Before the bond program expired in 2010, by comparison, only about $180 billion in bonds were issued.
Build America Bonds were created in 2009 as part of that year’s stimulus package. The program gave states and municipalities the ability to issue new taxpayer-backed bonds to raise revenue. Local jurisdictions then received subsidies from the federal government to help cover the interest on the bonds.
The bonds were designed to lower the cost that local governments faced in borrowing money to pay for infrastructure projects while spurring private sector investment.
“They can be a significant way of incentivizing private capital into our infrastructure,” said Republican Sen. Michael Crap of Idaho, the ranking member on the Senate Finance Committee.
POLITICO
Supporters hope for Build America Bonds revival in infrastructure plan
It won’t likely be hard to find buyers for the program, designed to leverage increasing amounts of private funding for public works via taxable municipal debt.
House Ways and Means Chair Richard Neal listed BABs among his own priorities for the infrastructure plan earlier this month. | Jessica Hill/AP Photo
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The push to revive the federally subsidized Build America Bonds program as part of massive infrastructure legislation has investors and issuers champing at the bit.
Their appetite for the bonds, or BABs, was immense when they were briefly issued more than a decade ago by states, cities and local governments unable to finance their projects at reasonable rates during the Great Recession.
The pace of tax-free bond sales could drop this year to a more than two-decade low.
Nic Querolo | Jan 12, 2021
(Bloomberg) America’s municipal-bond market is becoming less of a tax haven.
Interest rates have sunk so low that states and local governments have been flooding the market with bonds that aren’t tax-exempt, allowing them to revive a refinancing tactic that was stripped of its subsidies by President Donald Trump’s 2017 tax-cut law or sidestep federal rules on how the proceeds can be spent.
The volume of taxable municipal-debt sales more than doubled last year to about $140 billion, the most since the Obama administration’s Build America Bond program picked up part of the interest bills on state and local securities to stoke the economy after the recession. At the same time, tax-exempt bond sales declined about 8% to $315 billion, according to data compiled by Bloomberg.
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