What are certificates of participation primarily used for?

Certificates of participation (COPs) are primarily used for financing major projects. They function as a type of financing arrangement where investors purchase shares in a lease agreement, enabling a government or agency to fund specific capital projects, such as the construction of buildings or infrastructure improvements. By structuring this financing approach, the issuing authority is able to utilize the funds immediately for significant projects while spreading the repayment over time through lease payments.

This financing method is particularly advantageous for large projects that require substantial upfront capital, making it a preferred option for municipalities and public entities aiming to effectively manage their capital needs without incurring traditional debt obligations. Hence, the focus on selling shares to investors to facilitate such major endeavors is the core aspect that defines the use of certificates of participation.

In contrast, other options, such as short-term financing for minor projects, leasing due to quick obsolescence, or lease-to-own arrangements, do not capture the primary function of COPs, which emphasizes larger-scale project financing rather than the immediate, short-term, or alternative leasing scenarios indicated in those choices.