HB1679sam002 94TH GENERAL ASSEMBLY

Sen. William R. Haine

Filed: 5/9/2005

09400HB1679sam002 LRB094 03138 BDD 45934 a

AMENDMENT TO HOUSE BILL 1679

AMENDMENT NO. ______. Amend House Bill 1679 by replacing everything after the enacting clause with the following:

"Section 5. The Public Funds Investment Act is amended by changing Section 2 as follows:

(30 ILCS 235/2) (from Ch. 85, par. 902)

Sec. 2. Authorized investments.

(a) Any public agency may invest any public funds as follows:

(1) in bonds, notes, certificates of indebtedness, treasury bills or other securities now or hereafter issued, which are guaranteed by the full faith and credit of the United States of America as to principal and interest;

(2) in bonds, notes, debentures, or other similar obligations of the United States of America or its agencies;

(3) in interest-bearing savings accounts, interest-bearing certificates of deposit or interest-bearing time deposits or any other investments constituting direct obligations of any bank as defined by the Illinois Banking Act;

(4) in short term obligations of corporations organized in the United States with assets exceeding $500,000,000 if (i) such obligations are rated at the time of purchase at one of the 3 highest classifications established by at least 2 standard rating services and which mature not later than 180 days from the date of purchase, (ii) such purchases do not exceed 10% of the corporation's outstanding obligations at the time of the purchase of the obligations and (iii) no more than one-third of the public agency's funds may be invested in short term obligations of corporations; or

(5) in money market mutual funds registered under the Investment Company Act of 1940, provided that the portfolio of any such money market mutual fund is limited to obligations described in paragraph (1) or (2) of this subsection or in obligations described in subsection (a-1) and to agreements to repurchase such obligations.

(a-1) In addition to any other investments authorized under this Act, a municipality may invest its public funds in interest bearing bonds of any county, township, city, village, incorporated town, municipal corporation, or school district, of the State of Illinois, of any other state, or of any political subdivision or agency of the State of Illinois or of any other state, whether the interest earned thereon is taxable or tax-exempt under federal law. The bonds shall be registered in the name of the municipality or held under a custodial agreement at a bank. The bonds shall be rated at the time of purchase within the 4 highest general classifications established by a rating service of nationally recognized expertise in rating bonds of states and their political subdivisions.

(b) Investments may be made only in banks which are insured by the Federal Deposit Insurance Corporation. Any public agency may invest any public funds in short term discount obligations of the Federal National Mortgage Association or in shares or other forms of securities legally issuable by savings banks or savings and loan associations incorporated under the laws of this State or any other state or under the laws of the United States. Investments may be made only in those savings banks or savings and loan associations the shares, or investment certificates of which are insured by the Federal Deposit Insurance Corporation. Any such securities may be purchased at the offering or market price thereof at the time of such purchase. All such securities so purchased shall mature or be redeemable on a date or dates prior to the time when, in the judgment of such governing authority, the public funds so invested will be required for expenditure by such public agency or its governing authority. The expressed judgment of any such governing authority as to the time when any public funds will be required for expenditure or be redeemable is final and conclusive. Any public agency may invest any public funds in dividend-bearing share accounts, share certificate accounts or class of share accounts of a credit union chartered under the laws of this State or the laws of the United States; provided, however, the principal office of any such credit union must be located within the State of Illinois. Investments may be made only in those credit unions the accounts of which are insured by applicable law.

(c) For purposes of this Section, the term "agencies of the United States of America" includes: (i) the federal land banks, federal intermediate credit banks, banks for cooperative, federal farm credit banks, or any other entity authorized to issue debt obligations under the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto; (ii) the federal home loan banks and the federal home loan mortgage corporation; and (iii) any other agency created by Act of Congress.

(d) Except for pecuniary interests permitted under subsection (f) of Section 3-14-4 of the Illinois Municipal Code or under Section 3.2 of the Public Officer Prohibited Practices Act, no person acting as treasurer or financial officer or who is employed in any similar capacity by or for a public agency may do any of the following:

(1) have any interest, directly or indirectly, in any investments in which the agency is authorized to invest.

