James McIntire, Washington State

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Washington Treasurer James McIntire says the Build America Bond program has delivered tangible benefits for his state — quite tangible benefits.

In October, the state sold $500 million of BABs for its transportation capital program.

“We achieved the lowest net interest rates we can find on record in Washington state,” McIntire said.

“We were pretty happy,” he said. “On half a billion dollars, that saved us enough to buy a new ferry.”

Washington, with ratings at the double-A and double-A plus level, priced 20-year bonds at 5.381% and 30-year bonds at 5.481% — before the federal subsidy.

The treasurer’s office estimated the savings on the deal, compared to a tax-exempt issue, was $64 million.

McIntire said Washington anticipates issuing between $1.1 billion and $1.3 billion of BABs this year for its transportation financing program, which is backed by a voter-approved fuel tax, in addition to the state’s general obligation pledge.

The treasurer’s office has not used BABs for the state’s purely GO-backed general capital program, because the taxable interest rate would be computed against the state’s constitutional debt limit. McIntire said he’s working toward a constitutional amendment that would allow Washington to apply the after-subsidy rate for BABs to its debt limit.

“We’ve been very enthusiastic about the 35% credit,” he said. “We’ll have to take another look if a ramp-down of the credit occurs and if that makes sense for us.”

McIntire said the taxable option has proven to be a useful tool, but added that it’s most useful in combination with the tax-exempt market, rather than as a substitute for it.

“My only concern is that it’s introduced the notion we might see a complete substitution of taxable for tax-exempt status,” the treasurer said. “It’s the choice that really helps.”

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