Public Act 93-0009
SB1601 Enrolled LRB093 02811 SJM 02827 b
AN ACT concerning finance.
WHEREAS, The General Assembly takes note that
governmental units in the State must borrow funds in the
current bond market, and the issuance of bonds or other
obligations as what are commonly referred to as variable rate
demand bonds, auction bonds, or commercial paper bonds is
ever increasing, and is frequently the most advisable and
economic means of borrowing; and
WHEREAS, It is sometimes most advantageous in connection
with such borrowings to enter into cap, collar, swap, or
other derivative transactions relating to interest rates
which serve to hedge interest rate risk and it is frequently
necessary to procure credit enhancement in the forms commonly
referred to as municipal bond insurance, letters of credit,
lines of credit, standby bond purchase agreements, or surety
bonds, and the like, in such demand bond and similar
transactions; and
WHEREAS, Existing law authorizes such transactions, but
it is advisable for the law to be more fully stated to
accommodate same, expressly permitting certain aspects of
such transactions; therefore
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 3. The State Finance Act is amended by changing
Section 6z-45 as follows:
(30 ILCS 105/6z-45)
Sec. 6z-45. The School Infrastructure Fund.
(a) The School Infrastructure Fund is created as a
special fund in the State Treasury.
In addition to any other deposits authorized by law,
beginning January 1, 2000, on the first day of each month, or
as soon thereafter as may be practical, the State Treasurer
and State Comptroller shall transfer the sum of $5,000,000
from the General Revenue Fund to the School Infrastructure
Fund; provided, however, that no such transfers shall be made
from July 1, 2001 through June 30, 2003.
(b) Subject to the transfer provisions set forth below,
money in the School Infrastructure Fund shall, if and when
the State of Illinois incurs any bonded indebtedness for the
construction of school improvements under the School
Construction Law, be set aside and used for the purpose of
paying and discharging annually the principal and interest on
that bonded indebtedness then due and payable, and for no
other purpose.
In addition to other transfers to the General Obligation
Bond Retirement and Interest Fund made pursuant to Section 15
of the General Obligation Bond Act, upon each delivery of
bonds issued for construction of school improvements under
the School Construction Law, the State Comptroller shall
compute and certify to the State Treasurer the total amount
of principal of, interest on, and premium, if any, on such
bonds during the then current and each succeeding fiscal
year. With respect to the interest payable on variable rate
bonds, such certifications shall be calculated at the maximum
rate of interest that may be payable during the fiscal year,
after taking into account any credits permitted in the
related indenture or other instrument against the amount of
such interest required to be appropriated for that period.
On or before the last day of each month, the State
Treasurer and State Comptroller shall transfer from the
School Infrastructure Fund to the General Obligation Bond
Retirement and Interest Fund an amount sufficient to pay the
aggregate of the principal of, interest on, and premium, if
any, on the bonds payable on their next payment date, divided
by the number of monthly transfers occurring between the last
previous payment date (or the delivery date if no payment
date has yet occurred) and the next succeeding payment date.
Interest payable on variable rate bonds shall be calculated
at the maximum rate of interest that may be payable for the
relevant period, after taking into account any credits
permitted in the related indenture or other instrument
against the amount of such interest required to be
appropriated for that period. Interest for which moneys have
already been deposited into the capitalized interest account
within the General Obligation Bond Retirement and Interest
Fund shall not be included in the calculation of the amounts
to be transferred under this subsection.
(c) The surplus, if any, in the School Infrastructure
Fund after the payment of principal and interest on that
bonded indebtedness then annually due shall, subject to
appropriation, be used as follows:
First - to make 3 payments to the School Technology
Revolving Loan Fund as follows:
Transfer of $30,000,000 in fiscal year 1999;
Transfer of $20,000,000 in fiscal year 2000; and
Transfer of $10,000,000 in fiscal year 2001.
Second - to pay the expenses of the State Board of
Education and the Capital Development Board in administering
programs under the School Construction Law, the total
expenses not to exceed $1,200,000 in any fiscal year.
Third - to pay any amounts due for grants for school
construction projects and debt service under the School
Construction Law.
Fourth - to pay any amounts due for grants for school
maintenance projects under the School Construction Law.
