New York City plans to begin selling its first qualified school construction bonds by May, the comptroller’s office said last week.
The U.S. Treasury and Education departments last week announced that the city received a $664 million allocation of QSCBs for 2010 — the largest allocation for a municipality out of $11 billion divided among states and municipalities with large school districts.
“We currently expect the full allocation will not be sold in one bond issue, but will be incorporated into a number of issues, together with other taxable and tax-exempt bonds,” Greg Bell, spokesman for City Comptroller John Liu, said in an e-mail. “We have not finalized a QSCB plan of finance, but currently expect both [general obligation bonds and New York City Transitional Finance Authority debt] will be used.”
Changes to the QSCB program enacted in the jobs bill signed last week by President Obama make the securities more like Build America Bonds in that the issuer can now receive a direct subsidy from the federal government.
When the new class of bonds were created last year under the American Recovery and Reinvestment Act, they offered investors a tax credit instead of interest and were meant to give school districts a means of borrowing that was effectively interest-free.
The market for the tax-credit bonds didn’t materialize as envisioned and some issuers had to add an interest coupon or offer the bonds at a discount in order to attract buyers.
The Treasury Department allocated $11 billion of QSCBs to state governments and large municipalities last year, but only $2.8 billion of that told were issued through Dec. 31, 2009, according to Thomson Reuters.
New York City did not issue its $699 million allocation of QSCBs last year because the market hadn’t developed.
