FINANCIAL MECHANISM FOR THE IMPLEMENTATION OF LOCAL LOAN BONDS IN THE TRANSPORT INDUSTRY

Abstract

The work is devoted to the analysis and development of the financial mechanism for the introduction of local loan bonds. The author generalizes the concept of «local loan bonds» and identifies the advantages and disadvantages in the process of implementing local loan bonds in the transport industry. Has been studied, that local loan bonds are one of the most effective financial instruments used by local governments to attract additional sources of financial support for businesses in the transport sector. The difficulties of applying local bonds in four relevant areas were identified as organizational, financial, investment and regional. The advantages of local loan bonds introduction at different levels were systematized as state, regional and for the issuer – city self-government bodies. It is determined that there are a number of restrictions on the issuance of local bonds at the legislative level on the total amount of loans to the local budget, local budget expenditures may not exceed 10 percent of the general fund expenditures on local debt service and time limits.

The organizational mechanism of local loan bonds introduction is developed and expenses of local authorities in the course of their issue are considered. It is determined that during the issue of local bonds the issuer incurs costs for basic or additional services. The issuer will make a significant part of the costs in the process of organizing the registration of the issue of local loan bonds, for the services of an underwriter and financial advisor. The implementation of the financial mechanism for the local loan bonds introduction through certain forms of interaction, which are proposed to be considered in terms of cash flows, bond rights and information flows. The financial mechanism of introduction of bonds of local loans for subjects of managing of transport branch is offered. Within the mechanism of introduction of local bonds, its main participants are the issuer, investor and professional intermediaries, and as elements of market institutions – governing bodies: the stock market, the depository and the registrar. On the basis of the financial mechanism of local loan bonds implementation, the stages of financial support of local loan bonds are systematized in accordance with their purpose and functions of the mechanism participants. An important feature of the mechanism of financing of economic entities of the transport industry is the gradual nature of its implementation.