HB2626sam001 93RD GENERAL ASSEMBLY

Sen. Don Harmon

Filed: 3/3/2004

09300HB2626sam001 SDS093 00071 AWM 40022 a

AMENDMENT TO HOUSE BILL 2626

AMENDMENT NO. ______. Amend House Bill 2661 by replacing everything after the enacting clause with the following:

"Section 1. Short title. This Act may be cited as the Bond Issuance Expense Limitation Act.

Section 5. Definitions. For the purposes of this Act:

"Bond" or "bonds" means any general obligation bond, revenue bond, alternate bond, refunding or advance refunding bond, or other bond, note, or evidence of borrowing or indebtedness issued by a public issuer.

"Bond issuance expenses" means the fees and charges payable by the issuer, either directly or out of the bond proceeds, for the issuance and sale of bonds. The term does not, however, include the costs of bond insurance, capitalized interest, credit or liquidity enhancements, interest rate swaps or guarantees, or financial futures contracts.

"Public issuer" means the State or any of its agencies or instrumentalities.

Section 10. Applicability. This Act applies to all bonds issued by or through a public issuer pursuant to an authorizing resolution or contract for issuance adopted or entered into after the effective date of this Act, regardless of the statute, Omnibus Bond Act, or other source of authority under which the issuance of those bonds is authorized. This Act does not apply to bonds issued by a public issuer pursuant to an authorizing resolution or contract for issuance adopted or entered into on or before the effective date of this Act.

Section 15. Bond issuance expense limitations.

(a) Except as provided in subsection (b), bond issuance expenses shall not exceed 0.5% of the principal amount of the proceeds realized from the sale of the bonds.

(b) Bond issuance expenses for refunding and advance refunding bonds shall not exceed 0.3% of the principal amount of the proceeds realized from the sale of the refunding or advance refunding bonds.

Section 20. Refunding bonds; net present value savings. A public issurer may not issue refunding or advance refunding bonds unless, before issuing the bonds, the public issurer files with the Governor and the General Assembly a written certification demonstrating that the issuance will result in a net present value savings of at least 3%.

Section 25. Violation.

(a) The issuance of bonds or payment of bond issuance expenses in violation of this Act does not invalidate the bonds.

(b) The amount of any bond issuance expenses paid in excess of the limitation imposed by Section 15 of this Act may be recovered from the payee in an action brought by the public issuer or the Illinois Attorney General. In addition, a payee who knowingly accepts payment of bond issuance expenses in violation of this Act shall be liable to the State for a civil penalty of 3 times the amount in violation or $100,000, whichever is greater.

(c) Excess payments and penalties recovered under this Section by the State or any of its agencies or instrumentalities or by the Attorney General shall be deposited into the General Revenue Fund.

Section 30. Competitive procurement. A public issuer issuing bonds to which this Act applies must employ authorized competitive procedures. Negotiated sale may be used only if (i) it is permitted by the law authorizing issuance of the bonds and (ii) it is preceded by a competitive request for proposal procedure substantially similar to that required to be followed by the State in the issuance of General Obligation Bonds under Section 11 of the General Obligation Bond Act and the Illinois Procurement Code.

Section 35. Guidance. The Governor's Office of Management and Budget shall, upon request, provide guidance to any potential public issuer on conforming its bond sale to the requirements of this Act.

Section 90. The Statute on Statutes is amended by changing Section 8 as follows:

(5 ILCS 70/8) (from Ch. 1, par. 1107)

Sec. 8. Omnibus Bond Acts.

(a) A citation to the Omnibus Bond Acts is a citation to all of the following Acts, collectively, as amended from time to time: the Bond Authorization Act, the Registered Bond Act, the Municipal Bond Reform Act, the Local Government Debt Reform Act, subsection (a) of Section 1-7 of the Property Tax Extension Limitation Act, subsection (a) of Section 18-190 of the Property Tax Code, the Uniform Facsimile Signature of Public Officials Act, the Local Government Bond Validity Act, the Illinois Finance Authority Act, the Public Funds Investment Act, the Local Government Credit Enhancement Act, the Local Government Defeasance of Debt Law, the Intergovernmental Cooperation Act, the Local Government Financial Planning and Supervision Act, the Special Assessment Supplemental Bond and Procedure Act, Section 12-5 of the Election Code, and any similar Act granting additional omnibus bond powers to governmental entities generally, whether enacted before, on, or after the effective date of this amendatory Act of 1989.

(b) The General Assembly recognizes that the proliferation of governmental entities has resulted in the enactment of hundreds of statutory provisions relating to the borrowing and other powers of governmental entities. The General Assembly addresses and has addressed problems common to all such governmental entities so that they have equal access to the municipal bond market. It has been, and will continue to be, the intention of the General Assembly to enact legislation applicable to governmental entities in an omnibus fashion, as has been done in the provisions of the Omnibus Bond Acts.

