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School Construction

​Important Notice:  This is NOT a GRANT and the State Board will NOT be issuing Qualified School Construction Bonds on behalf of qualifying school districts. Districts must issue the bonds within 18 months of receipt of authority. Each qualified school district that issues this debt will be responsible for the issuance, repayment of the debt, and all federal/IRS reporting requirements. Therefore, each district must work closely with their bond counsel before submitting an application to determine if these bonds are a good debt instrument for the district. Each district must also work closely with their bond counsel, annually, to insure that all federal/IRS reporting requirements are completed.

 Introduction

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The Qualified School Construction Bond (QSCB) program was created under Section 1521(a) of the American Recovery and Reinvestment Act of 2009 (ARRA). The QSCB program is a source of limited financial bonding for school districts to fund the rehabilitation or repair of an existing public school facility, construction of a new public school facility, equipment associated with repair or construction, or for land acquisition related to the construction of a new facility. Since the bond proceeds can be used for building rehabilitation and repair, districts will be able to issue these low-to-no interest bonds in lieu of Fire Prevention (health, life, and safety) bonds that would be at a higher interest rate.

In 2009, ARRA authorized tax-credit bonds for school con​struction by authorizing $11 billion in QSCBs for the first time. QSCBs provide tax credits for new construction as well as renovation. In 2010, an additional $11 billion was authorized for total authorization of $22 billion throughout the United States and US possessions. Of the $22 billion, 40% was directly allocated to large educational agencies. Chicago School District 299 received a direct authorization of approximately $511 million. In harmony with the School Construction Grants and the School Maintenance Grants, since Chicago Schools District 299 received a direct allocation, they are excluded from applying for any of this authority.

The calendar year 2009 and 2010 designations for Illinois were $244.4 million and $251.2 million for a total of $495.6 million in QSCB authority. If an allocation to a State is unused for a calendar year, the State may carry it forward to the next calendar year. Since the original 2009 and 2010 allocations were not used, they have been carried forward and are still available. No additional allocations have been made.​

 Eligibility

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All school districts, except Chicago School District 299, are eligible to apply. Chicago School District 299 received a direct allocation from the Treasury.

  • The district submitting an application must have the Fiscal Year 2014 (FY14) Annual Financial Report (AFR) on file with ISBE
  • Districts ineligible to construct a new facility may still apply for repair and renovation projects
  • Please submit only 1 application per district. If there are multiple projects being considered please attach supplemental documents with the name and address of the buildings along with the planned use of the bond proceeds for the additional projects.
  • A Health/ Life Safety Amendment/ 10 Year Survey submitted or approved is not required to submit an application​

 Purpose

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Eligible QSCB projects include all projects permitted to be financed with QSCBs under federal law, including:

  • New construction of a public school owned facility
  • Rehabilitation or repair of an existing public school owned facility
  • Land acquisition for the facility to be constructed with the QSCB proceeds, and
  • Equipment to be used in the facility that is being constructed, rehabilitated, or repaired with the proceeds of QSCBs

In addition to previously stated requirements, there are a number of administrative items school districts must keep in mind:

  • QSCB proceeds cannot be used to pay debt service or other outstanding debt obligations
  • QSCB proceeds cannot be used to make lease payments
  • QSCB funds may not be used for stadiums or other facilities which admission is charged to the general public
  • QSCB cannot be used for stand-alone facilities, such as a central office, whose purpose is not the education of children
  • Certain Eligible equipment expenditures: Please see program guidelines.
  • Land cannot be purchased for a future project.

The district is responsible for compliance with all applicable federal reporting requirements.

  • Districts must have all bonds issued within 18 months of receipt of authority. Unused allotments will revert back to ISBE for reallocation
  • 100 percent of bond proceeds must be spent within three years of the date of issuance
  • 100 percent of the bond proceeds must be used for construction of public school facilities, rehabilitation, or repair of school facilities, acquisition of land, or for equipment related to the project constructed or rehabilitated with bond proceeds
  • Districts must reasonably expect as of the issue date that a binding agreement will be entered into with a third party so that at least 10% of the expenditures are incurred within the 6-month period beginning with the issue date of the bonds
  • A maximum of 2% of the bond proceeds may be used for QSCB issuance costs
  • Projects/construction contracts must be in compliance with the Davis-Bacon Act, which includes prevailing wage and labor standards established by the U.S. Department of Labor
  • Completion of IRS forms such as 1097-BTC and 8038-CP​

 Allocation Process

All information contained in the applications will be verified. Should application requests exceed the authority Illinois has been granted, a priority ranking will be calculated for each district based upon the following criteria:

  • Referendum and debt capacity, districts are ready to begin their project – shovel ready
    • The district has passed a referendum to construct a new school, if a new school is being built, OR
    • The district has passed a referendum increasing their debt extension limitation (if required), OR
    • The district has the debt capacity to issue the amount requested and the ability to start their project(s)
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Note: If QSCB allocation is available after all districts that are ready to begin their projects have been allotted their requests, districts that need to pass a referendum will be prioritized. These districts will have 18 months to pass a referendum and issue the bonds.

  • Highest concentration of low income as measured and reported on the latest General State Aid claim
  • Lowest available local resources per pupil as reported on the latest General State Aid claim
  • Highest percentage of 2013 total tax rate over the median tax rate per type of school district: unit, elementary, high school, partial elementary unit district
  • Lowest building capacity per student weighted by age of facilities
    • The formula establishes the actual available space per student for the district compared to the yearly published national averages for the square footage per student
    • From the ISBE Facility Inventory, the age of the facility will be factored in to help establish conditions of older facilities and the need for more modern amenities (such as energy efficiency, accessibility, upgrade of electrical needs, and security)​

As stated above, districts that are shovel ready and capable of issuing the requested debt will be prioritized first. Should more requests be received than authority available, the four individual ranks will be added to determine an overall score, which will be used to determine a priority ranking of all applicants and provide a prioritized list of applicants. In the event of a tie for the final recipient placeholder, the lowest available local resources per pupil will prevail.

If QSCB allocation remains after all shovel ready districts have prioritized and allotted their requested amount, districts that are not shovel ready will be prioritized in the same process as denoted above. These districts will have 18 months to pass necessary referendums and issue their bonds.

School districts will be limited to a maximum request of $50,000,000. If a district does not issue the bonds within 18 months, the authority will revert back to ISBE. If authorization remains after all eligible applicants have received their requested amount or authority is relinquished, another application cycle will be opened.

When the authority is not enough to completely fund the full request of the next district on the list, that district will be contacted and given the option to accept or decline a reduced allocation.

 Federal Guidelines

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The statutory authorization for the QSCB program can be found in Section 1521(a) of the American Recovery and Reinvestment Act of 2009 (Section 54F of t​he Internal Revenue Code). The U.S. Treasury Department’s guidance on the Qualified School Construction Bonds program can be found in its entirety using the following links:

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