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90_HB1591
30 ILCS 105/9 from Ch. 127, par. 145
30 ILCS 105/9c new
30 ILCS 105/9d new
30 ILCS 105/9e new
30 ILCS 105/9f new
30 ILCS 105/9g new
30 ILCS 105/9h new
Amends the State Finance Act. Imposes conditions and
restrictions on the issuance of certificates of
participation. Provides that certificates of participation
shall be considered debt under the Illinois Constitution.
Requires the Bureau of the Budget to administer and issue the
certificates. Provides that the Comptroller and Treasurer
shall approve the certificates. Effective immediately.
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1 AN ACT concerning certificates of participation.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The State Finance Act is amended by changing
5 Section 9 and adding Sections 9c, 9d, 9e, 9f, 9g, and 9h as
6 follows:
7 (30 ILCS 105/9) (from Ch. 127, par. 145)
8 Sec. 9. Certificates of participation.
9 (a) No disbursements from appropriations shall be made
10 for rental or purchase of office or other space, buildings or
11 land, except in pursuance of a written lease or purchase
12 contract entered into by the proper State authority and the
13 owner or authorized agent of the property. Such lease shall
14 not exceed 5 years unless a greater term is authorized by
15 law, but such lease may contain a renewal clause subject to
16 acceptance by the State after that date or an option to
17 purchase. Such purchase contract may provide for the title to
18 the property to transfer immediately to the State or a
19 trustee or nominee for the benefit of the State and for the
20 consideration to be paid in installments to be made at stated
21 intervals during a certain term not to exceed 25 30 years
22 from the date of the contract and may provide for the payment
23 of interest on the unpaid balance at a rate that does not
24 exceed a rate determined by adding 3 percentage points to the
25 annual yield on United States Treasury obligations of
26 comparable maturity as most recently published in the Wall
27 Street Journal at the time such contract is signed. Such
28 lease or purchase contract shall be and shall recite that it
29 is subject to termination and cancellation in any year for
30 which the General Assembly fails to make an appropriation to
31 pay the rent or purchase installments payable under the terms
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1 of such lease or purchase contract. Additionally such
2 purchase contract shall specify that title to the office and
3 storage space, buildings, land and other facilities being
4 acquired under such a contract shall revert to the Seller in
5 the event of the failure of the General Assembly to
6 appropriate suitable funds. This limitation does not apply
7 to leases for office or other space, buildings, or land,
8 where such leases or purchase contracts contain a provision
9 limiting the liability for the payment of the rental or
10 installments thereunder solely to funds received from the
11 Federal Government. A copy of each such lease or purchase
12 contract shall be filed in the office of the Secretary of
13 State within 15 days after execution.
14 (b) The State, through the Bureau of the Budget for real
15 property and improvements and personal property related
16 thereto, and through the Department of Central Management
17 Services for personal property, may issue or cause to be
18 issued certificates of participation or similar instruments
19 representing the right to receive a proportionate share in
20 lease-purchase or installment purchase payments to be made by
21 or for the benefit of one or more State agencies for the
22 acquisition or improvement of real or personal property, or
23 refinancing of such property or payment of expenses related
24 to the issuance subject to the provisions of Sections 9c
25 through 9h. The total principal amount of the certificates
26 issued pursuant to this Section for acquisition of real
27 property shall not exceed $125,000,000.
28 (1) Certificates may be issued if the State determines
29 that the use of certificates of participation is financially
30 desirable and in the best interest of the State. The State,
31 through the Bureau of the Budget for real property and
32 improvements and personal property related thereto, and
33 through the Department of Central Management Services for
34 personal property, may enter into arrangements for issuing,
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1 securing, and marketing certificates of participation,
2 including agreements, trust indentures and other arrangements
3 necessary or desirable to carry out the foregoing, and any
4 reserve funds or other amounts securing the certificates may
5 be held and invested as provided in such agreements and trust
6 indentures.
7 (2) Certificates of participation or similar instruments
8 issued pursuant to this Section and the underlying
9 lease-purchase or installment purchase contracts shall not
10 constitute or create debt of the State as defined in the
11 Illinois Constitution. Certificates of participation or
12 similar instruments issued under this Section and the
13 underlying lease-purchase or installment purchase contracts
14 shall not constitute or create, nor a contractual obligation
15 in excess of the amounts appropriated therefor, and the State
16 shall have no continuing obligation to appropriate money for
17 said payments or other obligations due under the
18 lease-purchase or installment purchase contracts; provided,
19 however, that the Governor shall include in the annual budget
20 request to the General Assembly for each relevant fiscal year
21 appropriations sufficient to permit payment of all amounts
22 which will be due and payable during the fiscal year with
23 respect to certificates of participation issued pursuant to
24 this Section.
