Build America Bonds (BABs) may make a resurgence. This Recession-era infrastructure financing program provided state and local governments access to taxable bonds, along with a subsidy from the federal government of 35 percent of the interest payments – bringing the net cost closer to that of more traditional, tax-exempt municipal bonds.

Governing reports that interest has been expressed in the financing tool by economic advisors to President Trump, who has pledged to invest $1 trillion in infrastructure – purportedly at least in part through encouraging private investment. BABs would open up the municipal market to new private investors. From Governing:

All told, state and local governments sold more than $151 billion in BABs between 2009 and 2010. The program even propelled total bond issuance in 2010 to $433 billion, a record that still holds today.

Unfortunately, the last time around, mandated cutbacks in federal appropriations in 2013 resulted in decimating program subsidies by seven to nine percent. In addition, the bonds were not eligible for refinancing – leaving some jurisdictions on the hook for higher interest rates than they would have had under traditional tax-exempt municipal bonds. Governing quotes Dan White, senior economist at Moody’s Analytics:

[The feds] could theoretically design a program that protects states against this. But states know this has the potential to be changed at a moment’s notice by policymakers in Washington.