Bill Text: IL HB2718 | 2017-2018 | 100th General Assembly | Introduced

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Bill Title: 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.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2019-01-08 - Session Sine Die [HB2718 Detail]

Download: Illinois-2017-HB2718-Introduced.html

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100TH GENERAL ASSEMBLY State of Illinois 2017 and 2018 HB2718 Introduced , by Rep. Emanuel Chris Welch SYNOPSIS AS INTRODUCED:
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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
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AN ACT concerning State government.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Findings. Beginning in 1998, the State of
Illinois and its agencies began entering into interest rate
swap agreements with various counterparties, including Bank of
America, JP Morgan Chase, Goldman Sachs, Wells Fargo,
Citigroup, Bank of New York Mellon, Deutsche Bank, Loop
Financial, Morgan Stanley, and the American International
Group in the connection with the issuance of bonds and
certificates.
It is estimated that the State has made more than
$700,000,000 in net payments to these counterparties as of the
end of fiscal year 2016, and continues to pay more than
$70,000,000 a year, resulting in an additional $800,000,000 in
net payments projected over the remaining life of these deals,
from fiscal years 2017 through 2033.
The swap agreements do not serve their stated original
purpose to mitigate interest rate risks largely due to the 2008
financial crash and the resulting sharp decline in variable
interest rates.
Section 5. The Illinois Housing Development Act is amended
by changing Section 16 as follows:

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

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exempt from income taxation under the Internal Revenue Code of
1954, as amended, such notes or bonds shall bear interest at a
rate or rates as shall be determined by the members of the
Authority by the resolution authorizing issuance of the bonds
and notes. Prime commercial rate means such prime rate as from
time to time is publicly announced by the largest commercial
banking institution located in this State, measured in terms of
total assets. A contract is made with respect to notes or bonds
when the Authority is contractually obligated to issue and sell
such notes or bonds to a purchaser who is contractually
obligated to purchase them. The notes and bonds shall be in
such denominations, be in such form, either coupon or
registered, carry such registration privileges, be executed in
such manner, be payable in such medium of payment, at such
place or places and be subject to such terms of redemption as
such resolution or resolutions may provide. The notes and bonds
of the Authority may be sold by the Authority, at public or
private sale, at such price or prices as the Authority shall
determine.
In lieu of establishing the rate at which notes or bonds of
the Authority shall bear interest and the price at which the
notes or bonds shall be sold, the resolution authorizing their
issuance may set maximum and minimum prices, interest rates and
annual interest cost to the Authority for that issue of notes
or bonds (computed as the resolution shall provide), such that
the difference between the maximum and minimum annual interest

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

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

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

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notes or bonds which are exempt from income taxation under the
Internal Revenue Code of 1954, as amended, or which are not
exempt.
The Director of the Illinois Housing Development Authority
must 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. If these agreements have resulted in losses
to the Authority, the Director shall make all necessary efforts
to recover those moneys. To achieve these goals, the Director
shall:
(1) Authorize agency administrators to negotiate and
terminate the Authority's interest rate swap agreements
with banks to the extent that the Authority is able to do
so at no cost and not later than the end of the next fiscal
year after a finding of losses to Illinois taxpayers is
made. If a respective bank refuses to terminate without
fees or penalty by that date, then it will be excluded from
any future business with the Authority during the life of
the swap agreement, and the Authority should continue to
use all good faith efforts until said bank drops the
termination fees and penalty.
(2) Not enter into any blanket release of legal
liabilities in relation to any interest rate swap
agreement.
(3) Investigate and determine the amount of the moneys

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

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

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

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

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

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provisions will apply during such times as Variable Rate Bonds
of any series are held by a person providing credit or
liquidity enhancement arrangements for such Bonds as
authorized in subsection (b) of this Section. The Bond Sale
Order may also provide for such variable interest rates to be
established pursuant to a process generally known as an auction
rate process and may 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.
(b) In connection with the issuance of any series of Bonds,
the State may enter into arrangements to provide additional
security and liquidity for such Bonds, including, without
limitation, bond or interest rate insurance or letters of
credit, lines of credit, bond purchase contracts, or other
arrangements whereby funds are made available to retire or
purchase Bonds, thereby assuring the ability of owners of the
Bonds to sell or redeem their Bonds. The State may enter into
contracts and may agree to pay fees to persons providing such
arrangements, but only under circumstances where the Director
of the Governor's Office of Management and Budget certifies
that he or she reasonably expects the total interest paid or to
be paid on the Bonds, together with the fees for the
arrangements (being treated as if interest), would not, taken
together, cause the Bonds to bear interest, calculated to their
stated maturity, at a rate that is no more than two-thirds in

