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.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB2718LRB100 10499 KTG 20713 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 1. Findings. Beginning in 1998, the State of
5Illinois and its agencies began entering into interest rate
6swap agreements with various counterparties, including Bank of
7America, JP Morgan Chase, Goldman Sachs, Wells Fargo,
8Citigroup, Bank of New York Mellon, Deutsche Bank, Loop
9Financial, Morgan Stanley, and the American International
10Group in the connection with the issuance of bonds and
11certificates.
12    It is estimated that the State has made more than
13$700,000,000 in net payments to these counterparties as of the
14end of fiscal year 2016, and continues to pay more than
15$70,000,000 a year, resulting in an additional $800,000,000 in
16net payments projected over the remaining life of these deals,
17from fiscal years 2017 through 2033.
18    The swap agreements do not serve their stated original
19purpose to mitigate interest rate risks largely due to the 2008
20financial crash and the resulting sharp decline in variable
21interest rates.
 
22    Section 5. The Illinois Housing Development Act is amended
23by changing Section 16 as follows:
 

 

 

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1    (20 ILCS 3805/16)  (from Ch. 67 1/2, par. 316)
2    Sec. 16. The notes and bonds issued under this Act shall be
3authorized by resolution of the members of the Authority, shall
4bear such date or dates, and shall mature at such time or
5times, in the case of any note, or any renewal thereof, not
6exceeding 15 years (or such longer time not exceeding 25 years
7if the Authority shall determine, with respect to notes issued
8in anticipation of bonds, that a longer maturity date is
9required in order to assure the ability to issue the bonds),
10from the date of issue of such original note, and in the case
11of any bond not exceeding 50 years from the date of issue, as
12the resolution may provide. The bonds may be issued as serial
13bonds or as term bonds or as a combination thereof. The notes
14and bonds shall bear interest at such rate or rates as shall be
15determined by the members of the Authority by the resolution
16authorizing issuance of the bonds and notes provided, however,
17that notes and bonds issued after July 1, 1983, shall bear
18interest at such rate or rates not exceeding the greater of (i)
19the maximum rate established in "An Act to authorize public
20corporations to issue bonds, other evidences of indebtedness
21and tax anticipation warrants subject to interest rate
22limitations set forth therein", approved May 26, 1970, as from
23time to time in effect; (ii) 11% per annum or (iii) 70% of the
24prime commercial rate in effect at the time the contract is
25made. In the event the Authority issues notes or bonds not

 

 

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1exempt from income taxation under the Internal Revenue Code of
21954, as amended, such notes or bonds shall bear interest at a
3rate or rates as shall be determined by the members of the
4Authority by the resolution authorizing issuance of the bonds
5and notes. Prime commercial rate means such prime rate as from
6time to time is publicly announced by the largest commercial
7banking institution located in this State, measured in terms of
8total assets. A contract is made with respect to notes or bonds
9when the Authority is contractually obligated to issue and sell
10such notes or bonds to a purchaser who is contractually
11obligated to purchase them. The notes and bonds shall be in
12such denominations, be in such form, either coupon or
13registered, carry such registration privileges, be executed in
14such manner, be payable in such medium of payment, at such
15place or places and be subject to such terms of redemption as
16such resolution or resolutions may provide. The notes and bonds
17of the Authority may be sold by the Authority, at public or
18private sale, at such price or prices as the Authority shall
19determine.
20    In lieu of establishing the rate at which notes or bonds of
21the Authority shall bear interest and the price at which the
22notes or bonds shall be sold, the resolution authorizing their
23issuance may set maximum and minimum prices, interest rates and
24annual interest cost to the Authority for that issue of notes
25or bonds (computed as the resolution shall provide), such that
26the difference between the maximum and minimum annual interest

 

 

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1cost shall not exceed 1% of the principal amount of the notes
2or bonds. Such a resolution shall authorize any two of the
3Chairman, Treasurer or Director (or in the Director's absence,
4the Deputy Director) to establish the actual price and interest
5rate within the range established by the resolution. In lieu of
6establishing the dates, maturities or other terms of the notes
7or bonds, the resolution authorizing their issuance may
8authorize any two of the Chairman, Treasurer or Director (or in
9the Director's absence, the Deputy Director) to establish such
10dates, maturities and other terms within ranges or criteria
11established by the resolution.
12    In connection with the issuance of its notes and bonds, the
13Authority may enter into arrangements to provide additional
14security and liquidity for the notes and bonds. These may
15include, without limitation, letters of credit, lines of credit
16by which the Authority may borrow funds to pay or redeem its
17notes or bonds and purchase or remarketing arrangements for
18assuring the ability of owners of the Authority's notes and
19bonds to sell or to have redeemed their notes and bonds. The
20Authority may enter into contracts and may agree to pay fees to
21persons providing such arrangements, but only under
22circumstances in which the total interest paid or to be paid on
23the notes or bonds, together with the fees for the arrangements
24(being treated as if interest), would not, taken together,
25cause the notes or bonds to bear interest, calculated to their
26absolute maturity, at a rate in excess of the maximum rate

 

 

