"Tom Kozlik, head of municipal strategy and credit at Hilltop Securities in Dallas, Texas, said he thought the tax-credit versus direct payment represented 'an important drawback' to the program and that it would depress issuance.

'There is a gross-up provision that tries to make the strategy sequestration-proof,' he said in an email. 'There will be many issuers out there who felt burned by sequestration-related subsidy cuts last time and may not even consider this taxable financing option without overwhelmingly attractive subsidy rates.'"

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