Municipal Pooled Financing of Infrastructure in the United States: Experience and Lessons
The objective of this paper is to review the experience of the pooled financing structures and mechanisms in the United States, with a focus on municipal bond banks and to draw lessons and implications for developing countries that might pursue this type of financing mechanism.4 The success of pooled financing relies primarily on the creditworthiness of the municipal borrowers. The municipal borrowers’ credit strength is shaped by the state’s intergovernmental fiscal system including tax sharing and fiscal transfers, a municipality’s own revenue and expenditure flexibility, and financial management, accounting and reporting systems. The systemic reform of these factors is outside the scope of this paper. This paper examines these factors only in the context of how they may impact pooled financing.
The structure of the paper is as follows. Section 2 reviews the rationale, origin and types of pooled financing in the United States, and how pooled financing relates to the overall regulatory framework for the subnational bond market in the country. Section 3 provides an overview of legal, governance, managerial and financial operation of municipal bond banks. Section 4 discusses the potential role of pooled financing in developing countries and draws lessons from the United States experience. Section 5 concludes.