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1allowed by this Act.
2    The resolution of the Authority authorizing the issuance of
3its notes or bonds may provide that interest rates may vary
4from time to time depending upon criteria established by the
5Authority, which may include, without limitation, a variation
6in interest rates as may be necessary to cause notes or bonds
7to be remarketable from time to time at a price equal to their
8principal amount (or compound accredited value in case of
9original issue discount bonds), and may provide for appointment
10of a national banking association, bank, trust company,
11investment bank or other financial institution to serve as a
12remarketing agent in that connection. The resolution of the
13Authority authorizing the issuance of its notes or bonds may
14provide that alternative interest rates or provisions will
15apply during such times as the notes or bonds are held by a
16person providing a letter of credit or other credit enhancement
17arrangement for those notes or bonds. Notwithstanding any other
18provisions of law, there shall be no statutory limitation on
19the interest rates which such variable rate notes and bonds may
20bear from time to time.
21    In addition to the other authorizations contained in this
22Section, the Authority may adopt a resolution or resolutions
23granting to any two of the Chairman, Treasurer or Director (or
24in the Director's absence, the Deputy Director) the power to
25authorize issuance of notes or bonds, or both, on behalf of the
26Authority from time to time without further resolution of the

 

 

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1Authority. Any such resolution shall contain a statement of the
2maximum aggregate amount of notes or bonds that may be
3outstanding at any one time pursuant to the authorization
4granted in such resolution. Such resolution shall also contain
5a statement of the period of time during which such notes or
6bonds of the Authority may be so issued. Such resolution shall
7also delegate specifically or generally to the persons
8empowered to authorize issuance of the notes or bonds the
9authority to establish or approve any or all matters relating
10to the issuance and sale of the notes or bonds, which may
11include the interest rates, if any, which the notes or bonds
12shall bear and the prices (including premiums or discounts, if
13any) at which they shall be issued and sold, or the criteria
14upon which such interest rates and prices may vary, the
15appointment of remarketing agents, the approval of alternative
16interest rates, whether there shall be any statutory or other
17limitation on the interest rates which such notes or bonds may
18bear (treating as if interest the fees for any arrangements to
19provide additional security and liquidity for the notes and
20bonds), and the dates, maturities and other terms and
21conditions on which the notes or bonds shall be issued and
22sold. Any or all of such matters may vary from issue to issue
23and within an issue. Any such resolution may set forth the
24criteria by which any or all of the matters entrusted to the
25persons designated in such resolution are to be established or
26approved, and may grant the power to authorize issuance of

 

 

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1notes or bonds which are exempt from income taxation under the
2Internal Revenue Code of 1954, as amended, or which are not
3exempt.
4    The Director of the Illinois Housing Development Authority
5must oversee an annual evaluation of derivative deals,
6including interest rate swaps, initiated to manage interest
7rate exposure, in order to ascertain the financial costs of
8these agreements. If these agreements have resulted in losses
9to the Authority, the Director shall make all necessary efforts
10to recover those moneys. To achieve these goals, the Director
11shall:
12        (1) Authorize agency administrators to negotiate and
13    terminate the Authority's interest rate swap agreements
14    with banks to the extent that the Authority is able to do
15    so at no cost and not later than the end of the next fiscal
16    year after a finding of losses to Illinois taxpayers is
17    made. If a respective bank refuses to terminate without
18    fees or penalty by that date, then it will be excluded from
19    any future business with the Authority during the life of
20    the swap agreement, and the Authority should continue to
21    use all good faith efforts until said bank drops the
22    termination fees and penalty.
23        (2) Not enter into any blanket release of legal
24    liabilities in relation to any interest rate swap
25    agreement.
26        (3) Investigate and determine the amount of the moneys

 

 

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1    lost by the Authority due to alleged illegal or unethical
2    acts by financial institutions, including, but not limited
3    to, manipulating the London Interbank Offered Rate
4    (LIBOR), misrepresenting the risks associated with complex
5    financial deals like interest rate swaps and auction rate
6    securities, mispricing municipal derivatives, and rigging
7    bids on competitively bid contracts.
8            (A) The investigation shall examine all successful
9        or pending legal actions taken by other governmental
10        entities (including both issuers of debt and
11        enforcement authorities) in the United States to
12        recover money from such practices. In each case if the
13        investigation finds no basis for action under a similar
14        legal theory, the report of the investigation shall set
15        forth specific reasons why action under the legal
16        theory is not feasible.
17            (B) The investigation shall be completed no later
18        than 6 months after the effective date of this
19        amendatory Act of the 100th General Assembly. The
20        Director shall request the Attorney General to
21        evaluate and pursue all legal remedies.
22    Notwithstanding any other provision of law, and in addition
23to any other authority provided by law, with respect to
24mortgage or other loans made by it, the Authority may require
25payments of principal, make interest charges and impose
26prepayment premiums or penalties (in addition to any fees or

 

 

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1charges made by the Authority) so that such principal, interest
2and premiums or penalties are sufficient to enable the
3Authority to pay when due all principal, interest and
4redemption premiums or penalties on any notes or bonds issued
5by the Authority to finance or continue the financing of such
6loans (including a proportionate share of such bonds or notes
7issued to fund reserves or to cover any discount) and to make
8any required deposits in any reserve funds; and any contract
9relating to any mortgage or other loan made by the Authority
10may provide for changes during its term in the rate at which
11interest shall be paid, to the extent the changes are provided
12for in order to enable the Authority to make payments with
13respect to bonds or notes as provided in this Section.
14(Source: P.A. 85-1450.)
 
