98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB4634

 

Introduced , by Rep. Brandon W. Phelps

 

SYNOPSIS AS INTRODUCED:
 
20 ILCS 3501/830-30
20 ILCS 3501/830-35

    Amends the Illinois Finance Authority Act. Provides that the Illinois Finance Authority (instead of the State Treasurer) shall be custodian of the Illinois Agricultural Loan Guarantee Fund and the Illinois Farmer and Agribusiness Loan Guarantee Fund. Provides that all moneys in those Funds shall be paid by the State Treasurer to the Illinois Finance Authority no later than June 30, 2014, and, on and after that date, all future moneys deposited into the Illinois Agricultural Loan Guarantee Fund shall be paid by the State Treasurer to the Illinois Finance Authority as a continuing appropriation. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB4634LRB098 16040 HLH 51092 b

1    AN ACT concerning State government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Finance Authority Act is amended by
5changing Sections 830-30 and 830-35 as follows:
 
6    (20 ILCS 3501/830-30)
7    Sec. 830-30. State Guarantees for existing debt.
8    (a) The Authority is authorized to issue State Guarantees
9for farmers' existing debts held by a lender. For the purposes
10of this Section, a farmer shall be a resident of Illinois, who
11is a principal operator of a farm or land, at least 50% of
12whose annual gross income is derived from farming and whose
13debt to asset ratio shall not be less than 40%, except in those
14cases where the applicant has previously used the guarantee
15program there shall be no debt to asset ratio or income
16restriction. For the purposes of this Section, debt to asset
17ratio shall mean the current outstanding liabilities of the
18farmer divided by the current outstanding assets of the farmer.
19The Authority shall establish the maximum permissible debt to
20asset ratio based on criteria established by the Authority.
21Lenders shall apply for the State Guarantees on forms provided
22by the Authority and certify that the application and any other
23documents submitted are true and correct. The lender or

 

 

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1borrower, or both in combination, shall pay an administrative
2fee as determined by the Authority. The applicant shall be
3responsible for paying any fees or charges involved in
4recording mortgages, releases, financing statements, insurance
5for secondary market issues and any other similar fees or
6charges as the Authority may require. The application shall at
7a minimum contain the farmer's name, address, present credit
8and financial information, including cash flow statements,
9financial statements, balance sheets, and any other
10information pertinent to the application, and the collateral to
11be used to secure the State Guarantee. In addition, the lender
12must agree to bring the farmer's debt to a current status at
13the time the State Guarantee is provided and must also agree to
14charge a fixed or adjustable interest rate which the Authority
15determines to be below the market rate of interest generally
16available to the borrower. If both the lender and applicant
17agree, the interest rate on the State Guarantee Loan can be
18converted to a fixed interest rate at any time during the term
19of the loan. Any State Guarantees provided under this Section
20(i) shall not exceed $500,000 per farmer, (ii) shall be set up
21on a payment schedule not to exceed 30 years, and shall be no
22longer than 30 years in duration, and (iii) shall be subject to
23an annual review and renewal by the lender and the Authority;
24provided that only one such State Guarantee shall be
25outstanding per farmer at any one time. No State Guarantee
26shall be revoked by the Authority without a 90-day notice, in

 

 

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1writing, to all parties. In those cases where the borrower has
2not previously used the guarantee program, the lender shall not
3call due any loan during the first 3 years for any reason
4except for lack of performance or insufficient collateral. The
5lender can review and withdraw or continue with the State
6Guarantee on an annual basis after the first 3 years of the
7loan, provided a 90-day notice, in writing, to all parties has
8been given.
9    (b) The Authority shall provide or renew a State Guarantee
10to a lender if:
11        (i) A fee equal to 25 basis points on the loan is paid
12    to the Authority on an annual basis by the lender.
13        (ii) The application provides collateral acceptable to
14    the Authority that is at least equal to the State's portion
15    of the Guarantee to be provided.
16        (iii) The lender assumes all responsibility and costs
17    for pursuing legal action on collecting any loan that is
18    delinquent or in default.
19        (iv) The lender is responsible for the first 15% of the
20    outstanding principal of the note for which the State
21    Guarantee has been applied.
22    (c) There is hereby created outside of the State treasury a
23special fund to be known as the Illinois Agricultural Loan
24Guarantee Fund. The Authority State Treasurer shall be
25custodian of this Fund. No later than June 30, 2014, all moneys
26in the Illinois Agricultural Loan Guarantee Fund shall be paid

