100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB5976

 

Introduced , by Rep. David McSweeney

 

SYNOPSIS AS INTRODUCED:
 
30 ILCS 350/3  from Ch. 17, par. 6903
30 ILCS 350/15  from Ch. 17, par. 6915

    Amends the Local Government Debt Reform Act. Provides that no alternate bonds shall be issued if the issuance of such bonds would create or continue the accumulation of stacked alternate-bonded debt. Provides that provisions concerning stacked alternate-bonded debt do not apply to any transactions or agreements concerning debt that may be in place before the effective date of this amendatory Act. Defines "stacked alternate-bonded debt". Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning finance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Local Government Debt Reform Act is amended
5by changing Sections 3 and 15 as follows:
 
6    (30 ILCS 350/3)  (from Ch. 17, par. 6903)
7    Sec. 3. Definitions. In this Act words or terms shall have
8the following meanings unless the context or usage clearly
9indicates that another meaning is intended.
10    (a) "Alternate bonds" means bonds issued in lieu of revenue
11bonds or payable from a revenue source as provided in Section
1215.
13    (b) "Applicable law" means any provision of law, including
14this Act, authorizing governmental units to issue bonds.
15    (c) "Backdoor referendum" means the submission of a public
16question to the voters of a governmental unit, initiated by a
17petition of voters, residents or property owners of such
18governmental unit, to determine whether an action by the
19governing body of such governmental unit shall be effective,
20adopted or rejected.
21    (d) "Bond" means any instrument evidencing the obligation
22to pay money authorized or issued by or on behalf of a
23governmental unit under applicable law, including without

 

 

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1limitation, bonds, notes, installment or financing contracts,
2leases, certificates, tax anticipation warrants or notes,
3vouchers, and any other evidences of indebtedness.
4    (e) "Debt service" on bonds means the amount of principal,
5interest and premium, if any, when due either at stated
6maturity or upon mandatory redemption.
7    (f) "Enterprise revenues" means the revenues of a utility
8or revenue producing enterprise from which revenue bonds may be
9payable.
10    (g) "General obligation bonds" means bonds of a
11governmental unit for the payment of which the governmental
12unit is empowered to levy ad valorem property taxes upon all
13taxable property in a governmental unit without limitation as
14to rate or amount.
15    (h) "Governing body" means the legislative body, council,
16board, commission, trustees, or any other body, by whatever
17name it is known, having charge of the corporate affairs of a
18governmental unit.
19    (h-5) "Governmental revenue source" means a revenue source
20that is either (1) federal or State funds that the governmental
21unit has received in some amount during each of the 3 fiscal
22years preceding the issuance of alternate bonds or (2) revenues
23to be received from another governmental unit under an
24intergovernmental cooperation agreement.
25    (i) "Governmental unit" means a county, township,
26municipality, municipal corporation, unit of local government,

 

 

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1school district, special district, public corporation, body
2corporate and politic, forest preserve district, fire
3protection district, conservation district, park district,
4sanitary district, and all other local governmental agencies,
5including any entity created by intergovernmental agreement
6among any of the foregoing governmental units, but does not
7include any office, officer, department, division, bureau,
8board, commission, university, or similar agency of the State.
9    (j) "Ordinance" means an ordinance duly adopted by a
10governing body or, if appropriate under applicable law, a
11resolution so adopted.
12    (k) "Revenue bonds" means any bonds of a governmental unit
13other than general obligation bonds, but "revenue bonds" does
14include any debt authorized under Section 11-29.3-1 of the
15Illinois Municipal Code.
16    (l) "Revenue source" means a source of funds, other than
17enterprise revenues, received or available to be received by a
18governmental unit and available for any one or more of its
19corporate purposes.
20    (m) "Limited bonds" means bonds, excluding leases, notes,
21installment or financing contracts, certificates, tax
22anticipation warrants or notes, vouchers, and any other
23evidences of indebtedness, issued under Section 15.01 of this
24Act.
25    (n) "Stacked alternate-bonded debt" means any debt: (1)
26that contains 2 or more layers, one of which finances another

 

 

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1layer; and (2) in which at least one of the 2 or more layers is
2financed with alternate revenue.
3(Source: P.A. 92-879, eff. 1-13-03.)
 
