Local Government Infrastructure Financing

Local Government Infrastructure Financing offers Maryland counties and municipalities a cost effective way to finance public purpose capital projects; enabling the delivery of essential services to support communities and the people they serve.

The City of Havre de Grace has received over $3 million in bond proceeds for projects including construction of and additions to a new city hall complex, purchase of vehicles and equipment, replacement of the city pier, and improvements to local parks.

How does the program work?

The Maryland Department of Housing and Community Development (DHCD) – Community Development Administration (CDA) issues bonds, on behalf of counties, municipalities and/or their instrumentalities, to finance projects that serve the community at large.  These projects can include, but are not limited to, streetscape improvements, transportation enhancements, and water and sewer treatment facilities.

CDA has at its disposal the expertise and resources (including bond counsel and a financial advisor) to manage the details of the bond issuance, and to help local governments navigate successfully through the complexities of a tax-exempt bond financing.  Additionally, the program reduces issuance costs through economies of scale and by pooling the local demand.

CDA issues tax-exempt bonds as a way of raising capital, and loans those bond proceeds to local governments.  The interest rate on the local government loans is subject to market conditions at the time of sale - based upon the rate attained on CDA’s pooled bond issue.  Local governments are responsible for repaying the debt incurred through the bond financing and for paying their pro-rata share of the costs of issuance of the pooled bonds.  To secure payment of the loans and to enhance the marketability of the bonds that are sold to fund the loans, each participant pledges its full faith and credit to make payment on the loan. 

Whether funds are needed for a $150,000 effort or a $10 million project, Local Government Infrastructure Financing is a convenient and streamlined resource for those that:

• Want to secure long-term capital financing with advantageous terms
• Do not routinely issue bonds, and
• Have limited resources to initiate a financing on their own

Additionally, the term of the loan is set at the option of the local government, but cannot exceed the useful life of the project or thirty years, whichever is less.

Who can apply

All Maryland counties, municipalities and/or their agencies are eligible, provided they have legal authority necessary for:

• Constructing, operating and maintaining the proposed project,
• Pledging security for and repaying the proposed loan, and
• Pledging income tax payments and various other shared revenue from the State.

Local governments must secure local legislative approval(s) to incur the debt, certify the capacity to inspect the project’s construction progress, and agree to submit periodic status reports.  Additionally, they must ensure the adequacy and sufficiency of the project’s design and construction. Further, local governments must meet credit requirements sufficient to satisfy rating agencies and secure a favorable credit rating on the pooled bonds.

The City of Laurel received bond proceeds of $718,000 to purchase a series of fleet vehicles, including a police mobile command unit, to increase the effectiveness of the delivery of services to the community.

The City of Frostburg received bond proceeds of $1.4 million to install dome covers for the water plant in an effort to protect and safeguard the public water supply from airborne contaminates.