ADE Director's Communication Memo Form

Memo Number : FIN-09-089

Date Created : 06/25/2009


Co-op Directors
other: General Business Managers

Type of Memo: Informational
Response Required: No
Section:   Fiscal and Administrative Services - William J. Goff, Assistant Commissioner
Qualified School Construction Bonds (QSCBs)

Regulatory Authority:

Contact Person:
Cindy Hedrick

Phone Number:


The purpose of this commissioner’s memorandum is to provide information about Qualified School Construction Bonds (QSCBs). The American Recovery and Reinvestment Act of 2009 (ARRA) authorized tax-credit bonds for school construction by authorizing $11.2 billion in Qualified School Construction Bonds (QSCBs) for the first time.

QSCBs benefit school districts by stretching repair, renovation, or construction dollars. QSCB bondholders receive a quarterly federal income tax credit on the outstanding bonds, in lieu of tax exempt interest normally paid by the school district. The U.S. Treasury Department establishes state allocation limits, maximum maturity, and sets a tax-credit rate for the QSCB bond program that, on average, equals the amount of interest school districts would ordinarily pay on debt. The maximum maturity and the credit rate are determined as of the date that there is a binding, written contract for the sale or exchange of the bond. The applicable maximum maturity, the discount rate for determining the maturity, and QSCB credit rate are published for that date by the Bureau of Public Debt on its internet site for state and local government series securities at:

An invested sinking fund may be established to allow school districts to set aside and invest money for the repayment of principal at maturity if: (i) it is not funded at a rate more rapid than equal annual installments; (ii) it is funded in a manner reasonably expected to result in an amount not greater than an amount necessary to repay the issue; and (iii) the yield on such fund is not greater than the discount rate determined under § 54A(d)(5)(B) (the “permitted sinking fund yield”). The Bureau of Public Debt publishes the permitted sinking fund yield for each month on its internet site for state and local government series securities at:

The ARRA makes available to states and certain large LEAs, $11.2 billion for 2009 and $11.2 billion for 2010 in QSCB bonding authority for construction, rehabilitation, or repair of a public school facility, or for the acquisition of land on which the school facility is to be constructed with QSCB funds. On April 3, 2009, the Treasury Department issued its 2009 list of allocations by state of QSCB bonding authority. The list of allocations may be accessed from the following web site: The 2009 allocation for Arkansas is $113,443,000.

For a QSCB bond that is issued by a public school, 100 percent of available project proceeds must be used for the construction, rehabilitation, or repair of the public school facility. In addition, a portion of the proceeds of such a bond may be used for the acquisition of land on which a public school facility is to be constructed.

QSCBs may be purchased by any individual or private business, and used to generate a tax credit against the individual's or entity's Federal income taxes.

If an allocation to a state or school district is unused for a calendar year, the state or school district may carry it forward to the next calendar year, subject to the six-month provision in section 4.07 of the guidelines. In other words, states or school districts have until the end of 2010 to use their 2009 allocation and until the end of 2011 to use their 2010 allocation, subject to the six-month provision in section 4.07 of the guidelines.

For answers to questions about this program, contact Cindy Hedrick, Loans and Bonds Coordinator, at (501) 682-4484. For questions related to facilities or the QSCB project, contact Doug Eaton, Director of the Arkansas Division of Public School Academic Facilities and Transportation, at (501) 682-4261. Also, questions may be directed to the fiscal agent used by the school district. The Treasury Department's recent guidance on this new program can be found at


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