Report Title:

Education; GO Bond Authorization for QZAB Facilities

 

Description:

Authorizes the issuance of general obligation bonds to pay for a qualified zone academy at the national guard facility on 22nd Avenue on Oahu.

THE SENATE

S.B. NO.

2100

TWENTY-FIRST LEGISLATURE, 2002

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO EDUCATION.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. In 1997, Congress passed legislation making funds available for state governments to issue qualified zone academy bonds to establish qualified zone academies in those areas designated as empowerment zones, enterprise communities, or a designated area serving low and moderate income students as calculated through the National School Lunch Act. In 1999, Congress extended this program making additional funds available in 2000 and 2001. This program was created to help school systems collaborate with business partners to renovate state and school district properties to support educational initiatives that will ensure students are prepared to be competitive in today's global economy.

The fiscal benefits of the qualified zone academy bond program far outweigh the difficulties in the process. Due to the taxable status of the bonds, the issuer is able to set up a sinking fund reinvestment contract that allows interest earnings to help repay the loan. For example, in a situation where the loan amount is $6,000,000 and the repayment period is thirteen years, the structure is a bullet (single payment) maturity due on the thirteenth year. If the issuer receives an investment agreement that yields 6.5 per cent per year, the deposit due on the loan origination day would be $2,646,100.59.

Because the qualified zone academy bond program is a zero interest loan, due to a federal subsidy to the lender, the issuer can borrow $6,000,000 and repay only $2,646,100.59. What this means is that the issuer can leverage its current cash on hand at better than a 2:1 ratio.

The department of education has recently been given access to the former national guard facility located at 475 22nd Avenue, Honolulu, Hawaii, 96816, to work with business partners to develop and provide innovative instructional initiatives that utilize advanced technology and practices.

The purpose of this Act is to authorize the issuance of general obligation bonds and make a one time appropriation to repay the bond issue. The funds will be used for necessary renovation, equipment, infrastructure, professional development, and classroom instructional resources for the national guard and other facilities located at 475 22nd Avenue, Honolulu, Hawaii, 96816. This will enable the department to take advantage of qualified zone academy bond funding to renovate the national guard buildings into a state-of-the-art technology enterprise that will model virtual learning and serve as the department's advanced technology "think tank" to prepare students housed at the former national guard facility to excel in the "dot com" economy.

In addition, the qualified zone academy bond funds will be used to provide competitive grants for similar sites statewide and establish firm partnerships with businesses. The businesses that have committed to the renovation of the national guard facility include Apple Computers, Cisco Systems, Compact Computers Corporation, HelpHawaii, InParadigm Corporation, The Audio Visual Company, Microsoft, 3Com, Design Land Concepts, Oracle Corporation and Tech Corps Hawaii. Other businesses have expressed interest in supporting this effort.

SECTION 2. The director of finance is authorized to issue general obligation bonds in the sum of $          , or so much thereof as may be necessary, and the same sum, or so much thereof as may be necessary, is appropriated for fiscal year 2002-2003, to qualify the financing of the department of education's project at 475 22nd Avenue, Honolulu, Hawaii, 96816 for financing under the federal qualified zone academy bond program.

SECTION 3. The appropriation made from the issuance of general obligation bonds authorized by this Act shall not lapse at the end of the fiscal year for which the appropriation is made; provided that all moneys from the appropriation unencumbered as of June 30, 2005, shall lapse as of that date.

SECTION 4. The sum appropriated shall be expended by the department of accounting and general services for the purposes of this Act.

SECTION 5. This Act shall take effect on July 1, 2002.

INTRODUCED BY:

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