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Qualified Zone Academy Bond (QZAB)

In a February 1999 issue of The Bond Buyer, the national trade publication for the municipal bond industry, school districts from Oklahoma were recognized as issuers of Qualified Zone Academy Bonds through a program offered by McDonald & Associates. The Bond Buyer article noted that Oklahoma school districts are among the very few nationally which have been able to access the Qualified Zone Academy Bond (“QZAB”) program. In fact, the nine school districts from Oklahoma which had issued QZABs represented at that time three-fourths of the entire number of districts in the country which have issued the obligations. The article noted that Oklahoma school districts were extremely limited by two factors:

  1. The only form of issuance available was through lease-purchase obligations
  2. The maximum size of the obligations under the rules promulgated by the State Board of Education was $1,000,000

Since the date of that article, an additional 40 issues of QZABs have been closed by McDonald & Associates. All of those issues have been for amounts of $1,000,000 or less each. McDonald & Associates still has completed more issues of QZABs than any other firm in the United States. In addition, it is the only firm known to have completed and delivered QZAB issues for small and rural school districts or to utilize a lease-purchase structure in conjunction with the QZABs. The size of those issues range from $166,000 to $1,000,000 and they average less than $425,000 each.

The professionals of McDonald & Associates began in the Spring of 1998 working with officials at the State Department of Education to enable Oklahoma school districts to arrange lease-purchase financing at rates significantly below those available even for general obligation bonds. What followed was a five-month process involving discussions about the program, drafting of proposed regulations, review and adoption of the emergency regulations (and approval of the regulations by the Governor), applications by school districts and approval of allocations by the State Board. During that process, McDonald & Associates worked with potential investors to develop a structure acceptable to the investors while, at the same time, offering an investment return which met the needs of the investors and the school districts. At each step during which documents were prepared and spreadsheets were created, the firm was required by the investors to evidence that the documents met state and federal law and that the spreadsheets accurately reflected total investor return. This time-consuming process required hours of consultation with U.S. Treasury officials responsible for the implementation of the QZAB program and the development of the program’s regulations.

McDonald & Associates is extremely proud to be associated with the QZAB program. The firm’s professionals have over the years been responsible for a number of innovative programs designed to benefit its school district clients. The QZAB program is simply one of the most recent of those innovations.

If you have any questions, please contact Ryan McDonald.

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