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excess of the rate that the Bonds would bear in the absence of
such arrangements.
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. The State
may, with respect to Bonds issued or anticipated to be issued,
participate in and enter into arrangements with respect to
interest rate protection or exchange agreements, guarantees,
or financial futures contracts for the purpose of limiting,
reducing, or managing interest rate exposure. The authority
granted under this paragraph, however, shall not increase the
principal amount of Bonds authorized to be issued by law. The
arrangements may be executed and delivered by the Director of
the Governor's Office of Management and Budget on behalf of the
State. Net payments for such arrangements shall constitute
interest on the Bonds and shall be paid from the General
Obligation Bond Retirement and Interest Fund. The Director of
the Governor's Office of Management and Budget shall at least
annually certify to the Governor and the State Comptroller his
or her estimate of the amounts of such net payments to be
included in the calculation of interest required to be paid by
the State.
(c) Prior to the issuance of any Variable Rate Bonds
pursuant to subsection (a), the Director of the Governor's

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Office of Management and Budget shall adopt an interest rate
risk management policy providing that the amount of the State's
variable rate exposure with respect to Bonds shall not exceed
10% 20%. This policy shall remain in effect while any Bonds are
outstanding and the issuance of Bonds shall be subject to the
terms of such policy. The terms of this policy may be amended
from time to time by the Director of the Governor's Office of
Management and Budget but in no event shall any amendment cause
the permitted level of the State's variable rate exposure with
respect to Bonds to exceed 10% 20%.
(d) "Build America Bonds" in this Section means Bonds
authorized by Section 54AA of the Internal Revenue Code of
1986, as amended ("Internal Revenue Code"), and bonds issued
from time to time to refund or continue to refund "Build
America Bonds".
(e) Notwithstanding any other provision of this Section,
Qualified School Construction Bonds shall be issued and sold
from time to time, in one or more series, in such amounts and
at such prices as may be directed by the Governor, upon
recommendation by the Director of the Governor's Office of
Management and Budget. Qualified School Construction Bonds
shall be in such form (either coupon, registered or book
entry), in such denominations, payable within 25 years from
their date, subject to such terms of redemption with or without
premium, and if the Qualified School Construction Bonds are
issued with a supplemental coupon, bear interest payable at

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

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

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

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

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

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

HB2718 - 22 - LRB100 10499 KTG 20713 b
the payment of interest shall include the amounts certified by
the Director of the Governor's Office of Management and Budget
under subsection (b) of Section 9 of this Act.
If for any reason there are insufficient funds in either
the General Revenue Fund or the Road Fund to make transfers to
the General Obligation Bond Retirement and Interest Fund as
required by Section 15 of this Act, or if for any reason the
General Assembly fails to make appropriations sufficient to pay
the principal of, interest on, and premium, if any, on the
Bonds, as the same by their terms shall become due, this Act
shall constitute an irrevocable and continuing appropriation
of all amounts necessary for that purpose, and the irrevocable
and continuing authority for and direction to the State
Treasurer and the Comptroller to make the necessary transfers,
as directed by the Governor, out of and disbursements from the
revenues and funds of the State.
(d) If, because of insufficient funds in either the General
Revenue Fund or the Road Fund, monies have been transferred to
the General Obligation Bond Retirement and Interest Fund, as
required by subsection (c) of this Section, this Act shall
constitute the irrevocable and continuing authority for and
direction to the State Treasurer and Comptroller to reimburse
these funds of the State from the General Revenue Fund or the
Road Fund, as appropriate, by transferring, at such times and
in such amounts, as directed by the Governor, an amount to
these funds equal to that transferred from them.

HB2718 - 23 - LRB100 10499 KTG 20713 b
(Source: P.A. 96-828, eff. 12-2-09.)
(30 ILCS 330/15.1 new)
Sec. 15.1. Derivative deal investigations. The Director of
the Governor's Office of Management and Budget must 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. If these
agreements have resulted in losses to the State, the Governor's
Office of Management and Budget shall make all necessary
efforts to recover those moneys. To achieve these goals, the
State shall:
(1) Authorize agency administrators to negotiate and
terminate the State's interest rate swap agreements with
banks to the extent that the State is able to do so at no
cost and not later than the end of the next fiscal year
after a finding of losses to Illinois taxpayers is made. If
a respective bank refuses to terminate without fees or
penalty by that date, then it will be excluded from any
future business with the State of Illinois during the life
of the swap agreement, and the State should continue to use
all good faith efforts until said bank drops the
termination fees and penalty.
(2) Not enter into any blanket release of legal
liabilities in relation to any interest rate swap
agreement.

