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related to Recovery Act spending and allows for the reporting of potential fraud, waste, and abuse.

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Recovery Subsidized Bonds Helped States Raise Cash
Artist's rendition, left, of completed San Francisco-Oakland Bay Bridge seismic retrofit project, currently under construction, at right.

Workers clear and prepare ground for San Francisco-Oakland Bay Bridge seismic retrofit project.

The Build America Bonds (BABs) program was launched in April 2009 by the Recovery Act to help states and cities borrow money for infrastructure projects.  The program raised more than $186 billion before it concluded at the end of 2010.

Build America Bonds are federally subsidized municipal bonds, which are routinely issued by state and local governments to raise cash for public works projects. But when the credit crisis struck at the onset of the recession in 2008, investors who normally buy municipal bonds withdrew from the market.  BABs was created in response.

Using Recovery funds, the federal government covered 35 percent of the interest payment on BABs, and state and local governments had the option of either covering the remaining 65 percent, or covering the full amount and adding 35 percent to the return on the bond from the federal government.  The result of both options was to effectively increase the return on the investment which made the bonds more attractive.

According to the Treasury Department, the following types of projects were funded by Build America Bonds:

  • Public buildings, courthouses, schools, and hospitals
  • Transportation/highway improvements
  • Maintenance on public safety facilities such as police and fire departments
  • Water and sewer projects

    Work on the New Jersey Turnpike, funded in part by Build America Bonds.
  • Environmental projects
  • Energy projects
  • Government housing projects and public utilities

For example, New Jersey issued $3.2 billion of Build America Bonds to help finance the widening of the New Jersey Turnpike and the Garden State Parkway. The city of Alliance, Nebraska raised nearly $6.7 million through issuing the bonds to finance construction of a student performing arts center. And San Francisco’s Bay Area Toll Authority issued $1.5 billion in Build America Bonds to help underwrite improvements to the San Francisco-Oakland Bay Bridge.

The Treasury Department has said the Build America Bonds program “helped to relieve” the crisis in the municipal bond market.


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