Stone & Youngberg Provides QZAB Expertise to Members of Congress and Department of Treasury; Supporting H.R. 717 to Strengthen Financial Resources Available to the Nation's Schools.

News Editors/Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--March 5, 2003

Jeff Baratta, director at Stone & Youngberg, is heading East this week to meet with California members of the House of Representatives and Senators Barbara Boxer and Dianne Feinstein and their staff in support of H.R. 717. This legislation allocates $2.8 billion for expansion of the existing Qualified Zone Academy Bond (QZAB) program. At the same time, Baratta will meet with the Department of Treasury to discuss technical issues on the QZAB securities. In 2002, Stone & Youngberg, a champion of the QZAB program and one of the West's largest underwriters of tax-exempt local government debt, placed $36.8 million of QZABs in California, which represents 70 percent of the total allocation for that year.

"The QZAB program has been a major success in California and many other states," said Baratta. "However, we could make changes to the current program that would make it more efficient and provide even greater support to our schools especially during these economically challenging times."

President Bush's current budget supports extending the existing program, but H.R. 717 proposes six changes that would strengthen it. In a letter to the Department of Treasury, Mike Vail, chair of the Cal-Fed School Infrastructure Coalition, writes, "The combination of these changes would further facilitate the program's purpose -- the improvement in school facilities and educational facilities."

The legislation proposes stripping the tax credit from the principal which would make the bonds more marketable to a larger market and more of the QZAB proceeds available to schools. The bill also suggests broadening the investor base which would also contribute to the marketability of the bonds.

The current QZAB program allows local school districts to renovate and repair existing school facilities, but H.R. 717 would allow schools to build new facilities with the proceeds. Allowing new construction under the program would provide flexibility in planning and designing school improvements without adding to the cost of the program.

H.R. 717 also proposes allowing expiring QZAB allocations in state's that do not fully utilize their QZAB money to be redistributed to states with high demand for the funds. By redistributing the funds the program would no longer penalize states not fully utilizing their allocation.

In addition, the legislation recommends increasing the annual allocation to $1.2 billion per year to provide critically needed federal assistance to state and local efforts to modernize schools and develop challenging academic programs. And finally, H.R. 717 recommends that states be required to report allocation use.

QZABs are a federal tax credit bond program developed to provide local school districts a financing tool to increase graduation rates, rehabilitate school facilities and upgrade equipment and technology. Since 1998, when the program began, $276 million has been allocated to schools throughout California. Stone & Youngberg has placed 46 percent of that allocation in schools across the State.

Stone & Youngberg has been a champion of the QZAB program from the beginning. In the past Baratta has testified before Congress on the economic benefit the interest-free loans have to both schools and investors. He has also worked closely with the Department of the Treasury to refine the tax credit calculations and helped develop the regulations. Baratta continues to help school officials understand the applicability of this financing tool to their district and has led Stone & Youngberg's QZAB financings.

Founded in 1931, Stone & Youngberg, a fixed-income securities firm and California's leading underwriter of local agency debt, is headquartered in San Francisco and has offices in Los Angeles, San Diego, and Phoenix. The firm is one of the largest underwriters of tax-exempt local government debt in the West, underwriting 153 new municipal bond issues in 2002. In addition, Stone & Youngberg offers financial and wealth management services, including a variety of tax-exempt and taxable securities, to individuals and institutions. Further information is available at buybonds.com.