An old idea is finding new life in the municipal bond market, where a stubborn complacency with conventional ways of doing things is being challenged by a fresh crop of market participants.
The status quo has long meant that smaller, poorer, public entities – often communities of color – face hurdles when they try to borrow in the muni market. What’s sometimes called the “Black Tax” can add nearly half a percentage point to borrowing costs for municipalities with higher proportions of Black residents, recent research shows.
Bundling bond deals from multiple municipalities through state agencies known as bond banks is a time-tested way of achieving economies of scale, with benefits for both issuers and investors. Now, bond banks are getting a new look as a possible tool for not just mitigating inequities, but tackling them proactively.
impactalpha.com
by Andrea Riquier
November 9, 2022