As the World Cup unfolds across 11 U.S. cities, the financial implications of the event are becoming clear, particularly regarding the use of municipal bonds for infrastructure improvements. Dan Close, head of municipals at Nuveen, highlighted that while federal funding contributed to preparations, the bulk of the capital investment is being financed through municipal bonds.
Unlike previous events like the Olympics, which often resulted in short-term projects, the World Cup has catalyzed long-term infrastructure enhancements. Cities have leveraged this opportunity to address overdue projects in transit, airport upgrades, and urban infrastructure.
For instance, Houston financed an airport expansion, while Dallas renovated its convention center, which is now the International Broadcast Center for the games. Close noted that bonds associated with these projects are of high quality, and investors can find opportunities in the secondary market, where they can avoid the initial pricing pressures of new issues.
He emphasized the importance of understanding the bond structures, as they vary between general obligation bonds and revenue bonds, each carrying different risk profiles. Close expressed particular interest in the bonds funding the Houston airport expansion, citing their solid repayment sources.
Additionally, he mentioned that Dallas plans to retire interim financing through long-term revenue bonds, which could offer good risk-adjusted returns for investors, especially those interested in convention center bonds backed by hotel occupancy taxes