What is a Mutual Investment Certificate
A mutual investment certificate is a certificate issued by a local or municipal authority for the purpose of funding a public works project. The public works project category encompasses many different types of developments and initiatives, which could include facilities intended for entertainment purposes, along with those that will serve health and safety functions. This category could also include locations developed to promote employment or education opportunities in the community.
BREAKING DOWN Mutual Investment Certificate
A mutual investment certificate is a financial instrument that offers a resource for community leaders, boards or other local government entities to finance worthwhile projects that have potential to make a positive impact on the area.
This type of obligation is financed by a tax assessment imposed upon the residents who will benefit from the facility. This represents a way for the local residents to invest in, and directly support, a project that I intended to benefit the community as a whole. This type of financial strategy is based upon the idea of members of a community all pulling together to jointly enable the community to improve and expand. Residents can literally invest in their community in a tangible way. Mutual investment certificate income is always tax-free to the recipient.
Mutual Investment Certificate Processes
By providing new resources or facilities to the community and those who lives in it, this construction or development may have a positive impact not only on the quality of life, but also on the economic picture. Improvements like these can boost the desirability of the area, which in turn may help increase property values. In this way, this investment may at some point down the line pay off for the residents who provided financial support for the project.
Mutual investment certificates essentially function as a type of general obligation bond, although they are technically in a different category. A typical general obligation bond is backed by the credit of the jurisdiction, rather than a specific project.
Mutual investment certificates are not backed directly by revenue from the project, but are instead supported by the local taxpayers. The revenue from the projects behind the certificates also may be collected directly by the contractor that is building or renovating the facility, instead of the locality. When managed in this way, the process relieves some of the logistical burden on the municipality, which can be an advantage for local organizations or authorities that have limited manpower or resources to implement a process for collecting and overseeing financial management aspects of the process.