Borrowing for the Public Good: The Growing Importance of Tax-Exempt Bonds for Public Charities

Thad D. Calabrese, Todd L. Ely

Research output: Contribution to journalArticlepeer-review


The importance of tax-exempt borrowing as a capital source to the nonprofit sector has significantly grown over time. Outstanding tax-exempt bonds issued by nonprofits have risen from an inflation-adjusted US$106.3 billion in 1993 to US$388.5 billion in 2010 representing an 8% compound annual growth rate over the period. The increased importance of tax-exempt borrowing relative to other borrowing for nonprofits has gone unnoticed. Here, we ask what factors are associated with this trend. We find wide variation in the increasing use of tax-exempt bond usage between nonprofit sectors. Although nonprofit borrowers other than hospitals have increasingly entered the tax-exempt capital market over the past decade, they still tend to be large organizations with lower risk of bankruptcy or default. Our empirical findings continue to raise the questions that others have raised: How do we make smaller, capital-starved nonprofits better able to take advantage of the tax-exempt market in a responsible manner?

Original languageEnglish (US)
Pages (from-to)458-477
Number of pages20
JournalNonprofit and Voluntary Sector Quarterly
Issue number3
StatePublished - Jun 2015


  • capital finance
  • nonprofit financial management
  • tax expenditures
  • tax-exempt bonds

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)


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