A key House Republican is pledging to renew a popular municipal bond program, which is good news for state and local governments that have relied on them in lean revenue years.
Rep. John Mica (R., Fla.), incoming chairman of the House Transportation and Infrastructure Committee, said he wants to introduce a “reincarnation” of the Build America Bond program, which expires on Friday.
The Obama administration started the program as part of its first economic recovery plan in 2009 to help state and local governments finance capital projects in a difficult market for borrowing. The government agencies issued taxable Build America bonds, with the federal government paying 35 percent of the interest.
The money has been used for everything from building college dormitories to rebuilding highways. More than $185 billion in debt was issued nationwide since the program began in April 2009. But Senate Republicans resisted extending it in the tax-cut deal that the president reached with Congress this month.
Pennsylvania has sold about $1.2 billion of the bonds, using much of that money to repair crumbling bridges. The state has a growing backlog of transportation projects, while funding solutions such as tolling Interstate 80 have fallen apart.
Gov. Rendell cited the expiration of the bonds as a prime reason that he requested $1 billion in new borrowing before he leaves office. That request was trimmed to a more reasonable $650 million by state Treasurer Rob McCord for projects that require immediate funding.
Making the bond program available again in the new year would allow Pennsylvania and other government agencies to save money on borrowing costs as capital needs arise.
Build America bonds have worked well. While state and local governments were experiencing a severe decline in tax revenue, the bond sales helped to preserve construction jobs and restore infrastructure.
The bonds, combined with other stimulus money, boosted public construction spending by 2.2 percent in the past year while private construction jobs plummeted.
The state university system in California estimated that it saved $600 million on $3 billion worth of bonds sold. Texas used a portion of its $2 billion of bond sales to rebuild Interstate 35 between San Antonio and Dallas. The city of Washington, D.C., used part of its money to refurbish buses.
The program has helped to create jobs, kept taxes from rising, and provided an attractive income option for investors of moderate means. Renewing the bonds should be a rare opportunity for bipartisan cooperation between President Obama and the incoming House Republican majority in the new year.