State of Illinois
91st General Assembly

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 1        AN ACT concerning tobacco settlement proceeds.

 2        Be it enacted by the People of  the  State  of  Illinois,
 3    represented in the General Assembly:

 4                     Article 5.  General Provisions

 5        Section  5-1.  Short title.  This Act may be cited as the
 6    Tobacco Settlement Investment Act.

 7        Section 5-5.  Legislative intent.  The  General  Assembly
 8    finds that the most prudent way to manage the proceeds of the
 9    Tobacco  Settlement is to securitize a portion of the State's
10    interest in the Tobacco Settlement to  enable  the  State  to
11    diversify  its  interest in the Settlement, and to invest all
12    the proceeds of the Settlement, including Bond proceeds,  and
13    spend  only  the revenue generated from the investment of the
14    proceeds.

15        Section 5-10.  Definitions.  In this Act:
16        "Authority"  means   the   Tobacco   Settlement   Bonding
17    Authority created under Article 15.
18        "Board"  means  the  Board  of  Directors  of the Tobacco
19    Settlement Bonding Authority.
20        "Bond" means a bond or note  or  any  other  evidence  of
21    obligation for borrowed money deemed appropriate by the Board
22    of Directors of the Tobacco Settlement Bonding Authority.
23        "Public  member"  means  a  person who is not, and is not
24    related to anyone who  is,  an  elected  official,  employee,
25    consultant,  agent,  attorney,  or accountant of the State of
26    Illinois  or  any  political  subdivision  of  the  State  of
27    Illinois.
28        "Tobacco  Settlement"   means   the   Master   Settlement
29    Agreement  entered  in the case of the People of the State of
                            -2-                LRB9108981DJcd
 1    Illinois v. Phillip Morris, et al.  (Circuit  Court  of  Cook
 2    County, No. 96-L13146).
 3        "Tobacco Settlement Recovery Fund" means the special fund
 4    created under the Tobacco Settlement Recovery Fund Act in the
 5    State treasury separate and apart from all other State moneys
 6    into  which the proceeds of the Tobacco Settlement are placed
 7    upon receipt of payments by the State.
 8        "Trust Fund"  means  the  Tobacco  Settlement  Investment
 9    Trust Fund created under Article 10.

10          Article 10.  Tobacco Settlement Investment Trust Fund

11        Section  10-1.   Creation.  There is created in the State
12    treasury the Tobacco  Settlement  Investment  Trust  Fund,  a
13    special  fund  that  shall  be  held  by  the State Treasurer
14    separate and apart from all other State  moneys.   The  State
15    Treasurer  shall  deposit  into  the  Trust  Fund  60% of all
16    payments received into the Tobacco Settlement  Recovery  Fund
17    and  100%  of  the  payments  received  by the State from the
18    Authority under Section 15-1.  The Treasurer may  invest  the
19    moneys  in  the  Trust  Fund  in the same manner, in the same
20    types of investments, and subject  to  the  same  limitations
21    provided  in  the Illinois Pension Code for the investment of
22    pension funds other than those established under Article 3 or
23    4 of the Code.  All earnings on the investment of  moneys  in
24    the Trust Fund shall be credited to the Trust Fund.

25        Section  10-5.  Transfer of moneys.  The General Assembly
26    shall annually direct the State Treasurer  to  transfer  from
27    the Trust Fund an amount of money that is equal to the annual
28    investment  income earned by the Trust Fund for the preceding
29    year  less  the  expenses  incurred  by  the  Treasurer   for
30    administering the Trust Fund.  The total expenses incurred by
31    the  Treasurer  shall  not  exceed  $200,000 through the year
                            -3-                LRB9108981DJcd
 1    2001.  In the  year  2002  and  every  year  thereafter,  the
 2    expense  limit  shall be adjusted based on the Consumer Price
 3    Index for the North Central Region as published by the United
 4    States Department of Labor, Bureau of  Labor  Statistics  for
 5    the immediately preceding calendar year.

