HB2718 100TH GENERAL ASSEMBLY

LRB100 10499 KTG 20713 b

100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB2718

Introduced , by Rep. Emanuel Chris Welch

SYNOPSIS AS INTRODUCED:

See Index

Amends the Illinois Housing Development Act. Requires the Director of the Illinois Housing Development Authority to oversee an annual evaluation of derivative deals, including interest rate swaps, initiated to manage interest rate exposure, in order to ascertain the financial costs of these agreements. Provides that if these agreements have resulted in losses to the Authority, the Director shall make all necessary efforts to recover those moneys. Requires the Authority to conduct specified duties to achieve these goals. Makes similar changes concerning the annual evaluation of derivative deals under the General Obligation Bond Act, the State University Certificates of Participation Act, the University of Illinois Revenue Bond Financing Act for Auxiliary Facilities, and the Toll Highway Act. Further amends the General Obligation Bond Act by removing a provision permitting a Bond Sale Order to provide for variable interest rates to be established pursuant to a process generally known as an auction rate process and to 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. Provides that after July 1, 2017, the State may not, with respect to Bonds issued or anticipated to be issued, participate in and enter into interest rate exchange agreements, financial futures contracts, or any other similar arrangements alleged to have the purpose of managing interest rate exposure. Provides that the amount of the State's variable rate exposure with respect to Bonds shall not exceed 10% (rather than 20%). Makes other changes.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning State government.

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

Section 1. Findings. Beginning in 1998, the State of Illinois and its agencies began entering into interest rate swap agreements with various counterparties, including Bank of America, JP Morgan Chase, Goldman Sachs, Wells Fargo, Citigroup, Bank of New York Mellon, Deutsche Bank, Loop Financial, Morgan Stanley, and the American International Group in the connection with the issuance of bonds and certificates.

It is estimated that the State has made more than $700,000,000 in net payments to these counterparties as of the end of fiscal year 2016, and continues to pay more than $70,000,000 a year, resulting in an additional $800,000,000 in net payments projected over the remaining life of these deals, from fiscal years 2017 through 2033.

The swap agreements do not serve their stated original purpose to mitigate interest rate risks largely due to the 2008 financial crash and the resulting sharp decline in variable interest rates.

Section 5. The Illinois Housing Development Act is amended by changing Section 16 as follows:

(20 ILCS 3805/16) (from Ch. 67 1/2, par. 316)

Sec. 16. The notes and bonds issued under this Act shall be authorized by resolution of the members of the Authority, shall bear such date or dates, and shall mature at such time or times, in the case of any note, or any renewal thereof, not exceeding 15 years (or such longer time not exceeding 25 years if the Authority shall determine, with respect to notes issued in anticipation of bonds, that a longer maturity date is required in order to assure the ability to issue the bonds), from the date of issue of such original note, and in the case of any bond not exceeding 50 years from the date of issue, as the resolution may provide. The bonds may be issued as serial bonds or as term bonds or as a combination thereof. The notes and bonds shall bear interest at such rate or rates as shall be determined by the members of the Authority by the resolution authorizing issuance of the bonds and notes provided, however, that notes and bonds issued after July 1, 1983, shall bear interest at such rate or rates not exceeding the greater of (i) the maximum rate established in "An Act to authorize public corporations to issue bonds, other evidences of indebtedness and tax anticipation warrants subject to interest rate limitations set forth therein", approved May 26, 1970, as from time to time in effect; (ii) 11% per annum or (iii) 70% of the prime commercial rate in effect at the time the contract is made. In the event the Authority issues notes or bonds not exempt from income taxation under the Internal Revenue Code of 1954, as amended, such notes or bonds shall bear interest at a rate or rates as shall be determined by the members of the Authority by the resolution authorizing issuance of the bonds and notes. Prime commercial rate means such prime rate as from time to time is publicly announced by the largest commercial banking institution located in this State, measured in terms of total assets. A contract is made with respect to notes or bonds when the Authority is contractually obligated to issue and sell such notes or bonds to a purchaser who is contractually obligated to purchase them. The notes and bonds shall be in such denominations, be in such form, either coupon or registered, carry such registration privileges, be executed in such manner, be payable in such medium of payment, at such place or places and be subject to such terms of redemption as such resolution or resolutions may provide. The notes and bonds of the Authority may be sold by the Authority, at public or private sale, at such price or prices as the Authority shall determine.