(Source: P.A. 91-38, eff. 6-15-99; 91-711, eff. 7-1-00;
92-11, eff. 6-11-01; 92-600, eff. 6-28-02.)
Section 5. The Bond Authorization Act is amended by
changing Sections 7, 9, 14 and 15 as follows:
(30 ILCS 305/7) (from Ch. 17, par. 6607)
Sec. 7. Interest rate swaps. For purposes of this
Section, terms are as defined in the Local Government Debt
Reform Act. With respect to all or part of any currently
outstanding or proposed issue of its bonds, a governmental
unit public corporation whose aggregate principal amount of
bonds outstanding or proposed exceeds $10,000,000 may,
without prior appropriation, enter into agreements or
contracts with any necessary or appropriate person (the
counter party) that will have the benefit of providing to the
governmental unit: (i) public corporation an interest rate
basis, cash flow basis, or other basis different from that
provided in the bonds for the payment of interest or (ii)
with respect to a future delivery of bonds, one or more of a
guaranteed interest rate, interest rate basis, cash flow
basis, or purchase price. Such agreements or contracts
include without limitation agreements or contracts commonly
known as "interest rate swap, collar, cap, or derivative
agreements", "forward payment conversion agreements",
interest rate locks, forward bond purchase agreements, bond
warrant agreements, or bond purchase option agreements and
also include agreements or contracts providing for payments
based on levels of or changes in interest rates, including a
change in an interest rate index, to exchange cash flows or a
series of payments, or to hedge payment, rate spread, or
similar exposure (such agreements or contracts, collectively,
being "swaps"). Without limiting other permitted terms which
may be included in swaps, the following provisions may or, if
hereinafter so required, shall apply:
(a) Payments made pursuant to a swap (the swap payments)
which are to be made by the governmental unit may be paid by
such governmental unit, without limitation, from proceeds of
the bonds, including bonds for future delivery, identified to
such swaps, or from bonds issued to refund such bonds, or
from whatever enterprise revenues or revenue source,
including taxes pledged or to be pledged to the payment of
such bonds, which enterprise revenues or revenue source may
be increased to make such swap payments, and swap payments to
be received by the governmental unit, which may be periodic,
up-front, or on termination, shall be used solely for and
limited to any lawful corporate purpose of the governmental
unit.
(b) Up-front or periodic net swap payments to be paid by
the governmental unit under the swaps (the standard swap
payments) such agreements or contracts shall be treated as
interest for the purpose of calculating any interest rate
limit applicable to the bonds, provided, however, that for
purposes of making such standard swap payments only (and not
with respect to the bonds so issued or to be issued), the
bonds shall be deemed not exempt from income taxation under
the Internal Revenue Code for purposes of State law, as
contained in this Bond Authorization Act, relating to the
permissible rate of interest to be borne thereon, and,
provided further, that if payments of any standard swap
payments are to be made by the governmental unit and the
counterparty on different dates, the net effect of such
payments for purposes of such interest rate limitation shall
be determined using a true interest cost (yield) calculation.
(c) Any such agreement or contract and the swap payments
to be made thereunder shall not be taken into account with
respect to any debt limit applicable to the governmental unit
public corporation.
(d) Swap payments upon the termination of any swap may
be paid to a counterparty upon any terms customary for swaps,
including, without limitation, provisions using market
quotations available for giving the net benefit of the swap
at the time of termination to the persons entitled thereto
(viz., the governmental unit or the counterparty) or
reasonable fair market value determinations of the value at
termination made in good faith by either such persons.
(e) The term of the swap shall not exceed the term of
any currently outstanding bonds identified to such swap or,
for bonds to be delivered, not greater than 5 years plus the
term of years proposed for such bonds to be delivered, but in
no event longer than 40 years, plus, in each case, any time
period necessary to cure any defaults under such swap.
(f) The choice of law for enforcement of swaps as to any
counterparty may be made for any state of these United
States, but the law which shall apply to the obligations of
the governmental unit shall be the law of the State of
Illinois, and jurisdiction to enforce the swaps as against
the governmental units shall be exclusively in the courts of
the State of Illinois or in the applicable federal court
having jurisdiction and located within the State of Illinois.