 6        Section  10-10.   Investment  policy. The Treasurer shall
 7    develop, publish, and implement an investment policy covering
 8    the investment of the moneys in the Trust Fund.   The  policy
 9    shall  be  published  at least once each year in at least one
10    newspaper of general  circulation  in  both  Springfield  and
11    Chicago.   The  Treasurer  shall  publish  in  a newspaper of
12    general circulation  in  both  Chicago  and  Springfield  any
13    changes  to  the  previously  published  investment policy at
14    least 30 calendar days before implementing the changes.   Any
15    such  investment  policy  adopted  by  the Treasurer shall be
16    reviewed and updated if necessary within  90  days  following
17    the date that a new State Treasurer takes office.

18            Article 15.  Tobacco Settlement Bonding Authority

19        Section  15-1.   Creation.   There is created the Tobacco
20    Settlement Bonding Authority for the purpose of  securitizing
21    a  portion of the State's interest in the Tobacco Settlement.
22    The State Treasurer shall transfer to the  Authority  40%  of
23    all  payments  received  into the Tobacco Settlement Recovery
24    Fund.  The Authority shall pay  its  administrative  expenses
25    and  debt service expenses from the payments that it receives
26    from the Tobacco Settlement Recovery Fund, provided that  its
27    administrative   expenses   are  approved  by  the  Board  of
28    Directors and do not exceed 0.5% of the payments  transferred
29    to  the  Authority.  The Authority shall, by April 14 of each
30    year,  after  payment  of  debt  service  and  administrative
31    expenses, remit to the State Treasurer for deposit  into  the
                            -4-                LRB9108981DJcd
 1    Trust  Fund  the  remainder  of  the  proceeds of the Tobacco
 2    Settlement that it has received from the  Tobacco  Settlement
 3    Recovery  Fund,  including  investment  earnings and any bond
 4    proceeds including earnings on the  investment  of  the  bond
 5    proceeds  prior  to  remittance  to the Treasurer.  The State
 6    Treasurer shall invest the payments that are not  needed  for
 7    debt  service  and  administrative expenses, on behalf of the
 8    Authority  in  interest-bearing   accounts   prior   to   the
 9    remittance  of  the moneys to the State Treasurer for deposit
10    into the Trust Fund.

11        Section 15-5.  Board of Directors.  The State  Treasurer,
12    or  his  or  her designee, shall serve as the Chairman of the
13    Board.  The Governor and  the  Attorney  General  shall  each
14    appoint  one member of the Board for an initial term expiring
15    July 1, 2001. The President of the Senate and the Speaker  of
16    the  House  of  Representatives  shall  each appoint a public
17    member to the Board for an  initial  term  expiring  July  1,
18    2002.   The  Minority  Leader  of the Senate and the Minority
19    Leader of the House of Representatives shall each  appoint  a
20    public  member to the Board for an initial term expiring July
21    1, 2003.  At the expiration of the term of any member, or  in
22    the  case of a vacancy, a successor shall be appointed by the
23    elected official, or the successor of the  elected  official,
24    who   made   the  appointment  for  the  initial  term.   All
25    successors of Board members shall hold office for a term of 3
26    years from the first day of July of the year  in  which  they
27    are  appointed,  except  in  case of an appointment to fill a
28    vacancy.  Vacancies for members shall be filled in  the  same
29    manner  as  original  appointments  for  the  balance  of the
30    unexpired term.  In case of a vacancy during  the  recess  of
31    the   Senate,   the   Governor,  the  Attorney  General,  the
32    Comptroller, the Speaker of the House or the Senate President
33    shall make a temporary appointment until the next meeting  of
                            -5-                LRB9108981DJcd
 1    the Senate, when he/she shall appoint some person to fill the
 2    vacancy.   Any  person  so appointed whom the Senate confirms
 3    shall hold office during the remainder of the term and  until
 4    his  successor  is  appointed  and  qualified.   The  initial
 5    appointments  by  the  Governor,  the  Attorney  General, the
 6    Comptroller, the Speaker of the House or the Senate President
 7    shall be effective immediately, but shall remain in effect no
 8    longer than 30 calendar days after commencement of  the  next
 9    Senate  session  unless  the  appointee  is  confirmed by the
10    Senate within that time.  Nothing  shall  preclude  a  member
11    from serving consecutive terms.