HB2718 - 24 - LRB100 10499 KTG 20713 b
(3) Investigate and determine the amount of the moneys
lost by the State of Illinois due to alleged illegal or
unethical acts by financial institutions, including but
not limited to manipulating the London Interbank Offered
Rate (LIBOR), misrepresenting the risks associated with
complex financial deals like interest rate swaps and
auction rate securities, mispricing municipal derivatives,
and rigging bids on competitively bid contracts.
(A) The investigation shall examine all successful
or pending legal actions taken by other governmental
entities (including both issuers of debt and
enforcement authorities) in the United States to
recover money from such practices. In each case if the
investigation finds no basis for action under a similar
legal theory, the report of the investigation shall set
forth specific reasons why action under the legal
theory is not feasible.
(B) The investigation shall be completed no later
than 6 months after the effective date of this
amendatory Act of the 100th General Assembly. The
Governor shall request the Attorney General to
evaluate and pursue all legal remedies.
Section 15. The State University Certificates of
Participation Act is amended by adding Sections 17 and 22 as
follows:

HB2718 - 25 - LRB100 10499 KTG 20713 b
(110 ILCS 73/17 new)
Sec. 17. Derivative deal investigations. The Board of
Trustees of a State University must 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. If these
agreements have resulted in losses to the State University, the
Board shall make all necessary efforts to recover those moneys.
To achieve these goals, the Board shall:
(1) Authorize agency administrators to negotiate and
terminate the State University's interest rate swap
agreements with banks to the extent that the State
University is able to do so at no cost and not later than
the end of the next fiscal year after a finding of losses
to Illinois taxpayers is made. If a respective bank refuses
to terminate without fees or penalty by that date, then it
will be excluded from any future business with the State
University during the life of the swap agreement, and the
State University should continue to use all good faith
efforts until said bank drops the termination fees and
penalty.
(2) Not enter into any blanket release of legal
liabilities in relation to any interest rate swap
agreement.
(3) Investigate and determine the amount of the moneys

HB2718 - 26 - LRB100 10499 KTG 20713 b
lost by the State University due to alleged illegal or
unethical acts by financial institutions, including, but
not limited to, manipulating the London Interbank Offered
Rate (LIBOR), misrepresenting the risks associated with
complex financial deals like interest rate swaps and
auction rate securities, mispricing municipal derivatives,
and rigging bids on competitively bid contracts.
(A) The investigation shall examine all successful
or pending legal actions taken by other governmental
entities (including both issuers of debt and
enforcement authorities) in the United States to
recover money from such practices. In each case if the
investigation finds no basis for action under a similar
legal theory, the report of the investigation shall set
forth specific reasons why action under the legal
theory is not feasible.
(B) The investigation shall be completed no later
than 6 months after the effective date of this
amendatory Act of the 100th General Assembly. The Board
shall request the Attorney General to evaluate and
pursue all legal remedies.
(110 ILCS 73/22 new)
Sec. 22. Derivative deal investigations. The Board of
Trustees of the University of Illinois must oversee an annual
evaluation of derivative deals, as set forth in Section 5.2 of

HB2718 - 27 - LRB100 10499 KTG 20713 b
the University of Illinois Revenue Bond Financing Act for
Auxiliary Facilities.
Section 20. The University of Illinois Revenue Bond
Financing Act for Auxiliary Facilities is amended by adding
Section 5.2 as follows:
(110 ILCS 405/5.2 new)
Sec. 5.2. Derivative deal investigations. The Board of
Trustees of the University of Illinois must 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. If these
agreements have resulted in losses to the University of
Illinois, the Board shall make all necessary efforts to recover
those moneys. To achieve these goals, the Board shall:
(1) Authorize agency administrators to negotiate and
terminate the University of Illinois' interest rate swap
agreements with banks to the extent that the University of
Illinois is able to do so at no cost and not later than the
end of the next fiscal year after a finding of losses to
Illinois taxpayers is made. If a respective bank refuses to
terminate without fees or penalty by that date, then it
will be excluded from any future business with the
University of Illinois during the life of the swap
agreement, and the University of Illinois should continue

