Municipal Bonds for Infrastructure

10/29/25

“How can governments create loans to pay for infrastructure projects?”

One of the most discussed subjects in local politics is infrastructure investment. Whether it’s planning new metro stops for commuters, creating green infrastructure for flood resilience in a marginalized community, or building a new wastewater treatment plant for a rapidly growing community, infrastructure is a core part of the public conversation. However, building these projects requires large capital investments that municipal governments may not have on hand. So what can they do? Well, governments have the power to issue Municipal Bonds for Infrastructure, or loan requests to finance specific projects. Investors can purchase these bonds by lending the required principal to governments, who can then use to fund their projects. Governments can repay these loans through raising tax revenues (known as a General Obligation (GO) Bond) or through revenue generated by the infrastructure investment (Revenue Bond). Loan providers like municipal bonds because interest on municipal bonds is generally exempt from federal taxes (and possibly state and local taxes if the loan provider is based in the same state/municipality, respectively). Interest rates on municipal bonds are typically lower because of these tax benefits. Municipal bonds for infrastructure are a cornerstone of modern infrastructure development, given the exponentially increasing need for new public works.