Certificates of Participation (COPs)
Certificates of participation are a mechanism for governmental entities to finance capital projects without technically issuing long-term debt. They are a type of financing in which the investor purchases a share of the lease revenue from a facility rather than a bond.
The leasing authority leases the asset to a municipality and transfers its right to receive lease payments to a trustee. The trustee executes certificates of participation, which are sold to members of the public. The purchaser of a certificate of participation receives a share of the lease payments, rather than the principal and interest of a bond. COPs are financing lease agreements, in the form of securities, sold to investors in both private placements and public offerings.
Leases generally are not considered debt, because the government’s obligation to make lease payments is contingent on the availability of the leased property for use. Since certificates of pa