 

 

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1by the State Treasurer to the Authority, and, on and after that
2date, all future moneys deposited into the Illinois
3Agricultural Loan Guarantee Fund shall be paid by the State
4Treasurer to the Authority under the continuing appropriation
5provision of this Section. Any amounts in the Illinois
6Agricultural Loan Guarantee Fund not currently needed to meet
7the obligations of the Fund shall be invested as provided by
8law, and all interest earned from these investments shall be
9deposited into the Fund until the Fund reaches the maximum
10amount authorized in this Act; thereafter, interest earned
11shall be deposited into the General Revenue Fund. After
12September 1, 1989, annual investment earnings equal to 1.5% of
13the Fund shall remain in the Fund to be used for the purposes
14established in Section 830-40 of this Act. The Authority is
15authorized to transfer to the Fund such amounts as are
16necessary to satisfy claims during the duration of the State
17Guarantee program to secure State Guarantees issued under this
18Section. If for any reason the General Assembly fails to make
19an appropriation sufficient to meet these obligations, this Act
20shall constitute an irrevocable and continuing appropriation
21of an amount necessary to secure guarantees as defaults occur
22and the irrevocable and continuing authority for, and direction
23to, the State Treasurer and the Comptroller to make the
24necessary transfers to the Illinois Agricultural Loan
25Guarantee Fund, as directed by the Governor, out of the General
26Revenue Fund. Within 30 days after November 15, 1985, the

 

 

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1Authority may transfer up to $7,000,000 from available
2appropriations into the Illinois Agricultural Loan Guarantee
3Fund for the purposes of this Act. Thereafter, the Authority
4may transfer additional amounts into the Illinois Agricultural
5Loan Guarantee Fund to secure guarantees for defaults as
6defaults occur. In the event of default by the farmer, the
7lender shall be entitled to, and the Authority shall direct
8payment on, the State Guarantee after 90 days of delinquency.
9All payments by the Authority shall be made from the Illinois
10Agricultural Loan Guarantee Fund to satisfy claims against the
11State Guarantee. The Illinois Agricultural Loan Guarantee Fund
12shall guarantee receipt of payment of the 85% of the principal
13and interest owed on the State Guarantee Loan by the farmer to
14the guarantee holder. It shall be the responsibility of the
15lender to proceed with the collecting and disposing of
16collateral on the State Guarantee within 14 months of the time
17the State Guarantee is declared delinquent; provided, however,
18that the lender shall not collect or dispose of collateral on
19the State Guarantee without the express written prior approval
20of the Authority. If the lender does not dispose of the
21collateral within 14 months, the lender shall be liable to
22repay to the State interest on the State Guarantee equal to the
23same rate which the lender charges on the State Guarantee;
24provided, however, that the Authority may extend the 14-month
25period for a lender in the case of bankruptcy or extenuating
26circumstances. The Fund shall be reimbursed for any amounts

 

 

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1paid under this Section upon liquidation of the collateral. The
2Authority, by resolution of the Board, may borrow sums from the
3Fund and provide for repayment as soon as may be practical upon
4receipt of payments of principal and interest by a farmer.
5Money may be borrowed from the Fund by the Authority for the
6sole purpose of paying certain interest costs for farmers
7associated with selling a loan subject to a State Guarantee in
8a secondary market as may be deemed reasonable and necessary by
9the Authority.
10    (d) Notwithstanding the provisions of this Section 830-30
11with respect to the farmers and lenders who may obtain State
12Guarantees, the Authority may promulgate rules establishing
13the eligibility of farmers and lenders to participate in the
14State guarantee program and the terms, standards, and
15procedures that will apply, when the Authority finds that
16emergency conditions in Illinois agriculture have created the
17need for State Guarantees pursuant to terms, standards, and
18procedures other than those specified in this Section.
19(Source: P.A. 93-205, eff. 1-1-04.)
 