15    Section 10. The General Obligation Bond Act is amended by
16changing Sections 9 and 14 and by adding Section 15.1 as
17follows:
 
18    (30 ILCS 330/9)  (from Ch. 127, par. 659)
19    Sec. 9. Conditions for Issuance and Sale of Bonds -
20Requirements for Bonds.
21    (a) Except as otherwise provided in this subsection, Bonds
22shall be issued and sold from time to time, in one or more
23series, in such amounts and at such prices as may be directed
24by the Governor, upon recommendation by the Director of the

 

 

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1Governor's Office of Management and Budget. Bonds shall be in
2such form (either coupon, registered or book entry), in such
3denominations, payable within 25 years from their date, subject
4to such terms of redemption with or without premium, bear
5interest payable at such times and at such fixed or variable
6rate or rates, and be dated as shall be fixed and determined by
7the Director of the Governor's Office of Management and Budget
8in the order authorizing the issuance and sale of any series of
9Bonds, which order shall be approved by the Governor and is
10herein called a "Bond Sale Order"; provided however, that
11interest payable at fixed or variable rates shall not exceed
12that permitted in the Bond Authorization Act, as now or
13hereafter amended. Bonds shall be payable at such place or
14places, within or without the State of Illinois, and may be
15made registrable as to either principal or as to both principal
16and interest, as shall be specified in the Bond Sale Order.
17Bonds may be callable or subject to purchase and retirement or
18tender and remarketing as fixed and determined in the Bond Sale
19Order. Bonds, other than Bonds issued under Section 3 of this
20Act for the costs associated with the purchase and
21implementation of information technology, (i) except for
22refunding Bonds satisfying the requirements of Section 16 of
23this Act and sold during fiscal year 2009, 2010, 2011, or 2017
24must be issued with principal or mandatory redemption amounts
25in equal amounts, with the first maturity issued occurring
26within the fiscal year in which the Bonds are issued or within

 

 

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1the next succeeding fiscal year and (ii) must mature or be
2subject to mandatory redemption each fiscal year thereafter up
3to 25 years, except for refunding Bonds satisfying the
4requirements of Section 16 of this Act and sold during fiscal
5year 2009, 2010, or 2011 which must mature or be subject to
6mandatory redemption each fiscal year thereafter up to 16
7years. Bonds issued under Section 3 of this Act for the costs
8associated with the purchase and implementation of information
9technology must be issued with principal or mandatory
10redemption amounts in equal amounts, with the first maturity
11issued occurring with the fiscal year in which the respective
12bonds are issued or with the next succeeding fiscal year, with
13the respective bonds issued maturing or subject to mandatory
14redemption each fiscal year thereafter up to 10 years.
15Notwithstanding any provision of this Act to the contrary, the
16Bonds authorized by Public Act 96-43 shall be payable within 5
17years from their date and must be issued with principal or
18mandatory redemption amounts in equal amounts, with payment of
19principal or mandatory redemption beginning in the first fiscal
20year following the fiscal year in which the Bonds are issued.
21    Notwithstanding any provision of this Act to the contrary,
22the Bonds authorized by Public Act 96-1497 shall be payable
23within 8 years from their date and shall be issued with payment
24of maturing principal or scheduled mandatory redemptions in
25accordance with the following schedule, except the following
26amounts shall be prorated if less than the total additional

 

 

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1amount of Bonds authorized by Public Act 96-1497 are issued:
2    Fiscal Year After Issuance    Amount
3        1-2                        $0 
4        3                          $110,712,120
5        4                          $332,136,360
6        5                          $664,272,720
7        6-8                        $996,409,080
8    In the case of any series of Bonds bearing interest at a
9variable interest rate ("Variable Rate Bonds"), in lieu of
10determining the rate or rates at which such series of Variable
11Rate Bonds shall bear interest and the price or prices at which
12such Variable Rate Bonds shall be initially sold or remarketed
13(in the event of purchase and subsequent resale), the Bond Sale
14Order may provide that such interest rates and prices may vary
15from time to time depending on criteria established in such
16Bond Sale Order, which criteria may include, without
17limitation, references to indices or variations in interest
18rates as may, in the judgment of a remarketing agent, be
19necessary to cause Variable Rate Bonds of such series to be
20remarketable from time to time at a price equal to their
21principal amount, and may provide for appointment of a bank,
22trust company, investment bank, or other financial institution
23to serve as remarketing agent in that connection. The Bond Sale
24Order may provide that alternative interest rates or provisions
25for establishing alternative interest rates, different
26security or claim priorities, or different call or amortization

 

 

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1provisions will apply during such times as Variable Rate Bonds
2of any series are held by a person providing credit or
3liquidity enhancement arrangements for such Bonds as
4authorized in subsection (b) of this Section. The Bond Sale
5Order may also provide for such variable interest rates to be
6established pursuant to a process generally known as an auction
7rate process and may provide for appointment of one or more
8financial institutions to serve as auction agents and
9broker-dealers in connection with the establishment of such
10interest rates and the sale and remarketing of such Bonds.
11    (b) In connection with the issuance of any series of Bonds,
12the State may enter into arrangements to provide additional
13security and liquidity for such Bonds, including, without
14limitation, bond or interest rate insurance or letters of
15credit, lines of credit, bond purchase contracts, or other
16arrangements whereby funds are made available to retire or
17purchase Bonds, thereby assuring the ability of owners of the
18Bonds to sell or redeem their Bonds. The State may enter into
19contracts and may agree to pay fees to persons providing such
20arrangements, but only under circumstances where the Director
21of the Governor's Office of Management and Budget certifies
22that he or she reasonably expects the total interest paid or to
23be paid on the Bonds, together with the fees for the
24arrangements (being treated as if interest), would not, taken
25together, cause the Bonds to bear interest, calculated to their
26stated maturity, at a rate that is no more than two-thirds in

 

 

