School stimulus jobs in the works
by Ry Rivard
CHARLESTON, W.Va.–The West Virginia School Building Authority entered the bond market on Thursday.
A rather unremarkable fact, perhaps, except that last year the bond market choked up and nearly shut down during the economic downturn.
But in a deal signed Thursday afternoon with Guggenheim Partners, LLC, an international financial services company, the state will have $30 million to spend for school repairs starting July 23.
The money will fund renovations, roofing projects and new heating, ventilating and air conditioning units at 38 schools across the state.
But the deal is more than that.
The state’s move into the market is due in part to financial wizardry in the massive federal stimulus package passed this spring.
The deal is also a key local test of the Obama administration’s $787 billion spending plan, formally known as the American Recovery and Reinvestment Act.
The first test of the stimulus package is whether or not it does what it says it will: stimulate the economy by creating jobs.
Mark Manchin, the building authority’s executive director, said contracts have already been signed so that construction can begin immediately on all the repair projects once the bond money arrives in late-July.
He said that by mid-August, people would be working as a result of the deal.
“You’ll see people on roofs around the state of West Virginia within a week, 10 days of that,” Manchin said.
The state, like states across the country, is likely to be getting a good deal. Both labor and material costs are down because of weak demand.
A second test will be of the way the bonds are funded, which is through an innovative financial arrangement.
Typically bonds work like car or home loans. They require someone who wants money for something now - like a new school - to agree to pay interest on top of what they were loaned. That interest ends up costing them a lot more money then if they could have just bought everything outright.
But the bonding capacity being used by the building authority takes advantage of a part of the stimulus package that uses the federal tax code to entice investors like Guggenheim to put money into public projects. The company is being given a federal tax credit for not charging the state interest.
So instead of collecting interest from West Virginia, Guggenheim will collect tax credits.
This encourages investors to loan money. It also makes it easier for states to get a good deal on their bonds because the interest on a multi-million bond can itself be millions.
“This is the cheapest money the School Building Authority has ever had the opportunity to work with schools,” Manchin said.
It has taken awhile for these new arrangements, called qualified school construction bonds, to take off. So far, West Virginia appears to be the first state to use the new bonding capacity, though several municipal school districts across the country have entered into similar deals.
Some legislatures across the country even had to change laws to allow school districts to take advantage of the stimulus package arrangements, said Judy Marks, associate director of the National Clearinghouse for Educational Facilities, a project of the U.S. Dept. of Education.
* Schools slated to receive money from the School Building Authority for facilities additions and/or renovations are: Brookview Elementary in Boone County, Flatwoods Elementary in Braxton, Fairplain Elementary in Jackson, University High in Monongalia, Scott Teays Elementary in Putnam, Shady Spring Middle in Raleigh, Elkins Middle in Randolph, Buffalo Middle in Wayne and Parkersburg High in Wood.
* Schools to receive funding for heating, air conditioning and ventilation repairs or for energy-conserving projects are: Maysville Elementary in Grant County, Oak Glen High in Hancock, Fairmont East High in Marion, Madison Elementary in Ohio, Woodrow Wilson High in Raleigh, Summers County Middle in Summers, Davis Thomas Elementary and Middle in Tucker, three schools in Tyler, Glade Elementary and Middle in Webster and New Martinsville School in Wetzel.
* Schools expected to receive funds for roofing repairs are: Philip Barbour High in Barbour, Nellis Elementary in Boone, Burnsville Elementary in Braxton, Arnoldsburg School in Calhoun, Clay Middle in Clay, Gilmer County High in Gilmer, East Hardy High School in Hardy, South Harrison High in Harrison, South Charleston High in Kanawha, Frankfort High in Mineral, Paw Paw High in Morgan, Preston High in Preston, Buffalo Elementary in Putnam, Stratton Elementary in Raleigh, Washington District Elementary in Upshur, Vinson Middle in Wayne and Webster Springs Elementary in Webster.
But Marks said the school construction bonds and several other tax-credit bonds included in the stimulus package are changing the face of the municipal bond market.
“It seems to be a win-win for everybody,” Marks said.
Manchin said the state was able to move quickly because last year the Legislature changed the law so the building authority could back bonds with excess lottery revenue.
Still, the financial arrangement is different from what some state officials had originally expected. In the early drafts of the stimulus package was about $100 million in money for West Virginia school construction, with few strings attached. Then the U.S. Senate balked and took the money out.
Several members of Congress, including Sen. Jay Rockefeller, D-W.Va., fought to include school construction bonds, which use a financing arrangement modeled after a piece of legislation the senator has long touted, the America’s Better Classroom Act.
Rockefeller said he was glad to see West Virginia taking advantage of the bonds.
“I am thrilled that West Virginia will very soon begin to benefit from the school construction bonds I fought to include in the Recovery Act - and it’s terrific news that ours is the first state to put this funding in to action,” Rockefeller said.
“Safe, modern, energy-efficient schools will not only better prepare our students for the future, but also generate thousands of badly-needed construction jobs along the way. That’s a surefire recipe for new and long-term economic growth.”
Contact writer Ry Rivard at ry.riv…@dailymail.com or 304-348-1796.
-READ MORE STORIES BY CLICKING THE ARCHIVES TAB ON THE www.challengewv.org HOMEPAGE-