Authorizes the issuance of general obligation bonds to pay for a Qualified Zone Academy at the National Guard Facility on 22^nd Avenue on Oahu.

A BILL FOR AN ACT

SECTION 1. In 1997, Congress passed legislation making funds available for state governments to issue Qualified Zone Academy Bonds (QZAB) to establish Qualified Academy 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/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.

It is the purpose of this Act 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 QZAB 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 National Guard facility to excel in the "dot com" economy.

In addition, the QZAB 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 2001-2002, to establish the department of education's Qualified Zone Academy located at 475 22nd Avenue, Honolulu, Hawaii 96816.

SECTION 3. The sum appropriated shall be expended by the department of accounting and general services for the purposes of this Act.

SECTION 4. This Act shall take effect on July 1, 2001.