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John Nephew

Maplewood City Council Policy & Politics


Build America Bonds

For this year's bond sale, Maplewood is considering the possibility of selling Build America Bonds rather than the traditional tax-exempt municipal bonds. Build America Bonds pay interest that is taxable income to the bondholder, but the federal government pays a rebate to the bond issuer. For some tax brackets the result may be a wash, but this makes BABs potentially attractive to some investors who would not otherwise buy munis -- for example, retirees who may be in lower income tax brackets, or IRA holders whose investments are tax exempt or tax-deferred. Greater demand for BABs versus traditional munis generally translates into lower net interest costs to the cities that issue them.

Yesterday the Minnesota Independent had an interesting article on the topic of Build America Bonds, discussing concerns expressed about them by some people.

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