The Federal Department Of Housing And Urban Development Is Working On Regulations That Would, For The First Time, Enable The Authorities To Back Bonds With Future Housing Operating Grants. The Regulations Are Expected By Year-End.
Investors Have Already Bought Millions In Tax-Exempt Bonds Backed By Federal Housing Capital Grants And Billions In Similar Debt Backed By Federal Transportation Grants. These Grant Anticipation Revenue Vehicles Appeal To State And Local Issuers Because They Enable Projects To Be Accelerated. Rather Than Wait To Spend Federal Money Piecemeal As Annual Grants Are Received, They Get The Money Up Front From Investors Who Then Have Claim On The Federal Grants For Repayment.
Transportation Grant Bonds, Known As Garvees For Short, Came To Market In 1998. Housing Capital Grant Securitization Debt, Which Has No Nickname, Was First Issued By The Chicago Housing Authority In 2001. Since Then, Authorities From New York To Alabama Have Sold Similar Debt. Soon They May Be Able To Test The Market's Appetite For Operating Grant Bonds.
