Summary of Bond Provisions of the Recovery Act
Applicable to Illinois School Districts
On February 17, 2009, President Obama signed The American Recovery and Reinvestment Act of 2009. In addition to some operating money and some construction grants that may be made available to Illinois School Districts, the Recovery Act also contains provisions related to bonding that may be of interest to Illinois School Districts. Those bonding provisions are highlighted below along with links to more complete discussions of the cited provisions.
I. Bond Provisions Which May Directly Benefit Illinois School Districts
A. Improvements in marketability of Bonds
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Expansion of bank qualified designation from $10 million per year to $30 million per year may reduce interest costs of school bonds. Read more.
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De mininus allowance will allow banks to treat more bonds as bank qualified. Read more.
B. Tax Credit Bonds
Issue bonds that provide bondholders with a tax credit rather than tax exempt interest - an interest free loan to the school district. Read more.
C. Qualified Zone Academy Bonds (QZAB)
D. Build American Bonds
Taxable bonds for school construction with a tax credit to bondholders or refundable tax credit to school districts. Read more.
II. Bond Provisions of Recovery Act That May Indirectly Benefit Illinois School Districts
A. Recovery Zone Economic Development Bonds
Potential decrease in effect of overlapping debt. Read more.
B. Recovery Zone Facility Bonds
Potential increase in tax base and employment. Read more.
C. Volume Cap for Recovery Zone Economic Development Bonds ($10 Billion) and Recovery Zone Facility Bonds ($15 Billion)
Read more.
III. Provisions of Recovery Act That May Indirectly Disadvantage Illinois School Districts
A. Increase in Bank Qualification Limit
Increase in the amount of bonds that may be designated as bank qualified will increase supply of bank qualified bonds and potentially limit benefit of bank qualification. Read more.
B. Suspension of Alternative Minimum Tax (AMT)
Suspension of AMT applicable to private activity bonds issued in 2009 and 2010 and bonds issued to refund private activity bonds issued in 2004 through 2008--increase supply of tax exempt bonds not subject to AMT. Read more.
C. Prevailing Wage Law
Application of federal prevailing wage law for projects financed with tax credit bonds. Read more. | 