In lieu of establishing the rate at which notes or bonds of the Authority shall bear interest and the price at which the notes or bonds shall be sold, the resolution authorizing their issuance may set maximum and minimum prices, interest rates and annual interest cost to the Authority for that issue of notes or bonds (computed as the resolution shall provide), such that the difference between the maximum and minimum annual interest cost shall not exceed 1% of the principal amount of the notes or bonds. Such a resolution shall authorize any two of the Chairman, Treasurer or Director (or in the Director's absence, the Deputy Director) to establish the actual price and interest rate within the range established by the resolution. In lieu of establishing the dates, maturities or other terms of the notes or bonds, the resolution authorizing their issuance may authorize any two of the Chairman, Treasurer or Director (or in the Director's absence, the Deputy Director) to establish such dates, maturities and other terms within ranges or criteria established by the resolution.

In connection with the issuance of its notes and bonds, the Authority may enter into arrangements to provide additional security and liquidity for the notes and bonds. These may include, without limitation, letters of credit, lines of credit by which the Authority may borrow funds to pay or redeem its notes or bonds and purchase or remarketing arrangements for assuring the ability of owners of the Authority's notes and bonds to sell or to have redeemed their notes and bonds. The Authority may enter into contracts and may agree to pay fees to persons providing such arrangements, but only under circumstances in which the total interest paid or to be paid on the notes or bonds, together with the fees for the arrangements (being treated as if interest), would not, taken together, cause the notes or bonds to bear interest, calculated to their absolute maturity, at a rate in excess of the maximum rate allowed by this Act.

The resolution of the Authority authorizing the issuance of its notes or bonds may provide that interest rates may vary from time to time depending upon criteria established by the Authority, which may include, without limitation, a variation in interest rates as may be necessary to cause notes or bonds to be remarketable from time to time at a price equal to their principal amount (or compound accredited value in case of original issue discount bonds), and may provide for appointment of a national banking association, bank, trust company, investment bank or other financial institution to serve as a remarketing agent in that connection. The resolution of the Authority authorizing the issuance of its notes or bonds may provide that alternative interest rates or provisions will apply during such times as the notes or bonds are held by a person providing a letter of credit or other credit enhancement arrangement for those notes or bonds. Notwithstanding any other provisions of law, there shall be no statutory limitation on the interest rates which such variable rate notes and bonds may bear from time to time.

In addition to the other authorizations contained in this Section, the Authority may adopt a resolution or resolutions granting to any two of the Chairman, Treasurer or Director (or in the Director's absence, the Deputy Director) the power to authorize issuance of notes or bonds, or both, on behalf of the Authority from time to time without further resolution of the Authority. Any such resolution shall contain a statement of the maximum aggregate amount of notes or bonds that may be outstanding at any one time pursuant to the authorization granted in such resolution. Such resolution shall also contain a statement of the period of time during which such notes or bonds of the Authority may be so issued. Such resolution shall also delegate specifically or generally to the persons empowered to authorize issuance of the notes or bonds the authority to establish or approve any or all matters relating to the issuance and sale of the notes or bonds, which may include the interest rates, if any, which the notes or bonds shall bear and the prices (including premiums or discounts, if any) at which they shall be issued and sold, or the criteria upon which such interest rates and prices may vary, the appointment of remarketing agents, the approval of alternative interest rates, whether there shall be any statutory or other limitation on the interest rates which such notes or bonds may bear (treating as if interest the fees for any arrangements to provide additional security and liquidity for the notes and bonds), and the dates, maturities and other terms and conditions on which the notes or bonds shall be issued and sold. Any or all of such matters may vary from issue to issue and within an issue. Any such resolution may set forth the criteria by which any or all of the matters entrusted to the persons designated in such resolution are to be established or approved, and may grant the power to authorize issuance of notes or bonds which are exempt from income taxation under the Internal Revenue Code of 1954, as amended, or which are not exempt.

