EDU-35-10-00019-RP Qualified School Construction Bonds (QSCB) and Qualified Zone Academy Bonds (QZAB)

11/17/10 N.Y. St. Reg. EDU-35-10-00019-RP

NEW YORK STATE REGISTER

VOLUME XXXII, ISSUE 46

November 17, 2010

RULE MAKING ACTIVITIES

EDUCATION DEPARTMENT

REVISED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. EDU-35-10-00019-RP

Qualified School Construction Bonds (QSCB) and Qualified Zone Academy Bonds (QZAB)

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following revised rule:

Proposed Action:

Amendment of section 155.22 of Title 8 NYCRR.

Statutory authority:

Education Law, sections 101, 207, 305(1) and (2); and 26 USC sections 54E and 54F

Subject:

Qualified School Construction Bonds (QSCB) and Qualified Zone Academy Bonds (QZAB).

Purpose:

Establish criteria for QSCB and to update QZAB provisions.

Substance of revised rule:

The Commissioner of Education proposes to amend section 155.22 of the Commissioner's Regulations, effective December 8, 2010, relating to Qualified School Construction Bonds issued pursuant to 26 USC section 54F and Qualified Zone Academy Bonds issued pursuant to 26 USC sections 1397E and 54E. The following is a summary of the substance of the proposed amendment.

Section 155.22 is revised to organize the regulation into subdivision (a), relating to Qualified Zone Academy Bonds, and subdivision (b), relating to Qualified School Construction Bonds. The provisions relating to Qualified Zone Academy Bonds (QZAB) are revised to provide for a separate Charter school allocation from the QZAB State limitation amount. The QZAB provisions are also updated to include QZAB issued under 26 USC 54E, as added by Pub.L. 110-343, 122 Stat. 3765, 3869. Prior to the addition of section 54E, QZAB were issued pursuant to 26 USC section 1397E.

Provisions relating to Qualified School Construction Bonds (QSCB) are established in section 155.22(b).

Section 155.22(b)(1) sets forth the purpose of the subdivision, to establish procedures for the allocation and issuance of QSCB as authorized by 26 USC section 54F.

Section 155.22(b)(2) sets forth definitions for terms used in the subdivision.

Section 155.22(b)(3) establishes procedures for allocating respective amounts of the QSCB State limitation amount to local educational agencies LEAs), including provisions for allocating to the large city school districts, charter schools, and all other LEAs.

Section 155.22(b)(4) establishes procedures for making adjustments for unused allocations.

Section 155.22(b)(5) requires QSCB to be used within three years after issuance.

Section 155.22(b)(6) requires that capital construction projects to be financed through the issuance of QSCB must be submitted for review to the Office of Facilities Planning in the State Education Department.

Section 155.22(b)(7) provides that capital construction projects funded in whole or in part with QSCB and involving the repair, renovation or alternation of public school facilities that are approved by the Commissioner, shall be eligible to receive building aid pursuant to the provisions of Education Law section 3602(6).

Revised rule compared with proposed rule:

Substantial revisions were made in section 155.22(a)(3), (b)(3) and (4).

Text of revised proposed rule and any required statements and analyses may be obtained from:

Chris Moore, State Education Department, Office of Counsel, State Education Building Room 148, 89 Washington Ave., Albany, NY 12234, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

John B. King, Jr., Senior Deputy Commissioner P-12 Education, State Education Department, State Education Building Room 125, 89 Washington Ave., Albany, NY 12234, [phone], email: [e-mail]

Public comment will be received until:

30 days after publication of this notice.

Revised Regulatory Impact Statement

Since publication of a Notice of Proposed Rule Making in the State Register on September 1, 2010, the proposed rule has been substantially revised as follows:

Clause 155.22(a)(3)(i)(b) and clause155.22(b)(3)(iii)(a) have been revised to increase the total allocation amounts for charter schools of Qualified Zone Academy Bonds (QZAB) and Qualified School Construction Bonds (QSCB) to be not less than $2,000,000 for QZAB and not less than $5,000,000 for QSCB.

Subparagraph 155.22(b)(3)(ii) has been revised to increase the maximum QSCB limitation amount for the Syracuse and Yonkers city school districts to $15 million.

Subparagraph 155.22(b)(4)(i) has been revised to ensure consistency with a June 11, 2010 policy letter of the U.S. Department of Education, by clarifying that QSCB limitation amounts carried forward to successive calendar year(s) by a large local educational agency shall not be included in the amounts to be reallocated by the Commissioner pursuant to that subparagraph.

The above revisions do not require any changes to the previously published Regulatory Impact Statement.

Revised Regulatory Flexibility Analysis

Since publication of a Notice of Proposed Rule Making in the State Register on September 1, 2010, the proposed rule has been substantially revised as set forth in the Statement Concerning the Regulatory Impact Statement filed herewith.

The aforesaid revisions do not require any changes to the previously published Regulatory Flexibility Analysis for Small Businesses and Local Government.