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1excess of the rate that the Bonds would bear in the absence of
2such arrangements.
3    After July 1, 2017, the State may not, with respect to
4Bonds issued or anticipated to be issued, participate in and
5enter into interest rate exchange agreements, financial
6futures contracts, or any other similar arrangements alleged to
7have the purpose of managing interest rate exposure. The State
8may, with respect to Bonds issued or anticipated to be issued,
9participate in and enter into arrangements with respect to
10interest rate protection or exchange agreements, guarantees,
11or financial futures contracts for the purpose of limiting,
12reducing, or managing interest rate exposure. The authority
13granted under this paragraph, however, shall not increase the
14principal amount of Bonds authorized to be issued by law. The
15arrangements may be executed and delivered by the Director of
16the Governor's Office of Management and Budget on behalf of the
17State. Net payments for such arrangements shall constitute
18interest on the Bonds and shall be paid from the General
19Obligation Bond Retirement and Interest Fund. The Director of
20the Governor's Office of Management and Budget shall at least
21annually certify to the Governor and the State Comptroller his
22or her estimate of the amounts of such net payments to be
23included in the calculation of interest required to be paid by
24the State.
25    (c) Prior to the issuance of any Variable Rate Bonds
26pursuant to subsection (a), the Director of the Governor's

 

 

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1Office of Management and Budget shall adopt an interest rate
2risk management policy providing that the amount of the State's
3variable rate exposure with respect to Bonds shall not exceed
410% 20%. This policy shall remain in effect while any Bonds are
5outstanding and the issuance of Bonds shall be subject to the
6terms of such policy. The terms of this policy may be amended
7from time to time by the Director of the Governor's Office of
8Management and Budget but in no event shall any amendment cause
9the permitted level of the State's variable rate exposure with
10respect to Bonds to exceed 10% 20%.
11    (d) "Build America Bonds" in this Section means Bonds
12authorized by Section 54AA of the Internal Revenue Code of
131986, as amended ("Internal Revenue Code"), and bonds issued
14from time to time to refund or continue to refund "Build
15America Bonds".
16    (e) Notwithstanding any other provision of this Section,
17Qualified School Construction Bonds shall be issued and sold
18from time to time, in one or more series, in such amounts and
19at such prices as may be directed by the Governor, upon
20recommendation by the Director of the Governor's Office of
21Management and Budget. Qualified School Construction Bonds
22shall be in such form (either coupon, registered or book
23entry), in such denominations, payable within 25 years from
24their date, subject to such terms of redemption with or without
25premium, and if the Qualified School Construction Bonds are
26issued with a supplemental coupon, bear interest payable at

 

 

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1such times and at such fixed or variable rate or rates, and be
2dated as shall be fixed and determined by the Director of the
3Governor's Office of Management and Budget in the order
4authorizing the issuance and sale of any series of Qualified
5School Construction Bonds, which order shall be approved by the
6Governor and is herein called a "Bond Sale Order"; except that
7interest payable at fixed or variable rates, if any, shall not
8exceed that permitted in the Bond Authorization Act, as now or
9hereafter amended. Qualified School Construction Bonds shall
10be payable at such place or places, within or without the State
11of Illinois, and may be made registrable as to either principal
12or as to both principal and interest, as shall be specified in
13the Bond Sale Order. Qualified School Construction Bonds may be
14callable or subject to purchase and retirement or tender and
15remarketing as fixed and determined in the Bond Sale Order.
16Qualified School Construction Bonds must be issued with
17principal or mandatory redemption amounts or sinking fund
18payments into the General Obligation Bond Retirement and
19Interest Fund (or subaccount therefor) in equal amounts, with
20the first maturity issued, mandatory redemption payment or
21sinking fund payment occurring within the fiscal year in which
22the Qualified School Construction Bonds are issued or within
23the next succeeding fiscal year, with Qualified School
24Construction Bonds issued maturing or subject to mandatory
25redemption or with sinking fund payments thereof deposited each
26fiscal year thereafter up to 25 years. Sinking fund payments

 

 

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1set forth in this subsection shall be permitted only to the
2extent authorized in Section 54F of the Internal Revenue Code
3or as otherwise determined by the Director of the Governor's
4Office of Management and Budget. "Qualified School
5Construction Bonds" in this subsection means Bonds authorized
6by Section 54F of the Internal Revenue Code and for bonds
7issued from time to time to refund or continue to refund such
8"Qualified School Construction Bonds".
9    (f) Beginning with the next issuance by the Governor's
10Office of Management and Budget to the Procurement Policy Board
11of a request for quotation for the purpose of formulating a new
12pool of qualified underwriting banks list, all entities
13responding to such a request for quotation for inclusion on
14that list shall provide a written report to the Governor's
15Office of Management and Budget and the Illinois Comptroller.
16The written report submitted to the Comptroller shall (i) be
17published on the Comptroller's Internet website and (ii) be
18used by the Governor's Office of Management and Budget for the
19purposes of scoring such a request for quotation. The written
20report, at a minimum, shall:
21        (1) disclose whether, within the past 3 months,
22    pursuant to its credit default swap market-making
23    activities, the firm has entered into any State of Illinois
24    credit default swaps ("CDS");
25        (2) include, in the event of State of Illinois CDS
26    activity, disclosure of the firm's cumulative notional

 

 

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1    volume of State of Illinois CDS trades and the firm's
2    outstanding gross and net notional amount of State of
3    Illinois CDS, as of the end of the current 3-month period;
4        (3) indicate, pursuant to the firm's proprietary
5    trading activities, disclosure of whether the firm, within
6    the past 3 months, has entered into any proprietary trades
7    for its own account in State of Illinois CDS;
8        (4) include, in the event of State of Illinois
9    proprietary trades, disclosure of the firm's outstanding
10    gross and net notional amount of proprietary State of
11    Illinois CDS and whether the net position is short or long
12    credit protection, as of the end of the current 3-month
13    period;
14        (5) list all time periods during the past 3 months
15    during which the firm held net long or net short State of
16    Illinois CDS proprietary credit protection positions, the
17    amount of such positions, and whether those positions were
18    net long or net short credit protection positions; and
19        (6) indicate whether, within the previous 3 months, the
20    firm released any publicly available research or marketing
21    reports that reference State of Illinois CDS and include
22    those research or marketing reports as attachments.
23    (g) All entities included on a Governor's Office of
24Management and Budget's pool of qualified underwriting banks
25list shall, as soon as possible after March 18, 2011 (the
26effective date of Public Act 96-1554), but not later than

