QZAB Summary

What it is: Quality Zone Academy Bonds are noninterest-bearing bonds. The borrowing school district pays the principal back in 15 years.

Where it comes from: The money is part of an annual $400 million federal program, appropriated by Congress. Every State’s share is administered by the State Department of Education, which allots the money on a first-come, first-served or other criteria basis.

Match Partner: A 10 percent match is required from a business or nonprofit partner which can be in cash or in-kind donations. The match partner should work with the school district to set up a QZAB Academy that “prepares students for college or workforce.”

Who is involved: Qualified investors, including financial institutions, brokerages or wealthy individuals receive a tax credit for participating. Generally, banks have bought the QZAB bonds.

Eligibility: Each district's projects must be outlined in the QZAB application. The money can only be used for qualifying schools where 35 percent or more of students are eligible for free or reduced-price school meals or if the school is located in an enterprise community or empowerment zone.

Use of funds: The funds can be used for renovation and repairs, energy efficiency and renewable energy, equipment and technology, curricula development and Professional development (teacher training).

How is it repaid: Through cash flow in the district's general operations budget, or districts may ask voters for general obligations bonds. School Districts can reduce the payments by using money available through energy savings created by the projects the QZABs funded.

The money may be held in an interest-bearing sinking fund account, so the district makes money before the bonds are dispersed for projects. Districts have five years to spend the money and 15 years to repay the bonds.