20    (20 ILCS 3501/830-35)
21    Sec. 830-35. State Guarantees for loans to farmers and
22agribusiness; eligibility.
23    (a) The Authority is authorized to issue State Guarantees
24to lenders for loans to eligible farmers and agribusinesses for
25purposes set forth in this Section. For purposes of this

 

 

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1Section, an eligible farmer shall be a resident of Illinois (i)
2who is principal operator of a farm or land, at least 50% of
3whose annual gross income is derived from farming, (ii) whose
4annual total sales of agricultural products, commodities, or
5livestock exceeds $20,000, and (iii) whose net worth does not
6exceed $500,000. An eligible agribusiness shall be that as
7defined in Section 801-10 of this Act. The Authority may
8approve applications by farmers and agribusinesses that
9promote diversification of the farm economy of this State
10through the growth and development of new crops or livestock
11not customarily grown or produced in this State or that
12emphasize a vertical integration of grain or livestock produced
13or raised in this State into a finished agricultural product
14for consumption or use. "New crops or livestock not customarily
15grown or produced in this State" shall not include corn,
16soybeans, wheat, swine, or beef or dairy cattle. "Vertical
17integration of grain or livestock produced or raised in this
18State" shall include any new or existing grain or livestock
19grown or produced in this State. Lenders shall apply for the
20State Guarantees on forms provided by the Authority, certify
21that the application and any other documents submitted are true
22and correct, and pay an administrative fee as determined by the
23Authority. The applicant shall be responsible for paying any
24fees or charges involved in recording mortgages, releases,
25financing statements, insurance for secondary market issues
26and any other similar fees or charges as the Authority may

 

 

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1require. The application shall at a minimum contain the
2farmer's or agribusiness' name, address, present credit and
3financial information, including cash flow statements,
4financial statements, balance sheets, and any other
5information pertinent to the application, and the collateral to
6be used to secure the State Guarantee. In addition, the lender
7must agree to charge an interest rate, which may vary, on the
8loan that the Authority determines to be below the market rate
9of interest generally available to the borrower. If both the
10lender and applicant agree, the interest rate on the State
11Guarantee Loan can be converted to a fixed interest rate at any
12time during the term of the loan. Any State Guarantees provided
13under this Section (i) shall not exceed $500,000 per farmer or
14an amount as determined by the Authority on a case-by-case
15basis for an agribusiness, (ii) shall not exceed a term of 15
16years, and (iii) shall be subject to an annual review and
17renewal by the lender and the Authority; provided that only one
18such State Guarantee shall be made per farmer or agribusiness,
19except that additional State Guarantees may be made for
20purposes of expansion of projects financed in part by a
21previously issued State Guarantee. No State Guarantee shall be
22revoked by the Authority without a 90-day notice, in writing,
23to all parties. The lender shall not call due any loan for any
24reason except for lack of performance, insufficient
25collateral, or maturity. A lender may review and withdraw or
26continue with a State Guarantee on an annual basis after the

 

 

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1first 5 years following closing of the loan application if the
2loan contract provides for an interest rate that shall not
3vary. A lender shall not withdraw a State Guarantee if the loan
4contract provides for an interest rate that may vary, except
5for reasons set forth herein.
6    (b) The Authority shall provide or renew a State Guarantee
7to a lender if:
8        (i) A fee equal to 25 basis points on the loan is paid
9    to the Authority on an annual basis by the lender.
10        (ii) The application provides collateral acceptable to
11    the Authority that is at least equal to the State's portion
12    of the Guarantee to be provided.
13        (iii) The lender assumes all responsibility and costs
14    for pursuing legal action on collecting any loan that is
15    delinquent or in default.
16        (iv) The lender is responsible for the first 15% of the
17    outstanding principal of the note for which the State
18    Guarantee has been applied.
19    (c) There is hereby created outside of the State treasury a
20special fund to be known as the Illinois Farmer and
21Agribusiness Loan Guarantee Fund. The Authority State
22Treasurer shall be custodian of this Fund. No later than June
2330, 2014, all moneys in the Illinois Farmer and Agribusiness
24Loan Guarantee Fund shall be paid by the State Treasurer to the
25Authority, and, on and after that date, all future moneys
26deposited into the Illinois Farmer and Agribusiness Loan