4    (30 ILCS 350/15)  (from Ch. 17, par. 6915)
5    Sec. 15. Double-barrelled bonds. Whenever revenue bonds
6have been authorized to be issued pursuant to applicable law or
7whenever there exists for a governmental unit a revenue source,
8the procedures set forth in this Section may be used by a
9governing body. General obligation bonds may be issued in lieu
10of such revenue bonds as authorized, and general obligation
11bonds may be issued payable from any revenue source. Such
12general obligation bonds may be referred to as "alternate
13bonds". Alternate bonds may be issued without any referendum or
14backdoor referendum except as provided in this Section, upon
15the terms provided in Section 10 of this Act without reference
16to other provisions of law, but only upon the conditions
17provided in this Section. Alternate bonds shall not be regarded
18as or included in any computation of indebtedness for the
19purpose of any statutory provision or limitation except as
20expressly provided in this Section.
21    Such conditions are:
22    (a) Alternate bonds shall be issued for a lawful corporate
23purpose. If issued in lieu of revenue bonds, alternate bonds
24shall be issued for the purposes for which such revenue bonds
25shall have been authorized. If issued payable from a revenue

 

 

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1source in the manner hereinafter provided, which revenue source
2is limited in its purposes or applications, then the alternate
3bonds shall be issued only for such limited purposes or
4applications. Alternate bonds may be issued payable from either
5enterprise revenues or revenue sources, or both.
6    (b) Alternate bonds shall be subject to backdoor
7referendum. The provisions of Section 5 of this Act shall apply
8to such backdoor referendum, together with the provisions
9hereof. The authorizing ordinance shall be published in a
10newspaper of general circulation in the governmental unit.
11Along with or as part of the authorizing ordinance, there shall
12be published a notice of (1) the specific number of voters
13required to sign a petition requesting that the issuance of the
14alternate bonds be submitted to referendum, (2) the time when
15such petition must be filed, (3) the date of the prospective
16referendum, and (4), with respect to authorizing ordinances
17adopted on or after January 1, 1991, a statement that
18identifies any revenue source that will be used to pay debt
19service on the alternate bonds. The clerk or secretary of the
20governmental unit shall make a petition form available to
21anyone requesting one.
22    Except as provided in the following paragraph, if no
23petition is filed with the clerk or secretary within 30 days of
24publication of the authorizing ordinance and notice, the
25alternate bonds shall be authorized to be issued. But if within
26this 30 days period, a petition is filed with such clerk or

 

 

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1secretary signed by electors numbering the greater of (i) 7.5%
2of the registered voters in the governmental unit or (ii) 200
3of those registered voters or 15% of those registered voters,
4whichever is less, asking that the issuance of such alternate
5bonds be submitted to referendum, the clerk or secretary shall
6certify such question for submission at an election held in
7accordance with the general election law.
8    Notwithstanding the previous paragraph, in governmental
9units with fewer than 500,000 inhabitants that propose to issue
10alternate bonds payable solely from enterprise revenues as
11defined under Section 3 of this Act, except for such alternate
12bonds that finance or refinance projects concerning public
13utilities, public streets and roads or public safety
14facilities, and related infrastructure and equipment, if no
15petition is filed with the clerk or secretary within 45 days of
16publication of the authorizing ordinance and notice, the
17alternate bonds shall be authorized to be issued. But if,
18within this 45-day period, a petition is filed with such clerk
19or secretary signed by the necessary number of electors, asking
20that the issuance of such alternate bonds be submitted to
21referendum, the clerk or secretary shall certify such question
22for submission at an election held in accordance with the
23general election law. For purposes of this paragraph, the
24necessary number of electors for a governmental unit with more
25than 4,000 registered voters is the lesser of (i) 5% of the
26registered voters or (ii) 5,000 registered voters; and the

 

 