Revised Rural Area Flexibility Analysis

Since publication of a Notice of Proposed Rule Making in the State Register on September 1, 2010, the proposed rule has been substantially revised as set forth in the Statement Concerning the Regulatory Impact Statement filed herewith.

The aforesaid revisions do not require any changes to the previously published Rural Area Flexibility Analysis.

Revised Job Impact Statement

Since publication of a Notice of Proposed Rule Making in the State Register on September 1, 2010, the proposed amendment has been substantially revised as set forth in the Statement Concerning the Regulatory Impact Statement.

The proposed amendment, as so revised, will not have an adverse impact on jobs or employment opportunities. Because it is evident from the nature of the revised proposed amendment that it will have a positive impact, or no impact, on jobs or employment opportunities, no further steps were needed to ascertain those facts and none were taken. Accordingly, a job impact statement is not required and one has not been prepared.

Assessment of Public Comment

Since publication of a Notice of Proposed Rule Making in the State Register on September 1, 2010, the State Education Department received the following comments:

1. COMMENT:

Proposed section 155.22(b)(4)(i) would appear to allow Qualified School Construction Bond (QSCB) limitation amounts that are allocated by the Federal government directly to the Buffalo and Rochester city school districts, as large local educational agencies (LEAs) pursuant to 26 USC section 54F(d)(2), to be re-directed to the State if unused in any calendar year. This is contrary to a June 11, 2010 policy letter from the U.S. Secretary of Education, which permits large LEAs that receive direct allocations to maintain them without limitations, whether the district had reallocated such allocations to the State or not. Section 155.22(b)(4)(i) should be deleted to permit the Buffalo and Rochester school districts to maintain their respective direct QSCB allocations for their individual district needs.

2. DEPARTMENT RESPONSE:

Section 155.22(b)(4)(i) provides that: "in the event a local educational agency that received a direct allocation pursuant to 26 USC section 54F(d)(2) for any calendar year, reallocates such allocation to the State pursuant to 26 USC section 54F(d)(2)(D) for such calendar year, the commissioner may adjust the amounts allocated. . . as needed to assure that the State limitation amount for such calendar year is exhausted." The purpose of this provision is to ensure maximum usage of QSCB amounts by permitting reallocation of unused amounts to school districts that are able to use such amounts in a given calendar year. The provision is consistent with 26 USC section 54(d)(2)(D), which provides that a large LEA may reallocate its unused direct allocation to the State, and that any amount so reallocated to the State may be allocated by the State to QSCB issuers within the State.

We disagree with the comment's contention that the June 11, 2010 policy letter from the U.S. Secretary of Education "permits large LEAs that receive direct allocations to maintain them without limitations, whether the district had reallocated such allocations to the State or not [emphasis added]." The applicable provision of the policy letter states "[i]f a QSCB allocation to a State or a large LEA is unused for a calendar year, the State or large LEA, respectively, may carry it forward to the next calendar year, increasing the following year's limitation [emphasis added]", and further provides that "[t]here is no limitation on the number of years to which unused allocation may be carried forward." Use of the term "respectively" means that a State may carry forward unused amounts allocated to the State and a large LEA may carry forward unused amounts allocated to such large LEA. However, if the large LEA reallocates its amount to the State pursuant to 26 USC section 54F(d)(2)(D), such amount becomes part of the State's allocation.

Nevertheless, the provision in section 155.22(b)(4)(i) is not meant to prohibit or restrict a large LEA from carrying forward its allocation amount to a successive calendar year or years, as provided for in Secretary's policy letter. In order to clarify the intent of the provision, section 155.22(b)(4)(i) has been revised to state that the ". . . commissioner may adjust the amounts allocated pursuant to paragraph (3) of this subdivision as needed to assure exhaustion of the State limitation amount for such calendar year (excluding any amounts carried forward to a successive calendar year or years by the State or a large LEA)."

2. COMMENT:

Proposed section 155.22(b)(3)(ii) would provide the Syracuse and Yonkers city school districts direct QSCB allocations by the State of up to $10 million each in the 2010-2011 school year. This amount should be raised to $80 million for the Syracuse city school district and $50 million for the Yonkers city school district, in order to more fairly reflect the size and scope of these districts and to account for the extent of construction and reconstruction work such school districts anticipate for this school year.

DEPARTMENT RESPONSE:

The Department disagrees that the Syracuse and Yonkers allocations should be increased to $80 million and $50 million respectively. These amounts would represent 73% of the available funding for two districts educating only 3% of the State student population. Additionally, Syracuse and Yonkers do not rise to the level of the federal largest 100 school districts, yet the requested amount for Syracuse is 20% greater than Buffalo would receive and 40% greater than Rochester, and greater than the amounts received by 85% of the federal largest 100 school districts. This is not acceptable to the Department.

However, upon further consideration, the Department believes that some increase in the QSCB allocation limitation amount is warranted. A review of the largest 100 school districts nationwide that received direct federal allocations indicates the districts received amounts in proportion to their shares of the Title I basic grant funds. Applying the same proportional strategy to Syracuse and Yonkers would increase their maximum limitation amounts to $15 million each. The proposed rule has been revised to reflect this higher amount.