WASHINGTON — Since the beginning of the year, Wall Street firms, trade associations, and municipal bond issuers have significantly stepped up their lobbying efforts to get lawmakers to extend the
According to congressional lobbying records and interviews with market participants, 78 organizations have either hired lobbyists or lobbied on their own for BABs, and as many as 202 lobbyists have taken on the issue since the taxable stimulus bonds were created in February 2009. But activity spiked most noticeably this year, as muni market participants began pushing for a BAB extension and Republicans started complaining the program was expensive and was lining the pockets of Wall Street firms.
About 40 of the 78 organizations that reported lobbying for BABs did so during the first quarter of 2010, and that figure grew to about 55 in the second quarter. In contrast, only eight organizations reported lobbying for BABs in 2009.
Records that lobbyists are required to submit on a quarterly and annual basis list BABs among the dozens or hundreds of issues lobbyists have worked on for municipal governments and Wall Street trade groups. As a result, it is impossible to discern the extent of their focus on BABs or how much money they are spending on the effort. The records also do not distinguish between lobbying lawmakers and meeting with regulators and agencies such as the
The records show that lobbyists, or those that hired lobbyists, include the top three BAB underwriters, more than two dozen cities and counties, as well as muni market trade groups and individual bond issuers in the higher education, health care, transportation, and energy sectors.
Many of the groups that lobbied for BABs have also issued the bonds, accounting for a total of about $6 billion, or about 5% of all BAB volume so far.
The fiscally strained
New York’s
The muni market initially harbored some skepticism about BABs, fretting that they were a sign of lawmakers trying to steer the market away from traditional tax-exempt debt. But the market quickly responded to a direct-pay option that
As of Tuesday, $123 billion of BABs have been issued, far surpassing the expectations of the lawmakers who created them. The
However, budget concerns have not stopped Congress from providing a direct-pay option for other types of tax-credit bonds — qualified school construction bonds, qualified zone academy bonds, clear renewable energy bonds, and qualified energy conservation bonds.
In spite of the popularity of BABs, not everyone is bullish about them. Several Republicans have launched a campaign against the program, including the
Grassley also warned that Wall Street underwriters “skim the cream” by charging municipal bond issuers higher fees. Earlier this year, he demanded that
Goldman reported in March that it earned $54 million to underwrite $34 billion of BABs and charged slightly higher fees for BABs than for tax-exempt bonds, but said its fees were competitive and that BABs are still a relatively new kind of municipal bond trying to fit into the taxable market.
The three investment banks, including Goldman, that lead the pack in BABs underwriting have dispatched lobbyists to work on legislation that authorizes, extends, or expands the program, according to records.
The major financial industry trade groups — the
“We’ve been supporters of Build America Bonds since their creation in 2009 and believe that they should be made permanent,” said Andrew DeSouza, spokesman for SIFMA, which has seven people working on BABs. “Extending the BABs program remains a top priority for SIFMA, and our advocacy efforts reflect that focus.”
The RBDA has a small in-house lobbying staff and one outside lobbyist who bolsters its federal efforts, according to Chief Executive Officer Mike Nicholas. The group also paid
There has also been a spike in BAB lobbying in other sectors that created the largest amount of BAB activity.
Disclosures for the past three quarters show BAB lobbying by groups in the education, transportation, utilities and electric power, and health care sectors — which, after general-purpose issuance, led the market for BABs. They include the
“It’s one of many issues we’re working on,” said Lane Dickson, a lobbyist for the
“While SRP has not issued any BABs to date, we would consider issuing BABs under the current program (and would under any extended program) if it is a lower-cost option to meet our financing needs,” said Aidan McSheffrey, manager of financial services for the Salt River Project.
Other pro-BAB groups have pushed for Congress to extend the direct-pay option to other tax-credit bonds. The
Many of the lobbyists who have worked on BABs, including Dickson, already had long-standing relationships with governmental clients and simply added BABs to their to-do list.
Brad Van Dam, who lobbied on BABs for the
The same is true for cities — BABs have taken off as a lobbying issue, but they number among dozens, or in some cases hundreds, of topics listed in the reports.
“We’re urban generalists,” said Ralph Garboushian, a lobbyist for
“When it comes to municipal bonds, anything that’s in the direction of more flexibility, generally, cities support,” he said.