SENATE BILL NO. 476
AN ACT TO AMEND CHAPTER 74, TITLE 29, OF THE DELAWARE CODE RELATING TO BONDS OF THE STATE.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
WHEREAS, State of Delaware bond Issues have not been readily available to the general public; and
WHEREAS, many Delawareans for whom Delaware bonds could have been a desirable investment were not able to invest In Delaware bond issues because of the large denominations In which such bonds were marketed; and
WHEREAS, capital appreciation bonds an be a useful vehicle for long term savings, such as for the higher education expenses of Delawareans; and
WHEREAS, the State bond issuing officers lacked the necessary authority to bring about small denomination capital appreciation bond Issues;
NOW, THEREFORE, it is declared to be the purpose of this bill to grant the authority to the bond issuing officers to enable them to arrange with the appropriate institutions to provide bond Issues that are both more accessible to more Delawareans and in the capital appreciation bond format suitable to savings for long term expenses such as higher education.
Section 1. Amend §7406, Chapter 74, Title 29 of the Delaware Code by striking said section in its entirety and substitute in lieu thereof a new §7406 to read as follows:
§7406. Terms, forms and contents of bonds; installment payments.
(a) the resolution of the issuing officers authorizing the issuance of bonds may Include provisions for the date or dates of such bonds; the maturity of such bonds, which shall not exceed 20 years from their date; provisions for serial, term, or "capital appreciation" bonds; sinking fund or reserve fund requirements, if any; due dates of the interest thereon; the form of bonds (including whether bonds shall be certificated or uncertificated); the denominations and designation of bonds;
registration, conversion and transfer privileges; the terms of redemption with or without premium; the date and manner of sale of bonds, (which may be a private, negotiated sale only if any of the bonds of a series of bonds or all the bonds to be sold are capital appreciation bonds); provisions for the consolidation of bonds authorized to finance all or a portion of the costs of projects authorized in one or more authorization acts with bonds authorized by one or more authorization acts; limitations with respect to the Interest rate or rates on bonds; provisions for receipt and deposit or investment of the good faith deposit pending delivery of bonds and such other terms and conditions of bonds and of the Issuance and sale thereof as the issuing officers may determine to be In the best interests of the State.
(b) Notwithstanding the foregoing provisions of this section or any other law to the contrary, the issuing officers shall be required to provide In the resolution authorizing the issuance of general obligation bonds of the State (other than capital appreciation bonds as defined in Section 7425 of this Chapter):
(I) For the payment of bonds in annual Installments, the first of which shall be not more than one year from the date of such bonds; and
(2) That no annual installment, except in the case of refunding of the bonds, shall be more than any prior installment of those bonds."
Section 2. Amend Chapter 74, Title 29 of the Delaware Code by adding thereto a new §7425 to read as follows:
§7425. Capital Appreciation Bonds. The term "capital appreciation bonds" means any
bond or bonds sold at a price substantially less than the principal amount thereof and on which compounded interest Is payable at maturity, as conclusively determined by the issuing officers, but only if such bond or bonds are designated as capita) appreciations by the issuing officers In the resolution authorizing the Issuance of bonds. For purposes of Sections 7422 and 7423 of this Chapter, the aggregate principal amount of any capital appreciation bonds shall be the aggregate of the Initial offering prices at
which such bonds are offered for sale to the public, whether in a private or negotiated sale or in a public or competitive sale, or sold to the initial purchaser thereof in a private placement, without, in every case, reduction to reflect underwriters' discount or placement agents' fees or other similar fees."
Section 3. The- Secretary of Finance shall report to the General Assembly on an annual
basis regarding the amount of capital appreciation bonds issued, the Interest and other costs associated with such issuance and other related matters as appropriate.
Approved July 14, 1988.