(c) It is and always has been the intention of the General Assembly that the Omnibus Bond Acts are and always have been supplementary grants of power, cumulative in nature and in addition to any power or authority granted in any other laws of the State. The Omnibus Bond Acts are supplementary grants of power when applied in connection with any similar grant of power or limitation contained in any other law of the State, whether or not the other law is enacted or amended after an Omnibus Bond Act or appears to be more restrictive than an Omnibus Bond Act, unless the General Assembly expressly declares in such other law that a specifically named Omnibus Bond Act does not apply.

(c-5) Notwithstanding the other provisions of this Section and of any other law, bonds issued after the effective date of this amendatory Act of the 93rd General Assembly under the authority of any of the Omnibus Bond Acts are subject to the requirements of the Bond Issuance Expense Limitation Act.

(d) All instruments providing for the payment of money executed by or on behalf of any governmental entity organized by or under the laws of this State, including without limitation the State, to carry out a public governmental or proprietary function, acting through its corporate authorities, or which any governmental entity has assumed or agreed to pay, which were:

(1) issued or authorized to be issued by proceedings adopted by such corporate authorities before the effective date of this amendatory Act of 1989;

(2) issued or authorized to be issued in accordance with the procedures set forth in or pursuant to any authorization contained in any of the Omnibus Bond Acts; and

(3) issued or authorized to be issued for any purpose authorized by the laws of this State,

are valid and legally binding obligations of the governmental entity issuing such instruments, payable in accordance with their terms.

(Source: P.A. 93-205, eff. 1-1-04.)

Section 92. The Illinois Finance Authority Act is amended by adding Section 801-50 as follows:

(20 ILCS 3501/801-50 new)

Sec. 801-50. Bond Issuance Expense Limitation Act. Notwithstanding any other provision of law, the issuance of bonds under this Act is subject to the requirements of the Bond Issuance Expense Limitation Act.

Section 94. The General Obligation Bond Act is amended by changing Sections 8, 9, and 16 as follows:

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

Sec. 8. Bond sale expenses; capitalized interest.

(a) Except as provided in subsection (a-5), an amount not to exceed 0.5 percent of the principal amount of the proceeds of sale of each bond sale is authorized to be used to pay the reasonable costs of issuance and sale of State of Illinois general obligation bonds authorized and sold pursuant to this Act.

(a-5) An amount not to exceed 0.3 percent of the principal amount of the proceeds of sale of each sale of refunding or advance refunding bonds is authorized to be used to pay the reasonable costs of issuance and sale of State of Illinois general obligation bonds authorized and sold pursuant to this Act.

(a-10) Notwithstanding any other provision of law, the issuance of bonds under this Act is subject to the requirements of the Bond Issuance Expense Limitation Act.

(b) The Bond Sale Order may provide for a portion of the proceeds of the bond sale, representing up to 12 months' interest on the bonds, to be deposited directly into the capitalized interest account of the General Obligation Bond Retirement and Interest Fund.

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

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

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

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

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

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

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

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

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

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

Sec. 16. Refunding Bonds. The State of Illinois is authorized to issue, sell, and provide for the retirement of General Obligation Bonds of the State of Illinois in the amount of $2,839,025,000, at any time and from time to time outstanding, for the purpose of refunding any State of Illinois general obligation Bonds then outstanding, including the payment of any redemption premium thereon, any reasonable expenses of such refunding (subject to the requirements of the Bond Expense Limitation Act), any interest accrued or to accrue to the earliest or any subsequent date of redemption or maturity of such outstanding Bonds and any interest to accrue to the first interest payment on the refunding Bonds; provided that such refunding Bonds shall mature no later than the final maturity date of Bonds being refunded.

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

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

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

Section 98. The Build Illinois Bond Act is amended by changing Section 5 as follows:

(30 ILCS 425/5) (from Ch. 127, par. 2805)

Sec. 5. Bond Sale Expenses. An amount necessary to pay the reasonable costs of each issuance and sale of Bonds authorized and sold pursuant to this Act, including advertising, printing, bond rating, travel, security, delivery, legal and financial advisory services, insurance, initial fees of trustees, registrars, paying agents and other fiduciaries, initial costs of credit or liquidity enhancement arrangements, initial fees of indexing and remarketing agents, and initial costs of interest rate swaps, guarantees or arrangements to limit interest rate risk, as determined in the related Bond Sale Order, is hereby authorized to be paid from the proceeds of each Bond sale.

Notwithstanding any other provision of law, the issuance of bonds under this Act is subject to the requirements of the Bond Issuance Expense Limitation Act.

(Source: P.A. 84-111.)

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