Municipal Pooled Financing of Infrastructure in the United States : Experience and Lessons
Despite a world awash with liquidity, large infrastructure supply gaps exist across developing and emerging markets. Infrastructure has been largely decentralized to subnational governments in many countries, and many policymakers are keenly intere...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/628371507561674012/Municipal-pooled-financing-of-infrastructure-in-the-United-States-experience-and-lessons http://hdl.handle.net/10986/28547 |
| Summary: | Despite a world awash with liquidity,
large infrastructure supply gaps exist across developing and
emerging markets. Infrastructure has been largely
decentralized to subnational governments in many countries,
and many policymakers are keenly interested in developing
subnational bond markets to give subnational governments
access to private financing for infrastructure. Despite
this, the transaction costs of bond issuance are still
prohibitive for many subnational governments to access
financing. Pooled financing, through regional infrastructure
funds, municipal funds, or bond banks, has become a
sought-after solution for helping subnational governments
access private financing for infrastructure. In the United
States, municipal bond banks that were established since the
1970s have become a cost-effective and stable model for
expanding subnational financing for many small
municipalities, while maintaining strong credit ratings with
virtually no defaults from sub-borrowers. The municipal bond
banks have been successful in lowering financing costs for
many small, unrated local governments, with loan sizes as
low as less than $50,000. This paper examines the policies
and structures that have made pooled financing successful in
the United States, including regulatory frameworks,
governance and managerial systems, the role of project
appraisal, operations and pricing, and managing the default
risks of borrowers. The paper also explores broader lessons
for developing countries that are interested in establishing
pooled financing for subnational infrastructure. |
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