(Dow Jones) Wall Street firms have received fees exceeding $1 billion in less than a year selling "Build America Bonds" meant to spur jobs in struggling cities, often charging municipalities higher costs than for traditional bond deals.

These new bonds were rolled out in April 2009 under President Obama's economic stimulus plan to create jobs building roads, schools and hospitals. Unlike conventional municipal debt, the new bonds are taxable and generally carry higher interest rates.

The U.S. pays 35% of the interest, so the bonds have enabled local governments to borrow during a credit crunch and save money at the same time, making the higher costs a wash for them.

The Wall Street fees are "surprisingly high," says Edward Prescott, a Nobel-winning economist at the Federal Reserve Bank of Minneapolis and a professor at Arizona State University.

The banks confirm charging higher Build America fees, but say the costs are coming down as the bonds become more popular. Bank officials say the higher fees are justified because they are working harder to sell the bonds to investors who wouldn't traditionally buy municipal debt, such as pension funds, insurance companies and foreign investors.

Goldman Sachs Group Inc. (GS) is the top seller of Build America Bonds, with $9.79 billion in sales, according to research firm Thomson Reuters, followed closely by J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C), Barclays PLC (BCS, BARC.LN), Bank of America Corp.'s (BAC) Bank of America Merrill Lynch and Morgan Stanley (MS).

On average, the underwriting fees for Build America Bonds are $8.20 per $1,000, according to Thomson Reuters. By comparison, the standard fee for tax-exempt issues is $5 to $6 per $1,000, according to Wall Street banks. Thomson Reuters says 984 deals have been done since April. Underwriting fees were disclosed in just two-thirds of those, totaling nearly $1 billion.

Spokesmen for all the banks declined to comment.

One of the biggest deals was a $1.3-billion Build America Bond issued in October to rebuild the San Francisco-Oakland Bay Bridge and make it earthquake-resistant. The Bay Area Toll Authority, the agency handling the project, paid $11.37 in fees per $1,000 in bonds to a syndicate led by Citigroup and Merrill Lynch, or more than $14 million.

That was about twice what it would have paid banks to underwrite traditional tax-exempt municipal bonds, says Brian Mayhew, chief financial officer of the agency. And the interest rates paid to investors are higher. Since Washington pays 35% of the interest, the amount that the Bay Area Toll Authority pays is just 4.07% over 40 years compared with 5.5% it would have paid with tax-exempt bonds, Mr. Mayhew says.

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