build advantage - ice miller llp...contact jim snyder or enzo incandela. created date: 12/9/2015...
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QUALIFIED SCHOOL CONSTRUCTION BONDSStimulus Act Leftover Benefits Now Available to Lower Interest Costs for Illinois School Districts
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Qualified School Construction Bonds “(QSCBs)” are low-to-no interest bonds that Illinois school districts can obtain and utilize the proceeds for building renovations; repairs and construction; and health, life, and safety needs for district facilities; or the acquisition of land on which such facilities are to be constructed with part of the proceeds. Since QSCB’s are low-to-no interest, districts can redirect interest savings on such QSCB’s towards the education of students and professional development of teachers instead of utilizing funding for interest costs.
On November 20, the Illinois State Board of Education approved allocation guidelines regarding $495,602,000 in Qualified School Construction Bond (QSCBs) volume limitation that remains from the Federal American Reinvestment and Recovery Act of 2009 (the “Stimulus Act”).
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Summary of Qualified School Construction Bonds
Amount of Illinois Allocation
$495,602,000 allocated from 2009 and 2010 volume. Allocation was not used in Illinois and was carried forward. Allocation is now available for use by Illinois School districts. The Allocation Application to the Illinois Department of Education is available at www.isbe.state.il.us/construction/html/qscb.htm
Types of Projects
○ Construction, remodel and repair of public school facilities (including equipment) and cost of real estate acquisition
ISBE Allocation Priority Factors
Low-Income Concentration Highest % receives prioritization
Available Local Resources Per Pupil
Lowest receives prioritization
Percentage of Inadequately Housed Pupils
Highest % receives prioritization
Total Tax Rate
Highest Rate as measured by the variance to the median (by district type) receives prioritization
Passed Referendum and/or Debt Capacity
Priority 1
School Districts with a passed referendum and/or debt capacity will be prioritized and awarded authority. Alternate revenue bonds and building bonds should be included with voted bonds as Priority 1.
Priority 2
If authorization amounts remain after Priority 1, School Districts will be prioritized and considered for an award of authority.
Maximum Term & Interest Rate to be Reimbursed
Set by US Treasury. Maximum term currently 25 years. See www.treasurydirect.gov/GA-SL/SLGS/selectQTCDate.htm. No tax credit rate will be determined on the date of sale.
Spending Limits 100% of proceeds plus investment earnings spent within 3 years on qualified school projects. Also limits costs of issuance paid from bond proceeds to 2% of the issue price.
Requirements Davis-Bacon Act prevailing wages are required (i.e. union scale) District must have annual financial report on file with ISBE. Bond Counsel (Ice Miller LLP) Certification.
Summary of Qualified School Construction Bonds Continued
School District Interest Cost*
Depending on the market, loan is expected to be interest free to the school district (up to the tax credit rate on the date of sale).
Timing Application due by 1/15/2016; Bonds issued within 18 months of award.
Bond Descriptions (like Build America Bonds)
○ Taxable bonds issued for project (broader market than tax credit bonds);
○ Form 8038 CP is filed every 6 months with IRS requesting payment of interest subsidy to Issuer;
○ IRS will pay school district an amount equal to interest due (up to the tax credit rate on date of sale), which could result in zero interest paid by the school district.
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* While an Illinois school district that receives QSCB allocation should result in paying little or no net interest cost to the district depending on bond market conditions, the district’s credit rating and maturity length of the bonds, note that QSCB and Build America Bonds, are currently subject to Federal sequestration. This means that the amount of subsidy ultimately received by a district could be reduced (currently by about 7%).
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.Jim Snyder
Enzo [email protected]
Mark A. HuddleSenior [email protected]
Contact
© 2015 Ice Miller LLP
Bond Counsel Requirement Questions Ice Miller LLP is available to assist with completing the application, procedures and questions, as well as providing the required bond counsel certifications. For further information, please contact Jim Snyder or Enzo Incandela.