Qualified School Construction Bonds (QSCB) are authorized by the federal government through the American Recovery and Reinvestment Act (ARRA) of 2009. The bonds provide federal tax credits for bondholders in lieu of interest in order to significantly reduce an issuer's cost of borrowing. The ARRA provides for an allocation to each state, along with separate allocations for large school districts. Guidance provided by the Internal Revenue Service through Notice 2010-17 indicates that the allocation for California is $720,058,000 in calendar year 2010. Additional allocations totaling $546,568,000 in calendar year 2010 were made directly to California's twelve largest urban districts, which may choose to re-allocate any unused balance to the State of California.
The State Superintendent Jack O'Connell and State Treasurer Bill Lockyer co-sponsored Assembly Bill (AB) 2560 (Chapter 266, Statutes of 2010) to provide the California Department of Education (CDE) and the California School Finance Authority (CSFA) the authority to assign and distribute the state's 2010 federal QSCB tax credit bond volume cap to or for the benefit of school districts, county offices of education, and charter schools.
- Total state allocation $720,058,000.
- $651,652,000 will be allocated to school districts or county offices of education through the CDE.
- $68,406,000 will be allocated to charter schools through the CSFA.
- Additionally, $214,753,568 of the 2009 volume cap was returned to the State and will roll over to the 2010 program.
California Department of Education Program
Minimum - Maximum
- No minimum for bond authorization.
- Maximum of $25,000,000 authorization per school district or county office of education.
- Applications (DOC) will be posted to the CDE's Website on October 1, 2010.
- Applications will be accepted by certified mail only and may not be postmarked prior to November 5, 2010. Any applications postmarked prior to this date will be returned.
- No other form of delivery will be accepted .
- Applications will be accepted on a first-come-first-served basis until the state's allocation is fully committed.
- Districts or county offices of education that received a 2009 authorization but did not issue are not eligible to apply until June 24, 2011.
- Districts that received a direct allocation from the U.S. Treasury in 2009 or 2010 are not eligible to apply for the state program.
- The project(s) will be funded by local voter-approved bonds issued by the school district or bond anticipation notes as authorized by Education Code Section 15150.
- County offices of education or school districts with an enrollment of 2,500 or less may pursue other forms of financing and must provide a resolution adopted by the county board of education or governing board authorizing the issuance of the financing.
- Applications not meeting the above criteria will be returned to the applicant.
- 100 percent of the issuance proceeds will be used for construction of public school facilities, rehabilitation, or repair of school facilities, acquisition of land on which public school facilities will be constructed with proceeds of issuance, or for equipment related to the project constructed or rehabilitated with proceeds of issuance.
- Within six months of issuance, the district or county office of education will have entered into contract(s) for use of proceeds equal to 10 percent.
- Within three years of the date of issuance, 100 percent of the bond proceeds must be spent for a qualified purpose.
- All laborers and mechanics employed by contractors or subcontractors on projects funded by the issuance will be paid wages and fringe benefits at rates not less than those prevailing on similar projects in locality (Davis Bacon Act).
- Applicable state and local law requirements governing conflicts of interest are satisfied with respect to the issuance, and if additional conflict of interest rules are imposed by the Internal Revenue Service regulation, such additional rules will be satisfied with respect to the issuance.
- Fifteen days after bond issuance the school district or county office of education shall submit to the CDE a copy of the appropriate federal Internal Revenue Service Form, Information Return for Tax-Exempt Bonds as confirmation of issuance.
- Thirty days after the completion of the expenditure of the bond issuance a completion report will be submitted to the CDE and certified by bond counsel of the school district or county office of education.
- In the event that the school district or county office of education does not issue the QSCB in the full amount of authorization within six months from the date of authorization, any unused portion of the authorization will revert to the CDE.
- No extensions will be provided.
- The CDE will reallocate any remaining 2010 federal QSCB allocation to school districts or county offices of education that were eligible and applied for the 2010 authorization but did not receive an allocation.
- If the program is oversubscribed the order of authorization shall be established using the following criteria:
- First, the earliest date of postmark.
- Second, the project(s) for which the federal QSCB authorization will be applied has received approval from the Division of the State Architect before the application was submitted.
- Third, the greater percentage of pupils who qualified for the federal free and reduced-price meals program and are enrolled in the applying school district or county office of education in the 2008-09. The CDE will certify the number of pupils who qualify and the overall enrollment and calculate the percentage to the nearest one-hundredth of 1 percent.
- The CDE shall maintain a waiting list of all eligible school districts and county offices of education in the priority established.
- School districts and county offices of education will provide the CDE with a copy of a completion report that has been certified by the bond counsel of the district or county office of education.