BILL ANALYSIS
AB 2560
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Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 2560 (Brownley) - As Amended: April 14, 2010
SUBJECT : Federal tax credit bond volume cap
SUMMARY : Authorizes the California Department of Education
(CDE) and the California School Financing Authority (CSFA) to
assign and distribute the state's 2010 federal tax credit bond
volume cap for qualified school construction bonds (QSCB).
Specifically, this bill :
1)Makes findings and declarations as follows:
a) The United States Department of the Treasury released
the second allocation authority of $11 billion in federal
tax credit volume cap for QSCBs that can be used to lower
the cost of financing the construction, rehabilitation or
repair of a public school facility or for the acquisition
of land where a school will be built;
b) California has received $720 million of federal tax
credit bond volume cap for QSCBs designated to the state by
the federal American Recovery and Reinvestment Act (ARRA)
of 2009; and,
c) The federal tax credit bond volume cap for QSCBs
designated for the state does not constitute federal
moneys, federal funds, or funds of any kind.
2)Authorizes the CDE to assign and distribute the state's 2010
federal tax credit bond volume cap for QSCBs to or for the
benefit of school districts and county offices of education.
3)Authorizes the CSFA to assign and distribute the state's 2010
federal tax credit bond volume cap for QSCBs to or for the
benefit of charter schools, or to be further assigned and
distributed to one or more issuers in the state for the
benefit of charter schools, as determined by CSFA.
EXISTING FEDERAL LAW establishes the ARRA in order to provide
funding and other economic stimulus to foster economic recovery
among the states.
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FISCAL EFFECT : According to the Assembly and Senate
Appropriations Committees of a similar bill, there is no General
Fund impact.
COMMENTS : In February 2009, the federal government passed ARRA,
which allocated approximately $100 billion nationwide for
education programs with the purpose of stimulating the economy,
including $22 billion in tax credits over two years under the
QSCB program. The QSCB program provides savings for school
districts issuing local bonds for the construction and
renovation of school facilities by lowering or eliminating
interest payments. The federal government will provide federal
tax credits for bondholders in lieu of interest normally paid by
issuers. According to the CDE, interest payments typically
equal about 50% of the cost of a bond. The maximum term of a
bond using QSCB tax credits is determined by the United States
Treasury Department - currently at approximately 15 years.
ARRA provides for an allocation to each state based on the
state's Title 1 (poor, needy pupils) allocation, 40% of which
are allocated directly by the federal government to large school
districts and the remaining to be allocated to local educational
agencies (LEAs) by the state. California received a total of
$1.3 billion for 2009 and received another $1.3 billion for
2010. Of the amount for 2009 and 2010, $582 million and $547
million, respectively, were allocated directly to 11 large
school districts and $773.5 and $720 million, respectively, were
reserved for school districts, COEs, and charter schools.
For the 2009 allocations, $73.5 million of the state's $773.5
million allocation was reserved for charter school facilities
and administered by the CSFA. This amount was determined based
on charter schools receiving approximately 10% of new
construction funding in the last two statewide education school
facility bonds. CDE developed an administrative process for
implementing this program, including parameters for
participation. There is not a minimum bond authorization amount
in order for LEAs to participate in this program. LEAs,
however, were limited to $25 million in tax credits per
authorization cycle. With requests from 231 school districts
applications totaling $3.6 billion in requests for $700 million,
the CDE conducted a lottery and allocated tax credits to 43
school districts. The CDE reports that thus far, one district
has issued a bond using the QSCB tax credits.
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CSFA was granted authority to administer the QSCB program for
charter schools due to its existing expertise in administering
federal and state funds for charter school facilities. Similar
to CDE, CSFA developed parameters and procedures for this
program; the eligibility criteria are similar to criteria used
for the Charter School Facility Program. CSFA received an
initial 28 applications from charter schools. The CSFA
guidelines prioritize charters that are deemed "credit worthy"
and that are "shovel ready" and awarded $29.2 million in tax
credits to six charter schools. The 22 remaining applicants are
being further evaluated by CSFA. Because charter schools do not
have authority to issue bonds, the CSFA will sell the bonds and
provide low- or no-interest loans to charter schools.
The problem that arose that prompted the introduction of a bill
came when school districts, in attempting to sell the bonds,
were informed by bond counsels that the federal law contained
ambiguity that requires statutory clarification by the state.
Specifically, the ARRA authorized "the state" to make federal
tax credit allocations, but did not specify which entity in the
state is the responsible entity. As a result, bond counsels
refused to issue bond opinions for school districts to sell
bonds fearing that a challenge can be made that a school
district did not receive the tax credits from a
legally-authorized entity.
SB 205 (Hancock), Chapter 11, Statutes of 2010, provided the
authorization for CDE and CSFA to assign and distribute the 2009
tax credits. This bill provides statutory authority for the CDE
and CSFA to administer the QSCB program and assign and
distribute 2010 program tax credits.
REGISTERED SUPPORT / OPPOSITION :
Support
Coalition for Adequate School Housing
State Superintendent of Public Instruction, Jack O'Connell
State Treasurer's Office
Opposition
None on file
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Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087