 

 

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1January 21, 2011, and on a quarterly fiscal basis thereafter,
2provide a written report to the Governor's Office of Management
3and Budget and the Illinois Comptroller. The written reports
4submitted to the Comptroller shall be published on the
5Comptroller's Internet website. The written reports, at a
6minimum, shall:
7        (1) disclose whether, within the past 3 months,
8    pursuant to its credit default swap market-making
9    activities, the firm has entered into any State of Illinois
10    credit default swaps ("CDS");
11        (2) include, in the event of State of Illinois CDS
12    activity, disclosure of the firm's cumulative notional
13    volume of State of Illinois CDS trades and the firm's
14    outstanding gross and net notional amount of State of
15    Illinois CDS, as of the end of the current 3-month period;
16        (3) indicate, pursuant to the firm's proprietary
17    trading activities, disclosure of whether the firm, within
18    the past 3 months, has entered into any proprietary trades
19    for its own account in State of Illinois CDS;
20        (4) include, in the event of State of Illinois
21    proprietary trades, disclosure of the firm's outstanding
22    gross and net notional amount of proprietary State of
23    Illinois CDS and whether the net position is short or long
24    credit protection, as of the end of the current 3-month
25    period;
26        (5) list all time periods during the past 3 months

 

 

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1    during which the firm held net long or net short State of
2    Illinois CDS proprietary credit protection positions, the
3    amount of such positions, and whether those positions were
4    net long or net short credit protection positions; and
5        (6) indicate whether, within the previous 3 months, the
6    firm released any publicly available research or marketing
7    reports that reference State of Illinois CDS and include
8    those research or marketing reports as attachments.
9(Source: P.A. 99-523, eff. 6-30-16.)
 
10    (30 ILCS 330/14)  (from Ch. 127, par. 664)
11    Sec. 14. Repayment.
12    (a) To provide for the manner of repayment of Bonds, the
13Governor shall include an appropriation in each annual State
14Budget of monies in such amount as shall be necessary and
15sufficient, for the period covered by such budget, to pay the
16interest, as it shall accrue, on all Bonds issued under this
17Act, to pay and discharge the principal of such Bonds as shall,
18by their terms, fall due during such period, to pay a premium,
19if any, on Bonds to be redeemed prior to the maturity date, and
20to pay sinking fund payments in connection with Qualified
21School Construction Bonds authorized by subsection (e) of
22Section 9. Amounts included in such appropriations for the
23payment of interest on variable rate bonds shall be the maximum
24amounts of interest that may be payable for the period covered
25by the budget, after taking into account any credits permitted

 

 

HB2718- 21 -LRB100 10499 KTG 20713 b

1in the related indenture or other instrument against the amount
2of such interest required to be appropriated for such period.
3Amounts included in such appropriations for the payment of
4interest shall include the amounts certified by the Director of
5the Governor's Office of Management and Budget under subsection
6(b) of Section 9 of this Act. The amount shall also include
7certified estimates from the Director of the Governor's Office
8of Management and Budget of net payments for any arrangements
9with respect to interest rate protection or exchange
10agreements, guarantees, or financial futures contracts for the
11purpose of limiting, reducing, or managing interest rate
12exposure entered into prior to July 1, 2017 and still remaining
13in effect.
14    (b) A separate fund in the State Treasury called the
15"General Obligation Bond Retirement and Interest Fund" is
16hereby created.
17    (c) The General Assembly shall annually make
18appropriations to pay the principal of, interest on, and
19premium, if any, on Bonds sold under this Act from the General
20Obligation Bond Retirement and Interest Fund. Amounts included
21in such appropriations for the payment of interest on variable
22rate bonds shall be the maximum amounts of interest that may be
23payable during the fiscal year, after taking into account any
24credits permitted in the related indenture or other instrument
25against the amount of such interest required to be appropriated
26for such period. Amounts included in such appropriations for

 

 

HB2718- 22 -LRB100 10499 KTG 20713 b

1the payment of interest shall include the amounts certified by
2the Director of the Governor's Office of Management and Budget
3under subsection (b) of Section 9 of this Act.
4    If for any reason there are insufficient funds in either
5the General Revenue Fund or the Road Fund to make transfers to
6the General Obligation Bond Retirement and Interest Fund as
7required by Section 15 of this Act, or if for any reason the
8General Assembly fails to make appropriations sufficient to pay
9the principal of, interest on, and premium, if any, on the
10Bonds, as the same by their terms shall become due, this Act
11shall constitute an irrevocable and continuing appropriation
12of all amounts necessary for that purpose, and the irrevocable
13and continuing authority for and direction to the State
14Treasurer and the Comptroller to make the necessary transfers,
15as directed by the Governor, out of and disbursements from the
16revenues and funds of the State.
17    (d) If, because of insufficient funds in either the General
18Revenue Fund or the Road Fund, monies have been transferred to
19the General Obligation Bond Retirement and Interest Fund, as
20required by subsection (c) of this Section, this Act shall
21constitute the irrevocable and continuing authority for and
22direction to the State Treasurer and Comptroller to reimburse
23these funds of the State from the General Revenue Fund or the
24Road Fund, as appropriate, by transferring, at such times and
25in such amounts, as directed by the Governor, an amount to
26these funds equal to that transferred from them.