The Director of the Illinois Housing Development Authority must oversee an annual evaluation of derivative deals, including interest rate swaps, initiated to manage interest rate exposure, in order to ascertain the financial costs of these agreements. If these agreements have resulted in losses to the Authority, the Director shall make all necessary efforts to recover those moneys. To achieve these goals, the Director shall:

(1) Authorize agency administrators to negotiate and terminate the Authority's interest rate swap agreements with banks to the extent that the Authority is able to do so at no cost and not later than the end of the next fiscal year after a finding of losses to Illinois taxpayers is made. If a respective bank refuses to terminate without fees or penalty by that date, then it will be excluded from any future business with the Authority during the life of the swap agreement, and the Authority should continue to use all good faith efforts until said bank drops the termination fees and penalty.

(2) Not enter into any blanket release of legal liabilities in relation to any interest rate swap agreement.

(3) Investigate and determine the amount of the moneys lost by the Authority due to alleged illegal or unethical acts by financial institutions, including, but not limited to, manipulating the London Interbank Offered Rate (LIBOR), misrepresenting the risks associated with complex financial deals like interest rate swaps and auction rate securities, mispricing municipal derivatives, and rigging bids on competitively bid contracts.

(A) The investigation shall examine all successful or pending legal actions taken by other governmental entities (including both issuers of debt and enforcement authorities) in the United States to recover money from such practices. In each case if the investigation finds no basis for action under a similar legal theory, the report of the investigation shall set forth specific reasons why action under the legal theory is not feasible.

(B) The investigation shall be completed no later than 6 months after the effective date of this amendatory Act of the 100th General Assembly. The Director shall request the Attorney General to evaluate and pursue all legal remedies.

Notwithstanding any other provision of law, and in addition to any other authority provided by law, with respect to mortgage or other loans made by it, the Authority may require payments of principal, make interest charges and impose prepayment premiums or penalties (in addition to any fees or charges made by the Authority) so that such principal, interest and premiums or penalties are sufficient to enable the Authority to pay when due all principal, interest and redemption premiums or penalties on any notes or bonds issued by the Authority to finance or continue the financing of such loans (including a proportionate share of such bonds or notes issued to fund reserves or to cover any discount) and to make any required deposits in any reserve funds; and any contract relating to any mortgage or other loan made by the Authority may provide for changes during its term in the rate at which interest shall be paid, to the extent the changes are provided for in order to enable the Authority to make payments with respect to bonds or notes as provided in this Section.

(Source: P.A. 85-1450.)

Section 10. The General Obligation Bond Act is amended by changing Sections 9 and 14 and by adding Section 15.1 as follows:

(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. Bonds shall be in such form (either coupon, registered or book entry), in such denominations, payable within 25 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 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, other than Bonds issued under Section 3 of this Act for the costs associated with the purchase and implementation of information technology, (i) except for refunding Bonds satisfying the requirements of Section 16 of this Act and sold during fiscal year 2009, 2010, 2011, or 2017 must be issued with principal or mandatory redemption amounts in equal amounts, with the first maturity issued occurring within the fiscal year in which the Bonds are issued or within the next succeeding fiscal year and (ii) must mature or be subject to mandatory redemption each fiscal year thereafter up to 25 years, except for refunding Bonds satisfying the requirements of Section 16 of this Act and sold during fiscal year 2009, 2010, or 2011 which must mature or be subject to mandatory redemption each fiscal year thereafter up to 16 years. Bonds issued under Section 3 of this Act for the costs associated with the purchase and implementation of information technology must be issued with principal or mandatory redemption amounts in equal amounts, with the first maturity issued occurring with the fiscal year in which the respective bonds are issued or with the next succeeding fiscal year, with the respective bonds issued maturing or subject to mandatory redemption each fiscal year thereafter up to 10 years. Notwithstanding any provision of this Act to the contrary, the Bonds authorized by Public Act 96-43 shall be payable within 5 years from their date and must be issued with principal or mandatory redemption amounts in equal amounts, with payment of principal or mandatory redemption beginning in the first fiscal year following the fiscal year in which the Bonds are issued.

