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A r c h i v e d  I n f o r m a t i o n

The Administration's School Construction Package:
$1.3 Billion Loan and Grant Proposal for Renovations and Repairs
$24.8 Billion for New Construction and Major Renovations

Loan and Grant Proposal: This $1.3 billion initiative would leverage over $6.7 billion of renovation projects through grants and loans to high-need school districts with little or no capacity to fund urgent repairs. Over five years, the program would leverage $33.5 billion, enough to help up to 25,000 schools. Both loans and grants would be made available, with the smaller grant program directed toward the neediest districts.

Tax Credit Bond Proposal: The President's School Modernization Bond proposal provides $24.8 billion in tax credit bonds (including $2.4 billion for Qualified Zone Academy Bonds, [QZAB's] -- see below) over two years to build and modernize up to 6,000 schools. Many states and school districts issue tax-exempt bonds to raise money for school construction. Bond buyers essentially agree to loan money to the state or the school district, with the understanding that the money will be paid back with interest over a number of years. Interest payments take a big chunk out of the pocketbooks of local taxpayers.

  • The interest on a typical 30-year tax-exempt bond almost equals the amount borrowed. Even on less typical 15-year tax-exempt bonds, the interest is still significant—totaling about 65 percent of the amount borrowed.

The Administration is proposing to create a new type of bond that states and school districts could use to pay for school construction and modernization. The Federal Government would provide tax credits to bond holders in lieu of interest payments on School Modernization Bonds, and the state or school district would only be responsible for repaying the principal. This proposal would save millions of dollars in interest payments for states and districts. These savings will help communities stretch their limited resources to pay for additional school construction.


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Last Updated -- April 3, 2000 (mhm)