Lansing State Journal
WASHINGTON - The need to fix Lansing's roads and sewer systems and attract businesses didn't slow down when the economy did.
So Lansing turned to a bond program, created by the federal stimulus package, to help pay for infrastructure improvements.
The city has issued about $20 million in bonds that are subsidized by the federal government through the Build America Bonds program.
"The decision to carry on with these projects was made easier with the Build America Bonds - and cheaper," said Chad Gamble, Lansing's public service director.
The federal government picks up 35 percent of the interest. In addition to making it cheaper to borrow money, the federal subsidy also attracts investors in a tight credit market because they can get a better return than they can on traditional tax-exempt bonds issued by states and local governments.
Michigan State University has used the program, as has the state government.
The U.S. Treasury Department estimates that the combined $2 billion in Build American bonds issued in Michigan through May has saved the state and local governments about $277 million in borrowing costs.
More than 1,300 bonds - 57 in Michigan - have been issued through the program around the country.
So Lansing turned to a bond program, created by the federal stimulus package, to help pay for infrastructure improvements.
The city has issued about $20 million in bonds that are subsidized by the federal government through the Build America Bonds program.
"The decision to carry on with these projects was made easier with the Build America Bonds - and cheaper," said Chad Gamble, Lansing's public service director.
The federal government picks up 35 percent of the interest. In addition to making it cheaper to borrow money, the federal subsidy also attracts investors in a tight credit market because they can get a better return than they can on traditional tax-exempt bonds issued by states and local governments.
Michigan State University has used the program, as has the state government.
The U.S. Treasury Department estimates that the combined $2 billion in Build American bonds issued in Michigan through May has saved the state and local governments about $277 million in borrowing costs.
More than 1,300 bonds - 57 in Michigan - have been issued through the program around the country.
Benefits disputed
President Barack Obama wants to expand the program and make it permanent at a reduced subsidy of 28 percent. House Democrats have pushed through the president's proposal in a bill to extend expiring tax provisions. But that bill is stalled in the Senate, where Democrats are unable to block a GOP filibuster.
Critics of Build America Bonds say all U.S. taxpayers ultimately will bear the burden of a program they say might be doing more for Wall Street banks, which are collecting hundreds of millions of dollars in fees, than for state and municipal governments.
"We certainly have concerns that because of the subsidies, communities don't appear to be doing as good a job of trying to get the best potential deal," said Steve Ellis, vice president of Taxpayers for Common Sense, a government watchdog group.
Ellis said underwriters are getting paid large fees, and investors are turning a quick buck selling the bonds at higher prices, "which means we're going to be picking up a higher tab because the interest is higher."
Better roads, sewers
Sen. Chuck Grassley, R-Iowa, called Build America Bonds "a spending program disguised as a tax cut, getting bigger each year."
"In an era of bailouts and disgust with government spending, House members should have to answer for giving yet more taxpayer dollars to Wall Street and foreign investors," Grassley said.
State and local government officials say the program has been a boon for them at a time of fiscal uncertainty.
"I would certainly like to see it continue," Gamble said. "The challenge that not only the city of Lansing has, but all governments have, is just the sheer ability to continue these very large projects at all with the current state of the economy."
In Lansing, about half of the $20 million in bonds has been used to improve roads and about half has been spent on sewer improvements. That includes work on the city's long-term combined sewer overflow program to reduce the flow of raw sewage into the Grand and Red Cedar rivers.
The city also has repaired roads in numerous neighborhoods and used funds to make Grand Avenue more attractive with benches, new greenscapes and other improvements.
"Despite the economy, we're trying creative ways to really do great things for the city," Gamble said. "We want to be very aggressive in showing people that downtown Lansing and the entire city is a great place to locate your businesses and a great place to bring your family downtown."
President Barack Obama wants to expand the program and make it permanent at a reduced subsidy of 28 percent. House Democrats have pushed through the president's proposal in a bill to extend expiring tax provisions. But that bill is stalled in the Senate, where Democrats are unable to block a GOP filibuster.
Critics of Build America Bonds say all U.S. taxpayers ultimately will bear the burden of a program they say might be doing more for Wall Street banks, which are collecting hundreds of millions of dollars in fees, than for state and municipal governments.
"We certainly have concerns that because of the subsidies, communities don't appear to be doing as good a job of trying to get the best potential deal," said Steve Ellis, vice president of Taxpayers for Common Sense, a government watchdog group.
Ellis said underwriters are getting paid large fees, and investors are turning a quick buck selling the bonds at higher prices, "which means we're going to be picking up a higher tab because the interest is higher."
Better roads, sewers
Sen. Chuck Grassley, R-Iowa, called Build America Bonds "a spending program disguised as a tax cut, getting bigger each year."
"In an era of bailouts and disgust with government spending, House members should have to answer for giving yet more taxpayer dollars to Wall Street and foreign investors," Grassley said.
State and local government officials say the program has been a boon for them at a time of fiscal uncertainty.
"I would certainly like to see it continue," Gamble said. "The challenge that not only the city of Lansing has, but all governments have, is just the sheer ability to continue these very large projects at all with the current state of the economy."
In Lansing, about half of the $20 million in bonds has been used to improve roads and about half has been spent on sewer improvements. That includes work on the city's long-term combined sewer overflow program to reduce the flow of raw sewage into the Grand and Red Cedar rivers.
The city also has repaired roads in numerous neighborhoods and used funds to make Grand Avenue more attractive with benches, new greenscapes and other improvements.
"Despite the economy, we're trying creative ways to really do great things for the city," Gamble said. "We want to be very aggressive in showing people that downtown Lansing and the entire city is a great place to locate your businesses and a great place to bring your family downtown."
$59 million saved
Michigan State University has used the bond program for $205 million in infrastructure improvements. About half the money was spent improving residence halls and about half spent improving academic areas, particularly research facilities.
Glen Klein, MSU's director of investments and financial management, said the university would have done the work anyway. But using the Build American Bonds program saved about $59 million in interest payments over the life of the 40-year bonds.
"The cost savings are such that we would hope that the program would be continued," Klein said.
The state Department of Transportation issued $282 million in bonds to reduce its overall debt service, saving $21.7 million. Michigan Department of Treasury spokesman Terry Stanton said Michigan was the first state to use the program that way.
The Taxpayers for Common Sense's Ellis, for one, is not surprised by the favorable assessments from state and local officials.
"It has been a good deal for them," he said. "It's like me asking you, 'Why don't you go buy a new car, and I'll pick up a third of the interest payments?' Wouldn't you like that?"
Michigan State University has used the bond program for $205 million in infrastructure improvements. About half the money was spent improving residence halls and about half spent improving academic areas, particularly research facilities.
Glen Klein, MSU's director of investments and financial management, said the university would have done the work anyway. But using the Build American Bonds program saved about $59 million in interest payments over the life of the 40-year bonds.
"The cost savings are such that we would hope that the program would be continued," Klein said.
The state Department of Transportation issued $282 million in bonds to reduce its overall debt service, saving $21.7 million. Michigan Department of Treasury spokesman Terry Stanton said Michigan was the first state to use the program that way.
The Taxpayers for Common Sense's Ellis, for one, is not surprised by the favorable assessments from state and local officials.
"It has been a good deal for them," he said. "It's like me asking you, 'Why don't you go buy a new car, and I'll pick up a third of the interest payments?' Wouldn't you like that?"
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