3 Stanislaus County school districts hit jackpot on bonds

Three Stanislaus County school districts won a lottery to help fund school construction projects more economically.

Winners are authorized to sell bonds, but they won't have to pay interest on them. Investors who buy the bonds will receive tax credits from the federal government instead of interest payments from the districts.

Modesto City Schools can sell $25 million in bonds. It plans to use part of the money for construction of Gregori High School in Salida.

Riverbank Unified School District can issue $25 million in bonds, and Sylvan Union School District in Modesto got $3 million.

The bonds can be spent on construction, renovation and repair of school facilities, buying land on which public schools will be built, and buying equipment related to the construction or renovation.

The state Department of Education held the lottery because requests exceeded funding for the bonds, which must be issued from a district's previously approved school construction funds.

More than 40 school districts were selected via lottery Aug. 25 as recipients of $700 million in Qualified School Construction Bond tax credits. More than 230 applications were submitted totaling $3.7 billion in requests.

The Qualified School Construction Bond gives federal income tax credits in lieu of interest to lenders who purchase bonds from school districts.

The program is funded through the American Recovery and Reinvestment Act.

Help for shortfall

The $25 million will help Modesto schools officials cover a funding shortfall of $10 million to build Gregori. The $150 million, 80-acre school is set to open to freshmen and sophomores in fall 2010.

Officials were looking at borrowing to fill the gap, but this is cheaper because the district will pay no interest on the money, said Dennis Snelling, director of business services.

"We're looking for the most cost-effective option," he said. "This frees up money for other stuff and can possibly help with the budget deficit."

Officials are deciding how to use the remaining $15 million.

Riverbank officials are considering buying land for an elementary or middle school, installing solar panels to help cut energy costs, and performing small renovation projects such as updating science labs, Superintendent Ken Geisick said.

Sylvan officials aren't sure how they might put their bonds to use.

Bee staff writer Michelle Hatfield can be reached at mhatfield@modbee.com or 578-2339.