(g) Governmental units, in entering into swaps, may not
waive any sovereign immunities from time to time available
under the laws of the State of Illinois as to jurisdiction,
procedures, and remedies, but such swaps shall otherwise be
fully enforceable as valid and binding contracts as and to
the extent provided herein and by other applicable law.
(Source: P.A. 87-1176.)
(30 ILCS 330/9) (from Ch. 127, par. 659)
Sec. 9. Conditions for Issuance and Sale of Bonds -
Requirements for Bonds.
(a) 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 Bureau of the Budget. Bonds shall be in such
form (either coupon, registered or book entry), in such
denominations, payable within 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 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. Said 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.
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 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 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 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 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 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. 91-39, eff. 6-15-99; 91-357, eff. 7-29-99;
92-16, eff. 6-28-01.)
(30 ILCS 330/14) (from Ch. 127, par. 664)
Sec. 14. Repayment.
(a) To provide for the manner of repayment of Bonds, the
Governor shall include an appropriation in each annual State
Budget of monies in such amount as shall be necessary and
sufficient, for the period covered by such budget, to pay the
interest, as it shall accrue, on all Bonds issued under this
Act, to pay and discharge the principal of such Bonds as
shall, by their terms, fall due during such period, and to
pay a premium, if any, on Bonds to be redeemed prior to the
maturity date. Amounts included in such appropriations for
the payment of interest on variable rate bonds shall be the
maximum amounts of interest that may be payable for the
period covered by the budget, after taking into account any
credits permitted in the related indenture or other
instrument against the amount of such interest required to be
appropriated for such period. Amounts included in such
appropriations for the payment of interest shall include the
amounts certified by the Director of the Bureau of the Budget
under subsection (b) of Section 9 of this Act.
(b) A separate fund in the State Treasury called the
"General Obligation Bond Retirement and Interest Fund" is
hereby created.
(c) The General Assembly shall annually make
appropriations to pay the principal of, interest on, and
premium, if any, on Bonds sold under this Act from the
General Obligation Bond Retirement and Interest Fund.
Amounts included in such appropriations for the payment of
interest on variable rate bonds shall be the maximum amounts
of interest that may be payable during the fiscal year, after
taking into account any credits permitted in the related
indenture or other instrument against the amount of such
interest required to be appropriated for such period.
Amounts included in such appropriations for the payment of
interest shall include the amounts certified by the Director
of the Bureau of the Budget under subsection (b) of Section 9
of this Act.
If for any reason there are insufficient funds in either
the General Revenue Fund or the Road Fund to make transfers
to the General Obligation Bond Retirement and Interest Fund
as required by Section 15 of this Act, or if for any reason
the General Assembly fails to make appropriations sufficient
to pay the principal of, interest on, and premium, if any, on
the Bonds, as the same by their terms shall become due, this
Act shall constitute an irrevocable and continuing
appropriation of all amounts necessary for that purpose, and
the irrevocable and continuing authority for and direction to
the State Treasurer and the Comptroller to make the necessary
transfers, as directed by the Governor, out of and
disbursements from the revenues and funds of the State.
(d) If, because of insufficient funds in either the
General Revenue Fund or the Road Fund, monies have been
transferred to the General Obligation Bond Retirement and
Interest Fund, as required by subsection (c) of this Section,
this Act shall constitute the irrevocable and continuing
authority for and direction to the State Treasurer and
Comptroller to reimburse these funds of the State from the
General Revenue Fund or the Road Fund, as appropriate, by
transferring, at such times and in such amounts, as directed
by the Governor, an amount to these funds equal to that
transferred from them.
(Source: P.A. 83-1490.)
(30 ILCS 330/15) (from Ch. 127, par. 665)
Sec. 15. Computation of Principal and Interest;
transfers.
(a) Upon each delivery of Bonds authorized to be issued
under this Act, the Comptroller shall compute and certify to
the Treasurer the total amount of principal of, interest on,
and premium, if any, on Bonds issued that will be payable in
order to retire such Bonds and the amount of principal of,
interest on and premium, if any, on such Bonds that will be
payable on each payment date according to the tenor of such
Bonds during the then current and each succeeding fiscal
year. With respect to the interest payable on variable rate
bonds, such certifications shall be calculated at the maximum
rate of interest that may be payable during the fiscal year,
after taking into account any credits permitted in the
related indenture or other instrument against the amount of
such interest required to be appropriated for such period
pursuant to subsection (c) of Section 14 of this Act. With
respect to the interest payable, such certifications shall
include the amounts certified by the Director of the Bureau
of the Budget under subsection (b) of Section 9 of this Act.