Notwithstanding any provision of this Act to the contrary, the Bonds authorized by Public Act 96-1497 shall be payable within 8 years from their date and shall be issued with payment of maturing principal or scheduled mandatory redemptions in accordance with the following schedule, except the following amounts shall be prorated if less than the total additional amount of Bonds authorized by Public Act 96-1497 are issued:

Fiscal Year After Issuance Amount

1-2 $0

3 $110,712,120

4 $332,136,360

5 $664,272,720

6-8 $996,409,080

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 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 that is no more than two-thirds in excess of the rate that the Bonds would bear in the absence of such arrangements.

After July 1, 2017, the State may not, with respect to Bonds issued or anticipated to be issued, participate in and enter into interest rate exchange agreements, financial futures contracts, or any other similar arrangements alleged to have the purpose of managing interest rate exposure. 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, reducing, or managing interest rate exposure. The authority granted under this paragraph, however, shall not increase the principal amount of Bonds authorized to be issued by law. The arrangements may be executed and delivered by the Director of the Governor's Office of Management and 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 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 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 10% 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 but in no event shall any amendment cause the permitted level of the State's variable rate exposure with respect to Bonds to exceed 10% 20%.

(d) "Build America Bonds" in this Section means Bonds authorized by Section 54AA of the Internal Revenue Code of 1986, as amended ("Internal Revenue Code"), and bonds issued from time to time to refund or continue to refund "Build America Bonds".

(e) Notwithstanding any other provision of this Section, Qualified School Construction 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. Qualified School Construction Bonds shall be in such form (either coupon, registered or book entry), in such denominations, payable within 25 years from their date, subject to such terms of redemption with or without premium, and if the Qualified School Construction Bonds are issued with a supplemental coupon, 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 in the order authorizing the issuance and sale of any series of Qualified School Construction Bonds, which order shall be approved by the Governor and is herein called a "Bond Sale Order"; except that interest payable at fixed or variable rates, if any, shall not exceed that permitted in the Bond Authorization Act, as now or hereafter amended. Qualified School Construction 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. Qualified School Construction Bonds may be callable or subject to purchase and retirement or tender and remarketing as fixed and determined in the Bond Sale Order. Qualified School Construction Bonds must be issued with principal or mandatory redemption amounts or sinking fund payments into the General Obligation Bond Retirement and Interest Fund (or subaccount therefor) in equal amounts, with the first maturity issued, mandatory redemption payment or sinking fund payment occurring within the fiscal year in which the Qualified School Construction Bonds are issued or within the next succeeding fiscal year, with Qualified School Construction Bonds issued maturing or subject to mandatory redemption or with sinking fund payments thereof deposited each fiscal year thereafter up to 25 years. Sinking fund payments set forth in this subsection shall be permitted only to the extent authorized in Section 54F of the Internal Revenue Code or as otherwise determined by the Director of the Governor's Office of Management and Budget. "Qualified School Construction Bonds" in this subsection means Bonds authorized by Section 54F of the Internal Revenue Code and for bonds issued from time to time to refund or continue to refund such "Qualified School Construction Bonds".

(f) Beginning with the next issuance by the Governor's Office of Management and Budget to the Procurement Policy Board of a request for quotation for the purpose of formulating a new pool of qualified underwriting banks list, all entities responding to such a request for quotation for inclusion on that list shall provide a written report to the Governor's Office of Management and Budget and the Illinois Comptroller. The written report submitted to the Comptroller shall (i) be published on the Comptroller's Internet website and (ii) be used by the Governor's Office of Management and Budget for the purposes of scoring such a request for quotation. The written report, at a minimum, shall:

(1) disclose whether, within the past 3 months, pursuant to its credit default swap market-making activities, the firm has entered into any State of Illinois credit default swaps ("CDS");

(2) include, in the event of State of Illinois CDS activity, disclosure of the firm's cumulative notional volume of State of Illinois CDS trades and the firm's outstanding gross and net notional amount of State of Illinois CDS, as of the end of the current 3-month period;

