What does a Certificate of Participation represent?

A Certificate of Participation (COP) represents a share in a revenue stream pledged by a public agency. This financing mechanism is commonly used by governments to raise funds for various projects without issuing bonds in the traditional sense. When a government entity engages in a COP, it essentially allows investors to participate in the revenues generated from specific projects or facilities that the government operates.

In practice, a COP involves a lease or installment purchase agreement whereby the government agency leases a facility or project, and the payments on that lease are secured by the revenues generated by the project. Investors receive payments based on the performance of that revenue stream, making COPs a form of investment in a planned and managed revenue-generating mechanism rather than a direct claim against the agency's general taxing power.

This structure is beneficial as it avoids some of the regulatory complexities involved with traditional bond issuance and can provide a more flexible way to finance public projects in a timely manner.