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30 ILCS 305/7
(30 ILCS 305/7)
(from Ch. 17, par. 6607)
Interest rate swaps.
For purposes of this Section, terms are as defined in the Local Government
With respect to all or part of any currently
outstanding or proposed issue
of its bonds, a governmental unit whose aggregate
principal amount of
bonds outstanding or proposed exceeds $10,000,000 may, without prior
into agreements or contracts with any necessary or appropriate person (the
counter party) that
will have the benefit of providing to the governmental unit: (i) an interest
rate basis, cash flow basis, or other basis different from that provided in
the bonds for the payment of interest
or (ii) with respect to a future delivery of bonds, one or more of a
interest rate, interest rate basis, cash flow basis, or purchase price.
Such agreements or contracts
include without limitation agreements or contracts commonly known as interest
rate swap, collar, cap, or derivative agreements, forward
payment conversion agreements,
interest rate locks, forward bond purchase agreements, bond warrant
or bond purchase option agreements
and also include agreements or
contracts providing for
payments based on levels of or
changes in interest rates, including a change in an interest rate index, to
exchange cash flows or a series of payments,
or to hedge payment, rate spread, or similar exposure
(such agreements or contracts, collectively, being "swaps"). Without
other permitted terms which may be included in swaps, the
following provisions may or, if hereinafter so required, shall apply:
(a) Payments made pursuant to a swap (the swap payments) which are to be
the governmental unit may be paid by such governmental unit, without
proceeds of the bonds, including bonds for future delivery, identified to such
swaps, or from bonds issued to refund such bonds, or from whatever enterprise
revenues or revenue source, including taxes pledged or to be pledged to the
payment of such bonds, which enterprise revenues or revenue source may be
increased to make such swap payments, and swap payments to be received by the
governmental unit, which may be periodic, up-front, or on termination, shall be
used solely for and limited to any lawful corporate purpose of the governmental
(b) Up-front or periodic net swap payments to be paid by the
the swaps (the standard swap payments) shall be treated as interest for the purpose
of calculating any interest rate limit applicable to the bonds, provided,
however, that for purposes of making such standard swap payments
only (and not with respect to the bonds so issued or to be issued), the bonds
shall be deemed not exempt from income taxation under the Internal Revenue Code
for purposes of State law, as contained in this Bond Authorization Act,
to the permissible rate of interest to be borne thereon, and, provided further,
that if payments of any standard swap payments are to be made by the
governmental unit and the counterparty on different dates, the net effect of
such payments for purposes of such interest rate limitation shall be determined
using a true interest cost (yield) calculation.
agreement or contract and the swap payments to be made thereunder shall not
be taken into account with respect to any
debt limit applicable to the governmental unit.
(d) Swap payments upon the termination of any swap may be paid to a
upon any terms customary for swaps, including, without limitation, provisions
using market quotations available for giving the net benefit of the swap at the
time of termination to the persons entitled thereto (viz., the governmental
or the counterparty) or reasonable fair market value determinations of the
at termination made in good faith by either such persons.
(e) The term of the swap shall not exceed the term of any currently
bonds identified to such swap or, for bonds to be delivered, not greater than
years plus the term of years proposed for such bonds to be delivered, but in no
event longer than 40 years, plus, in each case, any time period necessary to
cure any defaults under such swap.
(f) The choice of law for enforcement of swaps as to any counterparty may be
made for any state of these United States, but the law which shall apply to the
obligations of the governmental unit shall be the law of the State of Illinois,
and jurisdiction to enforce the swaps as against the governmental units shall
exclusively in the courts of the State of Illinois or in the applicable federal
court having jurisdiction and located within the State of Illinois.
(g) Governmental units, in entering into swaps, may not waive any sovereign
immunities from time to time available under the laws of the State of Illinois
as to jurisdiction, procedures, and remedies, but such swaps shall otherwise be
fully enforceable as valid and binding contracts as and to the extent provided
herein and by other applicable law.
(Source: P.A. 93-9, eff. 6-3-03