Apr. 22--More than 5,000 stalled public works projects around California -- from school construction to sewage treatment -- got a kick-start today, thanks to the mammoth sale of a new form of federally subsidized bond, state officials announced.

"California is restarting thousands of critical infrastructure projects that have been frozen because of tight credit markets and the state's cash crisis," Gov. Arnold Schwarzenegger said via a news release. "And that, in turn, means that we can retain jobs, create jobs, and give California's economy an additional boost at a time when it needs it the most."

The projects, which include stem cell research, children's hospitals, clean air programs, housing, libraries and public safety, were frozen last December when a legislative deadlock over the state budget stopped sales of all general obligation bonds.

Normally, the state's Pooled Money Investment Account lends money to public works projects, and then recoups it through the sale of bonds. But because they couldn't sell bonds, and there was no budget in place, state officials opted to cut off the flow of funds to thousands of projects.

State Treasurer Bill Lockyer said that of the $6.85 billion in general obligation bonds sold today, $5.23 billion were "Build America Bonds," or BABs, created as part of the $787 billion federal stimulus package approved by Congress in February.

Under the BAB program, government agencies can issue bonds for public works projects and get a 35 percent subsidy of their interest costs from the federal government. For example, if California paid $100 in interest to a bond buyer, the federal government would reimburse the state $35.

The University of Minnesota sold the first BABs earlier this month. But the $5.23 billion sold today by the state is by far the largest BAB transaction so far, more than triple a sale Monday by the New Jersey Turnpike Authority.

Tom Dresslar, a spokesman for Lockyer, said the BABs sold today, which are taxable at the federal level, offered buyers a yield of 7.43 percent, while the state's cost, with the federal subsidy, will be only 4.83 percent. That will save state taxpayers $1.68 billion over the life of the 25- and 30-year bonds. In contrast, Dresslar said, the state paid yields of 5.9 and 6.1 percent on $6.5 billion worth of bonds issued last month.

"The buyer gets more, the state pays less," Dresslar said.

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