Ohio school districts have a significant opportunity to finance renovations to certain school facilities at very low interest cost through the Qualified Zone Academy Bond (QZAB) program. More than $100 million in 2009 and 2010 QZAB volume cap remains available for eligible Ohio school districts to issue “direct payment” tax credit bonds. As with direct payment qualified school construction bonds (QSCBs), an issuer of QZABs utilizing 2009 or 2010 QZAB volume cap may elect to receive subsidy payments directly from the federal government in lieu of the tax credit otherwise available to holders of QZABs. The window of opportunity to issue direct payment QZABs is closing, with approximately $50 million of 2009 volume cap expiring at the end of 2011 and a similar amount of 2010 volume cap expiring at the end of 2012.
The eligibility requirements that a school district must meet in order to qualify for QZAB financing include:
- The school district must designate an “academy,” which must be a public school (or academic program within a public school) that is in an empowerment zone or an enterprise community, or at which the school district must reasonably expect that at least 35% of the students would qualify for free or reduced-price meals under the National School Lunch Program.
- The school district must establish a relationship with one or more private entities that will make a contribution to the academy equal to at least 10% of the proceeds of the QZABs.
- The academy’s programs must be “designed in cooperation with business to enhance the academic curriculum, increase graduation and employment rates and prepare students for college and the workforce.”
- The students in the academy must be subject to the same academic standards and assessments as other school district students.
Lawyers in the Squire Sanders Public & Infrastructure Finance Practice Group are available to answer any questions about, or further discuss the implications of, the QZAB program.