ABCsOFSCHOOLFUNDING-InternalRevenueService.PDFVIP

The ABCs of School Funding ABC’s OF SCHOOL FUNDING By Karen Skinder 1. Introduction Section 422 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“the 2001 Act”) provides for a new type of exempt facility bond called Qualified Public Education Facility Bonds. While the provision allowing for these bonds is IRC section 142(a)(13), section 142(k) provides the rules for these bonds. What is the effective date of section 142(a)(13) and how long does it last? Bonds may be issued pursuant to section 142(a)(13) after December 31, 2001. There is a sunset provision which provides that section 142(a)(13) (as well as ALL provisions and amendments made by the 2001 Act) shall not apply to bonds issued after December 31, 2010. What are these Bonds? IRC section 142(a)(13) basically allows for “public-private partnerships” between school districts and private developers. How do these partnerships work? The bond proceeds are loaned to a private for-profit developer, who builds the school. The school is then leased to the school district on a long-term basis. The cost of the lease is less than the cost of construction. For detailed information about how this works, see Exhibit A (reprinted with the permission of the Heritage Foundation). Because the developer actually owns the property, the Developer makes up the difference between the loan amount and the lease amount by leasing out the school building in the off-hours. Advantages to school district? The school district gets a school built much faster, and at a lower cost. 63 Continuing Professional Education Tax-Exempt Bonds Technical Instruction Program for FY 2003 Advantages to developer? The developer’s profit is