BILL ANALYSIS
SB 205
Page 1
SENATE THIRD READING
SB 205 (Hancock)
As Amended February 4, 2010
2/3 vote. Urgency
SENATE VOTE : Vote not relevant
TRANSPORTATION LOCAL GOVERNMENT
(vote not relevant) (vote not relevant)
APPROPRIATIONS 17-0
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|Ayes:|De Leon, Conway, Ammiano, |
| |Bradford, Charles |
| |Calderon, Coto, Davis, |
| |Fuentes, Hall, Harkey, |
| |Miller, Nielsen, John A. |
| |Perez, Skinner, Solorio, |
| |Audra Strickland, |
| |Torlakson |
|-----+--------------------------|
| | |
--------------------------------
SUMMARY : Provides statutory authority for the California
Department of Education (CDE) and the California School Finance
Authority (CSFA) to administer the federal Qualified School
Construction Bonds (QSCB) tax credit program authorized by the
federal American Recovery and Reinvestment Act of 2009 (ARRA).
Specifically, this bill :
1)Assigns $700 million of the state's 2009 federal tax credit
bond volume cap for the QSCB program to CDE for further
assignment and distribution to school districts and county
offices of education (COEs).
2)Assigns $73.5 million of the state's 2009 federal tax credit
bond volume cap for the QSCB program to CSFA to be issued for
the benefit of charter schools.
3)Provides that any of the state's 2009 federal tax credit
volume cap for QSCB assigned to CDE or CSFA that has not
resulted in the issuance of bonds by December 31, 2009 be
added to the state's volume cap for 2010.
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4)Extends school districts and COEs' ability to issue bonds by
120 days from the effective date of this bill, provided these
entities received an assignment of tax credits under the QSCB
program from CDE prior to December 31, 2009 and an extension
to issue bonds through March 31, 2010.
5)Requires any of the state's federal 2009 tax credit bond
volume cap for the QSCB program originally allocated to CDE
that does not result in the issuance of bonds within 120 days
from the effective date of this bill to revert to the state
and be reallocated in accordance with the process established
pursuant to state law for allocating the 2010 federal tax
credit bond volume cap.
6)Requires the CDE to reassign to a school district any 2009
federal tax credit bond volume cap for QSCBs that was directly
allocated to the district by the United States Internal
Revenue Service (IRS) that did not result in the issuance of
QSCBs by December 31, 2009 and was reallocated by the district
to the state no later than 30 days after the effective date of
this bill. Requires the CDE to grant the school district 120
days from the effective date of this bill to issue the QSCBs.
Provides that any of the federal tax credit bond volume cap
for QSCB that was reallocated to the district pursuant to this
provision that does not result in the issuance of QSCBs within
120 days from the effective date of this bill shall revert to
the state and shall be reallocated by the CDE in accordance
with the process to be established in state law for allocating
the 2010 federal tax credit bond volume cap for QCSBs.
7)Requires any charter school that received an allocation from
CSFA prior to December 31, 2009 to retain its allocation
pursuant to a CSFA resolution.
8)Requires any of the state's federal 2009 tax credit bond
volume cap for QSCB originally allocated to CSFA that does not
result in the issuance of bonds by December 31, 2010 to be
retained by CSFA and reallocated in accordance with the QSCB
program parameters established by the CSFA. Specifies that
all parameters and conditions for receipt of tax credits under
the tax credit bond volume cap to be allocated by the CSFA
shall be in accordance with the Charter Schools Act of 1992
and any related regulations.
9)Exempts the assignment and distribution of tax credit bond
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volume cap by CDE and CSFA from the rulemaking provisions of
the Administrative Procedures Act (APA) in order to further
the purposes of the ARRA and allow school districts to issue
federal tax credit bonds as expeditiously as possible.
10)States the intent of the Legislature that the parameters and
conditions adopted by the CDE and the CSFA be comparable where
practical and applicable in order to ensure consistency and
equity in the state level assignment and distribution of the
federal tax credit bond volume cap, including, but not limited
to, maximum tax credit amounts per project or school district.
11)Contains an urgency clause in order to access federal
stimulus tax credits at the earliest possible opportunity.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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
QCSB program. The QCSB 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 QCSB 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 school districts
by the state. California received a total of $1.3 billion for
2009 and will receive another $1.3 billion for 2010. Of the
amount for 2009, $582 million was allocated directly to 11 large
school districts and $773.5 million is reserved for school
districts, COEs, and charter schools. CDE, in collaboration
with the Governor's Office and the State Treasurer, designated
$73.5 million of the state's $773.5 million allocation for
charter schools, to be administered by the CSFA. This amount
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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 local educational
agencies (LEAs) to participate in this program. LEAs, however,
are 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.
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. This bill also
requires the CSFA parameters to be consistent with the Charter
Schools Act of 1992. CSFA received 28 applications from charter
schools. The CSFA guidelines prioritize charters that are
deemed "credit worthy" and that are "shovel ready" and awarded
$19.2 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 this
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. Thus far, no school district that
received its bond tax credits from the state has issued bonds,
despite a deadline of December 31, 2009 to do so.
This bill provides statutory authority for the CDE and CSFA to
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administer the QSCB program and issue 2009 program tax credits
to approved school districts and charter schools. The bill also
provides an extension of 120 days from the effective date of
this bill for districts to issue bonds, provided that they
received an extension from the CDE through March 31, 2010. The
CDE granted extensions to 39 of the 43 districts on a
case-by-case basis. Four LEAs returned their allocations. The
bill authorizes charter schools to retain their allocations as
established by the CSFA. Any allocations that do not ultimately
result in issuance of bonds and are therefore not used will
revert back to the CDE and the CSFA for reallocation in 2010.
Federal law requires large districts that received the federal
tax credit allocations directly from the IRS to issue QSCBs by
December 31, 2009. Federal law also allows large districts that
do not issue their allotted QSCBs to reallocate the credits to
the state for reallocation. Five districts out of the 11 large
districts did not issue QSCBs within the required timeframe.
The most recent amendments to the bill establish a process
whereby the CDE reassigns to these school districts their
federal tax credit bond volume cap for QSCBs if the districts
reallocate their credits to the state within 30 days after the
enactment of this bill. The amendments also require the CDE to
allow these districts to issue the QSCBs within 120 days after
the enactment of this bill and further provide that if the
districts do not issue the bonds within the 120 days, the
credits will revert back to the state and shall be reallocated
by the CDE in accordance with the process for allocating 2010
federal tax credit bond volume cap for QSCBs. This provision
will enable large school districts to take advantage of the
federal tax credits and ensure that any credits not utilized by
the large districts can be reallocated to other districts.
Due to time constraints and to enable school districts and the
CSFA to issue bonds as soon as possible, this bill contains an
urgency clause and waives the requirement for the CDE and the
CSFA to adopt regulations.
Analysis Prepared by : Sophia Kwong Kim / ED. / (916)
319-2087FN: 0003656