ISSUE No. 2/1999
Municipal Bond Financing
by Nikolay Kuznetsov, Mayor, Municipality of Svishtov
The idea to use municipal bond financing for the implementation of infrastructure projects was born as a result of a study tour in the United States, organized by USAID's Local Government Initiative (LGI) programme.
The decision-making procedure went through several stages.
Initially the municipal administration contracted "Unity Invest 99" investment agency to prepare a financial report on the capacity of the municipality to emit municipal bonds. The report was submitted for approval to the Municipal Council. After an in-depth discussion a decision was taken to launch the development of a project.
After five-month-work on the project with the active involvement of the entire financial and economic team of the municipality, a draft project was submitted to the municipal councilors. The draft proposal was discussed at the committees' sessions and was eventually approved by the Svishtov Municipal Council at its session. All councilors present voted in favor of it.
The project for upgrading the water supply system of the Municipality of Svishtov has the following main objectives:
increase the quantity of extracted water, which is subsequently being sold out/supplied;
improve the quality of drinking water;
reduce the specific electric power costs;
consider as much as possible the geographic and geological characteristics of the region;
minimize water losses in the system.
The municipal bonds will be used for the restructuring of the water supply system of the town, which was built more than 50 years ago.
It is expected that the solution of this problem will bring about a not only social, but also a huge economic impact as a result of the decrease in the number of leakages in the water-supply network. These currently bring about inefficiencies in the consumption of drinking water and electric power.
The management of the Municipality of Svishtov believes that the municipal bonds will prove to be a tool for alternative funding.