Sequester will cost district $300K
Much has been written about how sequestration will affect the functioning of the federal government from air traffic controllers, military operations and education among a host of others.
The $85.3 billion in across-the-board spending cuts that comprise the sequester were instituted after a congressional super-committee failed to make a deal to address long-term deficit reduction.
As a result, in addition to taking a cut of more than $200,000 in special education funding, the Warren County School District stands to lose an additional $100,000 associated with the Qualified Zone Academy Bonds utilized to renovate Beaty-Warren Middle School and Eisenhower Middle High School.
Qualified Zone Academy Bonds are low- to no-interest federally insured bonds that can be used to renovate existing school structures, among other uses.
“Schools usually fund large projects, like building renovation or construction, through debt mechanisms such as tax-exempt bonds or loans,” according to the U.S. Department of Education. “School districts must then pay a substantial amount of interest on this debt. For schools serving low income students, QZABs reduce the burden of interest payments by giving financial institutions holding the bonds a tax credit in lieu of interest. The school district must still pay back the amount of money it initially borrowed, but does not have to pay any interest, typically about half the cost of renovating a school.”
So what does it mean for status of the bonds in the WCSD?
“It means that the federal government will reimburse us approximately $100,000 less while the sequestration exists,” Business Manager Jim Grosch said. “In other words, the government was reimbursing us 100 percent back for the interest we pay on the QZAB bonds, thus making them interest free. Because they have issued the sequestration order, we will get approximately $100,000 less than being made whole.”
The board accepted $16.2 million for the renovation of Beaty in 2011 and voted to approve $17,984,000 for the Eisenhower renovations last April. An additional $5.2 million in QZAB bonds was approved last October for use in both projects.