Build Americas at Lower Subsidy May Aid Revival, Buckley Says

Reducing the subsidy on Build America Bonds would allow the federal government to revive the securities without a loss of revenue, said John Buckley, who helped design the program.

“A lower subsidy has the effect of increasing the overall efficiency of the market,” Buckley told the Bond Buyer’s National Municipal Bond Summit in Miami Beach, Florida, today.

About $187 billion of Build Americas were sold by state and local borrowers to finance infrastructure projects in the two-year program that ended Dec. 31. The federal government reimbursed 35 percent of the interest cost as part of President Barack Obama’s economic stimulus program.

The bonds’ payments to investors are taxable, allowing the U.S. to recoup some of its costs. Republicans, saying the subsidy was too generous, opposed extending the program as a way to reduce the government’s outlays.

The House Ways and Means Committee introduced a bill on March 10 to revive Build Americas. It calls for a 32 percent subsidy this year and 31 percent in 2012.

Buckley, who was the chief Democratic tax counsel for the committee when it passed Build Americas in 2009, urged investors today to press local officials to lobby Congress to reinstate the program.

“Your best lobbyists are not in Washington D.C.; they’re your state and local officials,” said Buckley, who teaches at the Georgetown University Law Center in Washington.

Congress will likely look “very carefully” at a modified Build America program when it considers reauthorizing a federal transportation bill later this year, Rosemary Becchi, who advocates for companies on tax issues at Patton Boggs LLP in Washington, said at the conference today.

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