Qualified School Construction Bonds
The Federal Government, as part of the American Recovery and Reinvestment Act ( created Qualified School Construction Bonds (QSCBs). These are tax credit bonds and are – or very low net interest – to school districts. In conjunction with the Build America Bond (BAB) Program, also part of the ARRA legislation, the bonds issued prior to December 31, 2010, could be issued as taxable which opened up a new market for the District. The documentation is similar to a COP issue and requires a supplement to our Master Lease. The transaction is also included in the calculation of our COP capacity. The bonds are generally structured with annual payments over a twelve to sixteen-year period.
In November 2010, the District issued a QSCB with a par of $67.6 million. Given the market conditions, the District chose to sell the issue competitively. The transaction was purchased by Bank of America with a TIC of 5.477%. The federal subsidy associated with the transaction was 5.24% which results in a net interest rate of 0.237%. The All-In Total Interest Cost of the transaction was 0.36%. Translated to dollars, the total interest that will be paid on the transaction is $53.8 million; the Federal Subsidy will be $51.7 million resulting in a net interest cost of $2.1 million.
The monies are employed to replace Galaxy Elementary School in Boynton Beach and Gove Elementary School in Belle Glade. Details on the construction projects are available online by clicking the school name above. This projects will be built in full compliance with the Davis-Bacon Act.
The QSCB program requires that all funds be spent within 36 months. To ensure the deadline is met, cash flows are monitored monthly and posted to this website. The report is provided to the School Board's Construction Oversight Review Committee monthly and to the Finance Committee quarterly.