How Municipal Bonds Can Help the Nation’s Infrastructure Crisis

Governing Institute and Build America Mutual recently produced a bond issuance guide.
Build America Mutual | November 19, 2017
David Kidd

The American Society of Civil Engineers estimates the United States faces an annual infrastructure funding shortfall of approximately $100 billion. Historically, municipal bonds have been a key financing tool for cities to invest in, repair and maintain big-ticket infrastructure projects. For instance, in 2014, a municipal bond allowed the county of Riverside in California to build a new county office law building. The 90,000 square foot building houses the offices of the District Attorney, Public Defender, County Counsel and the County Law Library.

“As one of the most efficient buildings in our inventory, the County Law Building leaves a smaller footprint on our environment by using energy and water more efficiently, while also generating significant savings on operations,” says Riverside County Supervisor John J. Benoit.

In addition, the National League of Cities estimates that municipal bonds have financed more than four million miles of roads, 500,000 bridges, 16,000 airports and 900,000 miles of water pipes. However, the Great Recession slowed bond activity and made government entities more cautious about moving forward with new issues.

As the nation recovers from the recession, governments are turning to bonds once again to fund deferred infrastructure initiatives. According to Thomson Reuters, the market is on pace for $236 billion in new money raised via the issuance of municipal bonds in 2017.

While municipal bonds hold great promise to help the country close the infrastructure gap, the bond landscape can be challenging for governments that are entering for the first time or re-entering after several years. To help governments, especially small and mid-sized municipalities, navigate the bond process, the Governing Institute and Build America Mutual recently produced a bond issuance guide. It covers several important decisions, such as:

  • Should you engage a municipal advisor? The guide lists out several advantages of engaging an advisor and offers tips on how to choose the best one.
  • Should you purchase municipal bond insurance? The guide explains the importance of insurance and how to perform a cost-benefit calculation to determine if it’s beneficial.
  • How will new financial regulations affect your issuance? The guide discusses the evolving regulatory environment post-recession and what governments need to be aware of.

The guide also covers information such as the types of municipal bonds, whether you should obtain a credit rating, and the difference between competitive and negotiated sales. If you are considering issuing a bond, this guide is your go-to resource. Download a complimentary copy now to learn more: governing.com/bondguide.