• Re-Allocation of Recovery Zone Bond Volume Cap in Illinois
  • July 27, 2010 | Author: Charles D. Katz
  • Law Firm: Drinker Biddle & Reath LLP - Chicago Office
  • The state of Illinois has been allocated more than $1 billion for the issuance of Recovery Zone Facility Bonds (RZF Bonds) and nearly $667 million for the issuance of Recovery Zone Economic Development Bonds (RZED Bonds) under the American Recovery and Reinvestment Act of 2009. Pursuant to the Stimulus Act, the Treasury Department provided both “state-by-state allocations”and “sub-allocations to each Authorized Municipality within each state” of the volume cap for these bonds (collectively RZ Bonds). While large municipalities like the city of Chicago, have received sub-allocations significant enough to make issuance of these bonds an attractive option, much of the Illinois statewide volume cap amount has been sub-allocated by the Treasury Department to counties in amounts too small to make issuance of RZ Bonds a realistic option. Not surprisingly, outside of the larger Illinois municipalities, almost no RZ Bonds have been issued to date and issuance of these bonds has received very little consideration. Treasury Guidance permits states to re-allocate the volume cap to better facilitate the issuance of RZ Bonds. Many states have started to pass legislation or otherwise take the steps necessary to enable such re-allocations to be made, in order to remove volume cap from Authorized Municipalities that have no need for it, and make it available to those Authorized Municipalities that have been approached regarding the issuance of RZF Bonds for Qualifying Projects (or have expenditures that would qualify for financing with RZED Bonds) but lack sufficient volume cap to issue RZF Bonds for every Qualifying Project (or RZED Bonds for every qualifying governmental expenditure). Effective July 12, 2010, Illinois enacted Public Act 096-1020 (the Illinois Re-Allocation Legislation), the intent of which is to address the states' re-allocation problem.