Bond-Pooling Program Provides Low-Cost Financing
For those districts seeking to construct, renovate, rehabilitate or acquire land, the National Education Technology Funding Corporation, or "Eddie Tech," has made an innovative program to simplify the process of accessing low-cost financing. Eddie Tech's School Investment Pooled-Securities (SIPS) Program is bringing together tax-credit Qualified School Construction Bonds (QSCBs) and creating larger and more marketable collections that are more desirable for investors. Eddie Tech is a nonprofit organization that was recognized legislatively by Congress in 1996 principally to improve education-technology infrastructure.
QSCBs were introduced in February 2009 as part of the American Recovery and Reinvestment Act (ARRA). These bonds offer a tax-credit and therefore require an investor who isn't interested in a cash return. Throughout 2009, it became apparent there was a small market for such investments. Districts often had to pay lenders supplemental interest, which raised the cost and complicated the process.
"It's the law of supply and demand," says Brett Mandel, executive director of Eddie Tech. "People interested in tax-credit bonds are interested in lots of them. Now we can get their attention because we'll have pools of millions of dollars."
QSCBs have a national limit of $11 billion in each of 2009 and 2010. Forty percent are given to the top 100 largest local education agencies based on the number of children below poverty level, and the remaining 60 percent are given to the states to be allocated to districts. They must be spent on construction, repairs or land for public school property.
"These things are complicated financial instruments," says Mandel. "We've made it a plug-and-play product. Now districts, especially smaller districts, can just plug into the deal and get their money cheaper and easier."
The National Education Association (NEA), the American Association of School Administrators (AASA), and the National School Boards Association (NSBA) partnered in February 2010 to show their support for Eddie Tech's efforts.
"The NEA has estimated that modernizing the nation's schools will cost billions, so we are very excited to promote Eddie Tech's program to help school districts finance construction and renovation," said John Wilson, the NEA's executive director, in a statement responding to the partnership between the organizations.
Anne Bryant, executive director of NSBA, supported the partnership as well. "While we were very pleased to see the dramatic expansion of the tax-credit-bond programs, we were disappointed to hear that many school districts have not been able to take full advantage of cost savings," said Bryant. "We fully support Eddie Tech's efforts and believe they will reduce borrowing costs and help our school boards meet their ongoing challenge to invest in schools."
Eddie Tech is finalizing program details and anticipates issuing the first bond pool in the first quarter of 2010. For more details on Eddie Tech's SIPS program, visit www.eddietech.org.