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TEA Correspondence

A Microsoft Word version of this letter is available for download and PRINTING.

April 27, 2007

TO THE ADMINISTRATOR ADDRESSED:

Subject:  Qualified Zone Academy Bond Program for 2006

The Texas Education Agency has been notified by the U.S. Department of Education that the Texas allocation for the Qualified Zone Academy Bond (QZAB) Program is $37,781,000 for calendar year 2006 and $37,781,000 for calendar year 2007. QZAB proceeds are to be used as a funding source for rehabilitating or repairing public school facilities in which an academy is established; providing equipment for use at an academy; developing course materials to be used at the academy; or training teachers and other school personnel in the academy, but not for new construction.

The program allows school districts to obtain interest-free financing for the purpose of establishing “qualified zone academies.” Qualified zone academies are schools or programs within a school, that are located in federally designated Empowerment Zones or Enterprise Communities and whose curriculum is designed through school-business partnerships. The program provides an incentive in the form of federal tax credits to lenders who purchase bonds from issuing school districts. The maximum authorization that may be requested is $8,000,000 per school district per year. For the purpose of the QZAB Program, a “bond” may be in the form of a bond, lease purchase, or time warrant.

There are new restrictions applicable to QZAB, per the Tax Relief and Health Care Act of 2006 (P.L. 109-432).  Issuers must now reasonably expect to spend 95 percent  of the QZAB proceeds within five years of the sale and must expect to enter into a binding commitment with a third party to spend at least 10 percent of the proceeds within six months. Issuers must also comply with arbitrage rebate and information reporting requirements and “The failure to spend required amount of bond proceeds within five (5) years” requirement.

The bond proceeds must benefit a campus with at least 35% of its student population eligible for the federal free and reduced price lunch program, as indicated by the preceding fall Public Education Information Management System economically disadvantaged student count or an individual campus located within a federally designated Empowerment Zone. The Empowerment Zones in Texas are in the following counties:

RIO GRANDE EMPOWERMENT ZONE
Cameron County
Hidalgo County 
Starr County
Willacy County
FUTURO EMPOWERMENT ZONE         
Dimmitt County
La Salle County
Maverick County
Uvalde County
Zavala County  

To apply for QZAB, a campus must obtain written assurance from a business partner designating a contribution of 10% of the total project cost. This partnership will work to create a new academic program at the qualified campus. A campus may partner with a single private entity or with several entities in order to reach the 10% threshold. The 10% contribution may include cash, property or equipment.

We encourage you to review this bond program, consult with legal counsel and bond counsel and make application as appropriate.  You may access the Application Packet from the QZAB website at the following address:

http://www.tea.state.tx.us/school.finance/facilities/qzab.html

If you have any questions, please contact Sam Lester or Gary Marek in the State Funding Division at 512-463-9238.

Sincerely,

Liz Caskey, Director
State Funding Division

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