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1necessary number of electors for a governmental unit with 4,000
2or fewer registered voters is the lesser of (i) 15% of the
3registered voters or (ii) 200 registered voters.
4    The question on the ballot shall include a statement of any
5revenue source that will be used to pay debt service on the
6alternate bonds. The alternate bonds shall be authorized to be
7issued if a majority of the votes cast on the question at such
8election are in favor thereof provided that notice of the bond
9referendum, if held before July 1, 1999, has been given in
10accordance with the provisions of Section 12-5 of the Election
11Code in effect at the time of the bond referendum, at least 10
12and not more than 45 days before the date of the election,
13notwithstanding the time for publication otherwise imposed by
14Section 12-5. Notices required in connection with the
15submission of public questions on or after July 1, 1999 shall
16be as set forth in Section 12-5 of the Election Code. Backdoor
17referendum proceedings for bonds and alternate bonds to be
18issued in lieu of such bonds may be conducted at the same time.
19    (c) To the extent payable from enterprise revenues, such
20revenues shall have been determined by the governing body to be
21sufficient to provide for or pay in each year to final maturity
22of such alternate bonds all of the following: (1) costs of
23operation and maintenance of the utility or enterprise, but not
24including depreciation, (2) debt service on all outstanding
25revenue bonds payable from such enterprise revenues, (3) all
26amounts required to meet any fund or account requirements with

 

 

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1respect to such outstanding revenue bonds, (4) other
2contractual or tort liability obligations, if any, payable from
3such enterprise revenues, and (5) in each year, an amount not
4less than 1.25 times debt service of all (i) alternate bonds
5payable from such enterprise revenues previously issued and
6outstanding and (ii) alternate bonds proposed to be issued. To
7the extent payable from one or more revenue sources, such
8sources shall have been determined by the governing body to
9provide in each year, an amount not less than 1.25 times debt
10service of all alternate bonds payable from such revenue
11sources previously issued and outstanding and alternate bonds
12proposed to be issued. The 1.25 figure in the preceding
13sentence shall be reduced to 1.10 if the revenue source is a
14governmental revenue source. The conditions enumerated in this
15subsection (c) need not be met for that amount of debt service
16provided for by the setting aside of proceeds of bonds or other
17moneys at the time of the delivery of such bonds.
18    (c-1) In the case of alternate bonds issued as variable
19rate bonds (including refunding bonds), debt service shall be
20projected based on the rate for the most recent date shown in
21the 20 G.O. Bond Index of average municipal bond yields as
22published in the most recent edition of The Bond Buyer
23published in New York, New York (or any successor publication
24or index, or if such publication or index is no longer
25published, then any index of long-term municipal tax-exempt
26bond yields selected by the governmental unit), as of the date

 

 

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1of determination referred to in subsection (c) of this Section.
2Any interest or fees that may be payable to the provider of a
3letter of credit, line of credit, surety bond, bond insurance,
4or other credit enhancement relating to such alternate bonds
5and any fees that may be payable to any remarketing agent need
6not be taken into account for purposes of such projection. If
7the governmental unit enters into an agreement in connection
8with such alternate bonds at the time of issuance thereof
9pursuant to which the governmental unit agrees for a specified
10period of time to pay an amount calculated at an agreed-upon
11rate or index based on a notional amount and the other party
12agrees to pay the governmental unit an amount calculated at an
13agreed-upon rate or index based on such notional amount,
14interest shall be projected for such specified period of time
15on the basis of the agreed-upon rate payable by the
16governmental unit.
17    (d) The determination of the sufficiency of enterprise
18revenues or a revenue source, as applicable, shall be supported
19by reference to the most recent audit of the governmental unit,
20which shall be for a fiscal year ending not earlier than 18
21months previous to the time of issuance of the alternate bonds.
22If such audit does not adequately show such enterprise revenues
23or revenue source, as applicable, or if such enterprise
24revenues or revenue source, as applicable, are shown to be
25insufficient, then the determination of sufficiency shall be
26supported by the report of an independent accountant or

 

 

