ABSTRACT
State and local governments often seek third-party credit enhancement as a means of reducing their borrowing costs or improving access to the credit markets with respect to their municipal securities. Thus, credit enhancement is a vital component in the efficient working of the municipal securities market. There are myriad different types of credit-enhancement devices offered by public and private sector third parties. In the use of these various credit devices, there are also several important decisions state and local governments must make. Credit-enhancement usage will likely remain an important component to effective and efficient public financial management as state and local governments are increasingly reliant on municipal securities to finance their sizeable capital improvement needs.
