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October 23, 2001 <br /> <br />Recommendation: <br /> <br />· Adoption of a resolution authorizing the issuance and sale of $885,054 Qualified <br />Zone Academy Bonds (QZABs). Adoption of this resolution is necessary in order for the <br />City and Schools to apply for an allocation by the State of interest free bonds for school <br />construction. <br /> <br />Purpose and Need: <br /> <br />· The Federal Taxpayer Relief Act of 1997 added Section 1397E of the Internal <br />Revenue Code to authorize a new type of debt instrument know as a qualified zone <br />academy bond (QZAB). These are taxable bonds issued by a state or local government <br />to be used to improve certain eligible public schools. <br /> <br />· In calendar year 2001, the Commonwealth of Virginia has available approximately <br />$9,900,000 issuing capacity of QZABs, of which, the City of Portsmouth has been <br />allocated $885,054. <br /> <br />· In lieu of receiving interest payments, a holder of a QZAB receives a federal income <br />tax credit for each year the QZAB is outstanding. <br /> <br />· These bonds are "interest free" to the City. <br /> <br />· It is the intent of the School System to use these bonds to fund projects proposed in <br />the School Facilities plan. <br /> <br />Financial Impact: <br /> <br />· QZABs will be general obligation debt of the City. The repayment period for these <br />bonds will be approximately 14 years. <br /> <br />· The issuance of the bonds for school construction projects will be considered an <br />"advance" of future CIP authorizations. <br /> <br />· As these bonds are "interest free", the amount of debt service will be less than that <br />normally projected on general obligation bonds. This will have a favorable impact on <br />the City's goals with respect to debt service as a percent of operating revenues, while <br />accomplishing the same level of debt funding. <br /> <br /> Motion by Mr. Whitehurst, and seconded by Mr. Benn, to adopt the following <br />resolution, and was adopted by the following vote: <br /> <br />"A RESOLUTION AUTHORIZING THE ISSUANCE OF UP TO $885,054 IN CITY OF <br />PORTSMOUTH, VIRGINIA GENERAL OBLIGATION QUALIFIED ZONE ACADEMY <br />BONDS AND SETTING FORTH THE FORM, DETAILS AND PROVISIONS FOR THE <br />PAYMENT TH EREOF. <br /> <br /> WHEREAS, the Council (the "Council") of the City of Portsmouth, Virginia (the <br />"City"), has determined that it is necessary to finance a portion of the public school <br />building renovation, rehabilitation and repair and public school equipment acquisition <br />projects constituting a portion of the City's Long-Term Capital Improvement Program for <br />the Portsmouth Public Schools (the "School Projects"), and that it is necessary and <br />expedient to borrow up to $885,054 and to issue general obligation bonds of the City to <br />provide funds to pay the costs of the School Projects; and <br /> <br /> WHEREAS, a public hearing on the general obligation bonds has been held after <br />notice was published in accordance with the requirements of Section 15.2-2606 of the <br />Code of Virginia of 1950, as amended (the "Virginia Code"); and <br /> <br /> WHEREAS, the federal Taxpayer Relief Act of 1997 added a new section, <br />Section 1397E, to the Internal Revenue Code of 1986, as amended (the "Tax Code"), to <br />authorize a new type of debt instrument known as a qualified zone academy bond <br />("QZAB"); and <br /> <br /> WHEREAS, QZABs are taxable bonds issued by a state or local government the <br />proceeds of which are to be used for qualified purposes with respect to certain eligible <br />public schools; and <br /> <br /> <br />