What is a port authority common bond fund?
A port authority bond fund is a credit-enhancement vehicle based on a system of program reserves established in special funds of the port authority deposited with a qualified corporate trustee. Those program reserves, additional reserves funded in connection with each series of revenue bonds issued to finance costs of approved projects, the portfolio of loans that are made from those proceeds and the collateral for each such loan, are all pledged under the applicable trust agreement to support the revenue bonds issued for those projects. The program reserves are typically funded with a combination of local contributions, state loans (repaid only from investment earnings), and bank letters of credit.
Why is a port authority bond fund important?
A bond fund is a unique and important tool for economic development because it enables a port authority to provide real value to many projects for which it could only otherwise act as a “conduit” and to much smaller projects. Port authorities have also pooled the resources of their bond funds and of state programs to provide financing for projects of significant size and have used their bond funds to fill funding gaps on major economic development projects.