Illinois General Assembly - Full Text of SB1307
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Full Text of SB1307  99th General Assembly




State of Illinois
2015 and 2016


Introduced 2/18/2015, by Sen. Ira I. Silverstein


30 ILCS 305/7  from Ch. 17, par. 6607

    Amends the Bond Authorization Act. Prohibits school districts from entering into interest rate swaps.

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SB1307LRB099 10018 NHT 30238 b

1    AN ACT concerning education.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Bond Authorization Act is amended by
5changing Section 7 as follows:
6    (30 ILCS 305/7)  (from Ch. 17, par. 6607)
7    Sec. 7. Interest rate swaps. For purposes of this Section,
8terms are as defined in the Local Government Debt Reform Act,
9except that "governmental unit" shall exclude a school
10district. With respect to all or part of any currently
11outstanding or proposed issue of its bonds, a governmental unit
12whose aggregate principal amount of bonds outstanding or
13proposed exceeds $10,000,000 may, without prior appropriation,
14enter into agreements or contracts with any necessary or
15appropriate person (the counter party) that will have the
16benefit of providing to the governmental unit: (i) an interest
17rate basis, cash flow basis, or other basis different from that
18provided in the bonds for the payment of interest or (ii) with
19respect to a future delivery of bonds, one or more of a
20guaranteed interest rate, interest rate basis, cash flow basis,
21or purchase price. Such agreements or contracts include without
22limitation agreements or contracts commonly known as interest
23rate swap, collar, cap, or derivative agreements, forward



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1payment conversion agreements, interest rate locks, forward
2bond purchase agreements, bond warrant agreements, or bond
3purchase option agreements and also include agreements or
4contracts providing for payments based on levels of or changes
5in interest rates, including a change in an interest rate
6index, to exchange cash flows or a series of payments, or to
7hedge payment, rate spread, or similar exposure (such
8agreements or contracts, collectively, being "swaps"). Without
9limiting other permitted terms which may be included in swaps,
10the following provisions may or, if hereinafter so required,
11shall apply:
12        (a) Payments made pursuant to a swap (the swap
13    payments) which are to be made by the governmental unit may
14    be paid by such governmental unit, without limitation, from
15    proceeds of the bonds, including bonds for future delivery,
16    identified to such swaps, or from bonds issued to refund
17    such bonds, or from whatever enterprise revenues or revenue
18    source, including taxes pledged or to be pledged to the
19    payment of such bonds, which enterprise revenues or revenue
20    source may be increased to make such swap payments, and
21    swap payments to be received by the governmental unit,
22    which may be periodic, up-front, or on termination, shall
23    be used solely for and limited to any lawful corporate
24    purpose of the governmental unit.
25        (b) Up-front or periodic net swap payments to be paid
26    by the governmental unit under the swaps (the standard swap



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1    payments) shall be treated as interest for the purpose of
2    calculating any interest rate limit applicable to the
3    bonds, provided, however, that for purposes of making such
4    standard swap payments only (and not with respect to the
5    bonds so issued or to be issued), the bonds shall be deemed
6    not exempt from income taxation under the Internal Revenue
7    Code for purposes of State law, as contained in this Bond
8    Authorization Act, relating to the permissible rate of
9    interest to be borne thereon, and, provided further, that
10    if payments of any standard swap payments are to be made by
11    the governmental unit and the counterparty on different
12    dates, the net effect of such payments for purposes of such
13    interest rate limitation shall be determined using a true
14    interest cost (yield) calculation.
15        (c) Any such agreement or contract and the swap
16    payments to be made thereunder shall not be taken into
17    account with respect to any debt limit applicable to the
18    governmental unit.
19        (d) Swap payments upon the termination of any swap may
20    be paid to a counterparty upon any terms customary for
21    swaps, including, without limitation, provisions using
22    market quotations available for giving the net benefit of
23    the swap at the time of termination to the persons entitled
24    thereto (viz., the governmental unit or the counterparty)
25    or reasonable fair market value determinations of the value
26    at termination made in good faith by either such persons.



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1        (e) The term of the swap shall not exceed the term of
2    any currently outstanding bonds identified to such swap or,
3    for bonds to be delivered, not greater than 5 years plus
4    the term of years proposed for such bonds to be delivered,
5    but in no event longer than 40 years, plus, in each case,
6    any time period necessary to cure any defaults under such
7    swap.
8        (f) The choice of law for enforcement of swaps as to
9    any counterparty may be made for any state of these United
10    States, but the law which shall apply to the obligations of
11    the governmental unit shall be the law of the State of
12    Illinois, and jurisdiction to enforce the swaps as against
13    the governmental units shall be exclusively in the courts
14    of the State of Illinois or in the applicable federal court
15    having jurisdiction and located within the State of
16    Illinois.
17        (g) Governmental units, in entering into swaps, may not
18    waive any sovereign immunities from time to time available
19    under the laws of the State of Illinois as to jurisdiction,
20    procedures, and remedies, but such swaps shall otherwise be
21    fully enforceable as valid and binding contracts as and to
22    the extent provided herein and by other applicable law.
23    A school district is prohibited from entering into an
24agreement or contract under this Section.
25(Source: P.A. 93-9, eff. 6-3-03.)