U.S. Department of the Treasury

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TG-575

Report Details Cumulative, State by State Bond Issuances
Recovery Act Bond Program Boosts Economic Development

WASHINGTON – The Treasury Department today released its monthly comprehensive update on issuances of the Build America Bonds program, including state-by-state data.   The Build America Bonds program is a financing tool created by the American Recovery and Reinvestment Act to allow state and local governments to obtain much-needed funding, at lower borrowing costs, for new capital projects such as construction of schools and hospitals, development of transportation infrastructure, and water and sewer upgrades.

Build America Bonds, which are taxable bonds, are designed to appeal to a broader set of investors than traditional tax-exempt bonds. 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 Build America Bonds.   Potential new investors include pension funds that typically do not hold tax exempt bonds and foreign investors.   These investors have been important additions to the market for municipal debt.

Build America Bonds have changed the landscape of the municipal bond market by opening it to a broader range of investors, said Alan B. Krueger, Assistant Secretary for Economic Policy at the Treasury Department.   Expanding and making this program permanent, as the President proposed in the budget, will further improve the long-term functioning of the municipal bonds market.  

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.  

Market reception for Build America Bonds has been very positive.   Between the program launch on April 3, 2009 and February 28, 2010:

· There have been nearly $78 billion in Build America Bond issuances;

· Build America Bonds now constitute about 20 percent of the municipal bonds market; and

· There have been a total of 929 separate issues of Build America Bonds by local or state governments in 47 states.

A complete list of issuances organized by state is available here.

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.  

Source:   Department of Treasury calculations.  Muni total includes traditional tax exempt bonds, Build American Bonds, and other ARRA bonds.