(2) have any interest, directly or indirectly, in the sellers, sponsors, or managers of those investments.

(3) receive, in any manner, compensation of any kind from any investments in which the agency is authorized to invest.

(e) Any public agency may also invest any public funds in a Public Treasurers' Investment Pool created under Section 17 of the State Treasurer Act. Any public agency may also invest any public funds in a fund managed, operated, and administered by a bank, subsidiary of a bank, or subsidiary of a bank holding company or use the services of such an entity to hold and invest or advise regarding the investment of any public funds.

(f) To the extent a public agency has custody of funds not owned by it or another public agency and does not otherwise have authority to invest such funds, the public agency may invest such funds as if they were its own. Such funds must be released to the appropriate person at the earliest reasonable time, but in no case exceeding 31 days, after the private person becomes entitled to the receipt of them. All earnings accruing on any investments or deposits made pursuant to the provisions of this Act shall be credited to the public agency by or for which such investments or deposits were made, except as provided otherwise in Section 4.1 of the State Finance Act or the Local Governmental Tax Collection Act, and except where by specific statutory provisions such earnings are directed to be credited to and paid to a particular fund.

(g) A public agency may purchase or invest in repurchase agreements of government securities having the meaning set out in the Government Securities Act of 1986 subject to the provisions of said Act and the regulations issued thereunder. The government securities, unless registered or inscribed in the name of the public agency, shall be purchased through banks or trust companies authorized to do business in the State of Illinois.

(h) Except for repurchase agreements of government securities which are subject to the Government Securities Act of 1986, no public agency may purchase or invest in instruments which constitute repurchase agreements, and no financial institution may enter into such an agreement with or on behalf of any public agency unless the instrument and the transaction meet the following requirements:

(1) The securities, unless registered or inscribed in the name of the public agency, are purchased through banks or trust companies authorized to do business in the State of Illinois.

(2) An authorized public officer after ascertaining which firm will give the most favorable rate of interest, directs the custodial bank to "purchase" specified securities from a designated institution. The "custodial bank" is the bank or trust company, or agency of government, which acts for the public agency in connection with repurchase agreements involving the investment of funds by the public agency. The State Treasurer may act as custodial bank for public agencies executing repurchase agreements. To the extent the Treasurer acts in this capacity, he is hereby authorized to pass through to such public agencies any charges assessed by the Federal Reserve Bank.

(3) A custodial bank must be a member bank of the Federal Reserve System or maintain accounts with member banks. All transfers of book-entry securities must be accomplished on a Reserve Bank's computer records through a member bank of the Federal Reserve System. These securities must be credited to the public agency on the records of the custodial bank and the transaction must be confirmed in writing to the public agency by the custodial bank.

(4) Trading partners shall be limited to banks or trust companies authorized to do business in the State of Illinois or to registered primary reporting dealers.

(5) The security interest must be perfected.

(6) The public agency enters into a written master repurchase agreement which outlines the basic responsibilities and liabilities of both buyer and seller.

(7) Agreements shall be for periods of 330 days or less.

(8) The authorized public officer of the public agency informs the custodial bank in writing of the maturity details of the repurchase agreement.

(9) The custodial bank must take delivery of and maintain the securities in its custody for the account of the public agency and confirm the transaction in writing to the public agency. The Custodial Undertaking shall provide that the custodian takes possession of the securities exclusively for the public agency; that the securities are free of any claims against the trading partner; and any claims by the custodian are subordinate to the public agency's claims to rights to those securities.

(10) The obligations purchased by a public agency may only be sold or presented for redemption or payment by the fiscal agent bank or trust company holding the obligations upon the written instruction of the public agency or officer authorized to make such investments.