25 (3) The Department of Central Management Services may
26 promulgate rules governing its issuance and conditions of use
27 of certificates of participation and similar instruments.
28 (c) Amounts paid from appropriations for personal
29 service of any officer or employee of the State, either
30 temporary or regular, shall be considered as full payment for
31 all services rendered between the dates specified in the
32 payroll or other voucher and no additional sum shall be paid
33 to such officer or employee from any lump sum appropriation,
34 appropriation for extra help or other purpose or any
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1 accumulated balances in specific appropriations, which
2 payments would constitute in fact an additional payment for
3 work already performed and for which remuneration had already
4 been made, except that wage payments made pursuant to the
5 application of the prevailing rate principle or based upon
6 the effective date of a collective bargaining agreement
7 between the State, or a State agency and an employee group,
8 or payment of funds as an adjustment to wages paid employees
9 or officers of the State for the purpose of correcting a
10 clerical or administrative error or oversight or pursuant to
11 a backpay order issued by an appropriate State or federal
12 administrative or judicial body or officer shall not be
13 construed as an additional payment for work already
14 performed.
15 (d) Disbursements from appropriations which are subject
16 to the approval or certification of the Department of Central
17 Management Services are subject to the following
18 restrictions. Payments for personal service except for
19 positions specified in all appropriation Acts shall be made
20 in conformity with schedules and amendments thereto submitted
21 by the respective officers and approved by the Director of
22 the Bureau of the Budget, the Treasurer, and the Comptroller
23 Department of Central Management Services before becoming
24 effective. Such schedules and amendments thereto may set up
25 groups of employment showing the approximate number to be
26 employed, with fixed or minimum and maximum salary rates.
27 This Section is subject to the provisions of Section 9.02
28 and Sections 9c through 9h.
29 (Source: P.A. 86-11; 86-657; 86-1028.)
30 (30 ILCS 105/9c new)
31 Sec. 9c. Restriction on issuance of certificates of
32 participation.
33 (a) Notwithstanding any law to the contrary, a person,
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1 partnership, corporation, or other legal entity or any
2 State officer, employee, agency, department, or university,
3 or the General Assembly shall not issue certificates of
4 participation or similar instruments representing the right
5 to receive a proportionate share in lease, installment, or
6 other periodic payments to be made by any State department,
7 agency, or university except in accordance with the
8 provisions of Sections 9c through 9h and with the express
9 written approval of the State Comptroller and the Treasurer.
10 The provisions of this Section are made a part of every
11 purchase contract entered into by a State entity providing
12 for periodic payments by any State department, agency, or
13 university. Every such contract shall contain a clause
14 expressly reciting the provisions of this subsection. The
15 absence of the clause in such a contract shall not obviate
16 the duty of all parties to the contract to comply with the
17 provisions of this subsection. Neither this provision, nor
18 any other provision of this Section, shall be construed to
19 prevent State entities from entering into installment
20 purchase or lease purchase agreements funded without the use
21 of certificates of participation or similar instruments.
22 (b) For the purposes of Sections 9 through 9h, "State
23 departments and agencies" shall not include the General
24 Assembly, and the provisions of Sections 9 through 9h, unless
25 otherwise specified, shall not apply to installment purchase
26 or lease purchase contracts entered into by the General
27 Assembly financed by the issuance of certificates of
28 participation or similar instruments representing the right
29 to receive a proportionate share in lease, installment, or
30 other periodic payments to be made by the General Assembly.
31 (30 ILCS 105/9d new)
32 Sec. 9d. Issuance of certificates of participation.
33 (a) The Director of the Bureau of the Budget shall
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1 determine whether the use of certificates of participation to
