Bill Text: IL SB1307 | 2015-2016 | 99th General Assembly | Introduced

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Bill Title: Amends the Bond Authorization Act. Prohibits school districts from entering into interest rate swaps.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2015-04-24 - Rule 3-9(a) / Re-referred to Assignments [SB1307 Detail]

Download: Illinois-2015-SB1307-Introduced.html

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99TH GENERAL ASSEMBLY State of Illinois 2015 and 2016 SB1307 Introduced 2/18/2015, by Sen. Ira I. Silverstein SYNOPSIS AS INTRODUCED:
30 ILCS 305/7 from Ch. 17, par. 6607
Amends the Bond Authorization Act. Prohibits school districts from entering into interest rate swaps.
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FISCAL NOTE ACT MAY APPLY
A BILL FOR
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AN ACT concerning education.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Bond Authorization Act is amended by
changing Section 7 as follows:
(30 ILCS 305/7) (from Ch. 17, par. 6607)
Sec. 7. Interest rate swaps. For purposes of this Section,
terms are as defined in the Local Government Debt Reform Act,
except that "governmental unit" shall exclude a school
district. With respect to all or part of any currently
outstanding or proposed issue of its bonds, a governmental unit
whose aggregate principal amount of bonds outstanding or
proposed exceeds $10,000,000 may, without prior appropriation,
enter into agreements or contracts with any necessary or
appropriate person (the counter party) that will have the
benefit of providing to the governmental unit: (i) an interest
rate basis, cash flow basis, or other basis different from that
provided in the bonds for the payment of interest or (ii) with
respect to a future delivery of bonds, one or more of a
guaranteed interest rate, interest rate basis, cash flow basis,
or purchase price. Such agreements or contracts include without
limitation agreements or contracts commonly known as interest
rate swap, collar, cap, or derivative agreements, forward

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payment conversion agreements, interest rate locks, forward
bond purchase agreements, bond warrant agreements, or bond
purchase option agreements and also include agreements or
contracts providing for payments based on levels of or changes
in interest rates, including a change in an interest rate
index, to exchange cash flows or a series of payments, or to
hedge payment, rate spread, or similar exposure (such
agreements or contracts, collectively, being "swaps"). Without
limiting other permitted terms which may be included in swaps,
the following provisions may or, if hereinafter so required,
shall apply:
(a) Payments made pursuant to a swap (the swap
payments) which are to be made by the governmental unit may
be paid by such governmental unit, without limitation, from
proceeds of the bonds, including bonds for future delivery,
identified to such swaps, or from bonds issued to refund
such bonds, or from whatever enterprise revenues or revenue
source, including taxes pledged or to be pledged to the
payment of such bonds, which enterprise revenues or revenue
source may be increased to make such swap payments, and
swap payments to be received by the governmental unit,
which may be periodic, up-front, or on termination, shall
be used solely for and limited to any lawful corporate
purpose of the governmental unit.
(b) Up-front or periodic net swap payments to be paid
by the governmental unit under the swaps (the standard swap

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payments) shall be treated as interest for the purpose of
calculating any interest rate limit applicable to the
bonds, provided, however, that for purposes of making such
standard swap payments only (and not with respect to the
bonds so issued or to be issued), the bonds shall be deemed
not exempt from income taxation under the Internal Revenue
Code for purposes of State law, as contained in this Bond
Authorization Act, relating to the permissible rate of
interest to be borne thereon, and, provided further, that
if payments of any standard swap payments are to be made by
the governmental unit and the counterparty on different
dates, the net effect of such payments for purposes of such
interest rate limitation shall be determined using a true
interest cost (yield) calculation.
(c) Any such agreement or contract and the swap
payments to be made thereunder shall not be taken into
account with respect to any debt limit applicable to the
governmental unit.
(d) Swap payments upon the termination of any swap may
be paid to a counterparty upon any terms customary for
swaps, including, without limitation, provisions using
market quotations available for giving the net benefit of
the swap at the time of termination to the persons entitled
thereto (viz., the governmental unit or the counterparty)
or reasonable fair market value determinations of the value
at termination made in good faith by either such persons.

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(e) The term of the swap shall not exceed the term of
any currently outstanding bonds identified to such swap or,
for bonds to be delivered, not greater than 5 years plus
the term of years proposed for such bonds to be delivered,
but in no event longer than 40 years, plus, in each case,
any time period necessary to cure any defaults under such
swap.
(f) The choice of law for enforcement of swaps as to
any counterparty may be made for any state of these United
States, but the law which shall apply to the obligations of
the governmental unit shall be the law of the State of
Illinois, and jurisdiction to enforce the swaps as against
the governmental units shall be exclusively in the courts
of the State of Illinois or in the applicable federal court
having jurisdiction and located within the State of
Illinois.
(g) Governmental units, in entering into swaps, may not
waive any sovereign immunities from time to time available
under the laws of the State of Illinois as to jurisdiction,
procedures, and remedies, but such swaps shall otherwise be
fully enforceable as valid and binding contracts as and to
the extent provided herein and by other applicable law.
A school district is prohibited from entering into an
agreement or contract under this Section.
(Source: P.A. 93-9, eff. 6-3-03.)