In Australia, the Municipal Association of Victoria (MAV) has taken the initiative to create a funding vehicle for the local authorities within the state of Victoria. The new entity has been given the name Local Government Funding Vehicle (LGFV).
The Board of LGFV will consist of independents, council representatives and MAV representatives. Day to day activities is outsourced to subsidiaries of National Bank of Australia.
Moody’s has assigned a Aa2 rating to LGFV. This rating has been given although the participating councils are not liable to one another, but will instead severally guarantee their debt obligations. According to Moody’s “The very high credit quality of the participating councils and the mature and supportive institutional framework under which they operate support the ratings”. It continues: “In addition, councils in the State of Victoria enjoy significant revenue flexibility with full discretion on the setting of property taxes, fees and charges, which together account for almost 70% of their total revenues”.
The rating is also underpinned by the fact that there has been no historical default by a Victorian Council.
30 councils in Victoria, out of 79, will participate in the inaugural bond issuance. In order to keep the rating for later bond issues, LGFV will apply a council eligibility criteria, “i.e. a new council must not have a negative impact on the rating of new or existing bonds”.
According to an article in the Australian Kanganews, “the potential attraction for councils is clear. Reports released by a number of councils refer to analysis conducted by Ernst & Young suggesting the LGFV will improve councils’ cost of funds by around 100 basis points.” Kanganews also writes that “a number of other states are exploring ways for local authorities to move at least some of their debt funding out of the bank sector”.
The new Board of Directors of FMDV, elected in Hyderabad on the 7th of October, is now presented on FMDV’s website.
The Annual Meeting of FMDV has appointed Lars M Andersson as a member of their Board of Directors.
The Fonds mondial pour le développement des villes (FMDV, in English: Global Fund for Cities development) is an organisation for local authorities, by local authorities. It was created in October 2010 at the initiative of Metropolis, United Cities and Local Governments (UCLG) and 34 founding members (cities and city networks). It is an international political organisation that aims to strengthen solidarity and financial capacity by and among local authorities and is complementary to existing mobilisation, coordination and advocacy networks.
FMDV provides technical expertise and financial engineering throughout the urban development project process (definition, fundraising and organisation). It facilitates territorial authorities’ access to financial resources, which match the needs that they themselves have identified, and under the best possible conditions: guarantees, loans, subsidies, grants, financial markets and endogenous mechanisms.
FMDV is based in Paris and is present in Africa, Asia and Latin America via its regional offices. This allows the organisation to work as closely as possible with its members and the territorial projects they are implementing.
FMDV, via its local offices, forms a readily available network of expert and committed international and regional partners, comprising chief financial officers, engineers and technicians from local authorities, universities, NGOs, private groups and international institutions.
FMDV’s website: www.fmdv.net
Lars M Andersson has been commissioned to participate in a group that will assist the Swedish Ministry of Finance to develop methods to follow the financial performance of local authorities.
The findings will be presented in February next year.
Last week (September 15 – 18) was busy. I had interesting meetings in both Lyon and London.
First to Lyon: Agence France Locale will be moving to the beautiful city of Lyon in the beginning of October and the Supervisory Board had its first meeting there September 16. The meeting took place on the 27th floor of the Tour Oxygen. On the same day, there were also a meeting of the Board of the Mother Company of the agency and a subsequent press conference. Read the press release (in French) here.
Then to London the following day, September 17: I was asked to speak at a meeting with representatives of councils interested to join the UK Municipal Bond Agency. My speech included a brief presentation of existing agencies in Europe and elsewhere and a more detailed description of Kommuninvest and Agence France Locale. More specifically I went through the applied guarantees and supervision of members/local authorities. Other external speakers at the meeting where Dr Stefan Vetter (Deutsche bank), Bernard Gordon (EIB), and Jennifer Wong (Moody’s).
I also had the opportunity to meet the team of the Local Capital Finance Company, the newly created entity for the Bond Agency. Read the Local Government Association’s press release issued on September 9, 2014, here.
Lars M. Andersson
During the Resolutions-to-fund-cities conference in Paris in the beginning of July, I presented a paper that explores questions concerning the financing of local government infrastructure investments in western Europe. It especially concentrates around the trend to create local government funding agencies. What are the reasons for this trend? Why do we see this trend now? Why is this development important for growth?
This paper is published on www.resolutionstofundcities.org. Here is a link to the paper.
Fonds mondial pour le développement des villes (FMDV) and Région Île de France are organizing a conference in Paris 3-4 July with the theme New funding models for local government: How to mobilize resources efficiently? More information on
I am invited to give a speech during the first plenary session, Thursday 3 July, 10:45 am. The headline for my speech is What opportunities does the creation of a Local Government funding Agency bring?
Together with EY and Agence France Locale, I am also organizing a workshop on Local Government Funding Agencies, Friday 4 July, 2:15 pm. The following will be speaking at this event: Sir Merrick Cockell, Chairman of the English Local Government Association, Marcel Roy, Director General of the European Association for Public Banks, Yves Millardet and Laurence Leydier, Agence France Locale and Raphael Ravoux, EY.
You will find more information on the workshop here.
Lars M Andersson
I am now back in Stockholm from a couple of interesting days in a sunny (!) Belfast. The NILGA (Northern Ireland Local Government Association) seminar was held in the very nice Riddel Hall. I made a presentation of how local government finance is connected to growth and gave an overview of the trend to create Municipal Bond Agencies in Europe and elsewhere.
Among other good presentations, it was, in particular, interesting for me to hear Andrew Dickson, when he spoke about the East/West Scotland Investment Fund. This is an entity, owned by Scottish Local Authorities, which ensures that SMEs have access to finance. This is an example that could be replicated in other countries.
Lars M Andersson
Lars M Andersson has been invited to speak at an event arranged by the Northern Ireland Local Government Association on Thursday June, 12. The Subject for the seminar is ”Strong councils, community stewardship and new investment”. Mr. Andersson will speak under the headline ”Making Investment happen – proposals and models for analysis”.
Energy Post has posted an article with the headline ”Let’s globalize! Global meets local in municipal green bonds” written by Clare Taylor. In this article, Lars M. Andersson is interviewed about the trend to create new Local Government Funding Agencies. Read the article here.