Why the Smartest Financing Decisions Start With Stepping Back, Not Rushing In
BY Thomas Wyatt, Partner, Obermayer
When a municipality comes to me with a financing question, it is usually framed narrowly: Can we sell the water system?; How do we pay for the new firehouse?; What incentives can we offer to land a developer? Those are the right questions eventually. But the municipalities that get the best long term results are the ones that ask a different question first: looking at everything we own and everything we are responsible for delivering and our aspiration to deliver more for residents, where do we actually need to focus, and why?
That question is bigger than any single transaction, and it is one that tends to get skipped under the pressure of a budget cycle or a specific deal on the table. But municipalities that are willing to step back and look at their full portfolio of assets and services, side by side with their comprehensive plan, existing zoning and land use ordinances, and known housing or commercial growth on the horizon, consistently make better financing decisions than those that solve one problem at a time.
Too often, the first conversation happens the other way around: someone brings the municipality an idea, a data center developer, a utility interested in buying the water or sewer system, a business looking for an incentive package, and the municipality is reacting to someone else’s proposal rather than its own plan. Don’t misunderstand, that inbound interest can be a legitimate opportunity. But the question that matters is not whether the idea is interesting on its own terms. It is where that idea fits within the municipality forging its own destiny, on its own priorities, as reflected in its comprehensive plan, its zoning/land use framework, anticipated growth, and its full portfolio of assets and obligations. That is where counsel that knows the portfolio and the plan, not just the deal in front of it, earns its keep. With this approach, the municipality is literally making the calls to invite partners and capital- not just a prong in someone else’s business plan.
Start With the Portfolio, Not the Project
Every municipality is sitting on a portfolio, whether or not it thinks of it that way: water and sewer systems, roads and stormwater infrastructure, public safety facilities and equipment, parks and recreation assets, vacant or underutilized municipal land, and the service obligations that come with all of it. Reviewing that portfolio as a whole, rather than reacting to whichever asset is failing loudest, surfaces things that a piecemeal approach misses.
The county and municipal comprehensive plan is the natural starting point for that review, but it should not be the only one. Existing zoning and land use ordinances tell you what development is actually permitted today, not just what the plan envisions. And growth that is already in the pipeline, a planned subdivision, a mixed-use project working through approvals, an announced commercial development, tells you what demand is coming whether the plan anticipated it or not. Reading the asset and service portfolio against all three tends to surface a handful of recurring themes:
- Public safety gaps: aging facilities, equipment, or coverage areas that no longer match where growth is actually happening under the plan.
- Increasing public service needs: be it emergency response services (such as paramedics, firefighters and police) and associated equipment costs; or social service needs for youth and/or aging segments of the population, growing at a rate which exceeds the taxing income, or what can realistically be required of the community’s population
- Infrastructure that is a constraint on growth: water, sewer, or road capacity that will not support the development the comprehensive plan anticipates, or that is consuming disproportionate operating budget relative to the service it delivers.
- Underused assets sitting on valuable ground: municipally owned land or buildings that no longer serve their original purpose but sit in areas the comprehensive plan identifies for growth or redevelopment.
- Tax base erosion or stagnation: areas where the plan calls for growth but existing zoning classifications, outdated land use restrictions, infrastructure gaps, or ownership issues are quietly blocking it, even where housing or commercial projects down the road show there is market demand the municipality is missing out on.
None of these themes show up clearly when a municipality looks at one asset or one budget line at a time. They show up when someone lays the full portfolio next to the plan, the zoning rules, the realistic tax base and the growth that is actually headed its way, and asks where things are out of alignment.
From Themes to Financing Tools
The reason this matters for financing is that the right tool depends entirely on what the portfolio review turns up, and the tools rarely work in isolation. A municipality that identifies an oversized, undercapitalized water or sewer system relative to its needs, for example, has an asset that allows it to sell a regulated acquirer at fair market value rather than depreciated book value. It could also lease the assets to itself through an authority and make a reasonable return. Where that theme emerges from the portfolio review, and the proceeds are directed deliberately, whether toward retiring debt, fixing pension issues, funding public safety improvements the plan calls for, or stabilizing rates, the transaction is solving a problem the municipality actually identified rather than chasing a number a prospective buyer offered.
A portfolio review should also surface how much room the municipality actually has left to raise revenue through its existing tools, before turning to a new financing structure. Tax rates, and rates for services like trash collection or a retained water or sewer function, all have practical, political and sometimes legal ceilings, and resident tolerance for further increases is not unlimited. Understanding where a municipality sits against that ceiling changes how urgently a given theme from the portfolio review needs to be addressed, and how much weight a sale, lease, or development financing tool should carry relative to simply adjusting rates or taxes.
Similarly, a municipality that identifies underused land or a stalled growth area that the plan supports, and where zoning already permits development or could be amended to permit it, especially if housing or commercial projects are already taking shape nearby, is positioned to pursue economic development financing with real purpose: tax increment financing, LERTA programs, land banking, or a structured development agreement with a redevelopment or municipal authority. Built on top of a portfolio review, those tools are aimed at a specific, plan-consistent outcome rather than assembled reactively once a developer or big utility shows interest.
The same discipline applies to smaller decisions: a public safety facility replacement, a stormwater system upgrade, or a decision about whether to hold or dispose of a piece of municipal land. Each of those is a better decision, and easier to finance and defend publicly, when it is anchored to a documented portfolio review and comprehensive plan alignment rather than treated as a standalone budget request.
Making the Review Useful, Not Just Thorough
A portfolio review does not need to be exhaustive to be useful. In practice, the municipalities that get the most value out of this work keep it disciplined: inventory what you own and what you owe in service obligations, lay it against the plan, the zoning rules, and the growth you see coming, find the two or three places where the gap between current reality and stated priorities is largest, and only then start matching financing tools to what you found. Done that way, the legal and financial structuring work is in service of a plan the governing body has already agreed to, which makes it far easier to build public and board support than a transaction that shows up first and asks for justification later.
I am glad to work through what a portfolio review might surface for a particular municipality, and how the financing tools available, whether for water and sewer infrastructure, economic development, or other capital needs, might fit the themes that come out of it. After having practiced in this area for so many years, I am confident we can work together to develop an appropriate path forward regardless of the challenges a community may face.
Thomas Wyatt is a Partner at Obermayer, where he chairs the municipal infrastructure and services practice area. His practice includes municipal water and sewer system monetization transactions, including the sales and purchases of assets to regulated utilities and municipal authorities.
Article from the October 2026 Municipal Reporter | Municipal Finance
