Definitions for "Certificate of Participation"
(COP) An ownership interest in a municipal lease obligation and its attendant tax-exempt interest and principal payments.
The City finances the construction of capital facilities by undertaking a long term lease with a private sector developer of a facility. The local government makes an obligation to make continuing installment payments up to the full price of the facility. At the end of the payments, the facility becomes the property of the governmental entity. A project is financed by COP's when the private sector lessor's interest in a project is marketed as fractional shares represented by certificates which are then sold to private investors. In theory, the facility would be usable by the investor for his/her purposes in the event of default.
Financing in which an individual buys a share of the lease revenues of an agreement made by a municipal or governmental entity, rather than the bond being secured by those revenues.