BRADENTON, Fla. — Fifteen schools across Tennessee will get interest-free loans for capital projects thanks to the qualified school construction bond program afforded by Congress as part of the federal stimulus program, state officials said Tuesday.

The state School Bond Authority sold $212.4 million of direct-subsidy, taxable QSCBs last week with a bullet maturity in 2027, earning an interest rate of 4.84%.

The direct-subsidy payment is equal to 100% of the lesser of the interest payments on the bonds or the tax credit rate that the Treasury Department sets daily.

With the direct-subsidy rate of 4.91% set by the Treasury on the day of pricing, Tennessee’s interest rate on the bonds was lower, so the final subsidized interest rate remained at 4.84%.

“What this means is the communities participating in the qualified school construction bond program this year are getting, in essence, interest-free loans,” said state Comptroller Justin Wilson, who is a member of the SBA board.

Closing on the deal is expected next Thursday. The sale represented the state’s final allocation of QSCBs.

Bond proceeds will be invested in the Local Government Investment Pool until the school districts need funds to cover expenses related to their construction projects.

Interest earnings on the investment of bond construction proceeds will be spent on the qualified school projects.

Last November, the SBA sold its first tranche of QSCBs as tax-credit bonds with a bullet maturity in 2026 for projects in 13 school districts.

Under this method of sale, investors received a tax credit at a rate set by the Treasury on their federal tax returns.

The tax-credit rate on the day of pricing for the $177 million of 2009 QSCBs was 5.86%.

“The market conditions at that time demanded a supplemental coupon of 1.51% to the investors,” state finance officials said.

The final interest rate on the 2009 QSCBs was 1.51%, which means that the tax-credit method of financing was more costly than the direct-subsidy bonds sold last week.

“The 2009 program is still a very good deal for the program participants,” officials said.

Tennessee was one of several states that established a pool bond program to sell all federal allocations of QSCBs to reduce financing costs to school districts.

The 2009 QSCBs were rated Aa3 by Moody’s Investors Service and AA by Standard & Poor’s. Barclay’s Capital Inc. was the book-runner.

The 2010 QSCBs were rated Aa2 by Moody’s and AA by Fitch Ratings and Standard & Poor’s. Citi was the book-runner on last week’s pricing.

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