Last year, a new record was set for the total volume of municipal bond issuance. Over $474 billion in municipal bonds was issued by state and local governments taking advantage of historically low interest rates while making up for lost revenue related to COVID shutdowns.
With interest rates still very low, it looks like 2021 municipal bond issuance is nearing last year’s record. Today’s interest rates in the public bond market are 1.25 percent for 10 years, around 2.25 percent for 20 years, and 2.50 -2.75 percent for 30 years. Rates this low used to be obtainable only from government lending programs.
What About Those Government Loans?
Public agencies still get the lowest interest rates from government lending programs such as the USDA and State Revolving Fund, but typically the process takes longer and is more cumbersome than the public finance market. Some USDA programs take the form of reimbursement loans, requiring the project to be constructed prior to loan funding, which can force the public agency to seek interim financing. On the other hand, the public finance market can provide funding upfront and the process to accessing those funds is more streamlined and with fewer limitations or special qualifications.
Is There Money Available?
Current investor demand is outweighing the supply of tax-exempt bonds. Municipal Market Analytics (MMA), an independent research firm providing strategic market and credit analysis and commentary on current, historical and quantitative conditions of the US municipal sector, estimates a $100 billion gap between the supply of new tax-exempt bonds and the amount of cash investors are looking to put into the market.
What Does This Mean to Special Districts?
In short, it means there is a lot of low-cost money available. For special districts well-positioned to issue debt, the interest rate environment has never been more inviting and the timing could not be better for the financing of new projects and refinancing of older debt.
When considering your financing options, make CSDA Finance Corporation your first call. We’ve specialized in providing solutions for special districts for over 30 years and our consultants are experts in municipal finance. Call 877.924.2732 or visit www.csdafinance.net.