(11) The custodial bank shall be liable to the public agency for any monetary loss suffered by the public agency due to the failure of the custodial bank to take and maintain possession of such securities.

(i) Notwithstanding the foregoing restrictions on investment in instruments constituting repurchase agreements the Illinois Housing Development Authority may invest in, and any financial institution with capital of at least $250,000,000 may act as custodian for, instruments that constitute repurchase agreements, provided that the Illinois Housing Development Authority, in making each such investment, complies with the safety and soundness guidelines for engaging in repurchase transactions applicable to federally insured banks, savings banks, savings and loan associations or other depository institutions as set forth in the Federal Financial Institutions Examination Council Policy Statement Regarding Repurchase Agreements and any regulations issued, or which may be issued by the supervisory federal authority pertaining thereto and any amendments thereto; provided further that the securities shall be either (i) direct general obligations of, or obligations the payment of the principal of and/or interest on which are unconditionally guaranteed by, the United States of America or (ii) any obligations of any agency, corporation or subsidiary thereof controlled or supervised by and acting as an instrumentality of the United States Government pursuant to authority granted by the Congress of the United States and provided further that the security interest must be perfected by either the Illinois Housing Development Authority, its custodian or its agent receiving possession of the securities either physically or transferred through a nationally recognized book entry system.

(j) In addition to all other investments authorized under this Section, a community college district may invest public funds in any mutual funds that invest primarily in corporate investment grade or global government short term bonds. Purchases of mutual funds that invest primarily in global government short term bonds shall be limited to funds with assets of at least $100 million and that are rated at the time of purchase as one of the 10 highest classifications established by a recognized rating service. The investments shall be subject to approval by the local community college board of trustees. Each community college board of trustees shall develop a policy regarding the percentage of the college's investment portfolio that can be invested in such funds.

Nothing in this Section shall be construed to authorize an intergovernmental risk management entity to accept the deposit of public funds except for risk management purposes.

(Source: P.A. 93-360, eff. 7-24-03.)

Section 10. The Local Government Debt Reform Act is amended by changing Sections 3, 9, 11, 16.5, 17, and 17.5 as follows:

(30 ILCS 350/3) (from Ch. 17, par. 6903)

Sec. 3. Definitions. In this Act words or terms shall have the following meanings unless the context or usage clearly indicates that another meaning is intended.

(a) "Alternate bonds" means bonds issued in lieu of revenue bonds or payable from a revenue source as provided in Section 15.

(b) "Applicable law" means any provision of law, including this Act, authorizing governmental units to issue bonds or relating to any procedure, including any notice, hearing, meeting, referendum, or backdoor referendum, to be taken in the course of actions to issue bonds.

(c) "Backdoor referendum" means the submission of a public question to the voters of a governmental unit, initiated by a petition of voters, residents or property owners of such governmental unit, to determine whether an action by the governing body of such governmental unit shall be effective, adopted or rejected.

(d) "Bond" means any instrument evidencing the obligation to pay money authorized or issued by or on behalf of a governmental unit under applicable law, including without limitation, bonds, notes, installment or financing contracts, leases, certificates, tax anticipation warrants or notes, vouchers, and any other evidences of indebtedness.

(e) "Debt service" on bonds means the amount of principal, interest and premium, if any, when due either at stated maturity or upon mandatory redemption.

(f) "Enterprise revenues" means the revenues of a utility or revenue producing enterprise from which revenue bonds may be payable.

(g) "General obligation bonds" means bonds of a governmental unit for the payment of which the governmental unit is empowered to levy ad valorem property taxes upon all taxable property in a governmental unit without limitation as to rate or amount.

(h) "Governing body" means the legislative body, council, board, commission, trustees, or any other body, by whatever name it is known, having charge of the corporate affairs of a governmental unit.

(h-5) "Governmental revenue source" means a revenue source that is either (1) federal or State funds that the governmental unit has received in some amount during each of the 3 fiscal years preceding the issuance of alternate bonds or (2) revenues to be received from another governmental unit under an intergovernmental cooperation agreement.