On or before the last day of each month the State
Treasurer and Comptroller shall transfer from (1) the Road
Fund with respect to Bonds issued under paragraph (a) of
Section 4 of this Act or Bonds issued for the purpose of
refunding such bonds, and from (2) the General Revenue Fund,
with respect to all other Bonds issued under this Act, to the
General Obligation Bond Retirement and Interest Fund an
amount sufficient to pay the aggregate of the principal of,
interest on, and premium, if any, on Bonds payable, by their
terms on the next payment date divided by the number of full
calendar months between the date of such Bonds and the first
such payment date, and thereafter, divided by the number of
months between each succeeding payment date after the first.
Such computations and transfers shall be made for each series
of Bonds issued and delivered. Interest payable on variable
rate bonds shall be calculated at the maximum rate of
interest that may be payable for the relevant period, after
taking into account any credits permitted in the related
indenture or other instrument against the amount of such
interest required to be appropriated for such period pursuant
to subsection (c) of Section 14 of this Act. Computations of
interest shall include the amounts certified by the Director
of the Bureau of the Budget under subsection (b) of Section 9
of this Act. Interest for which moneys have already been
deposited into the capitalized interest account within the
General Obligation Bond Retirement and Interest Fund shall
not be included in the calculation of the amounts to be
transferred under this subsection.
The transfer of monies herein and above directed is not
required if monies in the General Obligation Bond Retirement
and Interest Fund are more than the amount otherwise to be
transferred as herein above provided, and if the Governor or
his authorized representative notifies the State Treasurer
and Comptroller of such fact in writing.
(b) After the effective date of this Act, the balance
of, and monies directed to be included in the Capital
Development Bond Retirement and Interest Fund, Anti-Pollution
Bond Retirement and Interest Fund, Transportation Bond,
Series A Retirement and Interest Fund, Transportation Bond,
Series B Retirement and Interest Fund, and Coal Development
Bond Retirement and Interest Fund shall be transferred to and
deposited in the General Obligation Bond Retirement and
Interest Fund. This Fund shall be used to make debt service
payments on the State's general obligation Bonds heretofore
issued which are now outstanding and payable from the Funds
herein listed as well as on Bonds issued under this Act.
(c) The unused portion of federal funds received for a
capital facilities project, as authorized by Section 3 of
this Act, for which monies from the Capital Development Fund
have been expended shall be deposited upon completion of the
project in the General Obligation Bond Retirement and
Interest Fund. Any federal funds received as reimbursement
for the completed construction of a capital facilities
project, as authorized by Section 3 of this Act, for which
monies from the Capital Development Fund have been expended
shall be deposited in the General Obligation Bond Retirement
and Interest Fund.
(Source: P.A. 93-2, eff. 4-7-03.)
Section 10. The Local Government Credit Enhancement Act
is amended by changing Sections 2 and 3 as follows:
(50 ILCS 410/2) (from Ch. 85, par. 4302)
Sec. 2. For the purposes of this Act, terms are as
defined in the Local Government Debt Reform Act. unless the
context requires otherwise:
(a) "Unit of local government" shall have the meaning
ascribed to it in Article VII, Section 1 of the Illinois
Constitution.
(b) "School district" means any public school district
organized under the School Code or prior law and includes any
dual or unit school district, high school district, special
charter district and non-high school district. "School
district" also means any community college district organized
under the Public Community College Act or prior law.
(c) "Governing board" means the corporate authorities of
the municipality, county board, board of trustees, board of
education, board of school directors, or other governing body
of the unit of local government or school district.
(Source: P.A. 83-1536.)
