Behind the scenes municipal bonds affect our daily lives without most of us ever noticing. I do take notice since I am a municipal bond portfolio manager and deal in the public finance space for a living. What really turns me on is when I can connect the dots between my work life and my non-work or leisure life. That connection is the work being done to the central beach area on Fort Lauderdale Beach. The beach area is being transformed with a new four-story parking garage along the Intracoastal Waterway on the north side of the Las Olas Boulevard Bridge. There will also be an area built near the Elbo Room which will include an oceanfront park with water features. The municipal bonds that funded these to-be-built lifestyle improvements for residents on the beach were the essential finance funding block that most people don’t stop to consider. The $56 million dollar bond deal was financed in 2015 and work has now begun on the beach.
What public finance is able to do through municipal bonds is amazing, and let me explain a little more:
Most cities and towns don’t have $50 million or $10 million for that matter just laying around in their General Fund, their central cash flow account from a public financial accounting standpoint. So how can they build parking garages, marinas, or other essential things like schools and sewer systems? Simple, they go out and borrow it! Municipal borrowers tap the bond market through a new issuance of the bonds, and institutions and individual investors buy these securities, essentially lending money to the city or town. The municipal borrower then pays back the bond or loan over its life from either ad valorem property taxes or some other dedicated revenue stream. The bondholder gets his/her interest and principal, the city gets its long-term need funds to provide essential services to its residents. Everyone wins.
Pretty cool. This is how parking at the Elbo room, my favorite dive bar and municipal bonds come together.
Build it with muni bonds and they probably will come-All Aboard
The other really cool lifestyle change in Fort Lauderdale and in fact all of South Florida will be the coming online of the Brightline train. The high speed train will begin next month using existing rails to connect commuters from Miami to Fort Lauderdale and north to Palm Beach and eventually Orlando. This $1.75 billion dollar bond deal met with quite a bit of controversy. The fact that it is privately owned coupled with NIMBY (Not In My Backyard) concerns from environmental groups made the financing a challenge for Florida East Coast Industries, whose parent is Fortress Investment Group. Personally, I take my hat off to them for raising equity and the $1.75 billion in bond debt for a total project cost of $3.5 billion that will undoubtedly change people’s lives in South Florida, including my own. It is going to be sensational-no longer having to wait on congested highways to get around between South Florida’s cities. Kicking back on the Brightline train in the new high back leather seats with supposedly good Wifi. I can’t wait.