Maryland is using its greater access to capital markets to help small local government agencies get approximately $27.1 million in funding for public infrastructure projects.

The state legislature created the State Local Government Infrastructure Finance program in 1985, which began financing in 1988. The Department of Housing and Community Development’s (DHCD) Community Development Administration serves as a conduit for the financing.

Highway workers apply their skills to paving efforts to maintain the state’s highway infrastructure. Stockr /

“We help local governments access capital at reasonable rates and reasonable terms in order to fund critical infrastructure projects that they deem important to them specifically. So it’s particularly suitable for Maryland’s smaller jurisdictions,” Charles Day Jr., its program manager, told The Center Square.

Smaller, local jurisdictions have limited access to the capital markets. Administering a bond offering on their own is inconvenient and expensive, Day said.

Only incorporated municipalities in Maryland are eligible to use the program. The state has 23 counties, Baltimore City, and 151 incorporated municipalities. Day said technically all of them are eligible to use the program.

“But then we get into the reality of it is that it’s really better and more suitable for Maryland’s smaller jurisdictions,” he said.

Montgomery, Prince Georges, and Howard counties, plus Baltimore City, are large enough to administer public bond offerings on their own, with the resources to do so. They secure favorable capital typically through public bond executions.

Maryland’s smaller jurisdictions don’t have the same access to capital markets as they don’t utilize the bond markets on a regular basis. They don’t have the staff or resources to administer a bond offering on their own.

That’s where the state program steps in, working with jurisdictions like Aberdeen, Bel Air, Brentwood, Cumberland, Denton, and St. Mary’s Metropolitan Commission, which Day said is an instrumentality of St. Mary’s County that provides water and sewer services to roughly about 70% of its residents.

The program’s real advantage is that the state aggregates the demand for capital.

“We aggregate that demand and by aggregating it, we capture efficiencies and economies of scale that none of those individual borrowers through a public bond execution would be able to attain on their own,” Day said.

The most recent pooled issuance aggregated six local jurisdictions’ requests for a $27.1 million bond issuance.

Local jurisdictions must be incorporated and projects submitted for financing must meet the definition of an infrastructure project, Day said. That definition is broad, with a project owned, operated, and maintained by the local government that benefits public service considered an infrastructure project.

The state program funded eight distinct projects for the six jurisdictions. One such project: Cumberland wanted to purchase heavy-duty vehicles and equipment and also conduct street paving and facility improvements, Day said. Two jurisdictions refinanced existing debt: the Town of Colmar Manor refinanced a bank loan and the Town of Denton refinanced some USDA Rural Development loans.

“The reason that we’re refinancing the debt for these or enabling these municipalities to refinance the debt is they’re going to get savings from the refinance, which then they can take those savings and then put into other things, maybe to fund some of these community projects without having more money from the state,” Kevin Baynes, director of Community Programs for the DHCD, told The Center Square.

The state works with these jurisdictions to enable them to recapture and make the most effective long-term use of those resources and to increase their savings for the health of the communities, he said.

St. Mary’s Metropolitan Commission borrowed more than $10 million to fund water and sewer system improvements. And the Town of Bel Air borrowed $8 million to construct a police station and renovate its town hall, he said.

The local governments have to make the decision to apply for the financing. They must hold public hearings, discuss and debate any questions about the projects before adopting legislation about them.

The Community Development Administration reviews the applications with its own bond counsel and financial advisor. Local jurisdictions are not required to get their own bond counsel or financial advisor, though they can. They can use the state agency’s resources.

“We have billions and billions of dollars of bond issuance experience and so we’re very good at navigating through the complexities of the capital markets and helping really Maryland’s smaller, less sophisticated jurisdictions go through that process,” Day said.

The state engages investment bankers and rating agencies to secure capital at low rates, passing the cost of that capital to local government borrowers.

He said 67 municipalities, counties, or instrumentalities of counties use the program. Including the latest issuance, he estimates the program has raised more than $551 million to fund hundreds of projects across the state.

This article was originally published on on January 17, 2022.

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