Bond Accountability Commission 2 Recommendations Page 116

BABs, we feel sure that the “direct subsidy QSCB” will be a more cost efficient option for CMSD. The amount of the subsidy paid by the federal government is the lesser of the otherwise applicable credit rate and the actual interest rate on the direct subsidy QSCB. The Internal Revenue Service also sets maximum maturities for both types of QSCBs. The maximum credit rate and maturity as of March 26, 2010, are 4.39% and 16 years. There is a volume limitation on the amount of QSCBs of either type that can be issued. The Cleveland Municipal School Board received a direct allocation of $53,145,000 in QSCBs for 2009 and, if desired, could have sought more volume allocation from the State. In addition, CMSD received an allocation of $51,058,000 in 2010.123 It should be noted that any allocation for 2009 not used in 2009 could have expired, and CMSD apparently did not have the ability itself to carry the allocation forward to 2010. By contrast, ARRA specifically allowed the State to carry allocation for 2009 forward to next year. CMSD transferred that allocation to the State of Ohio, and the State carried it forward (with the understanding that the allocation would be reallocated back to CMSD in 2010) as a way of preserving CMSD’s 2009 volume cap.

                                                                                                                                                               See also the text accompanying n. 18. 123

CMSD currently plans to use its 2009 QSCB allocation for all or most of a CMSD bond issue in 2010 in the approximate principal amount of $55 million.

The allocation to the States with respect to volume cap available in 2010 also resulted in an award to the State of Ohio of a $293,763,000 allocation. Hume, “Treasury, Education Departments Release QSCB Allocations” (Bond Buyer Online March 17, 2010), with tables of “2010 Allocations to States of Volume Cap for Qualified School Construction Bonds” and “2010 Allocations to Large Local Educational Agencies of Volume Cap for Qualified School Construction Bonds.”