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1feasibility analyst, the latter having a national reputation
2for expertise in such matters, who is not otherwise involved in
3the project being financed or refinanced with the proceeds of
4the alternate bonds, demonstrating the sufficiency of such
5revenues and explaining, if appropriate, by what means the
6revenues will be greater than as shown in the audit. Whenever
7such sufficiency is demonstrated by reference to a schedule of
8higher rates or charges for enterprise revenues or a higher tax
9imposition for a revenue source, such higher rates, charges or
10taxes shall have been properly imposed by an ordinance adopted
11prior to the time of delivery of alternate bonds. The reference
12to and acceptance of an audit or report, as the case may be,
13and the determination of the governing body as to sufficiency
14of enterprise revenues or a revenue source shall be conclusive
15evidence that the conditions of this Section have been met and
16that the alternate bonds are valid.
17    (e) The enterprise revenues or revenue source, as
18applicable, shall be in fact pledged to the payment of the
19alternate bonds; and the governing body shall covenant, to the
20extent it is empowered to do so, to provide for, collect and
21apply such enterprise revenues or revenue source, as
22applicable, to the payment of the alternate bonds and the
23provision of not less than an additional .25 (or .10 for
24governmental revenue sources) times debt service. The pledge
25and establishment of rates or charges for enterprise revenues,
26or the imposition of taxes in a given rate or amount, as

 

 

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1provided in this Section for alternate bonds, shall constitute
2a continuing obligation of the governmental unit with respect
3to such establishment or imposition and a continuing
4appropriation of the amounts received. All covenants relating
5to alternate bonds and the conditions and obligations imposed
6by this Section are enforceable by any bondholder of alternate
7bonds affected, any taxpayer of the governmental unit, and the
8People of the State of Illinois acting through the Attorney
9General or any designee, and in the event that any such action
10results in an order finding that the governmental unit has not
11properly set rates or charges or imposed taxes to the extent it
12is empowered to do so or collected and applied enterprise
13revenues or any revenue source, as applicable, as required by
14this Act, the plaintiff in any such action shall be awarded
15reasonable attorney's fees. The intent is that such enterprise
16revenues or revenue source, as applicable, shall be sufficient
17and shall be applied to the payment of debt service on such
18alternate bonds so that taxes need not be levied, or if levied
19need not be extended, for such payment. Nothing in this Section
20shall inhibit or restrict the authority of a governing body to
21determine the lien priority of any bonds, including alternate
22bonds, which may be issued with respect to any enterprise
23revenues or revenue source.
24    In the event that alternate bonds shall have been issued
25and taxes, other than a designated revenue source, shall have
26been extended pursuant to the general obligation, full faith

 

 

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1and credit promise supporting such alternate bonds, then the
2amount of such alternate bonds then outstanding shall be
3included in the computation of indebtedness of the governmental
4unit for purposes of all statutory provisions or limitations
5until such time as an audit of the governmental unit shall show
6that the alternate bonds have been paid from the enterprise
7revenues or revenue source, as applicable, pledged thereto for
8a complete fiscal year.
9    Alternate bonds may be issued to refund or advance refund
10alternate bonds without meeting any of the conditions set forth
11in this Section, except that the term of the refunding bonds
12shall not be longer than the term of the refunded bonds and
13that the debt service payable in any year on the refunding
14bonds shall not exceed the debt service payable in such year on
15the refunded bonds.
16    Once issued, alternate bonds shall be and forever remain
17until paid or defeased the general obligation of the
18governmental unit, for the payment of which its full faith and
19credit are pledged, and shall be payable from the levy of taxes
20as is provided in this Act for general obligation bonds.
21    The changes made by this amendatory Act of 1990 do not
22affect the validity of bonds authorized before September 1,
231990.
24    (f) Notwithstanding any provision of law to the contrary,
25no alternate bonds shall be issued if the issuance of such
26bonds would create or continue the accumulation of stacked

 

 

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1alternate-bonded debt as defined under Section 3. The
2provisions of this subsection (f) do not apply to any
3transactions or agreements concerning debt that may be in place
4before the effective date of this amendatory Act of the 100th
5General Assembly.
6(Source: P.A. 97-542, eff. 8-23-11; 98-203, eff. 1-1-14.)
 
7    Section 99. Effective date. This Act takes effect upon
8becoming law.