12        Section  15-10.  Actions of members.  Four members of the
13    Authority constitute a quorum for the purpose  of  conducting
14    business.    Actions   of  the  Authority  must  receive  the
15    affirmative vote of at least 4 members.  The Authority  shall
16    determine  the times and places of its meetings.  The members
17    of the Authority shall serve without compensation for service
18    as a member but are entitled to reimbursement  of  reasonable
19    expenses  incurred  in  the  performance  of  their  official
20    duties.

21        Section  15-15.  Executive Director.  The Authority shall
22    appoint an Executive Director, who  is  the  chief  executive
23    officer  of  the  Authority.  In addition to any other duties
24    set forth in this Act, the Executive Director shall:
25             (1) Direct and supervise the administrative  affairs
26        and  activities  of the Authority, in accordance with its
27        rules, regulations, and policies.
28             (2) Attend meetings of the Authority.
29             (3)  Keep  minutes  of  all   proceedings   of   the
30        Authority.
31             (4)  Approve all accounts for salaries and all other
32        allowable expenses of the Authority and its employees and
                            -6-                LRB9108981DJcd
 1        consultants and approve all expenses  incidental  to  the
 2        operation of the Authority.
 3             (5)  Perform  any  other  duty  that  the  Authority
 4        requires for carrying out the provisions of this Act.

 5        Section  15-20.   Powers.   In addition to the powers set
 6    forth elsewhere in this Act, the Authority may:
 7             (1) Adopt and alter an official seal.
 8             (2) Sue and be sued and plead and be impleaded,  all
 9        in  its own name, and agree to binding arbitration of any
10        dispute to which it is a party.
11             (3) Adopt bylaws, rules, and  regulations  to  carry
12        out the provisions of this Article.
13             (4)  Maintain  an office or offices at such place as
14        the Authority may designate.
15             (5)  Employ,  either   as   regular   employees   or
16        independent    contractors,   consultants,   accountants,
17        attorneys,  financial   experts,   managers   and   other
18        professional  personnel,  and such other personnel as may
19        be necessary in the judgment of the  Authority,  and  fix
20        their compensation.
21             (6) Enter into contracts of any kind.
22             (7) Issue bonds under Section 15-25.
23             (8)   Exercise  all  the  corporate  powers  granted
24        Illinois corporations under the Business Corporation  Act
25        of   1983,   except   to   the  extent  that  powers  are
26        inconsistent with those of a body politic  and  corporate
27        of the State.
28             (9)  Do  all things necessary or convenient to carry
29        out the powers granted by this Act.

