Non-traditional capital financing mechanisms and strategies

This chapter details some of the evolving capital finance mechanisms and strategies beyond traditional, "plain vanilla" municipal securities that subnational governments have begun to utilize in recent years. Given the sizeable capital needs at the subnational level, governments have turned to other 'innovative' financing strategies such as federal loans and credit support, public-private partnerships and infrastructure banks. The federal government has encouraged the use of these financial measures and made it easier and more attractive for subnational governments to use them as a way to more efficiently access capital. State and local governments have also increasingly leveraged emerging investor interest in impact investing by designating some of their traditional municipal securities as "green" or "sustainability" bonds. This chapter discusses these strategies in depth and details some of the trade-offs associated with their use especially as it relates to issues of fiscal federalism.