30 ILCS 305/7 — Illinois Code / Chapter 30 / Act 305 / Section 7
Section 7
Status: in_force

(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. 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 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 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. (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. (Source: P.A. 93-9, eff. 6-3-03.)