2 finance or refinance installment purchase or lease purchase
3 contracts entered into by State departments, agencies, or
4 universities is financially desirable and in the best
5 interest of the State. Upon notice of such a determination
6 the Treasurer is authorized, pursuant to a request for
7 proposals, competitive bidding, or negotiated placement, to
8 cause to be issued certificates of participation or similar
9 instruments that represent undivided proportionate interests
10 in periodic payments due from the State to fund installment
11 purchase or lease purchase contracts entered into, or
12 expected to be entered into, by the State departments,
13 agencies, universities, or any combination of those entities,
14 pursuant to the provisions of Sections 9 through 9h. The
15 Treasurer shall issue rules to govern the procedure he or she
16 shall follow in any sale of the certificates conducted under
17 this Section. The rules shall, in the case of all sales,
18 require that notice be published in the official newspaper of
19 the State of Illinois designated in Section 4 of the Illinois
20 Purchasing Act. The proceeds from the issuance of the
21 certificates may also be used for the establishment of
22 reserve funds to secure the certificates, the cost or premium
23 of letters of credit, insurance or other credit enhancements,
24 the cost of bond counsel, trustees and paying agent, and any
25 other related expenses as may be necessary for the issuance
26 of the certificates. The foregoing shall not be construed to
27 authorize the use of the proceeds for the payment of personal
28 service expenses of State departments, agencies, or
29 universities, other than payments made to the Attorney
30 General for legal services rendered.
31 (b) The maximum term of certificates of participation
32 issued to finance personal property shall be 10 years. The
33 maximum term of certificates of participation to finance the
34 acquisition or improvement of real property shall be 25
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1 years. In no event, however, shall the term exceed the
2 expected useful life of the property being financed, with the
3 term calculated from the date of delivery, with respect to
4 personal property, and the date of occupancy, with respect to
5 real property.
6 (c) Ten days before the issuance of certificates of
7 participation under this Section, the Director of the Bureau
8 of the Budget shall transmit to the chairs of the
9 Appropriation Committees a copy of the Director of the Bureau
10 of the Budget's notice to the Comptroller and the Treasurer
11 under this Section. The notice shall provide the following
12 information pertaining to the personal property to be
13 financed by the certificates:
14 (1) The agency and program procuring the equipment.
15 (2) A brief description of the equipment.
16 (3) The estimated cost of the equipment if
17 purchased outright.
18 (4) The estimated terms of the financings.
19 (5) The estimated total lease or installment
20 purchase payments for the equipment.
21 (6) The estimated lease or installment purchase
22 payments by fiscal year for the current fiscal year and
23 the next 5 fiscal years.
24 (7) The anticipated source of funds to make lease
25 or installment purchase payments.
26 (8) Those items of equipment not anticipated to be
27 financed upon enactment of the budget for the fiscal
28 year.
29 Before the issuance of the certificates the Director of
30 the Bureau of the Budget may amend the notice. The Director
31 shall transmit a copy of the amended notice to the chairs of
32 the Appropriation Committees. After the issuance of the
33 certificates, the Director of the Bureau of the Budget shall
34 transmit to the chairs of the Appropriation Committees, the
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1 Treasurer, and the Comptroller a copy of the final official
2 statement accompanying the issuance and thereafter shall
3 transmit quarterly reports that update the notices to those
4 individuals.
5 (30 ILCS 105/9e new)
6 Sec. 9e. Annual ceiling on certificates of participation.
7 (a) The maximum amount of certificates of participation
8 or similar instruments representing periodic payments due
9 from the State issued for State departments, agencies, and
10 universities within a fiscal year shall not exceed the
11 maximum principal amount authorized in the budget enacted
12 into law for that fiscal year.
13 (b) Certificates of participation issued to refund or
14 advance refund prior issues of certificates of participation
15 or similar instruments including certificates of
16 participation issued under Section 9d and certificates of
17 participation issued before the effective date of this
18 amendatory Act of 1997, representing the right to receive a
19 proportionate share in lease, installment, or other periodic
20 payments to be made by any State department, agency, or
21 university shall not count against the above ceilings,
22 provided that the Comptroller and the Treasurer determine
23 that there will be a savings to the State on total periodic
24 payments on a present value basis as a result of the
25 refunding transaction.
26 (c) Certificates of participation issued in amounts over
27 $250,000 shall be included in determining the maximum State
28 debt allowed to be incurred under Section 9 of Article 9 of
29 the Illinois Constitution.
30 (30 ILCS 105/9f new)
31 Sec. 9f. Restrictions; transfer; indemnification.
32 (a) Certificates of participation or similar instruments
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1 shall not be used to finance the acquisition or improvement
2 of real property unless authorized by law and passed by the
3 vote of three-fifths of the members elected to each house of
4 the General Assembly or in a law approved by a majority of
5 the electors voting on the question at the next general
6 election following passage.
