Alert February 17, 2009

Municipal Bonds Versus Public/Private Partnerships

The California State Treasurer Bill Lockyer recently published an editorial in the Sacramento Bee touting the tried-and-true municipal bond system as the key to reinvigorating California’s economy and preferable to the increasingly popular public/private partnership model. Lockyer argues that using tax-exempt municipal bonds to finance infrastructure saves California taxpayers millions of dollars each year – savings that would be forfeited if private enterprise is permitted to share the load or the wealth. According to the Treasurer, “[The private sector] will provide capital only if it receives a profitable return, generally 15% to 25%. The state typically pays 5% or less on municipal bonds, so you have to wonder how the public benefits from private equity infrastructure.”