Private Investors are starting to replace Municipal Bonds in locations like San Francisco. The new Presidio Parkway project is rebuilding the road that leads up to the Golden Gate Bridge. Instead of issuing municipal bonds to fund the project, California found private investors seeking alternative ways to make money and willing to put up money to build new roads and maintain them. In this case it was a partnership between a German company and a Luxembourg company.
Such partnerships are going to become more commonplace as cash-strapped municipalities look to raise money and either aren’t able to through the municipal bond market, or get better terms from private parties.
This is akin to a Build America Bond replacement program where private investors or foreign money is tapped to expand funding options. China can literally purchase pieces of the United States and hold us hostage!
A union has sued to derail this partnership, claiming that this is an illegal public-private partnership. This amounts to more jobs lost in America.
The takeaways are:
- Municipalities may more likely defaults or walk away from municipal bonds because they can get funding abroad.
- Jobs will be lost if work goes overseas, but jobs will be created locally with each project.
- Cities and governments are looking for money anywhere in the world. If others are willing to lend money, when Americans aren’t, more power to them.