(i) "Governmental unit" means a county, township, municipality, municipal corporation, unit of local government, school district, special district, public corporation, body corporate and politic, forest preserve district, fire protection district, conservation district, park district, sanitary district, public corporations, as defined in the Bond Authorization Act, and all other local governmental agencies, including any entity created by intergovernmental agreement among any of the foregoing governmental units, but does not include any office, officer, department or , division, bureau, board, commission, university, or similar agency of the State.

(j) "Ordinance" means an ordinance duly adopted by a governing body or, if appropriate under applicable law, a resolution so adopted.

(k) "Revenue bonds" means any bonds of a governmental unit other than general obligation bonds, but "revenue bonds" does include any debt authorized under Section 11-29.3-1 of the Illinois Municipal Code.

(l) "Revenue source" means a source of funds, other than enterprise revenues, received or available to be received by a governmental unit and available for any one or more of its corporate purposes.

(m) "Limited bonds" means bonds, excluding leases, notes, installment or financing contracts, certificates, tax anticipation warrants or notes, vouchers, and any other evidences of indebtedness, issued under Section 15.01 of this Act.

(Source: P.A. 92-879, eff. 1-13-03.)

(30 ILCS 350/9) (from Ch. 17, par. 6909)

Sec. 9. Provisions for interest.

(a) The proceeds of bonds may be used to provide for the payment of interest upon such bonds for a period not to exceed the greater of 3 2 years or a period ending 6 months after the estimated date of completion of the acquisition and construction of the project or accomplishment of the purpose for which such bonds are issued.

(b) In addition it shall be lawful for the governing body of any governmental unit issuing bonds to appropriate money for the purpose of paying interest on such bonds during the period stated in subsection (a) of this Section. Such appropriation may be made in the ordinance authorizing such bonds and shall be fully effective upon the effective date of such ordinance without any further notice, publication or approval whatsoever.

(c) The governing body of any governmental unit may authorize the transfer of interest earned on any of the moneys of the governmental unit, including moneys set aside to pay debt service, into the fund of the governmental unit that is most in need of the interest. This subsection does not apply to any interest earned that has been earmarked or restricted by the governing body for a designated purpose. This subsection does not apply to any interest earned on any funds for the purpose of municipal retirement under the Illinois Pension Code and tort immunity under the Local Governmental and Governmental Employees Tort Immunity Act. Interest earned on those funds may be used only for the purposes authorized for the respective funds from which the interest earnings were derived.

(Source: P.A. 92-879, eff. 1-13-03.)

(30 ILCS 350/11) (from Ch. 17, par. 6911)

Sec. 11. Refundings and redemption premiums. Bonds may be refunded or advance refunded upon such terms as the governing body may set in accordance with this Act, for such term of years, not in excess of the maximum term of years permitted by applicable law for the bonds to be refunded, and in such principal amount, all as may be deemed necessary by the governing body. A refunding bond issue may authorize the use of proceeds of such issue to pay interest on the refunding bond issue during the period of time from delivery of such issue to the redemption date of the bonds being refunded. Revenue bonds may be issued to refund general obligation bonds or alternate bonds issued under this Act. General obligation bonds shall not be issued to refund revenue bonds or alternate bonds except as expressly permitted by applicable law. Any redemption premium payable upon the redemption of bonds may be payable from the proceeds of refunding bonds which may be issued for the purpose of refunding such bonds, from any other lawfully available source or from both proceeds and such other sources. Bonds that have been wholly refunded or provided for with qualifying securities shall not be included as debt for the purposes of any calculation or limitation under applicable law. "Qualifying securities" means securities or investments that are lawful for a governmental unit under State law and that have, at the time of purchase, a rating in the highest general classification established by a rating service of nationally recognized expertise in rating securities. "Wholly refunded" or "provided for" means that the interest on and principal of the qualifying securities, when due, which are set aside to pay debt service on the bonds, shall be sufficiently timely to pay the debt service on such bonds.

