Costs of Raising (Social) Capital Through Mini-Bonds

Public officials use mini-bonds, small denomination municipal bonds, as a mechanism to broaden citizen access to tax-exempt investments that finance public infrastructure. Marketing debt securities to smaller investors comes with costs, but a popular expectation is that such offerings strengthen local social capital. This paper provides a historical overview of the use of mini-bonds, including the rationale and challenges. It then uses a series of mini-bond issuances by the City and County of Denver from 1990 to 2014 to illustrate the differences in issuance and interest costs compared to traditional municipal bonds, as well as investor access outcomes. A series of considerations for public officials contemplating the issuance of mini-bonds is included. Mini-bonds present a conscious financing decision where the additional and substantial costs can be quantified, but the anticipated benefits of increased publicity about public projects and more equitable investor access are more difficult to value.