(3) indicate, pursuant to the firm's proprietary trading activities, disclosure of whether the firm, within the past 3 months, has entered into any proprietary trades for its own account in State of Illinois CDS;

(4) include, in the event of State of Illinois proprietary trades, disclosure of the firm's outstanding gross and net notional amount of proprietary State of Illinois CDS and whether the net position is short or long credit protection, as of the end of the current 3-month period;

(5) list all time periods during the past 3 months during which the firm held net long or net short State of Illinois CDS proprietary credit protection positions, the amount of such positions, and whether those positions were net long or net short credit protection positions; and

(6) indicate whether, within the previous 3 months, the firm released any publicly available research or marketing reports that reference State of Illinois CDS and include those research or marketing reports as attachments.

(g) All entities included on a Governor's Office of Management and Budget's pool of qualified underwriting banks list shall, as soon as possible after March 18, 2011 (the effective date of Public Act 96-1554), but not later than January 21, 2011, and on a quarterly fiscal basis thereafter, provide a written report to the Governor's Office of Management and Budget and the Illinois Comptroller. The written reports submitted to the Comptroller shall be published on the Comptroller's Internet website. The written reports, at a minimum, shall:

(1) disclose whether, within the past 3 months, pursuant to its credit default swap market-making activities, the firm has entered into any State of Illinois credit default swaps ("CDS");

(2) include, in the event of State of Illinois CDS activity, disclosure of the firm's cumulative notional volume of State of Illinois CDS trades and the firm's outstanding gross and net notional amount of State of Illinois CDS, as of the end of the current 3-month period;

(3) indicate, pursuant to the firm's proprietary trading activities, disclosure of whether the firm, within the past 3 months, has entered into any proprietary trades for its own account in State of Illinois CDS;

(4) include, in the event of State of Illinois proprietary trades, disclosure of the firm's outstanding gross and net notional amount of proprietary State of Illinois CDS and whether the net position is short or long credit protection, as of the end of the current 3-month period;

(5) list all time periods during the past 3 months during which the firm held net long or net short State of Illinois CDS proprietary credit protection positions, the amount of such positions, and whether those positions were net long or net short credit protection positions; and

(6) indicate whether, within the previous 3 months, the firm released any publicly available research or marketing reports that reference State of Illinois CDS and include those research or marketing reports as attachments.

(Source: P.A. 99-523, eff. 6-30-16.)

(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, to pay a premium, if any, on Bonds to be redeemed prior to the maturity date, and to pay sinking fund payments in connection with Qualified School Construction Bonds authorized by subsection (e) of Section 9. 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 Governor's Office of Management and Budget under subsection (b) of Section 9 of this Act. The amount shall also include certified estimates from the Director of the Governor's Office of Management and Budget of net payments for any arrangements with respect to interest rate protection or exchange agreements, guarantees, or financial futures contracts for the purpose of limiting, reducing, or managing interest rate exposure entered into prior to July 1, 2017 and still remaining in effect.

(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 Governor's Office of Management and 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. 96-828, eff. 12-2-09.)

(30 ILCS 330/15.1 new)

Sec. 15.1. Derivative deal investigations. The Director of the Governor's Office of Management and Budget must oversee an annual evaluation of derivative deals, including interest rate swaps, initiated to manage interest rate exposure, in order to ascertain the financial costs of these agreements. If these agreements have resulted in losses to the State, the Governor's Office of Management and Budget shall make all necessary efforts to recover those moneys. To achieve these goals, the State shall:

(1) Authorize agency administrators to negotiate and terminate the State's interest rate swap agreements with banks to the extent that the State is able to do so at no cost and not later than the end of the next fiscal year after a finding of losses to Illinois taxpayers is made. If a respective bank refuses to terminate without fees or penalty by that date, then it will be excluded from any future business with the State of Illinois during the life of the swap agreement, and the State should continue to use all good faith efforts until said bank drops the termination fees and penalty.

(2) Not enter into any blanket release of legal liabilities in relation to any interest rate swap agreement.

