The San Mateo Union High School District has been awarded $25 million in federal Qualified School Construction Bond (QSCB) tax credits as a result of Obama’s stimulus package, which could save district taxpayers $6 million, according to Elizabeth McManus, District Deputy Superintendent of Business Services.
According to a recent district newsletter, Tom Tolarkson, California state superintendent of public instruction, announced on Jan. 14 that 61 districts in California would receive money from Obama’s stimulus package, the American Recovery and Reinvestment Act (ARRA). In total, the federal government issued $848 million in tax credits.
The stimulus was passed to help the economy, explained McManus, who applied for the money in October. The QSCB tax credits are meant to be spent for construction purposes only.
“The $25 million from the federal government for QSCBs will only go toward the building of three projects in our district, including one project at Aragon—the building of a new performing arts theater. The $25 million will be split roughly evenly between these three projects,” she said.
Stephen Rogers, president of the SMUHSD board of trustees, explained further how the QSCB tax credits work, stating, “Selling bonds is like borrowing money. When the district sells bonds, there is a principal amount plus interest that the district must pay back. Usually, taxpayers pay the district in property taxes so that the district has money to pay back. In this case, the federal government is saying that it will pay for some or all of the interests, meaning the taxpayers do not have to pay as much for the interest. The net result is that the district can borrow money at a lower interest rate; this creates a savings for taxpayers.”
School districts usually pay annual payments to the lenders. However, a qualified school construction bond’s principal is paid off in one payment at the maturity of the bond. McManus added, “The San Mateo Treasurer’s Office will most likely set a tax rate so that we set aside a fund for 17 years, so that the money exists to repay the federal government. That way, we don’t have a tax hike in one year to pay off the principal amount.”
According to the district newsletter, the interest of a bond can be worth as much as half of the total price of the bond. McManus estimates that savings to taxpayers could come out to about $6 million. “It is important to note that we are not getting $25 million in free money. Rather, we are borrowing $25 million as a principal amount. This money, however, will come at a reduced interest rate, saving taxpayers $6 million that would have been paid if the federal government did not agree to pay the interest.”
Even if the district had not been awarded the money, construction would have continued, she said. If a school wants to go forward with a construction project, it must first be approved by the Division of the State Architect, or the DSA.
“Because the stimulus package wanted to provide work quickly, it gave districts extra points on the application if they had DSA-approved projects. In other words, the stimulus preferred districts with ready-to-go projects. Since I applied for the money using all pre-approved projects, all three projects were prepared before we received this money” said McManus.
Rogers added that the Board of Trustees must approve the construction and give financial approval before the project can begin.
Although $25 million was the limit for how much money a district could apply for, McManus noted that there are other ways of financing projects. She used construction projects at Aragon as an example.
According to McManus, Kurtz and other Aragon administrators have already received $1.4 million from state CTE grants toward the construction of a two-story industrial arts and biotech building. For comparison, the new performing arts theater is expected to cost $14.3 million.
The district also applied for government bonds for clean energy for solar energy, but was not rewarded money for it. As a final note, McManus said, “We always try to save our taxpayers money.”
