In his first address to Congress as President of the United States, Donald Trump presented them with his plan for $1 trillion in infrastructure spending to improve our country’s crumbling roads, structurally deficient bridges, and outdated airports. While few can debate the necessity of the work, especially in light of highly publicized infrastructure emergencies in California such as the near failure of the Oroville Dam and the collapse of the Pfieifer Canyon Bridge, with such an enormous price tag, there will certainly be debate over how to fund President Trump’s ambitious plan.
New ideas, including public/private partnerships, have been mentioned as ways to finance the improvements. One of the oldest methods, Municipal bonds, are still an attractive form of financing. Interest earned on Municipal bonds is exempt from federal income tax which has historically led to strong investor demand. That strong market demand directly translates into lower cost of capital for issuers. This advantage will be hard for any pundit to deny or ignore. When debating infrastructure financing, municipal bonds will be on everyone’s list of options to help cover the costs of this massive undertaking.
$1 trillion is an enormous price tag (some say it could even be higher) so every viable option should be considered. While projects such as interstate highways may be funded by larger federal programs, state specific projects such as local bridges could be financed by issuing municipal bonds. Even airports, many of whom have historically tapped the municipal market to fund improvements and expansion, could continue to utilize the proven financing method.
The cost of these necessary public improvements is going to be staggering. New innovative forms of financing may be necessary to bridge the budget gap. Municipal bonds, with their long track record of success should not be overlooked.