(3) Investigate and determine the amount of the moneys lost by the State of Illinois due to alleged illegal or unethical acts by financial institutions, including but not limited to manipulating the London Interbank Offered Rate (LIBOR), misrepresenting the risks associated with complex financial deals like interest rate swaps and auction rate securities, mispricing municipal derivatives, and rigging bids on competitively bid contracts.

(A) The investigation shall examine all successful or pending legal actions taken by other governmental entities (including both issuers of debt and enforcement authorities) in the United States to recover money from such practices. In each case if the investigation finds no basis for action under a similar legal theory, the report of the investigation shall set forth specific reasons why action under the legal theory is not feasible.

(B) The investigation shall be completed no later than 6 months after the effective date of this amendatory Act of the 100th General Assembly. The Governor shall request the Attorney General to evaluate and pursue all legal remedies.

Section 15. The State University Certificates of Participation Act is amended by adding Sections 17 and 22 as follows:

(110 ILCS 73/17 new)

Sec. 17. Derivative deal investigations. The Board of Trustees of a State University must oversee an annual evaluation of derivative deals, including interest rate swaps, initiated to manage interest rate exposure, in order to ascertain the financial costs of these agreements. If these agreements have resulted in losses to the State University, the Board shall make all necessary efforts to recover those moneys. To achieve these goals, the Board shall:

(1) Authorize agency administrators to negotiate and terminate the State University's interest rate swap agreements with banks to the extent that the State University is able to do so at no cost and not later than the end of the next fiscal year after a finding of losses to Illinois taxpayers is made. If a respective bank refuses to terminate without fees or penalty by that date, then it will be excluded from any future business with the State University during the life of the swap agreement, and the State University should continue to use all good faith efforts until said bank drops the termination fees and penalty.

(2) Not enter into any blanket release of legal liabilities in relation to any interest rate swap agreement.

(3) Investigate and determine the amount of the moneys lost by the State University due to alleged illegal or unethical acts by financial institutions, including, but not limited to, manipulating the London Interbank Offered Rate (LIBOR), misrepresenting the risks associated with complex financial deals like interest rate swaps and auction rate securities, mispricing municipal derivatives, and rigging bids on competitively bid contracts.

(A) The investigation shall examine all successful or pending legal actions taken by other governmental entities (including both issuers of debt and enforcement authorities) in the United States to recover money from such practices. In each case if the investigation finds no basis for action under a similar legal theory, the report of the investigation shall set forth specific reasons why action under the legal theory is not feasible.

(B) The investigation shall be completed no later than 6 months after the effective date of this amendatory Act of the 100th General Assembly. The Board shall request the Attorney General to evaluate and pursue all legal remedies.

(110 ILCS 73/22 new)

Sec. 22. Derivative deal investigations. The Board of Trustees of the University of Illinois must oversee an annual evaluation of derivative deals, as set forth in Section 5.2 of the University of Illinois Revenue Bond Financing Act for Auxiliary Facilities.

Section 20. The University of Illinois Revenue Bond Financing Act for Auxiliary Facilities is amended by adding Section 5.2 as follows:

(110 ILCS 405/5.2 new)

Sec. 5.2. Derivative deal investigations. The Board of Trustees of the University of Illinois must oversee an annual evaluation of derivative deals, including interest rate swaps, initiated to manage interest rate exposure, in order to ascertain the financial costs of these agreements. If these agreements have resulted in losses to the University of Illinois, the Board shall make all necessary efforts to recover those moneys. To achieve these goals, the Board shall:

(1) Authorize agency administrators to negotiate and terminate the University of Illinois' interest rate swap agreements with banks to the extent that the University of Illinois is able to do so at no cost and not later than the end of the next fiscal year after a finding of losses to Illinois taxpayers is made. If a respective bank refuses to terminate without fees or penalty by that date, then it will be excluded from any future business with the University of Illinois during the life of the swap agreement, and the University of Illinois should continue to use all good faith efforts until said bank drops the termination fees and penalty.

(2) Not enter into any blanket release of legal liabilities in relation to any interest rate swap agreement.

(3) Investigate and determine the amount of the moneys lost by the University of Illinois due to alleged illegal or unethical acts by financial institutions, including, but not limited to, manipulating the London Interbank Offered Rate (LIBOR), misrepresenting the risks associated with complex financial deals like interest rate swaps and auction rate securities, mispricing municipal derivatives, and rigging bids on competitively bid contracts.

