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U.S. Tax: US Treasury Releases New Build America Bonds Data

Recovery Act Bonds Program Provides $106 Billion Nationally to Date, Estimated to Save State and Local Governments Billions Compared to Tax Exempt Bonds
WASHINGTON - The U.S. Department of the Treasury today released its monthly comprehensive update on Build America Bonds issuances, including state-by-state data, showing $106 billion has been issued through May 31, 2010.  Build America Bond issuers benefit from substantial savings in borrowing costs when compared to issuing tax-exempt debt. 

"More than $100 billion in Build America Bonds has been issued by a broad range of state and local governments, demonstrating their continued popularity with both issuers and investors," said Alan B. Krueger, Assistant Secretary for Economic Policy and Chief Economist at the Treasury Department.  "Build America Bonds have had a very strong reception from state and local governments as a way to provide financing for critical building projects in a way that minimizes costs for taxpayers." 

Build America Bond issuance in the first 12 months of the program will save state and local governments across the country an estimated $12 billion in net present value relative to what they would have paid had they issued tax exempt bonds, according to a Treasury analysis.  For example, as of May 31, 2010, issuers in the state of Wisconsin have issued $1.32 billion in Build America Bonds in 95 separate issues - yielding a net present value savings to Wisconsin taxpayers from the Build America Bonds program of approximately $29 million, according to Treasury analysis.

"The American Recovery and Reinvestment Act has helped every state, including Wisconsin, deal with the most difficult national economic times since the Great Depression, while paving the way for future economic growth," Governor Jim Doyle said. "Through Build America Bonds, we have a powerful tool to help Wisconsin communities save money, invest in important projects that create jobs, and chart a path toward recovery.  Wisconsin is putting to work over $1.3 billion in Build America Bonds - saving our taxpayers tens of millions of dollars and making long-term investments to provide clean water, highways, higher education, and other critical infrastructure projects."

Market reception for Build America Bonds has been very positive.  Between the program launch on April 3, 2022 and May 31, 2010:

- $106 billion in Build America Bonds has been issued;  
- Build America Bonds now constitute 21 percent of the municipal bonds market; and
- There have been a total of 1,306 separate issuances of Build America Bonds by local or state governments in 49 states, the District of Columbia and two territories.

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 (IRS).

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