30        Section 15-25.  Bonding.
31        (a) The Authority shall issue bonds that  are  backed  by
32    the  40%  of  the proceeds of the Tobacco Settlement that has
                            -7-                LRB9108981DJcd
 1    been committed by the State of Illinois for transfer  to  the
 2    Authority  from  the  Tobacco  Settlement Recovery Fund.  The
 3    Authority may issue bonds, establish reserves,  and  pay  the
 4    interest  and  costs of issuance.  Bonds may be issued in one
 5    or more series and shall be payable solely and secured solely
 6    by the portion of the tobacco settlement that  the  State  of
 7    Illinois has committed to transfer to the Authority.
 8        (b)  Bonds  may  be  authorized  by  a  resolution of the
 9    Authority and may be secured by  a  trust  agreement  by  and
10    between  the  Authority  and a corporate trustee or trustees,
11    which may be any trust company or bank having the powers of a
12    trust company within or without the State.  Bonds may:
13             (1) Mature at a time or times not exceeding 40 years
14        from the effective date of this Act.
15             (2)  Notwithstanding  the  provision  of  the   Bond
16        Authorization  Act  or  any  other provision of law, bear
17        interest  at  any  fixed  or  variable  rate   or   rates
18        determined  by  the  method provided in the resolution or
19        trust agreement.
20             (3)  Be  payable  at  a  time  or  times,   in   the
21        denominations  and  form,  either coupon or registered or
22        both, and carry the registration  and  privileges  as  to
23        exchange, transfer, or conversion and for the replacement
24        of  mutilated, lost, or destroyed bonds as the resolution
25        or trust agreement may provide.
26             (4) Be payable in lawful money of the United  States
27        at a designated place.
28             (5)  Be  subject  to the terms of purchase, payment,
29        redemption, refunding, or refinancing that the resolution
30        or trust agreement provides.
31             (6)  Be  executed  by  the   manual   or   facsimile
32        signatures of the officers of the Authority designated by
33        the   Authority,  which  signatures  shall  be  valid  at
34        delivery even for one who has ceased to hold office.
                            -8-                LRB9108981DJcd
 1             (7) Be  sold  in  the  manner  and  upon  the  terms
 2        determined by the Authority.
 3        (c)   Any  resolution  or  trust  agreement  may  contain
 4    provisions that shall be a part  of  the  contract  with  the
 5    holders of the Bonds as to:
 6             (1)  Limitations  on  the issue of additional bonds,
 7        the terms upon which additional bonds may be  issued  and
 8        secured,  and  the  terms upon which additional bonds may
 9        rank on a parity with, or be subordinate or superior  to,
10        other bonds.
11             (2)  The refunding, advance refunding or refinancing
12        of outstanding bonds.
13             (3) The procedure, if any, by which the terms of any
14        contract with holders of the  bonds  may  be  altered  or
15        amended,  the  number  of  bond holders that must consent
16        thereto, and the manner in which consent shall be given.
17             (4) Defining  the  acts  or  omissions  which  shall
18        constitute  a  default  in the duties of the Authority to
19        holders of bonds and providing the rights or remedies  of
20        such  holders in the event of a default which may include
21        provisions restricting  individual  right  of  action  by
22        holders of the bonds.
23             (5) Any other matter relating to the bonds which the
24        Authority determines appropriate.
25        (d)  In  connection  with  the issuance of its bonds, the
26    Authority may enter into arrangements to  provide  additional
27    security  and  liquidity  for  the bonds.  These may include,
28    without limitation, bond insurance, letters of credit,  lines
29    of  credit  by which the Authority may borrow funds to pay or
30    redeem its bonds, and purchase  or  remarketing  arrangements
31    for  assuring the ability of holders of the Authority's bonds
32    to sell or to have redeemed their bonds.
33        (e) A pledge by the Authority of the 40% of the  proceeds
34    of  the  Tobacco  Settlement  that  the State of Illinois has
                            -9-                LRB9108981DJcd
 1    committed to transfer to the Authority  as  security  for  an
 2    issue  of  bonds  or  for  the performance of its obligations
 3    under any management agreement shall  be  valid  and  binding
 4    from  the  time  when the pledge is made.  The portion of the
 5    Tobacco Settlement that the State of Illinois  has  committed
 6    to  transfer  to  the  Authority pledged shall immediately be
 7    subject to the  lien  of  the  pledge  without  any  physical
 8    delivery  or further act, and the lien of any pledge shall be
 9    valid and binding against any person having any claim of  any
10    kind  in  tort, contract, or otherwise against the Authority,
11    irrespective  of  whether  the  person  has   notice.      No
12    resolution,   trust   agreement,   management   agreement  or
13    financing  statement,  continuation   statement,   or   other
14    instrument  adopted  or entered into by the Authority need be
15    filed or recorded in any public record other than the records
16    of the Authority in order to perfect the lien  against  third
17    persons, regardless of any contrary provision of law.
18        (f)  The  Authority  may  issue  bonds to refund, advance
19    refund, or refinance  any  of  its  bonds  then  outstanding,
20    including  the  payment  of  any  redemption  premium and any
21    interest  accrued  or  to  accrue  to  the  earliest  or  any
22    subsequent date of redemption, purchase, or maturity  of  the
23    bonds,  provided that the Authority shall not issue any bonds
24    that mature later than 50 years from the  effective  date  of
25    this Act.  Refunding or advance refunding bonds may be issued
26    for the public purposes of realizing savings in the effective
27    costs   of   debt   service,   directly  or  through  a  debt
28    restructuring, for alleviating impending or  actual  default,
29    or  for  paying principal of, redemption premium, if any, and
30    interest  on  bonds  as  they  mature  or  are   subject   to
31    redemption,  and  may  be  issued in one or more series in an
32    amount in excess of that of the bonds to be refunded.
33        (g) At no time shall the total outstanding bonds  of  the
34    Authority  issued  under  this Section exceed $1,000,000,000.
                            -10-               LRB9108981DJcd
 1    Bonds which are being paid or retired by  issuance,  sale  or
 2    delivery  of bonds, and bonds for which sufficient funds have
 3    been deposited with the paying agent or  trustee  to  provide
 4    for  payment  of  principal  and  interest  thereon,  and any
 5    redemption  premium,   as   provided   in   the   authorizing
 6    resolution,  shall  not  be  considered  outstanding  for the
 7    purposes of this subsection.
 8        (h) The bonds of the Authority shall not be  indebtedness
 9    of  the  State  or of any political subdivision of the State.
10    The bonds of the Authority are not general obligations of the
11    State of Illinois and are not secured by a pledge of the full
12    faith and credit of the State of Illinois, and the holders of
13    bonds of the Authority may not require the levy or imposition
14    by the State of any taxes or the application of  other  State
15    revenues  or  funds to the payment of bonds of the Authority.
16    No member of the Authority or any person executing the  bonds
17    shall  be  liable  personally  on the bonds or subject to any
18    personal liability by reason of the issuance of the bonds.
19        (i) The State of Illinois pledges to and agrees with  the
20    holders of the bonds of the Authority issued pursuant to this
21    Act  that  the  State  will not limit or alter the rights and
22    powers vested in the Authority by this Act so  as  to  impair
23    the  terms  of  any contract made by the Authority with those
24    holders or in any way impair the rights and remedies of those
25    holders until the bonds, together with interest thereon, with
26    interest on any unpaid  installments  of  interest,  and  all
27    costs   and   expenses  in  connection  with  any  action  or
28    proceedings by or on behalf of those holders, are  fully  met
29    and discharged.  In addition, the State pledges to and agrees
30    with  the  holders  of  the  bonds  of  the  Authority issued
31    pursuant to this Act that the State will not limit  or  alter
32    the  basis  on  which  the 40% of the proceeds of the Tobacco
33    Settlement that  the  State  of  Illinois  has  committed  to
34    transfer to the Authority are to be allocated, deposited, and
                            -11-               LRB9108981DJcd
 1    paid  to the Authority as provided in this Act, or the use of
 2    those funds, so as to impair the terms of any such  contract.
 3    The  Authority  is  authorized  to  include these pledges and
 4    agreements of the State in any contract with the  holders  of
 5    bonds issued pursuant to this Section.