 

 

HB2718- 23 -LRB100 10499 KTG 20713 b

1(Source: P.A. 96-828, eff. 12-2-09.)
 
2    (30 ILCS 330/15.1 new)
3    Sec. 15.1. Derivative deal investigations. The Director of
4the Governor's Office of Management and Budget must oversee an
5annual evaluation of derivative deals, including interest rate
6swaps, initiated to manage interest rate exposure, in order to
7ascertain the financial costs of these agreements. If these
8agreements have resulted in losses to the State, the Governor's
9Office of Management and Budget shall make all necessary
10efforts to recover those moneys. To achieve these goals, the
11State shall:
12        (1) Authorize agency administrators to negotiate and
13    terminate the State's interest rate swap agreements with
14    banks to the extent that the State is able to do so at no
15    cost and not later than the end of the next fiscal year
16    after a finding of losses to Illinois taxpayers is made. If
17    a respective bank refuses to terminate without fees or
18    penalty by that date, then it will be excluded from any
19    future business with the State of Illinois during the life
20    of the swap agreement, and the State should continue to use
21    all good faith efforts until said bank drops the
22    termination fees and penalty.
23        (2) Not enter into any blanket release of legal
24    liabilities in relation to any interest rate swap
25    agreement.

 

 

HB2718- 24 -LRB100 10499 KTG 20713 b

1        (3) Investigate and determine the amount of the moneys
2    lost by the State of Illinois due to alleged illegal or
3    unethical acts by financial institutions, including but
4    not limited to manipulating the London Interbank Offered
5    Rate (LIBOR), misrepresenting the risks associated with
6    complex financial deals like interest rate swaps and
7    auction rate securities, mispricing municipal derivatives,
8    and rigging bids on competitively bid contracts.
9            (A) The investigation shall examine all successful
10        or pending legal actions taken by other governmental
11        entities (including both issuers of debt and
12        enforcement authorities) in the United States to
13        recover money from such practices. In each case if the
14        investigation finds no basis for action under a similar
15        legal theory, the report of the investigation shall set
16        forth specific reasons why action under the legal
17        theory is not feasible.
18            (B) The investigation shall be completed no later
19        than 6 months after the effective date of this
20        amendatory Act of the 100th General Assembly. The
21        Governor shall request the Attorney General to
22        evaluate and pursue all legal remedies.
 
23    Section 15. The State University Certificates of
24Participation Act is amended by adding Sections 17 and 22 as
25follows:
 

 

 

HB2718- 25 -LRB100 10499 KTG 20713 b

1    (110 ILCS 73/17 new)
2    Sec. 17. Derivative deal investigations. The Board of
3Trustees of a State University must oversee an annual
4evaluation of derivative deals, including interest rate swaps,
5initiated to manage interest rate exposure, in order to
6ascertain the financial costs of these agreements. If these
7agreements have resulted in losses to the State University, the
8Board shall make all necessary efforts to recover those moneys.
9To achieve these goals, the Board shall:
10        (1) Authorize agency administrators to negotiate and
11    terminate the State University's interest rate swap
12    agreements with banks to the extent that the State
13    University is able to do so at no cost and not later than
14    the end of the next fiscal year after a finding of losses
15    to Illinois taxpayers is made. If a respective bank refuses
16    to terminate without fees or penalty by that date, then it
17    will be excluded from any future business with the State
18    University during the life of the swap agreement, and the
19    State University should continue to use all good faith
20    efforts until said bank drops the termination fees and
21    penalty.
22        (2) Not enter into any blanket release of legal
23    liabilities in relation to any interest rate swap
24    agreement.
25        (3) Investigate and determine the amount of the moneys

 

 

HB2718- 26 -LRB100 10499 KTG 20713 b

1    lost by the State University due to alleged illegal or
2    unethical acts by financial institutions, including, but
3    not limited to, manipulating the London Interbank Offered
4    Rate (LIBOR), misrepresenting the risks associated with
5    complex financial deals like interest rate swaps and
6    auction rate securities, mispricing municipal derivatives,
7    and rigging bids on competitively bid contracts.
8            (A) The investigation shall examine all successful
9        or pending legal actions taken by other governmental
10        entities (including both issuers of debt and
11        enforcement authorities) in the United States to
12        recover money from such practices. In each case if the
13        investigation finds no basis for action under a similar
14        legal theory, the report of the investigation shall set
15        forth specific reasons why action under the legal
16        theory is not feasible.
17            (B) The investigation shall be completed no later
18        than 6 months after the effective date of this
19        amendatory Act of the 100th General Assembly. The Board
20        shall request the Attorney General to evaluate and
21        pursue all legal remedies.
 
22    (110 ILCS 73/22 new)
23    Sec. 22. Derivative deal investigations. The Board of
24Trustees of the University of Illinois must oversee an annual
25evaluation of derivative deals, as set forth in Section 5.2 of

 

 

HB2718- 27 -LRB100 10499 KTG 20713 b

1the University of Illinois Revenue Bond Financing Act for
2Auxiliary Facilities.
 
