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Ron Wyden, D-OR
Mr. WYDEN. Mr. President, we are going to have the leadership discuss the process for moving forward, but I wish to take a minute and talk about one of the important bipartisan provisions in the jobs bill. I think colleagues know it is never hard to get me to focus on the health reform issue, and we are certainly going to be doing a lot of that in the days ahead, but our constituents want us to focus on jobs as well and particularly a jobs effort that is going to work. We have that in the Build
America Bonds program. I say to colleagues, the Build America Bonds program has far exceeded even the optimistic projections some of us had for this program.
I have been involved in the development of this program now for 6 years. Senator Thune, on the other side of the aisle, has worked very closely with me. When we started our work on the Build America Bonds program, our hope was that perhaps $4 billion or $5 billion worth of these Build America Bonds would be let. What we have seen is that now close to $80 billion worth of these bonds have been issued. They are literally selling like hotcakes. They have revolutionized municipal finance,
and some have projected that perhaps this year $150 billion worth of these Build America Bonds will be sold.
So Build America Bonds work, and they put people in the private sector to work as well. In my home State of Oregon, it has been proven, time and time again, that private investment follows well-targeted public investment. That is what we are seeing with this bipartisan program, and that is why colleagues on both sides of the aisle have proposed expanding it.
I note my good friend, Senator Thune, on the other side of the aisle, is here. He and I have worked hand in hand on this effort because we wanted to have something that would create jobs in our country that was nonpartisan.
The reason Senator Thune and I have worked on this effort in a bipartisan way is we wanted to have something that is common sense, we wanted to have a jobs creation effort that responded to basic needs of our country, and we wanted to see it part of an effort where the private sector takes the lead.
I am particularly appreciative the chairman of the Senate Finance Committee is here, Chairman Baucus. I wish to express my appreciation to him and his staff for their help in this effort. We saw in the Senate Finance Committee--Chairman Baucus is here, he remembers our discussions--our projections for Build America Bonds were pretty modest. The reality blew past those projections almost overnight. The projections for Build America Bonds were a few billion dollars, and we blew
past those projections like a bullet train.
Build America Bonds are getting desperately needed funding flowing into local communities, they are creating jobs, and they are helping to strengthen America's infrastructure. Almost $80 billion has been generated. This is in addition to the $80 billion of direct Federal infrastructure spending that has been included in the Recovery Act.
I note that in the HIRE bill there is going to be an effort once again to ensure there is direct support for infrastructure, and we also have this very promising opportunity with the private sector that we have been able to secure with Build America Bonds.
When a project is funded with Build America Bonds, the Federal Government pays a portion of the finance costs. It equals a very small percentage, perhaps a single-digit percentage of the total project cost. The city or State pays almost the entire cost of the project over time.
A project that is funded with direct spending will often have the Federal Government pay 50 percent or 75 percent of the project costs. Some communities need that kind of help to get needed projects off the ground. But when some argued that projects should only be funded with direct spending, I thought it was important to look for other opportunities. That is why Build America Bonds came into existence. It is not possible, given the enormous needs for infrastructure improvements, for roads and
bridges and transportation systems, to rely just on direct spending or rely just on bonds. What we ought to do is what we have done here in the Senate on a bipartisan basis; that is, put more options in the tool box for funding infrastructure. Of course, direct spending will be important. What we have seen is Build America Bonds take off as an additional tool.
In my home State, in the Dayton School District, they are using Build America Bonds to employ up to 150 people building and remodeling classrooms. By using Build America Bonds, this small school district in my home State saved an estimated $1.2 million in interest costs.
Up in Washington State, in Grand Coulee, the Coulee Medical Center was able to finance a new hospital building with Build America Bonds, saving more than $7 million in finance costs. They were able to start construction immediately. We had discussion on the floor earlier--are these government jobs? What that project did was put people in the private sector to work--construction workers, plumbers, electricians, tradesmen. Once the building, of course, is completed at the end of the year, doctors
and nurses, clerks and [Page: S1504]
support staff get to work in the new hospital.
Recently, a joint Congressional Budget Office-Joint Tax Committee report highlighted other benefits flowing from Build America Bonds. As my friend Senator Thune, who is in the Chamber, knows about Build America Bonds, this report shows that tax-credit bonds, such as Build America Bonds, can be more effective than tax-exempt bonds. The report also concluded that because the bonds are more attractive to investors, they are more efficient at raising capital.
Once again, Democrats and Republicans have been able to come together in the Senate to advance a fresh approach that saves municipalities time and money and effort that can otherwise be devoted to other priorities.