HB2718 - 28 - LRB100 10499 KTG 20713 b
to use all good faith efforts until said bank drops the
termination fees and penalty.
(2) Not enter into any blanket release of legal
liabilities in relation to any interest rate swap
agreement.
(3) Investigate and determine the amount of the moneys
lost by the University of Illinois due to alleged illegal
or unethical acts by financial institutions, including,
but not limited to, manipulating the London Interbank
Offered Rate (LIBOR), misrepresenting the risks associated
with complex financial deals like interest rate swaps and
auction rate securities, mispricing municipal derivatives,
and rigging bids on competitively bid contracts.
(A) The investigation shall examine all successful
or pending legal actions taken by other governmental
entities (including both issuers of debt and
enforcement authorities) in the United States to
recover money from such practices. In each case if the
investigation finds no basis for action under a similar
legal theory, the report of the investigation shall set
forth specific reasons why action under the legal
theory is not feasible.
(B) The investigation shall be completed no later
than 6 months after the effective date of this
amendatory Act of the 100th General Assembly. The Board
shall request the Attorney General to evaluate and

HB2718 - 29 - LRB100 10499 KTG 20713 b
pursue all legal remedies.
Section 25. The Toll Highway Act is amended by changing
Section 17 as follows:
(605 ILCS 10/17) (from Ch. 121, par. 100-17)
Sec. 17. (a) The Authority may from time to time issue
bonds for any lawful purpose including, without limitation, the
costs of issuance thereof and all such bonds or other
obligations of the Authority issued pursuant to this Act shall
be and are hereby declared to be negotiable for all purposes
notwithstanding their payment from a limited source and without
regard to any other law or laws.
(b) The bonds of every issue shall be payable solely out of
revenues of the Authority, accumulated reserves or sinking
funds, bond proceeds, proceeds of refunding bonds, or
investment earnings as the Authority shall specify in a bond
resolution.
(c) The bonds may be issued as serial bonds or as term
bonds, or the Authority, in its discretion, may issue bonds of
both types. The bonds shall be authorized by a bond resolution
of the Authority, may be issued in one or more series and shall
bear such date or dates, mature at such time or times not
exceeding 25 years from their respective date or dates of
issue, bear interest at such rate or rates, fixed or variable,
without regard to any limit contained in any other statute or

HB2718 - 30 - LRB100 10499 KTG 20713 b
law of the State of Illinois, be payable as to principal and
interest at such time or times, be in such denominations, be in
such form, either coupon or fully registered, carry such
registration and conversion privileges, be payable in lawful
money of the United States of America at such places, be
subject to such terms of redemption and may contain such other
terms and provisions, as such bond resolution or resolutions
may provide. The bonds shall be executed by the manual or
facsimile signatures of the Chairman and the Secretary. In case
any of the officers whose signature appears on the bonds or
coupons, if any, shall cease to be an officer before the
delivery of such bonds, such signature shall nevertheless be
valid and sufficient for all purposes, as if he had remained in
office until such delivery. The bonds shall be sold in such
manner as the Authority shall determine. The proceeds from the
sale of such bonds shall be paid to the Treasurer of the State
of Illinois as ex officio custodian. Pending preparation of the
definitive bonds, the Authority may issue interim receipts or
certificates which shall be exchanged for such definitive
bonds.
(d) Any bond resolution, or trust indenture entered into
pursuant to a bond resolution, may contain provisions, which
shall be a part of the contract with the holders of the bonds
to be authorized, as to: (i) pledging or creating a lien upon
all or part of the revenues of the Authority or any reserves,
sinking funds, bond proceeds or investment earnings; (ii) the

HB2718 - 31 - LRB100 10499 KTG 20713 b
setting aside of reserves or sinking funds, and the regulation,
investment and disposition thereof; (iii) the use and
maintenance requirements for the toll highways; (iv) the
purposes to which or the investments in which the proceeds of
sale of any series or issue of bonds then or thereafter to be
issued may be applied; (v) the issuance of additional bonds,
the terms upon which additional bonds may be issued and
secured, the purposes for such additional bonds, and the terms
upon which additional bonds may rank on a parity with, or be
subordinate or superior to other bonds; (vi) the refunding of
outstanding bonds; (vii) the procedure, if any, by which the
terms of any contract with bondholders may be amended or
abrogated, the amount of bonds the holders of which must
consent thereto, and the manner in which such consent may be
given; (viii) defining the acts or omissions to act which shall
constitute a default in the duties of the Authority to holders
of its obligations and providing the rights and remedies of
such holders in the event of a default; (ix) any other matters
relating to the bonds which the Authority deems desirable.
(e) Neither the directors of the Authority nor any person
executing the bonds shall be liable personally on the bonds or
be subject to any personal liability or accountability by
reason of the issuance thereof.
(f) The Authority shall have power out of any funds
available therefor to purchase its bonds. The Authority may
hold, pledge, cancel or resell such bonds subject to and in