(Source: P.A. 90-306, eff. 8-1-97.)

(30 ILCS 350/16.5)

Sec. 16.5. Proposition for bonds. For all elections held after July 1, 2000, the form of a proposition to authorize the issuance of bonds pursuant to either a referendum or backdoor referendum may be as set forth in this Section as an alternative to the form of proposition as otherwise set forth by applicable law. The proposition authorized by this Section shall be in substantially the following form:

Shall (name of governmental unit) (state purpose for the bond issue) and issue its bonds to the amount of $ (state amount) for the purpose of paying the costs thereof?

If a school district expects to receive a school construction grant from the State of Illinois pursuant to the School Construction Law for a school construction project to be financed in part with proceeds of a bond authorized by referendum, then the form of proposition may at the option of the school district additionally contain substantially the following language:

(Name of school district) expects to receive a school construction grant from the State of Illinois in the amount of $ (state amount) pursuant to the School Construction Law for the school construction project to be financed in part with proceeds of the bonds, based on (i) a grant entitlement from the State Board of Education and (ii) current recognized project costs determined by the Capital Development Board.

No action may be brought by any person in any Court or other tribunal seeking in any way to challenge or contest the validity of an election outcome based upon the wording set forth in any election notice or the ballot after a period of 30 days after the canvass of such election.

(Source: P.A. 91-868, eff. 6-22-00; 92-879, eff. 1-13-03.)

(30 ILCS 350/17) (from Ch. 17, par. 6917)

Sec. 17. Leases and installment contracts.

(a) Interest not debt; debt on leases and installment contracts. Interest on bonds shall not be included in any computation of indebtedness of a governmental unit for the purpose of any statutory provision or limitation. For bonds consisting of leases and installment or financing contracts, (1) that portion of payments made by a governmental unit under the terms of a bond designated as interest in the bond or the ordinance authorizing such bond shall be treated as interest for purposes of this Section (2) where portions of payments due under the terms of a bond have not been designated as interest in the bond or the ordinance authorizing such bond, and all or a portion of such payments is to be used for the payment of principal of and interest on other bonds of the governmental unit or bonds issued by another unit of local government, such as a public building commission, the payments equal to interest due on such corresponding bonds shall be treated as interest for purposes of this Section and (3) where portions of payments due under the terms of a bond have not been designated as interest in the bond or ordinance authorizing such bond and no portion of any such payment is to be used for the payment of principal of and interest on other bonds of the governmental unit or another unit of local government, a portion of each payment due under the terms of such bond shall be treated as interest for purposes of this Section; such portion shall be equal in amount to the interest that would have been paid on a notional obligation of the governmental unit (bearing interest at the highest rate permitted by law for bonds of the governmental unit at the time the bond was issued or, if no such limit existed, 12%) on which the payments of principal and interest were due at the same times and in the same amounts as payments are due under the terms of the bonds. The rule set forth in this Section shall be applicable to all interest no matter when earned or accrued or at what interval paid, and whether or not a bond bears interest which compounds at certain intervals. For purposes of bonds sold at amounts less than 95% of their stated value at maturity, interest for purposes of this Section includes the difference between the amount set forth on the face of the bond as the original principal amount and the bond's stated value at maturity.

This subsection may be made applicable to bonds issued prior to the effective date of this Act by passage of an ordinance to such effect by the governing body of a governmental unit.

