School Finance: School Building Issues
Qualified Zone Academy Bond Financing Program
Request for Proposals
The Massachusetts Department of Elementary and Secondary Education ("Department") invites proposals from Massachusetts public school districts and charter schools for allocations of qualified zone academy bond ("QZAB") tax credits.
The QZAB program allows public schools to obtain interest-free financing for the purpose of establishing "qualified zone academies." Qualified zone academies are schools, or programs within a school, which are located in economically distressed areas and whose curriculum is designed through school/business partnerships.
Under this program, eligible schools and districts are permitted to issue no-interest bonds for sale to eligible holders. The holders of the bonds will receive tax credits on their federal income tax returns to compensate them for the value of the foregone interest. The allowable interest rate and maximum term for each bond issue are set by the Secretary of the Treasury. Because some issuers are more or less credit-worthy than others, the use of a uniform interest rate may result in some bonds being issued at a premium above par or at a discount below par.
To be eligible for QZAB tax credits, the bonds and their associated projects must meet the requirements of the QZAB authorizing legislation, which is section 54E of the Internal Revenue Code. For a summary of these requirements, see IRS Notice 2015-11. The debt issuance also requires the appropriate local authorizations and approvals as specified under the school or district's governing Massachusetts law.
It is the responsibility of the governmental entity that issues the bonds to certify to prospective purchasers that the school or district has met all the requirements under this program. The Department will not be involved in reviewing or assessing an issuer's eligibility under this program. Given the complexity of this financing mechanism, potential borrowers and issuers are strongly urged to consult with bond counsel and with a financial advisor with QZAB experience before making any certifications of eligibility.
A total of $6,100,000 in QZAB credits is currently available to Massachusetts schools, which will expire on December 31, 2016. These credits will be allocated to individual school projects by the Department based on responses to this request for proposals. In allocating credits to individual school projects, the Department reserves the right to establish earlier deadlines for the issuance of bonds.
Applications must be in the form of a letter signed by the superintendent of schools or charter school leader, providing the following information:
- Name of school or district.
- Name, street address, phone number, and email address of contact person.
- Amount of bonds to be issued, expected date of issuance, and expected term of issue.
- Description of the project to be funded.
- For projects involving the rehabilitation or repair of a public school facility, a description of the technology infrastructure (broadband connections and internal wireless networks) to be included in the facility.
- Name of governmental entity that will issue the bonds.
- Name of financial advisor (if any) assisting the applicant in meeting the QZAB requirements.
The application letter must be converted to a PDF file and submitted via email to Deputy Commissioner Jeff Wulfson at email@example.com. Fax or hard copy mail submissions will not be accepted. All applications received on or before April 30, 2015, will receive equal consideration. If the initial round of eligible applications does not exhaust the available allocation, additional applications will be considered on a rolling basis as they are received.
Review of Proposals
Acceptance of proposals and allocation of credits will be at the sole discretion of the Commissioner. Factors that will be considered by the Commissioner include but are not limited to:
- The applicant's ability to meet the eligibility requirements of the program;
- The amount of requested credits, the proposed term of issuance, and the proposed date of issuance;
- Whether the applicant has previously received QZAB credits;
- Whether the proposed project is also eligible for reimbursement under the Commonwealth's school building assistance program.
Preference will be given to projects for the rehabilitation or repair of a public school facility and which incorporate a technology infrastructure (broadband connections and internal wireless networks) consistent with the Department's Next Generation Classroom recommendations.
For further information, please contact Jeff Wulfson at 781-338-6500 or firstname.lastname@example.org. Additional information is also available on the US Department of Education website.