Bond Programs

The Stimulus Act includes several provisions to help state and local governments issue bonds for various kinds of capital projects.

Build America Bonds

Under the Build America Bond program, state and local governments can issue taxable bonds for capital projects and can receive a direct subsidy payment from the Treasury Department for part of their borrowing costs. The program is designed to help state and local governments finance projects at a lower borrowing cost and thus help stimulate the economy and create jobs. The bonds can generally be used to finance any capital project for which they could otherwise issue tax-exempt governmental bonds. Build America Bonds can be issued in 2009 and 2010.

Click here to review the Internal Revenue Service’s (IRS) guidance on this financing instrument, with more specifics about eligible types of projects and forms of financing, and more details on application and reporting requirements.

Qualified Energy Conservation Bonds

The Stimulus Act created a new kind of bond designed to help state and local governments finance capital projects designed to promote energy conservation. Among the kinds of projects that could be financed with this instrument are capital expenditures designed to reduce energy consumption in public buildings by at least 20%, demonstration projects designed to promote green building technology and technologies to reduce peak use of electricity. Each state receives an allocation of a total of $800 million in bonding authority, based on the size of its population. Cities and counties with a population of over 100,000 then qualify for an allocation from the state’s total, based on their proportion to the state’s population.

Click here for further guidance from the Internal Revenue Service and the allocation of bonding authority for each state.

New Clean Renewable Energy Bonds

The Stimulus Act provides the authority for the government to issue up to $2.4 billion in a new program of Clean Renewable Energy Bonds. State and local governments are among the entities that can use this financial instrument to support the construction of alternative energy facilities, including those for wind, biomass, geothermal, solar, landfill gas and trash combustion, among others.

Click here to find out more about this bonding authority. The IRS’s initial application deadline is August 4, 2009.

School Construction and Renovation

The Stimulus Act also provides bonding authority for two kinds of bonds that can be used to support the renovation, modernization and construction of schools in certain parts of the county. More details on these programs can be found by clicking here.