HB2718 - 32 - LRB100 10499 KTG 20713 b
accordance with agreements with bondholders.
(g) In the discretion of the Authority any bonds issued
under the provisions of this Act may be secured by a trust
indenture by and between the Authority and a trustee or
trustees, which may be any trust company or bank in the State
of Illinois having the powers of a trust company and possessing
capital and surplus of not less than $50,000,000. The bond
resolution or trust indenture providing for the issuance of
bonds so secured shall pledge such revenues of the Authority,
sinking funds, bond proceeds, or investment earnings as may be
specified therein, may contain such provisions for protecting
and enforcing the rights and remedies of the bondholders as may
be reasonable and proper and not in violation of law, including
particularly such provisions as have hereinabove been
specifically authorized to be included in any bond resolution
or trust indenture of the Authority, and may restrict the
individual right of action by bondholders. In addition to the
foregoing, any bond resolution or trust indenture may contain
such other provisions as the Authority may deem reasonable and
proper for the security of the bondholders, including, but not
limited to, the purchase of bond insurance and the arrangement
of letters of credit, lines of credit or other credit or
liquidity enhancement facilities; provided there shall be no
pledge of the toll highway or any part thereof. All expenses
incurred in carrying out the provisions of any bond resolution
or trust indenture may be treated as a part of the cost of the

HB2718 - 33 - LRB100 10499 KTG 20713 b
operation of the toll highways.
(h) Bonds issued under the authority of this Act do not,
and shall state upon the face of each bond that they do not,
represent or constitute a debt of the Authority or of the State
of Illinois within the meaning of any constitutional or
statutory limitation or a pledge of the faith and credit of the
Authority or the State of Illinois, or grant to the owners or
holders thereof any right to have the Authority or the General
Assembly levy any taxes or appropriate any funds for the
payment of the principal thereof or interest thereon. Such
bonds shall be payable and shall state that they are payable
solely from the revenues and the sources authorized under this
Act and pledged for their payment in accordance with the bond
resolution or trust indenture.
Nothing in this Act shall be construed to authorize the
Authority or any department, board, commission or other agency
to create an obligation of the State of Illinois within the
meaning of the Constitution or Statutes of Illinois.
(i) Any resolution or trust indenture authorizing the
issuance of the bonds may include provision for the issuance of
additional bonds. All resolutions of the Authority to carry
such adopted bond resolutions into effect, to provide for the
sale and delivery of the bonds, for letting of contracts for
the construction of toll highways and the acquisition of real
and personal property deemed by the Authority necessary or
convenient for the construction thereof, shall not require the

HB2718 - 34 - LRB100 10499 KTG 20713 b
approval of the Governor or of any other department, division,
commission, bureau, board or other agency of the State.
(j) The Director of the Illinois State Toll Highway
Authority must 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. If these agreements have resulted in
losses to the Authority, the Director shall make all necessary
efforts to recover those moneys. To achieve these goals, the
Director shall:
(1) Authorize agency administrators to negotiate and
terminate the Authority's interest rate swap agreements
with banks to the extent that the Authority is able to do
so at no cost and not later than the end of the next fiscal
year after a finding of losses to Illinois taxpayers is
made. If a respective bank refuses to terminate without
fees or penalty by that date, then it will be excluded from
any future business with the Authority during the life of
the swap agreement, and the Authority should continue to
use all good faith efforts until said bank drops the
termination fees and penalty.
(2) Not enter into any blanket release of legal
liabilities in relation to any interest rate swap
agreement.
(3) Investigate and determine the amount of the moneys
lost by the Authority due to alleged illegal or unethical

HB2718 - 35 - LRB100 10499 KTG 20713 b
acts by financial institutions, including, but not limited
to, manipulating the London Interbank Offered Rate
(LIBOR), misrepresenting the risks associated with complex
financial deals like interest rate swaps and auction rate
securities, mispricing municipal derivatives, and rigging
bids on competitively bid contracts.
(A) The investigation shall examine all successful
or pending legal actions taken by other governmental
entities (including both issuers of debt and
enforcement authorities) in the United States to
recover money from such practices. In each case if the
investigation finds no basis for action under a similar
legal theory, the report of the investigation shall set
forth specific reasons why action under the legal
theory is not feasible.
(B) The investigation shall be completed by no
later than 6 months after the effective date of this
amendatory Act of the 100th General Assembly. The
Director shall request the Attorney General to
evaluate and pursue all legal remedies.
(Source: P.A. 83-1258.)
HB2718 - 36 - LRB100 10499 KTG 20713 b
INDEX
Statutes amended in order of appearance