May 26, 2007 By Joyce Koballa 3 min read

CONNELLSVILLE – The Connellsville Area School Board learned Monday of an interest-free bond the district would be required to pay back within 17 years in addition to finding a local commitment of 10 percent toward the amount borrowed. The board also learned of the July 31 deadline to apply for it and agreed during a work session they would vote Wednesday on the matter.

John McShane of Ferris, Baker, Watts Inc. provided the board with information on a Qualified Zone Academy Bond Program (QZAB) that he said school districts use to replace typical tax exempt bonds for various projects, such as renovations. The district is looking to renovate the Connellsville Area Career and Technical Center with estimates for the project ranging between $14 to $18 million.

According to McShane, the federal Taxpayers Relief Act of 1997 has a provision that allows certain schools the opportunity to obtain interest free bonds for improvements to their buildings and curriculum.

Once approved, the district can then move forward, but has to follow certain guidelines.

“If you want to borrow the money all you do is pay back the principal,” said McShane.

Since the QZAB has been available, McShane also pointed out that the $40 million in funding allocated each year has generally been taken by Pittsburgh and Philadelphia school districts until the federal government changed the criteria last year to include tier one school districts, such as Connellsville, Uniontown and Brownsville.

To qualify for QZABs, eligible school districts must enter into a public-private partnership, which means the district must have written commitment from the private entity that it will make a qualified contribution to the school no less than 10 percent of the capital provided under the act.

“This is one of the biggest hurdles that keeps schools away,” said McShane.

If and when a qualified school meets the criteria of the public-private partnership and issues bonds in support of the work, the financial institutions involved apply for and receive federal income tax credits in the amount equal to the interest that would be paid under a normal bond.

According to Francis Mongell, board president, administrators have so far garnered 75 percent in local commitments.

If school directors agree to the move, Mongell added the district would apply for $13 to $15 million for the renovation project.

In an unrelated matter, the board plans to vote on a final budget with an $184,500 deficit that will be offset with $200,00 transferred into the district’s capital reserve fund from the fund balance leaving about $3.1 million in that account.

The overall spending plan shows $61,776,200 in revenue and $61,960,700 in expenses.

Gene Cunningham, business manager, said before the transfer, the district is looking at a balance of $650,000 in the capital reserve fund and hasn’t placed money in that fund since 2003-2004.

“We replenished it,” said Cunningham.