(50 ILCS 410/3) (from Ch. 85, par. 4303)
Sec. 3. In connection with the issuance of its bonds and
notes, a governmental unit of local government or school
district may enter into agreements (credit agreements)
arrangements to provide additional security or and liquidity,
or both, for the bonds and notes. These may include, without
limitation, municipal bond insurance, letters of credit,
lines of credit, standby bond purchase agreements, surety
bonds, and the like, by which the governmental unit of local
government or school district may borrow funds to pay or
redeem or purchase and hold its bonds and a governmental unit
may enter into agreements for the purchase or remarketing of
bonds (remarketing agreements) arrangements for providing a
mechanism for remarketing bonds tendered for purchase in
accordance with their terms. The term of such credit
agreements or remarketing agreements shall not exceed the
term of the bonds, plus any time period necessary to cure any
defaults under such agreements assuring the ability of owners
of the issuing local government's or school district's bonds
to sell or to have redeemed their bonds. The unit of local
government or school district may enter into contracts and
may agree to pay fees to persons providing such arrangements,
including from bond proceeds.
Without limiting the terms which may be included in any
such credit agreements or remarketing agreements, the
ordinance The resolution of the governing board authorizing
the issuance of the bonds may or, if hereinafter so required,
shall provide as follows:
(a) that Interest rates on the bonds may vary from time
to time depending upon criteria established by the governing
body board, which may include, without limitation: (i), a
variation in interest rates as may be necessary to cause
bonds to be remarketed remarketable from time to time at a
price equal to their principal amount plus any accrued
interest; (ii) rates set by auctions; or (iii) rates set by
formula. and may provide for appointment of,
(b) A national banking association, bank, trust company,
investment banker or other financial institution may be
appointed to serve as a remarketing agent in that connection,
and such remarketing agent may be delegated authority by the
governing body to determine interest rates in accordance with
criteria established by the governing body. The resolution
of the governing board authorizing the issuance of the bonds
may provide that
(c) Alternative interest rates or provisions may will
apply during such times as the bonds are held by the a person
or persons (financial providers) providing a credit agreement
or remarketing agreement letter of credit or other credit
enhancement arrangement for those bonds and during such
times, the interest on the bonds may be deemed not exempt
from income taxation under the Internal Revenue Code for
purposes of State law, as contained in the Bond Authorization
Act, relating to the permissible rate of interest to be borne
thereon.
(d) Fees may be paid to the financial providers,
including all reasonably related costs, including therein
costs of enforcement and litigation (all such fees and costs
being financial provider payments) and financial provider
payments may be paid, without limitation, from proceeds of
the bonds being the subject of such agreements, or from bonds
issued to refund such bonds, or from whatever enterprise
revenues or revenue source, including taxes, pledged to the
payment of such bonds, which enterprise revenues or revenue
source may be increased to make such financial provider
payments, and such financial provider payments shall be made
subordinate to the payments on the bonds.
(e) The bonds need not be held in physical form by the
financial providers when providing funds to purchase or carry
the bonds from others but may be represented in
uncertificated form in the credit agreements or remarketing
agreements.
(f) The debt or obligation of the governmental unit
represented by a bond tendered for purchase to or otherwise
made available to the governmental unit and thereupon
acquired by either such governmental unit or a financial
provider shall not be deemed to be extinguished for purposes
of State law until cancelled by the governmental unit or its
agent.
(g) The choice of law for the obligations of a financial
provider may be made for any state of these United States,
but the law which shall apply to the obligations of the
governmental unit shall be the law of the State of Illinois,
and jurisdiction to enforce such credit agreement or
remarketing agreement as against the governmental unit shall
be exclusively in the courts of the State of Illinois or in
the applicable federal court having jurisdiction and located
within the State of Illinois.
(h) The governmental unit may not waive any sovereign
immunities from time to time available under the laws of the
State of Illinois as to jurisdiction, procedures, and
remedies, but any such credit agreement and remarketing
agreement shall otherwise by fully enforceable as valid and
binding contracts as and to the extent provided by applicable
law.
(i) Such credit agreement or remarketing agreement may
provide for acceleration of the principal amounts due on the
bonds, provided, however, that such acceleration shall be
deferred for not less than 18 months from the time any such
bond is acquired pursuant to any such agreement.
(Source: P.A. 83-1536.)
Section 99. Effective date. This Act takes effect upon
becoming law.
Effective Date: 6/3/2003