On July 29, 2009, Hawley Troxell issued its approving legal opinion on the issuance by the Snake River School District (Blackfoot) of its $5,000,000 “Qualified School Construction Bond” or “QSCB.” QSCBs are a feature of the federal stimulus bill authorized early in 2009, and this was the first QSCB issued in Idaho under this designation. Zions Bank Public Finance acted as financial advisor to the District and JP Morgan/Chase purchased the bond in a private placement.
QSCBs confer three benefits on the issuing school district:
- Because the holder of the bond receives a tax credit, the interest rate on the bond is 0.00%.
- The bond can be issued as a single maturity of up to 15 years, but the District can make annual payments toward the eventual payoff and invest those funds until the maturity date, thus resulting in a portion of the eventual repayment being made from interest earnings and not from District tax levies.
- The proceeds of the bonds are exempt from arbitrage rebate and so the District can retain investment earnings on the project fund and thereby make more funds available for project costs.
The Stimulus Bill granted approximately $37,000,000 of authority for issuance of QSCBs by Idaho public schools in each of the calendar years 2009 and 2010, and the State Department of Education is currently allocating this authorization to individual school districts in increments of a maximum of $5,000,000. School Districts must still obtain voter approval of the bonds under state law before qualifying to issue the bonds as a QSCB.