WASHINGTON — The Joint Tax Committee is estimating that the wildly popular Build America Bond program will cost $12.5 billion from fiscal 2009 through fiscal 2013.
The estimate, which the committee made in a report on federal tax expenditures issued earlier this week, is much higher than those made last year, but sources said they cannot be directly compared because they are based on different assumptions.
The JTC estimated that tax-exempt public purpose bonds issued by state and local governments will result in $149.4 billion of lost revenue over the same timeframe. That figure is $2.8 billion more than the five-year projection the committee made in 2008.
The report, Estimates of Federal Tax Expenditures for Fiscal Years 2009-2013, contains figures for all tax-credit and private-activity bond programs.
The BAB estimate varies widely from the earlier ones. The Obama administration, in an appendix to its fiscal 2010 budget request released in May, estimated the Treasury Department would spend $91 million in fiscal 2009 and $340 million in fiscal 2010 on BABs, which it said included Recovery Zone Economic Development Bonds. An analytical perspectives budget document released a week later contained estimates of $50 million and $192 million for BABs during those years.
In a report on the American Recovery and Reinvestment Act last year, the JTC estimated BABs would result in lost revenue of $53 million and $323 million in fiscal 2009 and 2010, respectively, and a total of $4.3 billion through 2019. This latest JTC report projects lost tax revenue from BABs at $1.3 billion and $2.2 billion for fiscal 2009 and 2010, respectively. However, sources said the committee’s ARRA figures were revenue estimates that projected changes in taxpayer behavior, while the more recent estimates are tax expenditures that do not.
The report does not make any assumptions about whether the BAB program will be extended beyond its Dec. 31, 2010, deadline, an extension sought by market participants.
The BAB projections also do not include RZEDBs, which are separately estimated.
The JTC estimated that private-activity bonds will cost the federal government $56.6 billion through fiscal 2013, and gave separate projections for each category of the bonds.
Among the PAB-financed categories, qualified public educational facilities are expected to cost the most, at $16.5 billion, with private nonprofit hospitals coming in second at $12.5 billion. Single-family homes are estimated to cost $7.4 billion, and rental housing $4.7 billion. Private airports, docks and mass commuting facilities are expected to cost $5.6 billion, while the JTC provides a $3.2 billion cost estimate for solid-waste disposal facilities. Student loans are estimated to cost $3.1 billion, while qualified small issues will cost $2.5 billion.
The committee estimates were fairly small for four other categories: $500 million for energy production facilities, $400 million for veteran’s housing, $100 million for green buildings and sustainable design projects, and $100 million for highway projects and rail-truck transfer facilities.
Cost estimates for tax-credit bond programs also were relatively small compared to most other bonds. The JTC estimates the revenue lost from the tax credits provided to investors of qualified school construction bonds will reach $1.9 billion by the end of fiscal 2013, while qualified zone academy bonds will cost $1.4 billion. Clean renewable energy bonds are expected to cost $500 million and qualified energy conservation bonds are pegged at $100 million.
Recovery zone economic development bonds, the so-called “Super BABs” targeted at economically distressed areas, are estimated to cost $1.5 billion, and the tribal economic development bond program, which allows tribes to issue up to $2 billion in bonds for economic development projects, is estimated to cost $300 million. The bank deductibility provisions of ARRA, which permit financial institutions to deduct interest expenses from the tax-exempt bonds of more issuers are estimated to cost $1.3 billion.