3    Section 20. The University of Illinois Revenue Bond
4Financing Act for Auxiliary Facilities is amended by adding
5Section 5.2 as follows:
 
6    (110 ILCS 405/5.2 new)
7    Sec. 5.2. Derivative deal investigations. The Board of
8Trustees of the University of Illinois must oversee an annual
9evaluation of derivative deals, including interest rate swaps,
10initiated to manage interest rate exposure, in order to
11ascertain the financial costs of these agreements. If these
12agreements have resulted in losses to the University of
13Illinois, the Board shall make all necessary efforts to recover
14those moneys. To achieve these goals, the Board shall:
15        (1) Authorize agency administrators to negotiate and
16    terminate the University of Illinois' interest rate swap
17    agreements with banks to the extent that the University of
18    Illinois is able to do so at no cost and not later than the
19    end of the next fiscal year after a finding of losses to
20    Illinois taxpayers is made. If a respective bank refuses to
21    terminate without fees or penalty by that date, then it
22    will be excluded from any future business with the
23    University of Illinois during the life of the swap
24    agreement, and the University of Illinois should continue

 

 

HB2718- 28 -LRB100 10499 KTG 20713 b

1    to use all good faith efforts until said bank drops the
2    termination fees and penalty.
3        (2) Not enter into any blanket release of legal
4    liabilities in relation to any interest rate swap
5    agreement.
6        (3) Investigate and determine the amount of the moneys
7    lost by the University of Illinois due to alleged illegal
8    or unethical acts by financial institutions, including,
9    but not limited to, manipulating the London Interbank
10    Offered Rate (LIBOR), misrepresenting the risks associated
11    with complex financial deals like interest rate swaps and
12    auction rate securities, mispricing municipal derivatives,
13    and rigging bids on competitively bid contracts.
14            (A) The investigation shall examine all successful
15        or pending legal actions taken by other governmental
16        entities (including both issuers of debt and
17        enforcement authorities) in the United States to
18        recover money from such practices. In each case if the
19        investigation finds no basis for action under a similar
20        legal theory, the report of the investigation shall set
21        forth specific reasons why action under the legal
22        theory is not feasible.
23            (B) The investigation shall be completed no later
24        than 6 months after the effective date of this
25        amendatory Act of the 100th General Assembly. The Board
26        shall request the Attorney General to evaluate and

 

 

HB2718- 29 -LRB100 10499 KTG 20713 b

1        pursue all legal remedies.
 
2    Section 25. The Toll Highway Act is amended by changing
3Section 17 as follows:
 
4    (605 ILCS 10/17)  (from Ch. 121, par. 100-17)
5    Sec. 17. (a) The Authority may from time to time issue
6bonds for any lawful purpose including, without limitation, the
7costs of issuance thereof and all such bonds or other
8obligations of the Authority issued pursuant to this Act shall
9be and are hereby declared to be negotiable for all purposes
10notwithstanding their payment from a limited source and without
11regard to any other law or laws.
12    (b) The bonds of every issue shall be payable solely out of
13revenues of the Authority, accumulated reserves or sinking
14funds, bond proceeds, proceeds of refunding bonds, or
15investment earnings as the Authority shall specify in a bond
16resolution.
17    (c) The bonds may be issued as serial bonds or as term
18bonds, or the Authority, in its discretion, may issue bonds of
19both types. The bonds shall be authorized by a bond resolution
20of the Authority, may be issued in one or more series and shall
21bear such date or dates, mature at such time or times not
22exceeding 25 years from their respective date or dates of
23issue, bear interest at such rate or rates, fixed or variable,
24without regard to any limit contained in any other statute or

 

 

HB2718- 30 -LRB100 10499 KTG 20713 b

1law of the State of Illinois, be payable as to principal and
2interest at such time or times, be in such denominations, be in
3such form, either coupon or fully registered, carry such
4registration and conversion privileges, be payable in lawful
5money of the United States of America at such places, be
6subject to such terms of redemption and may contain such other
7terms and provisions, as such bond resolution or resolutions
8may provide. The bonds shall be executed by the manual or
9facsimile signatures of the Chairman and the Secretary. In case
10any of the officers whose signature appears on the bonds or
11coupons, if any, shall cease to be an officer before the
12delivery of such bonds, such signature shall nevertheless be
13valid and sufficient for all purposes, as if he had remained in
14office until such delivery. The bonds shall be sold in such
15manner as the Authority shall determine. The proceeds from the
16sale of such bonds shall be paid to the Treasurer of the State
17of Illinois as ex officio custodian. Pending preparation of the
18definitive bonds, the Authority may issue interim receipts or
19certificates which shall be exchanged for such definitive
20bonds.
21    (d) Any bond resolution, or trust indenture entered into
22pursuant to a bond resolution, may contain provisions, which
23shall be a part of the contract with the holders of the bonds
24to be authorized, as to: (i) pledging or creating a lien upon
25all or part of the revenues of the Authority or any reserves,
26sinking funds, bond proceeds or investment earnings; (ii) the

 

 

HB2718- 31 -LRB100 10499 KTG 20713 b

1setting aside of reserves or sinking funds, and the regulation,
2investment and disposition thereof; (iii) the use and
3maintenance requirements for the toll highways; (iv) the
4purposes to which or the investments in which the proceeds of
5sale of any series or issue of bonds then or thereafter to be
6issued may be applied; (v) the issuance of additional bonds,
7the terms upon which additional bonds may be issued and
8secured, the purposes for such additional bonds, and the terms
9upon which additional bonds may rank on a parity with, or be
10subordinate or superior to other bonds; (vi) the refunding of
11outstanding bonds; (vii) the procedure, if any, by which the
12terms of any contract with bondholders may be amended or
13abrogated, the amount of bonds the holders of which must
14consent thereto, and the manner in which such consent may be
15given; (viii) defining the acts or omissions to act which shall
16constitute a default in the duties of the Authority to holders
17of its obligations and providing the rights and remedies of
18such holders in the event of a default; (ix) any other matters
19relating to the bonds which the Authority deems desirable.
20    (e) Neither the directors of the Authority nor any person
21executing the bonds shall be liable personally on the bonds or
22be subject to any personal liability or accountability by
23reason of the issuance thereof.
24    (f) The Authority shall have power out of any funds
25available therefor to purchase its bonds. The Authority may
26hold, pledge, cancel or resell such bonds subject to and in

