The Dormitory Authority of the State of New York could issue bonds on behalf of state school districts under the qualified school construction bond program, a new federal program that allocates $22 billion of bond volume cap nationwide over two years for tax-credit bonds.
State Division of Budget spokesman Jeffrey Gordon confirmed in an e-mail that the issue was under discussion but didn't offer more details.
"We're still in the process of talking with DOB to develop a program for New York State's share," DASNY spokesman Paul Burgdorf said, referring to the $192 million QSCB allocation for the state as a whole.
School districts have long had the option of selling bonds on their own or through DASNY's pooled school district building aid revenue bond program.
The state Department of Education is developing regulations for the program that will go to the New York State Board of Regents for approval following a public comment period. The board is a governing body that oversees primary, secondary, and higher education in the state.
"Since it's stimulus money, we're going to try to get an emergency adoption, get something moving in June and July," said Carl Thurnau, director of facilities at the Education Department. "That way, districts can get applications in to us but we won't have that process available until it is approved by the regents."
The Education Department won't make QSCB allocations to school districts until after the application and evaluation process has been approved, Thurnau said.
The federal program was created in the American Recovery and Reinvestment Act of 2009 and allows school districts to sell bonds that give the investor federal tax credits instead of interest. The issuer pays only the principal on the bonds. The QSCBs were created alongside the expansion of the existing Qualified Zone Academy Bond tax-credit program.
The QSCB program was allocated $11 billion in 2009 and will be allocated the same amount next year. New York received four allocations for 2009. The $192 million state allocation excludes three cities that received separate allocations because they were among the top 100 largest school districts in the nation.
New York City was allocated $699.9 million and has already announced plans to get in the market after the U.S. Treasury provides guidance on how the tax credits can be stripped from the bonds' principal payments. Buffalo was allocated $34.4 million and Rochester was allocated $29.5 million.
Charles Bastian, a financial consultant at Bernard P. Donegan Inc. whose clients include upstate school districts, said that they are still waiting to find out what kind of QSCB allocation districts can expect.
"It's certainly on the radar screen," Bastian said. "Once that allocation comes out from the state Department of Education, that's going to start the ball rolling for a lot of folks."
The size of the allocation could make a big difference for districts deciding whether or not to jump into a new program and a new taxable market.
"If there are some districts with some very small allocations, the paperwork process could be overwhelming for the issue size," Bastian said.
With the clock ticking, there's not much time to get the deals together by the end of the year.
"We've already lost half a year here on this year's allocation so there's not a lot of time left," Bastian said. "We cannot issue any bonds until you've gotten state Education Department approval."
Rochester doesn't expect to use its full allocation this year, said Jim Fenton, senior director of operations for the Rochester city school district.
"The question for us this year is timing," Fenton said. "It doesn't look like we're going to be able to use them right away."
The school district may have been able to delay a $12 million issuance in December had they known last year that this option was coming, he said.
"Construction planning happens years in advance," he said. "Next year we have some time so we can definitely plan around that."