House members voted 246-178 to approve the measure, HR 4849, the Small Business and Infrastructure Jobs Act. The $19 billion bill includes several tax provisions including the Build America Bonds extension. This bond program was created last year by the American Recovery and Reinvestment Act and extended last week by a jobs measure signed by President Barack Obama. (see March 19 AASHTO Journal story)
"As of this month, Build America Bonds helped state and local governments pay for $78 billion in infrastructure programs, projects that were needed but did not have the funds," said House Majority Leader Steny Hoyer, D-MD. "Build America Bonds assured that they had the funds and created the jobs."
The House bill would further extend Build America Bonds through April 1, 2013, at a cost of $7.5 billion. The bonds allow states and municipalities to finance infrastructure projects with an interest subsidy from the federal government. State and local governments have sold more than 800 Build America Bonds during the program's first year. So far this year, the program accounts for 23 percent of the municipal bond market, according to the U.S. Treasury Department. The bonds are designed to appeal to a broader set of investors than tax-exempt bonds traditionally used by state and local governments.
"The cornerstone, indeed, of this package is an extension of the Build America Bonds program. It's been an effective tool in job creation. It's been a vital resource for state and local governments looking to advance infrastructure programs," said House Ways & Means Committee Chairman Sander Levin, D-MI. "The money goes to local communities for infrastructure, and that creates jobs. That's what finance experts have said about BABs. It's one of the economic recovery effort's biggest successes."
Currently the interest subsidy paid by the federal government to the state or local government issuing the bonds is 35 percent of the bonds' interest costs. That figure would be reduced to 33 percent in 2011, 31 percent in 2012, and 30 percent in 2013 under the House bill approved Wednesday. Obama has separately proposed making the program permanent at a subsidy rate of 28 percent.
Los Angeles is among the jurisdictions hoping to issue Build America Bonds in the coming years. Mayor Antonio Villaraigosa said Wednesday the city hopes to sell as much as $8.8 billion in bonds to jump-start subway and light-rail expansion. The funds could be used to complete 30 years of transit construction projects within a decade. Planned upgrades by the Los Angeles County Metropolitan Transportation Authority include a subway line to the city's west side and a direct rail connection to LAX Airport. Presently the Green Line light rail runs near LAX but travelers must transfer to a shuttle bus to reach the airport.