About the Qualified School Construction Bond Program
In 2009, the General Assembly authorized the Authority to issue Qualified School Construction Bonds (“QSCB”) pursuant to program requirements approved by the Congress of the United States in Section 1521 of the American Recovery and Reinvestment Act of 2009. The QSCB program is a part of a federal government program designed to allow schools to borrow funds at minimal interest cost to the borrower. Under the 2009 program, bondholders receive a federal income tax credit along with a supplemental interest payment. Under the 2010 program, the federal government will subsidize the interest on the bonds. The bonds were issued under the provision of the Authority’s Qualified School Construction Bonds General Bond Resolution. The bonds are not supported by either the 1967 Resolution or the 1998 Resolution for Higher Education Facilities. The Authority was authorized to issue QSCBs pursuant to the Tennessee State School Bond Authority Act, Title 49, Chapter 3, Part 12. Tennessee Code Annotated, as amended.
The QSCB program provides loans to local governments to fund new construction, renovation and rehabilitation of schools, as well as the purchase of land and equipment for use in a qualified project. Funding for the QSCB program is limited to the amount allocated by the federal government.
Under the QSCB program, loans with local governments are direct general obligations of the local government for payment of principal and interest to which the local government has pledged its full faith and credit. As additional security for the loans, there is also pledged the borrower’s unobligated portions of State taxes that are by statute to be shared with the local governments.