(b) Purchase or lease of property. The governing body of each governmental unit may purchase or lease either real or personal property, including investments, investment agreements, or investment services, through agreements that provide that the consideration for the purchase or lease may be paid through installments made at stated intervals for a period of no more than 20 years or another period of time authorized by law, whichever is greater; provided, however, that investments, investment agreements, or investment services purchased in connection with a bond issue may be paid through installments made at stated intervals for a period of time not in excess of the maximum term of such bond issue. Each governmental unit may issue certificates evidencing the indebtedness incurred under the lease or agreement. The governing body may provide for the treasurer, comptroller, finance officer, or other officer of the governing body charged with financial administration to act as counter-party to any such lease or agreement, as nominee lessor or seller. When the lease or agreement is executed by the officer of the governmental unit authorized by the governing body to bind the governmental unit thereon by the execution thereof and is filed with and executed by the nominee lessor or seller, the lease or agreement shall be sufficiently executed so as to permit the governmental unit to issue certificates evidencing the indebtedness incurred under the lease or agreement. The certificates shall be valid whether or not an appropriation with respect thereto is included in any annual or supplemental budget adopted by the governmental unit. From time to time, as the governing body executes contracts for the purpose of acquiring and constructing the services or real or personal property that is a part of the subject of the lease or agreement, including financial, legal, architectural, and engineering services related to the lease or agreement, the governing body shall order the contracts filed with its nominee officer, and that officer shall identify the contracts to the lease or agreement; that identification shall permit the payment of the contract from the proceeds of the certificates; and the nominee officer shall duly apply or cause to be applied proceeds of the certificates to the payment of the contracts. Certificates evidencing the indebtedness incurred under any such lease or agreement may be refunded under Section 11 of this Act, which certificates may be designated "refunding debt certificates" and need not evidence participation in the original lease or agreement, may be issued on any terms set forth in Section 10 of this Act, and shall be payable from the same sources of funds as the certificates refunded. The governing body of each governmental unit may sell, lease, convey, and reacquire either real or personal property, or any interest in real or personal property, upon any terms and conditions and in any manner, as the governing body shall determine, if the governmental unit will lease, acquire by purchase agreement, or otherwise reacquire the property, as authorized by this subsection or any other applicable law.

All indebtedness incurred under this subsection, when aggregated with the existing indebtedness of the governmental unit, may not exceed the debt limits provided by applicable law.

(Source: P.A. 91-493, eff. 8-13-99; 91-868, eff. 6-22-00; 92-879, eff. 1-13-03.)

(30 ILCS 350/17.5)

Sec. 17.5. Bond authorization by referendum. Whenever applicable law provides that the authorization of or the issuance of bonds is subject to either a referendum or backdoor referendum, the approval, once obtained, remains (i) for 5 years after the date of the referendum or (ii) for 3 years after the end of the petition period for a backdoor referendum. This Section applies only to a referendum or a backdoor referendum held after August 13, 1999 the effective date of this amendatory Act of the 91st General Assembly.

(Source: P.A. 91-493, eff. 8-13-99.)

Section 15. The Kaskaskia Regional Port District Act is amended by changing Section 20.2 as follows:

(70 ILCS 1830/20.2)

Sec. 20.2. Authorization to borrow moneys. The District's Board may borrow money from any bank or other financial institution, and may provide appropriate security for that borrowing, if the money is repaid within 3 years one year after the money is borrowed. "Financial institution" means any bank subject to the Illinois Banking Act, any savings and loan association subject to the Illinois Savings and Loan Act of 1985, any savings bank subject to the Savings Bank Act, and any federally chartered commercial bank or savings and loan association organized and operated in this State pursuant to the laws of the United States.

(Source: P.A. 92-389, eff. 1-1-02.)

Section 20. The Tri-City Regional Port District Act is amended by adding Section 7.5 as follows:

(70 ILCS 1860/7.5 new)

Sec. 7.5. Authorization to borrow moneys. The District's Board may borrow money from any bank or other financial institution and may provide appropriate security for that borrowing, if the money is repaid within 3 years after the money is borrowed. "Financial institution" means any bank subject to the Illinois Banking Act, any savings and loan association subject to the Illinois Savings and Loan Act of 1985, any savings bank subject to the Savings Bank Act, and any federally chartered commercial bank or savings and loan association organized and operated in this State pursuant to the laws of the United States.

Section 99. Effective date. This Act takes effect upon becoming law.".