(A) The investigation shall examine all successful or pending legal actions taken by other governmental entities (including both issuers of debt and enforcement authorities) in the United States to recover money from such practices. In each case if the investigation finds no basis for action under a similar legal theory, the report of the investigation shall set forth specific reasons why action under the legal theory is not feasible.

(B) The investigation shall be completed no later than 6 months after the effective date of this amendatory Act of the 100th General Assembly. The Board shall request the Attorney General to evaluate and pursue all legal remedies.

Section 25. The Toll Highway Act is amended by changing Section 17 as follows:

(605 ILCS 10/17) (from Ch. 121, par. 100-17)

Sec. 17. (a) The Authority may from time to time issue bonds for any lawful purpose including, without limitation, the costs of issuance thereof and all such bonds or other obligations of the Authority issued pursuant to this Act shall be and are hereby declared to be negotiable for all purposes notwithstanding their payment from a limited source and without regard to any other law or laws.

(b) The bonds of every issue shall be payable solely out of revenues of the Authority, accumulated reserves or sinking funds, bond proceeds, proceeds of refunding bonds, or investment earnings as the Authority shall specify in a bond resolution.

(c) The bonds may be issued as serial bonds or as term bonds, or the Authority, in its discretion, may issue bonds of both types. The bonds shall be authorized by a bond resolution of the Authority, may be issued in one or more series and shall bear such date or dates, mature at such time or times not exceeding 25 years from their respective date or dates of issue, bear interest at such rate or rates, fixed or variable, without regard to any limit contained in any other statute or law of the State of Illinois, be payable as to principal and interest at such time or times, be in such denominations, be in such form, either coupon or fully registered, carry such registration and conversion privileges, be payable in lawful money of the United States of America at such places, be subject to such terms of redemption and may contain such other terms and provisions, as such bond resolution or resolutions may provide. The bonds shall be executed by the manual or facsimile signatures of the Chairman and the Secretary. In case any of the officers whose signature appears on the bonds or coupons, if any, shall cease to be an officer before the delivery of such bonds, such signature shall nevertheless be valid and sufficient for all purposes, as if he had remained in office until such delivery. The bonds shall be sold in such manner as the Authority shall determine. The proceeds from the sale of such bonds shall be paid to the Treasurer of the State of Illinois as ex officio custodian. Pending preparation of the definitive bonds, the Authority may issue interim receipts or certificates which shall be exchanged for such definitive bonds.

(d) Any bond resolution, or trust indenture entered into pursuant to a bond resolution, may contain provisions, which shall be a part of the contract with the holders of the bonds to be authorized, as to: (i) pledging or creating a lien upon all or part of the revenues of the Authority or any reserves, sinking funds, bond proceeds or investment earnings; (ii) the setting aside of reserves or sinking funds, and the regulation, investment and disposition thereof; (iii) the use and maintenance requirements for the toll highways; (iv) the purposes to which or the investments in which the proceeds of sale of any series or issue of bonds then or thereafter to be issued may be applied; (v) the issuance of additional bonds, the terms upon which additional bonds may be issued and secured, the purposes for such additional bonds, and the terms upon which additional bonds may rank on a parity with, or be subordinate or superior to other bonds; (vi) the refunding of outstanding bonds; (vii) the procedure, if any, by which the terms of any contract with bondholders may be amended or abrogated, the amount of bonds the holders of which must consent thereto, and the manner in which such consent may be given; (viii) defining the acts or omissions to act which shall constitute a default in the duties of the Authority to holders of its obligations and providing the rights and remedies of such holders in the event of a default; (ix) any other matters relating to the bonds which the Authority deems desirable.

(e) Neither the directors of the Authority nor any person executing the bonds shall be liable personally on the bonds or be subject to any personal liability or accountability by reason of the issuance thereof.

(f) The Authority shall have power out of any funds available therefor to purchase its bonds. The Authority may hold, pledge, cancel or resell such bonds subject to and in accordance with agreements with bondholders.

