary, except for reasons set forth herein.
11        (b)  The   Authority  shall  provide  or  renew  a  State
12    Guarantee to a lender if:
13             i.  A fee equal to 25 basis points on  the  loan  is
14        paid to the Authority on an annual basis by the lender.
15             ii.  The  application provides collateral acceptable
16        to the Authority that is at least equal  to  the  State's
17        portion of the Guarantee to be provided.
18             iii.  The  lender  assumes  all  responsibility  and
19        costs  for  pursuing  legal action on collecting any loan
20        that is delinquent or in default.
21             iv.  The lender is responsible for the first 15%  of
22        the outstanding principal of the note for which the State
23        Guarantee has been applied.
24        (c)  There   is  hereby  created  outside  of  the  State
25    Treasury a special fund to be known as  the  Illinois  Farmer
26    and  Agribusiness  Loan  Guarantee Fund.  The State Treasurer
27    shall be custodian of this Fund.  Any amounts in the Fund not
28    currently needed to meet the obligations of the Fund shall be
29    invested as provided by law, and  all  interest  earned  from
30    these  investments shall be deposited into the Fund until the
31    Fund reaches the maximum  amounts  authorized  in  this  Act;
32    thereafter,  interest  earned  shall  be  deposited  into the
33    General  Revenue  Fund.  After  September  1,  1989,   annual
34    investment earnings equal to 1.5% of the Fund shall remain in
 
                            -9-               LRB9113130JMdvA
 1    the  Fund  to be used for the purposes established in Section
 2    12.3 of this Act.
 3        The Authority is authorized to transfer such  amounts  as
 4    are necessary to satisfy claims from available appropriations
 5    and  from fund balances of the Farm Emergency Assistance Fund
 6    as of June 30  of  each  year  to  the  Illinois  Farmer  and
 7    Agribusiness  Loan  Guarantee Fund to secure State Guarantees
 8    issued under this Section and Sections 12.4 and 12.5. If  for
 9    any   reason   the   General   Assembly   fails  to  make  an
10    appropriation sufficient to meet these obligations, this  Act
11    shall  constitute an irrevocable and continuing appropriation
12    of an amount necessary to secure guarantees as defaults occur
13    and  the  irrevocable  and  continuing  authority  for,   and
14    direction to, the State Treasurer and the Comptroller to make
15    the   necessary   transfers   to   the  Illinois  Farmer  and
16    Agribusiness  Loan  Guarantee  Fund,  as  directed   by   the
17    Governor, out of the General Revenue Fund.
18        In  the  event  of  default  by  the  borrower  on  State
19    Guarantee  Loans under this Section, Section 12.4, or Section
20    12.5, the lender shall be  entitled  to,  and  the  Authority
21    shall direct payment on, the State Guarantee after 90 days of
22    delinquency.   All  payments  by  the Authority shall be made
23    from the Illinois Farmer and Agribusiness Loan Guarantee Fund
24    to satisfy claims against the State Guarantee.
25        It shall be the responsibility of the lender  to  proceed
26    with  the collecting and disposing of collateral on the State
27    Guarantee under this Section, Section 12.4, or  Section  12.5
28    within  14 months of the time the State Guarantee is declared
29    delinquent.  If the lender does not dispose of the collateral
30    within 14 months, the lender shall be liable to repay to  the
31    State  interest on the State Guarantee equal to the same rate
32    that the lender charges on the State Guarantee, provided that
33    the Authority shall have the authority to extend the 14 month
34    period for a lender in the case of bankruptcy or  extenuating
 
                            -10-              LRB9113130JMdvA
 1    circumstances.  The  Fund shall be reimbursed for any amounts
 2    paid under this Section, Section 12.4, or Section  12.5  upon
 3    liquidation of the collateral.
 4        The  Authority,  by  resolution  of the Board, may borrow
 5    sums from the Fund and provide for repayment as soon  as  may
 6    be  practical  upon  receipt  of  payments  of  principal and
 7    interest by a borrower on State Guarantee  Loans  under  this
 8    Section, Section 12.4, or Section 12.5. Money may be borrowed
 9    from the Fund by the Authority for the sole purpose of paying
10    certain  interest costs for borrowers associated with selling
11    a loan subject to  a  State  Guarantee  under  this  Section,
12    Section 12.4, or Section 12.5 in a secondary market as may be
13    deemed  reasonable  and necessary by the Authority. Money may
14    be borrowed from the Fund by the Authority in accordance with
15    subsection (d) of Section 12.6.
16        (d)  Notwithstanding the provisions of this Section  12.2
17    with  respect to the farmers, agribusinesses, and lenders who
18    may obtain State Guarantees,  the  Authority  may  promulgate
19    rules    establishing    the    eligibility    of    farmers,
20    agribusinesses,  and  lenders  to  participate  in  the State
21    Guarantee program and the terms,  standards,  and  procedures
22    that  will  apply,  when  the  Authority finds that emergency
23    conditions in Illinois agriculture have created the need  for
24    State Guarantees pursuant to terms, standards, and procedures
25    other than those specified in this Section.
26    (Source: P.A. 90-325, eff. 8-8-97; 91-386, eff. 1-1-00.)

