By Joe Mysak
The bonds designed by the U.S. government to help municipalities recover from the worst recession since the Great Depression may cost them millions of dollars in unforeseen borrowing costs instead of saving them money.
Build America Bonds were part of the American Recovery and Reinvestment Act, passed in 2009. The government offered state and local issuers a 35 percent subsidy on interest costs if they sold bonds on a taxable basis, making such financing cheaper than borrowing in the traditional tax-exempt market. Now the Treasury says it will reduce the BAB subsidies by any amount issuers owe the government.
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