 6        Section  15-30.   Records  and  reporting.  The Executive
 7    Director shall keep  a  record  of  the  proceedings  of  the
 8    Authority.   The  State  Treasurer  shall be custodian of all
 9    Authority funds and shall be bonded in the amount  the  other
10    members  of  the  Authority  may designate.  The accounts and
11    books of the Authority shall be set up and  maintained  in  a
12    manner  approved  by  the  Auditor General, and the Authority
13    shall file with the Auditor General a certified annual report
14    within 120 days after the close  of  its  fiscal  year.   The
15    Authority shall also file with the Governor, the Secretary of
16    the  Senate,  the  Clerk of the House of Representatives, and
17    the Illinois Economic and Fiscal Commission, by  March  1  of
18    each  year,  a written report covering its activities for the
19    previous fiscal year.  After being so filed, the report shall
20    be a public record and open for inspection at the offices  of
21    the Authority during normal business hours.

22        Section 15-35.  Ethics; reimbursement of expenses.
23        (a)  Members  and  employees  of  the  Authority shall be
24    required to observe  the  same  ethical  standards  as  State
25    employees are required by law to observe.
26        (b)  Reimbursement  of  expenses of members and employees
27    of the Authority shall not exceed the rates of  reimbursement
28    established  by  the  Governor's  Travel  Control  Board  for
29    employees of the State of Illinois.

30        Section  15-40.   Dissolution.   The  Tobacco  Settlement
31    Bonding  Authority  shall  be  dissolved  40  years after the
                            -12-               LRB9108981DJcd
 1    effective date of this Act.

 2                 Article 90.  Amendatory Provisions

 3        Section 90-5.  The State Finance Act is amended by adding
 4    Section 5.540 as follows:

 5        (30 ILCS 105/5.540 new)
 6        Sec. 5.540. The Tobacco Settlement Investment Trust Fund.

 7                     Article 99.  Effective date

 8        Section 99-5.  Effective date.   This  Act  takes  effect
 9    upon becoming law.

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