There are several reasons why pooling can be economical for school districts. Borrowing costs are spread over a larger base, so the cost per dollar borrowed is less. Rating agencies are willing to rate a pool's debt, and bond insurers are willing to consider insuring a pool issue, even though the pool includes districts which do not have ratings or w hone debt otherwise would not be insurable. This usually is because default risk is lower due to the diversification of credit risk and from a geographic dispersion of risk. Diversification results horn having many borrowers instead of a single one.
Dispersion results from differing demographic and business conditions among the pool participants.
The interest rate may be lower because there may a larger universe of potential lenders interested in the debt. Better liquidity usually translates into lower rates. There are non-econonuc reasons to borrow through a pool. Both the borrowing process and the related documentation arc standardized, so this can translate into quicker, more hassle-free experiences. School district officials do not need to denote a significant amount of their time preparing for, rehearsing, traveling and making presentations to the rating agencies and credit enhancers.