There are no legal constraints on local authorities raising bonds, but it has not been encouraged by governments since the 1980s. However this changed when an important precedent was set whereby the Treasury authorised Transport for London (itself a local authority in legal terms) to issue £600m of bonds as part of its borrowings to improve transport infrastructure. These were snapped up by big investors.
Issuing Bonds would be a good way to overcome the shortfall in SDC’s budget. Grant Thornton the auditors of SDC state:
“ Looking further ahead the current projections produced by the Council set out a funding shortfall of £5.5 million between 2016/17 and 2020/21. The funding shortfall for 2016/17 is currently projected to be £1.7m and the Council is considering options to close this gap.”
Issuing bonds may well be a good way of overcoming SDC’s funding shortfall.
Many have long campaigned for this idea.
The logic is threefold.
The first is that SDC could reduce their borrowing costs by raising funds in combination. That now seems to be true.
Second, buying local bonds represents a form of hypothecated saving that will appeal to many across all local authorities, not just SDC, and these bonds will be an ideal investment for pension purposes.
And third, this is one of the ways to fund a Green New Deal. These bonds could, of course, be repurchased using Green QE to inject money into local economies up and down the UK. They are perfect for the purpose and another necessary step on the way to achieving that goal.
These bonds could be set at a reasonable price allowing Local Business, Residents and Larger investors to take up if they wish. Issuing bonds could be part of the solution to fill the projected shortfall of 5.5 million.
Is it an Idea SDC will run with? We do not know, but it has been suggested, that is all we can do. It is down to SDC now if they act on it or not.