Build America Bonds Issuances Surpass $150 Billion

The U.S. Department of the Treasury today released its comprehensive monthly update on Build America Bonds issuances, including state-by-state data, showing that more than $150 billion have been issued through October 31, 2010. Build America Bond issuers benefit from substantial savings in borrowing costs when compared to issuing tax-exempt debt. "In the beginning, Build America Bonds helped fill a critical hole in the municipal finance market left by the financial crisis. Now, Build America Bonds have now become an important source of financing to help state and local governments undertake much-needed infrastructure projects," said Alan B. Krueger, Assistant Secretary for Economic Policy and Chief Economist at the Treasury Department. "That state and local governments have now issued more than $150 billion of Build America Bonds and saved billions of dollars in financing costs in the process is a testament to their success and further evidence that the program should be extended." Market reception for Build America Bonds has been very positive. Between the program launch on April 3, 2009 and October 31, 2010: There have been more than $150 billion in Build America Bond issuances; Build America Bonds now constitute about 21 percent of the municipal bonds market; and There have been a total of 1,912 separate issues of Build America Bonds by local or state governments in all 50 states, the District of Columbia and two territories. A complete list of issuances organized by state is available here. The Build America Bonds program, created by the American Recovery and Reinvestment Act, allows state and local governments to obtain much-needed financing at lower borrowing costs for new capital projects such as construction of schools and hospitals, development of transportation infrastructure, and water and sewer upgrades. Under the Build America Bonds program, the Treasury Department makes a direct payment to the state or local governmental issuer in an amount equal to 35 percent of the interest payment on the bonds. The Obama Administration's FY 2011 Budget proposes to make Build America Bonds permanent with a 28 percent subsidy rate; this rate is estimated to be revenue neutral relative to the estimated future Federal tax expenditure for tax-exempt bonds. The budget also proposes expanding the eligible uses of Build America Bonds to cover a wider range of municipal borrowing, including original financings for public capital projects, current refundings for public capital projects, short-term working capital, and nonprofit 501(c)(3) organization financings. The data contained in this report are compiled by the Department of the Treasury using data available from Bloomberg and are not based on filings with the Internal Revenue Service.