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Bond savings could be realized

Trains enter and leave the underground tracks leading to Penn Station in this 2004 Associated Press file photo. The station operates below Madison Square Garden, the round building at top center, in New York City. The federal government awarded $83.3 million in stimulus money to transform the city’s main post office building into a rail gateway, work also being financed in part by Build American Bonds. Bebeto Matthews for The Associated Press/File

Trains enter and leave the underground tracks leading to Penn Station in this 2004 Associated Press file photo. The station operates below Madison Square Garden, the round building at top center, in New York City. The federal government awarded $83.3 million in stimulus money to transform the city’s main post office building into a rail gateway, work also being financed in part by Build American Bonds. Bebeto Matthews for The Associated Press/File

Municipal borrowers may get a break if the Build America Bonds program is extended, but the savings will be less.

Bills pending in the U.S. House and Senate would incrementally lower a 35 percent interest subsidy to 32 percent in 2011 and 30 percent in 2012.

The Build America Bonds program is part of the American Recovery and Reinvestment Act of 2009. It was designed to help state and local governments access the corporate bond market as banks and other financial institutions became less willing to take on tax-exempt municipal bonds in a challenging market.

Build America Bonds are not tax-exempt, but bond issuers receive a federal subsidy of 35 percent of the interest paid to investors who buy the bonds.

The program was scheduled to end Dec. 31, but pending legislation could extend it through 2012.

Victoria Dillon, press secretary for Rep. Louise Slaughter, D-N.Y., of Fairport, said the measure could come before the Senate today, Wednesday. It was included in the American Jobs, Closing Tax Loopholes and Preventing Outsourcing Act, passed by the House in late May. Dillon said there have been some amendments to the Senate’s version of the bill but they don’t affect the Build America Bonds provision.

“We’re a little uncertain what the vote is going to be,” she said, referring to the Senate version, noting some Washington publications are reporting the vote could fall short of the 60 needed.

She said if it passes the Senate, it could be back in the House as early as later today or Thursday.

“The bill is going to be up in the House by the end of the week,” said Matthew Harakal, press secretary to Rep. Christopher Lee, R-N.Y., of Clarence. “This is part of a package dealing with a number of tax provisions.”

As of April 30, more than $10 billion worth of Build America Bonds had been issued to 33 entities in New York State. Most are in New York City, but the New York State Dormitory Authority has received $2 billion in four separate issues —  two each in 2009 and 2010, including $800 million in May.

Susan Barnett, the authority’s public information officer, said the money is being spent on State University of New York projects throughout the state and for City University of New York.

She said SUNY educational facilities are funded through the Personal Income Tax Revenue Bond Program. As such, the bonds are paid from personal income tax revenues. She didn’t have an immediate savings estimate, but said lower interest costs associated with the bonds would mean the state will pay  less in debt service.

“To date, the current BABs program has been very successful,” Dormitory Authority President Paul T. Williams Jr. wrote in an e-mail. “We support the continuation of the program at subsidy levels, which continue to offer benefits to issuers.”