Recovery Zone Bonds

• The American Recovery and Reinvestment Act (ARRA) stimulus program put in a provision for recovery zone bonds. The bonds are meant to provide favorable financing for construction activities in designated economic recovery zones. The ARRA intended this funding to provide a stimulus effect in these economic recovery zones that, following the "great recession" of 2007 to 2009, have high unemployment and population counts north of 100,000. As some of these cities did not make use of the funding, it has been reallocated, with student housing projects receiving some of the money.
  
  

Financing Benefits

• Besides providing a boost to the local economy, recovery zone bonds provide favorable financing to the universities that use them. Universities typically issue bonds that give investors tax benefits to make them more attractive; this means that the investors are happy with the lower interest rates they get on these tax-exempt bonds. This in turn lowers the university's cost of funding. However, university officials find that the recovery zone bonds provide an even lower cost of funding than other types of financing.
  
  

Missouri Western State University

• Missouri Western State University, for example, has taken advantage of the recovery zone bond financing to partly finance a three-story residential hall complex. The university's plan is for this student housing project to host 245 students. The state has granted the university $5.7 million in recovery zone bond funding for the $15 million project. The university expects to save $787,000 in interest payments over the life of the bonds, thanks to the 45 percent subsidy on the interest the bonds provide.
  
  

University of California Merced

• The University of California Merced is another school benefiting from the allocation of recovery zone bonds to its student housing project. The university is channeling the funding towards the construction of a $ 49.7 million student residence hall. The university is building the 112,000 square foot project to house 350 students at its campus. Considering that the recovery zone bonds provide a financing advantage, the university expects students to benefit in the form of lower rents. UC Merced has had to waitlist students applying for housing and expects the additional space will be useful.