 

 

HB2718- 32 -LRB100 10499 KTG 20713 b

1accordance with agreements with bondholders.
2    (g) In the discretion of the Authority any bonds issued
3under the provisions of this Act may be secured by a trust
4indenture by and between the Authority and a trustee or
5trustees, which may be any trust company or bank in the State
6of Illinois having the powers of a trust company and possessing
7capital and surplus of not less than $50,000,000. The bond
8resolution or trust indenture providing for the issuance of
9bonds so secured shall pledge such revenues of the Authority,
10sinking funds, bond proceeds, or investment earnings as may be
11specified therein, may contain such provisions for protecting
12and enforcing the rights and remedies of the bondholders as may
13be reasonable and proper and not in violation of law, including
14particularly such provisions as have hereinabove been
15specifically authorized to be included in any bond resolution
16or trust indenture of the Authority, and may restrict the
17individual right of action by bondholders. In addition to the
18foregoing, any bond resolution or trust indenture may contain
19such other provisions as the Authority may deem reasonable and
20proper for the security of the bondholders, including, but not
21limited to, the purchase of bond insurance and the arrangement
22of letters of credit, lines of credit or other credit or
23liquidity enhancement facilities; provided there shall be no
24pledge of the toll highway or any part thereof. All expenses
25incurred in carrying out the provisions of any bond resolution
26or trust indenture may be treated as a part of the cost of the

 

 

HB2718- 33 -LRB100 10499 KTG 20713 b

1operation of the toll highways.
2    (h) Bonds issued under the authority of this Act do not,
3and shall state upon the face of each bond that they do not,
4represent or constitute a debt of the Authority or of the State
5of Illinois within the meaning of any constitutional or
6statutory limitation or a pledge of the faith and credit of the
7Authority or the State of Illinois, or grant to the owners or
8holders thereof any right to have the Authority or the General
9Assembly levy any taxes or appropriate any funds for the
10payment of the principal thereof or interest thereon. Such
11bonds shall be payable and shall state that they are payable
12solely from the revenues and the sources authorized under this
13Act and pledged for their payment in accordance with the bond
14resolution or trust indenture.
15    Nothing in this Act shall be construed to authorize the
16Authority or any department, board, commission or other agency
17to create an obligation of the State of Illinois within the
18meaning of the Constitution or Statutes of Illinois.
19    (i) Any resolution or trust indenture authorizing the
20issuance of the bonds may include provision for the issuance of
21additional bonds. All resolutions of the Authority to carry
22such adopted bond resolutions into effect, to provide for the
23sale and delivery of the bonds, for letting of contracts for
24the construction of toll highways and the acquisition of real
25and personal property deemed by the Authority necessary or
26convenient for the construction thereof, shall not require the

 

 

HB2718- 34 -LRB100 10499 KTG 20713 b

1approval of the Governor or of any other department, division,
2commission, bureau, board or other agency of the State.
3    (j) The Director of the Illinois State Toll Highway
4Authority must oversee an annual evaluation of derivative
5deals, including interest rate swaps, initiated to manage
6interest rate exposure, in order to ascertain the financial
7costs of these agreements. If these agreements have resulted in
8losses to the Authority, the Director shall make all necessary
9efforts to recover those moneys. To achieve these goals, the
10Director shall:
11        (1) Authorize agency administrators to negotiate and
12    terminate the Authority's interest rate swap agreements
13    with banks to the extent that the Authority is able to do
14    so at no cost and not later than the end of the next fiscal
15    year after a finding of losses to Illinois taxpayers is
16    made. If a respective bank refuses to terminate without
17    fees or penalty by that date, then it will be excluded from
18    any future business with the Authority during the life of
19    the swap agreement, and the Authority should continue to
20    use all good faith efforts until said bank drops the
21    termination fees and penalty.
22        (2) Not enter into any blanket release of legal
23    liabilities in relation to any interest rate swap
24    agreement.
25        (3) Investigate and determine the amount of the moneys
26    lost by the Authority due to alleged illegal or unethical

 

 

HB2718- 35 -LRB100 10499 KTG 20713 b

1    acts by financial institutions, including, but not limited
2    to, manipulating the London Interbank Offered Rate
3    (LIBOR), misrepresenting the risks associated with complex
4    financial deals like interest rate swaps and auction rate
5    securities, mispricing municipal derivatives, and rigging
6    bids on competitively bid contracts.
7            (A) The investigation shall examine all successful
8        or pending legal actions taken by other governmental
9        entities (including both issuers of debt and
10        enforcement authorities) in the United States to
11        recover money from such practices. In each case if the
12        investigation finds no basis for action under a similar
13        legal theory, the report of the investigation shall set
14        forth specific reasons why action under the legal
15        theory is not feasible.
16            (B) The investigation shall be completed by no
17        later than 6 months after the effective date of this
18        amendatory Act of the 100th General Assembly. The
19        Director shall request the Attorney General to
20        evaluate and pursue all legal remedies.
21(Source: P.A. 83-1258.)

 

 

HB2718- 36 -LRB100 10499 KTG 20713 b

1 INDEX
2 Statutes amended in order of appearance
3    20 ILCS 3805/16from Ch. 67 1/2, par. 316
4    30 ILCS 330/9from Ch. 127, par. 659
5    30 ILCS 330/14from Ch. 127, par. 664
6    30 ILCS 330/15.1 new
7    110 ILCS 73/17 new
8    110 ILCS 73/22 new
9    110 ILCS 405/5.2 new
10    605 ILCS 10/17from Ch. 121, par. 100-17