AISD Eligible for Millions of Dollars to Help Offset Cost of Construction

Wednesday, September 09, 2009

Angleton ISD has been approved to designate $7,945,000 in bonded indebtedness as part of the federal Qualified School Construction Bond (QSCB) program.

With the passage of the American Recovery and Reinvestment Act of 2009, Congress authorized the creation of the QSCB program that allows school districts to obtain interest-free or very-low interest financing for qualified construction projects.  The program provides an incentive in the form of federal tax credits to lenders who purchase bonds from issuing school districts.  QSCB proceeds may be used as a funding source for the acquisition of land to build a new school facility, construction of a new facility, renovation and/or repair of a school facility, but the bonds must be issued within 180 days of the date of notification, which was in late August.

“AISD is at an advantage because we are already in the process of building new facilities and renovating and won’t have to wait to see if the proceeds could be applied if we pass a bond for construction and renovations,” Superintendent Heath Burns said.  “AISD will use the proceeds to help offset close to $8 million worth of the bond passed in 2007.  The money will help to relieve the burden on the taxpayers because the proceeds from the QSCB’s will be used in completing the 2010 summer projects.”

According to AISD Executive Director of Operations Scott McLean, the financial impact to the District will be significant although the financial analysis of the QSCB award has not been completed.

“The impact will primarily be in the form of interest cost avoidance,” he said.  “Normal amortization of $7.945 million in bonded debt issued at 4% over 25 years would generate an interest cost of $4.67 million.”

McLean says that to date, the District has issued $105 million of the $139.9 million authorized as part of the 2007 Bond Program. Therefore, of the remaining $34.9 million bonds to be issued, $7.945 million of the bonds will be either zero interest or very low interest bonds.

“AISD will most likely pay off the debt earlier and avoid the interest cost to keep in compliance with QSCB program guidelines,” McLean said.  “Thus, a reduction in the Interest and Sinking tax rate may not materialize, but the debt will be paid off much earlier and the payback will be no more or very little more than the amount borrowed.”