All host cities for the 2026 FIFA World Cup are leveraging municipal bonds for financing, according to Dan Close, head of municipals at Nuveen. This strategy allows cities to address overdue infrastructure projects, using the World Cup as an accelerator for improvements that will provide long-lasting benefits beyond the tournament. This contrasts with previous Olympic events where funded projects often had short lifespans.
These municipal bonds are allocated for improvements across various sectors, including transit, airport upgrades, convention and broadcast infrastructure, and urban connectivity. For example, Houston expanded its airport, Seattle enhanced its light rail system, and Dallas upgraded its Kay Bailey Hutchison Convention Center to serve as the International Broadcast Center. The Massachusetts Bay Transportation Authority also introduced a new platform outside Boston's Gillette Stadium, and Kansas City focused on essential street, sidewalk, and bridge improvements. While federal funds contributed to initial preparations, state and local governments, primarily through muni bonds, bore the majority of the financial burden.
The investment opportunities in these municipal bonds are significant. While primary issuance has concluded, the bonds are available on the secondary market. Nuveen's Dan Close suggests that investors can find attractive opportunities in this market, avoiding the new issue spread compression seen in the primary market. Many of these bonds are included in various Nuveen funds, such as the Nuveen All-American Muni Bond Fund. Close particularly favors convention center bonds, especially in Dallas, due to their repayment structure tied to hotel occupancy taxes, which promise attractive risk-adjusted returns.
Investors are advised to understand the structure of these bonds, which can range from general obligation bonds, backed by government credit and taxes, to revenue bonds, tied to project-generated revenue. Each type carries distinct risks requiring careful evaluation of credit quality. For instance, the Houston airport expansion bonds, despite slightly lower ratings, offer reliable repayment. This strategic use of municipal bonds not only ensures the completion of essential infrastructure projects but also positions host cities for robust market access and strong credit ratings in the future.