 

 

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1Guarantee Fund shall be paid by the State Treasurer to the
2Authority under the continuing appropriation provision of this
3Section. Any amounts in the Fund not currently needed to meet
4the obligations of the Fund shall be invested as provided by
5law, and all interest earned from these investments shall be
6deposited into the Fund until the Fund reaches the maximum
7amounts authorized in this Act; thereafter, interest earned
8shall be deposited into the General Revenue Fund. After
9September 1, 1989, annual investment earnings equal to 1.5% of
10the Fund shall remain in the Fund to be used for the purposes
11established in Section 830-40 of this Act. The Authority is
12authorized to transfer such amounts as are necessary to satisfy
13claims from available appropriations and from fund balances of
14the Farm Emergency Assistance Fund as of June 30 of each year
15to the Illinois Farmer and Agribusiness Loan Guarantee Fund to
16secure State Guarantees issued under this Section and Sections
17830-45, 830-50, and 830-55. If for any reason the General
18Assembly fails to make an appropriation sufficient to meet
19these obligations, this Act shall constitute an irrevocable and
20continuing appropriation of an amount necessary to secure
21guarantees as defaults occur and the irrevocable and continuing
22authority for, and direction to, the State Treasurer and the
23Comptroller to make the necessary transfers to the Illinois
24Farmer and Agribusiness Loan Guarantee Fund, as directed by the
25Governor, out of the General Revenue Fund. In the event of
26default by the borrower on State Guarantee Loans under this

 

 

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1Section, Section 830-45, Section 830-50, or Section 830-55, the
2lender shall be entitled to, and the Authority shall direct
3payment on, the State Guarantee after 90 days of delinquency.
4All payments by the Authority shall be made from the Illinois
5Farmer and Agribusiness Loan Guarantee Fund to satisfy claims
6against the State Guarantee. It shall be the responsibility of
7the lender to proceed with the collecting and disposing of
8collateral on the State Guarantee under this Section, Section
9830-45, Section 830-50, or Section 830-55 within 14 months of
10the time the State Guarantee is declared delinquent. If the
11lender does not dispose of the collateral within 14 months, the
12lender shall be liable to repay to the State interest on the
13State Guarantee equal to the same rate that the lender charges
14on the State Guarantee, provided that the Authority shall have
15the authority to extend the 14-month period for a lender in the
16case of bankruptcy or extenuating circumstances. The Fund shall
17be reimbursed for any amounts paid under this Section, Section
18830-45, Section 830-50, or Section 830-55 upon liquidation of
19the collateral. The Authority, by resolution of the Board, may
20borrow sums from the Fund and provide for repayment as soon as
21may be practical upon receipt of payments of principal and
22interest by a borrower on State Guarantee Loans under this
23Section, Section 830-45, Section 830-50, or Section 830-55.
24Money may be borrowed from the Fund by the Authority for the
25sole purpose of paying certain interest costs for borrowers
26associated with selling a loan subject to a State Guarantee

 

 

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1under this Section, Section 830-45, Section 830-50, or Section
2830-55 in a secondary market as may be deemed reasonable and
3necessary by the Authority.
4    (d) Notwithstanding the provisions of this Section 830-35
5with respect to the farmers, agribusinesses, and lenders who
6may obtain State Guarantees, the Authority may promulgate rules
7establishing the eligibility of farmers, agribusinesses, and
8lenders to participate in the State Guarantee program and the
9terms, standards, and procedures that will apply, when the
10Authority finds that emergency conditions in Illinois
11agriculture have created the need for State Guarantees pursuant
12to terms, standards, and procedures other than those specified
13in this Section.
14(Source: P.A. 96-897, eff. 5-24-10.)
 
15    Section 99. Effective date. This Act takes effect upon
16becoming law.