Nonetheless, as we have reported, the popularity of Build America Bonds, made possible by the American Recovery and Reinvestment Act, has helped lower the cost of borrowing for private, not-for-profit healthcare borrowers. That's because the new option—which is actually taxable debt with a federal interest-rate subsidy for borrowers—drained bonds from the tax-exempt markets.
As of Oct. 31, more than 1,900 bonds that may have otherwise been tax-exempt have been issued as Build America Bonds, for a total of $150 billion, the Treasury Department says. So far this year, Build America Bonds have financed $1.2 billion in healthcare projects, according to a summary of Thomson Reuters data published by the Securities Industry and Financial Markets Association.
The American Hospital Association has endorsed an expansion of the bonds in President Barack Obama's 2011 budget proposal, which called for the bonds to be permanent and available to private not-for-profits. Obama's budget also proposed to lower the interest subsidy, paid directly to borrowers, to 28% from 35%. The lame-duck Congress has little time to do so and efforts earlier this year to continue the bond option stalled in the Senate.