Build America Bonds were created under Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act that U.S. President Barack Obama signed into law on February 17, 2009.
[4] The purpose of Build America Bonds, commonly referred to as BABs, is to reduce the cost of borrowing for state and local government issuers and governmental agencies.
[1] Build America Bonds can provide states and localities with substantial savings on their borrowing costs.
According to the United States Department of the Treasury, the savings for a 10-year bond are estimated to be 31 basis points and the savings for a 30-year bond are estimated to be 112 basis points versus traditional tax-exempt financing.
"[6] The Direct Payment bonds provide a subsidy of 35% of the interest, paid to the issuer.