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The Ins and Outs of Pooling-Financing

Updated: Jul 30, 2023

CalMuni PFA issues pooled bonds on a quarterly basis and provides exclusive pooling opportunities for our members.

CalMuni PFA is offering a pooled bond financing program to minimize the costs of issuance and simplify the bond issuance process for borrowers. Combining the needs of multiple borrowers into a single, pooled financing can lower the overall cost of issuance for each borrower and potentially increase the long-term savings of each borrower.

Joint Powers Authorities & Pooled Funds

Joint Powers Authorities ("JPA") are legal entities under the Joint Excercise of Powers Act, Government Code section 6500, that allow two or more public agencies to jointly exercise common powers. The new entity or JPA, has the ability to enter into contracts, hold property, issue debt, sue, or be sued. Therefore, the debts, liabilities, and obligations of the JPA belong to that entity, not the members who formed that entity.

The IRS code defines the term "pooled financing bond" as any bond issued as part of an issue in which more than $5,000,000 of the proceeds are reasonably expected to be used directly or indirectly to make or finance loans to two or more ultimate borrowers.

How Pooled-Financing Works

In a pooled bond financing, CalMuni PFA issues bonds and subsequently loans the proceeds to multiple borrowers, i.e., our CalMuni PFA members. Bonds are only issued once the pool of borrowers and their specific financing needs have been identified in an application process.

The Pooled-Financing Program can be used for tax-exempt or taxable financings and is ideal for smaller or less frequent borrowers and those looking for the ease of a one-stop program administered and managed by a third-party (CalMuni PFA).

There are various methods of structuring pooled transactions such as pooling according to credit ratings, type of collateral or security, location, or length of maturity dates. CalMuni PFA does not prefer any one pooling method over another. Our Pooled Financing Program is customized based on the number of applications received every quarter. CalMuni PFA will send out an email announcement that the application is available for that round of financing, then determine based on responses the amount of the single issuance.

Benefits of Pooled Bond Financing

The number one benefit of our Pooled Financing program is the ability to utilize an experienced team of financing professionals including a municipal advisor and bond counsel to manage the financing and create credit enhancement to address differences in credit quality amongst borrowers. This program helps public agencies avoid the most restrictive tax requirements related to a single issuance. Pooled financing also significantly reduces issuance costs by combining the resources of multiple issuers and lowers interest rates to conduit borrowers.

What Can Be Financed

Pooled financing be can be used to finance new construction, renovation projects, land acquisition for future projects, refinancing outstanding debt, working capital for start-up facilities, equipment financing, funding of debt service reserves, costs of bond issuance, and much more. Please send us your project details here and we will be able to assess your eligibility for our next round of pooled financing. There is no upper limit on the amount of financing and terms of up to 25 years, subject to the useful life of what is being financed.

Strong Together

Our team at CalMuni PFA believes the community our members create can always benefit from one another and grow together. The goal of our Pooled Financing Program is to build better communities together.

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