In roughly a year on the market, federally subsidized Build America Bonds for public-works projects have soared to $90 billion in volume and saved localities more than $12 billion in interest costs, the Treasury Dept. says.

In a report released April 2, Treasury says that the Build America Bonds (BABs), created under last year's American Recovery and Reinvestment Act, have increased in volume to $90 billion as of March 31. That equals more than 20% of the market for new municipal bonds.

Critics have charged that investment firms' underwriting fees for issuing the new bonds have been too high. Treasury acknowledges that average BAB fees have been higher than fees for tax-exempt bonds, but adds that BAB fees "have declined significantly over time."

The University of Virginia was the first entity to issue a BAB, doing do on April 15, 2009. Since then, there have been a total of 1,066 BAB issues, totaling more than $90 billion, Treasury says, citing data from Bloomberg.

A list of the individual BAB issues shows that their uses include highway, water and sewer, school, electricity and other projects. Issuers include state agencies, cities, counties, transit authorities and school districts.

Unlike most municipal bonds, BABs are taxable. The new bonds' advantage to states and localities is that the federal government provides the issuers with a subsidy that equals 35% of the interest rate the localities pay.

In its report, Treasury estimates that BABs will save issuers $12.3 billion in the net present value of their interest costs, compared with the expense of issuing tax-exempt bonds.

On the question of underwriting fees, Treasury says the weighted average for BAB fees so far is $7.29 per $1,000, compared with $6.19 per $1,000 for tax-exempt bonds.

But Treasury adds that for January and February 2010, BAB fees have dipped to $6.64 per $1,000, which, it says, "approaches the average" of tax-exempt bond fees over the April 2009-March 2010 period.

The Hiring Incentives to Restore Employment Act, signe into law on March 18, broadens BABs' uses, to include school construction and energy projects.

BABs are now set to expire at the end of December. The House on March 24 passed a bill that would extend the program through March 2013, but it would trim the subsidy in stages, to 30% at the end of that period.

The Obama administration has proposed making BABs a permanent program, but with the subsidy reduced to 28%.