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QZABs were instated under the 1997 Tax Payer Relief Act to encourage a public-private partnership among schools and the business community and provide.

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Presentation on theme: "QZABs were instated under the 1997 Tax Payer Relief Act to encourage a public-private partnership among schools and the business community and provide."— Presentation transcript:

1 QZABs were instated under the 1997 Tax Payer Relief Act to encourage a public-private partnership among schools and the business community and provide low or no interest financing to schools in order to improve education in at risk schools. QZABs were extended through 2011 by the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 and the American Recovery and Reinvestment Act of Allocations: $1.4 billion in 2009 and 2010 |$400 million in 2011

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3 Taxable bonds issued by a school district (may carry a supplemental interest rate) and tax credits are provided in lieu of interest payments. Principal is paid at maturity. Secretary of U.S. Department of Treasury sets maximum maturity (4/11/11 = 15 yrs). Investor that buys QZAB is allowed annual federal income tax credits in lieu of periodic interest payments (4/11/11 = 5.50%). For 2009 and 2010 allocations, Districts can receive direct subsidy in amount equal to Qualified Tax Credit Bond rate as published by the Bureau of Public Debt on its Internet site for State and Local Government Securities at May be issued as voted unlimited tax general obligation (UTGO) bonds or non-voted lease purchase agreement or certificate of participation (COP). Principal amount of QZAB must not exceed applicable debt limits.

4 Federal law provides a national QZAB limitation for each calendar year, which is allocated among the states (based on poverty population) > limitation allocated by state education agency (in Colorado, CDE) to eligible school districts as defined (Code Section 54E(d)(2) defines eligible local education agency as any local educational agency as defined in Section 9101 of the Elementary and Secondary Education Act of 1965.). States may carry forward any unused QZAB limitation amount for two years following the unused limitation year to be used on a first-in, first-out basis. Currently, the total Colorado QZAB limitation amount that may be allocated by CDE to school districts is noted on the CDE web-site Allocation Tracking Form and Frequently Asked Questions documents at the following web-site location:

5 QZAB: Application Process Applications must include the following: District Board of Directors Resolution Provide the following items: Statement identifying the qualified zone academy Description of the expenditures the bonds will be used for Confirmation that Davis-Bacon wages have been included A written spending plan confirming all funding spent within 3 years A description of the planned private business partnership CDE Application Applications are available on CDEs website: 11QZABApplicationFormEDAC.pdf 11QZABApplicationFormEDAC.pdf

6 Upon receiving allocation QZABs may be issued as: Voter-approved general obligation (GO) bonds Most secure form of repayment and receives lowest cost of borrowing. A lease purchase agreement, secured by collateral, and repaid from the annual appropriation of monies from the districts general fund. Can be issued without voter approval. Receives slightly higher borrowing cost than GOs due to appropriation clause.

7 2% limit on costs of issuance (COI) Costs related to issuance above this limit are paid from traditional (fully) taxable bonds or cash on hand. Please contact CDE or your financial advisor for more detailed information about costs of issuance.

8 Collateral – a lease purchase is generally secured by property, which less complicated and costly with a larger transaction Its easier to use an entire building as collateral for a QZAB lease purchase agreement or COP amounting to $2 million. Smaller-sized transaction amounts may require collateralization of a part of a building, etc...each proposed project will need to be studied independently to determine the best way to collateralize. Davis - Bacon Requirements: 5-10% (estimated) increase in labor costs. Increase varies by project, local economy and job base.

9 Please contact Kristin Lortie or (303) ) at CDE for more information about QZAB eligibility and CDE suggests contacting a few of the finance companies listed here in the QZAB F.A.Q. available here:(http://www.cde.state.co.us/cdefinance/CapConstQZAB. htm).http://www.cde.state.co.us/cdefinance/CapConstQZAB. htm These companies will assist the District in determining if QZABs are appropriate for a project, how it will be structured (GO vs COP) and how it will be sold.


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