7 (b) The Director of the Bureau of the Budget may, if
8 necessary, authorize the transfer of moneys from one State
9 department, agency, or university to pay for installment
10 purchases or lease purchases made on its behalf, to another
11 State department, agency, or university under a multi-agency
12 installment purchase contract financed through the issuance
13 of certificates of participation or similar instruments, but
14 in no case shall the aggregate of State payments exceed the
15 total amount actually appropriated for the underlying
16 installment purchase obligations. The Director of the Bureau
17 of the Budget shall file his or her approval of a certificate
18 of allocation for such a transfer with the Comptroller, the
19 Treasurer, and the chairs of the Appropriation Committees.
20 (c) Any agreement for the issuance of certificates of
21 participation to fund installment purchases by the State may
22 provide that the State will indemnify the trustee, paying
23 agent, service agent, or any other person performing a
24 similar or related function, but only to the extent that the
25 liability triggering the event of indemnification is the
26 fault of the State.
27 (d) Any agreement for the issuance of certificates of
28 participation to fund installment purchases or lease
29 purchases by the State may provide that the certificates are
30 secured by the underlying property and that, in the event the
31 General Assembly fails to appropriate funds sufficient for
32 the underlying installment payments, the financed property
33 may be sold on behalf of the holders of the certificates,
34 provided that any excess proceeds from such a sale, after
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1 deduction for and payment of fees, expenses, and any taxes
2 levied on the sale, and distribution to the holders of the
3 certificates in the amount of the face value of the
4 certificates plus accrued interest, or in the case of a
5 certificate issued with an original issue discount, its
6 accreted value, shall be paid to the State.
7 Any security interest in personal property made or
8 created by any such agreement shall be valid, binding, and
9 perfected from the time the security interest attaches,
10 without any physical delivery of the collateral or further
11 act. The lien of any such security interest shall be valid,
12 binding, and perfected against all parties having claims of
13 any kind in tort, contract, or otherwise against the State
14 irrespective of whether the parties have notice of the lien.
15 An instrument by which a security interest is created or any
16 financing statement or other document need not be recorded or
17 filed.
18 (30 ILCS 105/9g new)
19 Sec. 9g. Annual report. On or before February 15 of each
20 fiscal year, the Comptroller shall submit an annual report to
21 the Director of the Bureau of the Budget and the chairs of
22 the Appropriation Committees regarding the issuance of
23 certificates of participation issued under Sections 9 through
24 9h. The report shall include, but not be limited to, a
25 summary statement of the aggregate amount of certificates of
26 participation issued; specific details pertaining to each
27 issuance, including the State department, agency, or
28 university that entered into lease or installment purchases
29 funded through the use of certificates of participation; each
30 issuance for the General Assembly; the amounts, purposes, and
31 financing terms and payment schedule of each issuance; and
32 any other matter that the Comptroller deems advisable.
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1 (30 ILCS 105/9h new)
2 Sec. 9h. Certificates of participation; reallocation
3 requirements.
4 (a) In those cases in which funds have been appropriated
5 to a State department or agency for the outright purchase of
6 equipment, and when, with the approval of the Director of the
7 Bureau of the Budget, the Treasurer, and the Comptroller, a
8 contract is entered into for the lease purchase or
9 installment purchase of equipment and the lease purchase or
10 installment purchase agreement is financed or will be
11 financed by the issuance of certificates of participation
12 under Sections 9 through 9h, the Director of the Bureau of
13 the Budget shall notify the chairs of the Appropriation
14 Committees of the Director's, Treasurer's, and Comptroller's
15 approval of the contract.
16 (b) If the outright purchase cost of the equipment is
17 $2,000,000 or more, the balance of the appropriation for the
18 outright equipment purchase not necessary to pay lease
19 purchase or installment purchase payments in the then current
20 fiscal year for the equipment shall be unallocated by the
21 Director and may be reallocated by the Director only in
22 accordance with the following procedures, and subject to the
23 following conditions and limitations:
24 (1) The Director of the department or agency to
25 which the appropriation is provided shall request
26 allocation of the balance or portion of the balance by
27 providing a statement to the Director of the Bureau of
28 the Budget and the chairs of the Appropriation Committees
29 certifying to (i) the amount of the requested allocation,
30 (ii) the purpose of the allocation, and (iii) the
31 necessary nature of the expenditures.
32 (2) The Director of the Bureau of the Budget may
33 allocate the moneys requested only after receiving
34 notification of approval for the allocation from the
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1 chairs of the Appropriation Committees.
2 (c) If the outright purchase cost of the equipment is
3 less than $2,000,000, the balance of the appropriation for
4 the outright equipment purchase not necessary to pay lease
5 purchase or installment purchase payments in the then current
6 fiscal year for the equipment may be reallocated by the
7 Director of the Bureau of the Budget with notification as
8 soon as practicable after such reallocation to the chairs of
9 the Appropriation Committees of the purpose of the
10 expenditures for which the allocation is made.
11 Section 99. Effective date. This Act takes effect upon
12 becoming law.