State Requirements for Educational Facilities 2007
Section 2.1
(15) Qualified Zone Academy Bonds (QZABs)
. The Tax Payer Relief Act of 1997
authorized Qualified Zone Academy Bonds (QZABs) to finance schools. Under
this program, qualified schools can borrow at little or no interest cost. A Qualified
Zone Academy Bond is a taxable bond issued by a state or local government, the
proceeds of which are used to improve certain eligible public schools. Instead of
receiving periodic interest payments from the issuer, the QZAB bondholder
(potential bondholders include banks, insurance companies, and corporations
actively involved in the business of lending money) receives a federal income tax
credit, while the bond is outstanding, in an amount equal to a percentage of the
face amount of the bond. The district is responsible for paying the principal amount
and interest if the bond so specifies. The full faith and credit of the State of Florida
does not back QZAB bonds. The federal QZAB program was first approved by the
U.S. Congress in 1998, and was recently extended by the 109
th
Congress as part
of the “Tax Relief and Health Care Act of 2006” (HR 6408).
(a) Eligibility Criteria
.
1.
The school is located in an Empowerment Zone (City of Jacksonville and
Miami-Dade County) or in an Enterprise Community (Empowerment
Alliance of Southwest Florida, which represents Immokalee and portions of
Hendry County), or there is a reasonable expectation, as of the date of
issuance of the bonds, that at least 35 percent of the students attending the
school participating in the program will be eligible for free or reduced cost
lunches established under the National School Lunch Act.
2.
The eligible school district has written commitments from private entity
match partners to make qualified contributions having a present value, as of
the date of the issuance, of not less than ten percent of the proceeds of the
bond issue, including such items as:
a.
Equipment for use in the qualified zone academy (including state-of-the-
art technology and vocational equipment),
b.
Technical assistance in developing curriculum or training teachers to
promote market-driven technology in the classrooms,
c.
Internships, field trips, or other educational opportunities outside the
academy for students,
d.
Any other property (including cash) or service specified by the Local
Education Agency that meets IRS requirements, and
e.
The value of the ten percent match is below the fair market value offered
by any entity providing similar products or services.
3.
The ten percent match partner will help to set up an academic program
(academy) to “prepare students for college or workforce,” as required by the
QZAB legislation. This academy program should specify how many
students will be trained in which academic areas using which resources,
when the program will be implemented, who will direct the implementation
and evaluation, and how the evaluation (pre- and post-tests) will be
accomplished.
4.
The academy program is established by and operated under the supervision
of an eligible local education agency (LEA), as defined in Section 14101 of
the Elementary and Secondary Education Act of 1965, to provide education
or training below the post-secondary level:
a.
Such academy is designed in cooperation with business to enhance the
academic curriculum, increase graduation and employment rates, and
better prepare students for the demands of college and the increasingly
complex workforce,
b.
Students in the academy are subject to the same academic standards
and assessments as other students educated by the school districts, and
c.
The comprehensive education plan of the program is approved by the
school district.
5.
Eligible QZAB projects include:
a.
Rehabilitating or repairing the public school facility in which the academy
is established,
b.
Providing equipment for use at such academy,
c.
Providing instructional materials, and
d.
Providing professional
development for teachers.
(b) Application Process.
1.
Application shall be made through submission of Form OEF 410, A
Qualified Zone Academy Bond Program Application, which is hereby
incorporated by reference and is available on the Office website.
2.
Applications must be received from the districts on or before the published
due date.
3.
Requests must contain a minimum of $1 million and a maximum of $5
million in projects per district.
4.
Districts should not request more bonding authority than can be reasonably
expected to be repaid or secured through a financial institution.
5.
Applications must clearly explain the means by which the district intends to
repay the bond principle upon maturity.
6.
The application must include the following documents:
a.
A copy of the resolution referenced in the Certificate of Eligibility section.
b.
Written verifications from private entity match partners must be attached
to the application.
c.
Providers of services or materials for the proposed project are not
eligible as contributors to meet the ten percent contribution requirement.
d.
An affidavit signed by the school superintendent, financial advisors, bond
counsels, and the ten percent match partners stating that the value of the
ten percent match is below the fair market value offered by any entity
providing similar products or services.
e.
An overview of the proposed academic program/academy details
including, but not limited to: program description, the number of students
benefiting, resources used, when and how the program will be
implemented, who will direct the implementation and evaluation, and how
the evaluation (pre- and post-tests) will be accomplished.
f.
A written spending plan including commitments to spend 10 percent of
funds within 6 months and 95 percent within 5 years of the issue of QZAB
bonds.
(c) Allocation Process.
1.
As soon as the federally imposed state bonding authority is known for each
calendar year, the districts will be notified by the Office.
2.
Applications are reviewed for eligibility and completeness. Districts may be
contacted for further information or clarification.
3.
Once the Office determines the district allocations, each district will be
notified in writing. Districts whose applications have been denied and those
with ineligible projects will also be notified.
(d) Administration.
In addition to previously stated requirements, there are a
number of administrative items school districts must keep in mind:
1.
While the federal government has provided broad guidance for the QZAB
program, the Florida Department of Education has further tailored these
guidelines to meet statewide funding needs. Districts should consult both
sets of requirements. As questions arise, districts should contact the Office
for clarification and guidance.
2.
Each district must determine whether the purposes for which QZABs are
issued conform to state law regarding indebtedness.
3.
Each district is responsible for repayment of the principle upon maturity.
4.
School districts shall not use PECO or CO&DS bond proceeds to pay QZAB
debt, but may use 2-mill funds.
5.
If 2-mill proceeds are proposed for repayment of QZAB debt, those
proceeds shall not exceed the COPs limit established for 2 mill revenue in
Section 1011.71, F.S.
6.
If a district determines that its allotment will not be used, the district should
notify the Office as soon as possible.
7.
If the scope of one of a district’s approved projects changes, the district
must consult with the Office before reallocating the funds to other projects.
Requests will be reviewed on a case-by-case basis.
a.
The Office may allow reallocations from one approved project, as
identified on the current QZAB cycle award letter, to another current
approved project.
b.
The Office will disallow the reallocation of funds to new or unapproved
projects.
8.
Districts must have all bonds issued by December 31 of its funding year.
9.
As districts issue QZAB bonds, a copy of the cover of the official statement
should be forwarded to the Office upon issuance of the bonds.
10.
On December 31 of the district’s funding year, allotments that have yet to be
bonded will revert back to the State for reallocation.
11.
Reverted allotments will be offered first to the participating district with the
lowest historical allotments, then the second lowest, etc., until the allotment
is reallocated in total.
12.
Allocations of the volume limitation are granted first from carried-forward
balances from previous years and then from the current year balance.