27        (20 ILCS 3605/12.6 new)
28        Sec. 12.6.  Value-added virtual equity program.
29        (a)  The   Authority   shall  develop  and  administer  a
30    value-added  virtual  equity  program  for  the  purpose   of
31    promoting   the   value-added  processing  of  Illinois  farm
32    products  and  by-products  through  loans  to  current   and
33    potential  processors.  Qualifying processing facilities must
 
                            -11-              LRB9113130JMdvA
 1    be  located  in  Illinois  and  must  process,  package,   or
 2    otherwise  enhance  the value of farm products or by-products
 3    produced in Illinois.  Loans may be used  for  the  costs  of
 4    establishing and operating a value-added processing facility,
 5    including,  but  not  limited  to,  (i) purchasing land, (ii)
 6    purchasing, constructing, or  refurbishing  buildings,  (iii)
 7    purchasing  or  refurbishing  machinery  or  equipment,  (iv)
 8    installation,  (v)  repairs,  (vi)  labor,  and (vii) working
 9    capital.
10        (b)  The recipient of a  loan  under  this  Section  must
11    provide a minimum percentage, as determined by the Authority,
12    of the total cost of the processing project, with the balance
13    of  the  project's  total  cost available from other sources.
14    Other sources include, but are not limited to, commercial and
15    private  lenders,  leasing  companies,   and   grants.    The
16    recipient's   match   may   be   in   cash,   cash-equivalent
17    investments,  or  both.   A  loan  under this Section may not
18    exceed 50% of the recipient's match or 17% of the  processing
19    project's  total cost, whichever is less.  No loan under this
20    Section may exceed $1,700,000.  A  loan  under  this  Section
21    must  be  secured  in  accordance with Authority rule, may be
22    disbursed only after funds from the project's  other  sources
23    have  been  disbursed,  and may be subordinate to that of any
24    primary lender.  Interest on a loan during the first 7  years
25    shall  accrue  and  compound  at  a  rate  determined  by the
26    Authority to  be  below  market.   Any  portion  of  a  loan,
27    including  principal  and  accrued  and  compounded interest,
28    unpaid  after  7  years  may  accrue  and  compound  at   the
29    then-current market rate of interest.
30        (c)  Loan  applications must be made on forms provided by
31    and  in  accordance  with  procedures  established   by   the
32    Authority.   At  a  minimum, an applicant must be an Illinois
33    resident, as defined by Authority rule, and shall be required
34    to provide the  names,  addresses,  and  occupations  of  all
 
                            -12-              LRB9113130JMdvA
 1    project  owners, the project address, and any relevant credit
 2    and financial information.
 3        The Authority may charge an application  fee,  an  annual
 4    administrative  fee,  or  both in connection with a loan, for
 5    which the recipient or the recipient's primary  lender  shall
 6    be  responsible.  Any  fees  or charges involved in recording
 7    mortgages,   releasing   financing   statements,   or   other
 8    loan-related activity, as the Authority may determine,  shall
 9    be the responsibility of the loan recipient.
10        (d)  The Virtual Equity Fund is created as a special fund
11    outside  the  State  treasury  for  which the State Treasurer
12    shall serve as custodian.
13        The Fund may accept appropriations and  moneys  from  any
14    public or private sources.  Amounts in the Fund not currently
15    needed  to meet the obligations of the Fund shall be invested
16    as  permitted  by  law.   All  interest  earned  from   those
17    investments  shall be deposited into the Fund, except that 1%
18    of annual investment earnings may be used  by  the  Authority
19    for expenses. The Fund shall be used to make loans under this
20    Section.   Repayments  of loans made under this Section shall
21    be deposited into the Fund.
22        The Authority may  periodically  borrow  money  from  the
23    Illinois  Agricultural  Loan  Guarantee  Fund,  the  Illinois
24    Farmer  and  Agribusiness  Loan Guarantee Fund, or both funds
25    for the purpose  of  this  Section  pending  the  deposit  of
26    appropriations  into the Virtual Equity Fund.  Money borrowed
27    from those funds must be repaid as expeditiously as possible.
28        (e)  The Authority shall adopt rules  necessary  for  the
29    implementation of this Section.

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

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