Aside from the fact that the funds are raised efficiently, they are answering a cry we hear again and again; that is, get the job done quickly. People are frustrated that sometimes it takes eons for government to work out the particular project, particularly in the transportation area. Bond funds need to be spent within 2 years of the date the bond is issued. What that means is money is not just flowing into projects, it is being spent in the short term. People get back to work quickly. You get
more bang for your dollar, and that obviously is what Americans are asking for, and Build America Bonds deliver.
Back in the days before these bonds were issued, the market for the traditional, normal municipal bond was just about frozen. It was hard to sell them. Now Build America Bonds have changed that. The private sector is strongly supporting this program. Groups such as the Chamber of Commerce and the National Association of Manufacturers and businesses across the country are saying they need a fresh approach to build infrastructure. Particularly with Build America Bonds, we are now seeing businesses
say this is an approach that gives them a long-term boost to what they know they can count on. They can plan new avenues for their businesses when they know there is going to be infrastructure there to support it.
It is not, however, just businesses that are buying Build America Bonds. Nonprofits such as pension funds are finding these bonds are an attractive investment. Nonprofits cannot benefit from the tax credits, but bond issuers can pass on the value of the tax credits in the form of a higher interest rate for Build America Bonds than other types of bonds. By contrast, traditional tax-exempt municipal bonds have not been a good investment for pension funds and other institutional investors that do
not pay taxes. What Build America Bonds have been able to do is provide a way for nonprofits to invest in American infrastructure that traditional tax-exempt bonds don't provide.
We are not surprised that Build America Bonds are reinventing the municipal bond market. We were told by people in the private sector, in the States, in the finance community, all across the country, that they thought this was a chance to, in effect, unfreeze the municipal bond market that had been frozen in Illinois, in Oregon, in South Dakota, and across the country. In some cases, these bonds are going to make the difference between whether the infrastructure projects come to fruition. In
other cases, they are going to lower the cost of the projects and allow the community to reinvest the savings in other projects.
By any scenario, the Build America Bonds program helps local government, local businesses, and those who rely on them for jobs and dependable infrastructure. In my view, that is exactly what the American people are looking for from their elected officials--something that works, something that is common sense, something that is bipartisan, something with a proven track record. That is, in fact, the Build America Bonds program.
Let me close with one last point. There have been discussions--and we have been in consultation with Chairman Baucus and the Senate Finance Committee staff on this--about financial institutions and whether the fees they are charging are appropriate for the issuance of Build America Bonds. First of all, it has been the position of Chairman Baucus, myself, and others that anybody who tries to take advantage of State and municipal issuers needs to understand that the Senate Finance
Committee is going to have a zero tolerance policy--zero tolerance policy--for ripping off the taxpayers. This program is designed to create jobs and make infrastructure funding more efficient and certainly not create any opportunities for somebody to try to skate around the rules and to take advantage of taxpayers.
In the Senate Finance Committee--and I am very appreciative of Chairman Baucus taking this approach. The Congress included a 2-percent limit on the amount of fees issuers of Build America Bonds can charge. In practice, the typical fee, in fact, has been far less than the statutory maximum fee that is allowed.
As the market for Build America Bonds has grown--and I
pointed out that it has mushroomed far beyond projections--the fees have kept coming down. They have come down close to the levels currently charged for tax-exempt bonds. With Build America Bonds having become well established--in fact, they now represent 20 percent of the municipal bond market--in our view, there simply is no longer a justification for charging a higher fee.
As the expiration of the Build America Bonds program approaches at the end of the year--and I am very glad the administration has proposed making the program permanent--I intend to keep monitoring the fees charged for issuing the bonds. If some can present the case that it is appropriate to further reduce the statutory cap on fees, I am certainly open to listening to it. I want to make sure every single dime of taxpayer money goes to these bondholders.
I am open to listening to any suggestions and any ideas to make a program that works, a program that Senator Thune and I have worked on together for many months that is working--we are certainly open to ideas for improving on it.
I see my friend from Florida is anxious to speak. I appreciate his desire to talk tonight.
Let's keep focusing--whether it is health care, whether it is transportation, whether it is tax reform--on ideas that bring the Senate together. I wanted to take a few minutes to talk about Build America Bonds specifically tonight. Again, the chairman of the Finance Committee is in the Chamber. I am very appreciative of his support and Senator Grassley's support. As the majority leader, Senator Reid, noted earlier tonight, we have to zero in on jobs. There is no economic multiplier
out there like jobs. If you put people to work, as I outlined--construction workers, electricians, plumbers--restaurants make the sandwiches to feed all the men and women who are doing the work. Let's keep coming back to approaches that bring both sides together. I have tried to do that in health care, in tax reform, and certainly in transportation,
where Senator Thune and I have been able to team up on something that works and is being used around the country. Let's remember that is what is needed right now when our folks are hurting. When they are looking for approaches that are common sense, that are nonpartisan, we can give them one specifically with the Build America Bonds program.
I yield the floor.