(g) In the discretion of the Authority any bonds issued under the provisions of this Act may be secured by a trust indenture by and between the Authority and a trustee or trustees, which may be any trust company or bank in the State of Illinois having the powers of a trust company and possessing capital and surplus of not less than $50,000,000. The bond resolution or trust indenture providing for the issuance of bonds so secured shall pledge such revenues of the Authority, sinking funds, bond proceeds, or investment earnings as may be specified therein, may contain such provisions for protecting and enforcing the rights and remedies of the bondholders as may be reasonable and proper and not in violation of law, including particularly such provisions as have hereinabove been specifically authorized to be included in any bond resolution or trust indenture of the Authority, and may restrict the individual right of action by bondholders. In addition to the foregoing, any bond resolution or trust indenture may contain such other provisions as the Authority may deem reasonable and proper for the security of the bondholders, including, but not limited to, the purchase of bond insurance and the arrangement of letters of credit, lines of credit or other credit or liquidity enhancement facilities; provided there shall be no pledge of the toll highway or any part thereof. All expenses incurred in carrying out the provisions of any bond resolution or trust indenture may be treated as a part of the cost of the operation of the toll highways.

(h) Bonds issued under the authority of this Act do not, and shall state upon the face of each bond that they do not, represent or constitute a debt of the Authority or of the State of Illinois within the meaning of any constitutional or statutory limitation or a pledge of the faith and credit of the Authority or the State of Illinois, or grant to the owners or holders thereof any right to have the Authority or the General Assembly levy any taxes or appropriate any funds for the payment of the principal thereof or interest thereon. Such bonds shall be payable and shall state that they are payable solely from the revenues and the sources authorized under this Act and pledged for their payment in accordance with the bond resolution or trust indenture.

Nothing in this Act shall be construed to authorize the Authority or any department, board, commission or other agency to create an obligation of the State of Illinois within the meaning of the Constitution or Statutes of Illinois.

(i) Any resolution or trust indenture authorizing the issuance of the bonds may include provision for the issuance of additional bonds. All resolutions of the Authority to carry such adopted bond resolutions into effect, to provide for the sale and delivery of the bonds, for letting of contracts for the construction of toll highways and the acquisition of real and personal property deemed by the Authority necessary or convenient for the construction thereof, shall not require the approval of the Governor or of any other department, division, commission, bureau, board or other agency of the State.

(j) The Director of the Illinois State Toll Highway Authority must oversee an annual evaluation of derivative deals, including interest rate swaps, initiated to manage interest rate exposure, in order to ascertain the financial costs of these agreements. If these agreements have resulted in losses to the Authority, the Director shall make all necessary efforts to recover those moneys. To achieve these goals, the Director shall:

(1) Authorize agency administrators to negotiate and terminate the Authority's interest rate swap agreements with banks to the extent that the Authority is able to do so at no cost and not later than the end of the next fiscal year after a finding of losses to Illinois taxpayers is made. If a respective bank refuses to terminate without fees or penalty by that date, then it will be excluded from any future business with the Authority during the life of the swap agreement, and the Authority should continue to use all good faith efforts until said bank drops the termination fees and penalty.

(2) Not enter into any blanket release of legal liabilities in relation to any interest rate swap agreement.

(3) Investigate and determine the amount of the moneys lost by the Authority due to alleged illegal or unethical acts by financial institutions, including, but not limited to, manipulating the London Interbank Offered Rate (LIBOR), misrepresenting the risks associated with complex financial deals like interest rate swaps and auction rate securities, mispricing municipal derivatives, and rigging bids on competitively bid contracts.

(A) The investigation shall examine all successful or pending legal actions taken by other governmental entities (including both issuers of debt and enforcement authorities) in the United States to recover money from such practices. In each case if the investigation finds no basis for action under a similar legal theory, the report of the investigation shall set forth specific reasons why action under the legal theory is not feasible.

(B) The investigation shall be completed by no later than 6 months after the effective date of this amendatory Act of the 100th General Assembly. The Director shall request the Attorney General to evaluate and pursue all legal remedies.

(Source: P.A. 83-1258.)