Build America Bond Subsidies May Be Cut

September 21, 2012

Offices
________________________ Atlanta, Georgia

Issuers of Build America Bonds (BABs) may not receive their full federal subsidies if massive federal budget cuts are implemented under sequestration, or the so-called "fiscal cliff."

Chicago, Illinois Cincinnati, Ohio Columbus, Ohio

Mandatory tax hikes and across-the-board cuts in defense and social programs will be implemented beginning Jan. 1, 2013, unless Congress reaches a new deficit reduction agreement. About $255 million in subsidy payments would be cut for BABs, according to a new projection from the Office of Management and Budget (OMB). State and local governments will have to make up the difference to bond holders, resulting in a revenue shortfall to be absorbed by state and local governments. The OMB also anticipates $62 million in payment cuts for qualified school construction bonds, $3 million for qualified zone academy bonds and $2 million for qualified energy conservation bonds. The BAB program, which ended in 2010, was Covington, Kentucky Denver, Colorado

part of the 2009 economic stimulus plan to boost state and local infrastructure spending. BABs are not tax-exempt; instead the federal government subsidizes 35 percent of their interest costs. If you would like know more about how federal budget deliberations are affecting the bond market, please contact any Peck Shaffer attorney.

Peck Shaffer is a national leader in public finance law and other finance-related activities, with offices in Cincinnati and Columbus, Ohio, Covington, Kentucky, Atlanta, Georgia, Chicago, Illinois, and Denver, Colorado. Peck Shaffer is regularly ranked among the top bond counsel firms in the country (based on principal amount) by information intelligence company Thomson Reuters. More information can be found at www.peckshaffer.com.

www.peckshaffer.com I Peck, Shaffer & Williams LLP I 800.927.2663

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