Los Angeles County has long been considered a trailblazer when it comes to raising money on Wall Street.

And this month it takes another pioneering step by becoming the first local government in the nation to issue commercial paper a tax-free financial instrument traditionally used by corporations.

The county is issuing $300 million of the financial instruments to pay for designing and building new medical facilities like the proposed replacement of County-USC Medical Center.

“For all of the financial troubles that the county has had, there is no denying that they are very innovative in how they raise capital,” said Chris Irwin, an analyst at Standard & Poor’s Corp. “Being the size they are, L.A. has to be creative. They need to save money any way they can to get the budget under control.”

Unlike short-term bonds, commercial paper will provide the county with an ongoing source of financing. It can issue the paper over a 10-year period, using the funds on an as-needed basis instead of getting all the money at once by issuing traditional short-term debt.

Local governments have not used commercial paper before because of the instrument’s need to be secured by revenues. But Maureen Sicotte, the county’s director of public finance, found a way to tie the commercial paper to lease payments on county buildings.

It involves the county forming a nonprofit corporation to own the project site. That nonprofit then raises money on Wall Street, typically through short-term debt called certificates of participation, to finance construction of the structures. The county then leases the resulting courthouse, jail, medical centers, or whatever from the nonprofit.

In this case, the nonprofit corporation will use the county’s lease payments to secure the commercial paper.

Another benefit of using commercial paper: It allows the county to shave about three percentage points from the interest rate it would have had to pay on short-term bonds saving an estimated $8 million, Sicotte said.

The county already has distinguished itself as a pioneer in coming up with new bond structures. Some of the other deals hailed by Wall Street include a $2 billion pension obligation bond issuance used to pay matching funds into the Los Angeles County Employee’s Retirement Association; and an annual equipment replacement program that issues tax-exempt securities to finance capital needs, instead of the taxable means traditionally used.

“This is something that pays off for us every year, and saves us millions of dollars,” Supervisor Zev Yaroslavsky said of the pension obligation bonds. “We created something from nothing. For all the problems the county might have, the ability to come up with these kinds of innovations is the way we are going to get our fiscal house in order.”

Sicotte said investors are becoming more confident in the county’s bonds. That means the county can be creative in the structure of its tax-free financings.

“Wall Street in general didn’t trust us once the ‘B’ word (bankruptcy) was being thrown around,” she said. “We had always been very innovative, tried new things but we were lucky to sell any bonds after what happened in Orange County.”

Sicotte was appointed director in 1994, but has been with the county since the 1960s, managing debt in several county departments. As director of finance, she oversees annual debt issuance of about $400 million, as well as the county’s $4.3 billion of outstanding debt.

Working behind the scenes, her job is to work with underwriters and bond counsel to develop ways to raise money on Wall Street.

Public finance analysts say the timing is right for the county to try new things like commercial paper and that big institutional investors are more willing to buy such instruments now.

The market’s readiness is mostly because L.A. County’s financial problems are on the mend and more disclosure requirements have been placed on municipalities in the aftermath of the Orange County bankruptcy, Sicotte said.

Los Angles County’s darling status on Wall Street came to an end after investors became leery of municipal bonds in the aftermath of the Orange County bankruptcy. L.A. County’s own budget problems added to that reluctance by investors.

“Necessity breeds innovation and in the county’s quest to save money, they come up with some great ideas,” said Kevin O’Brien, a senior vice president at Lehman Brothers. “L.A. has always been a county where you just shake your head and think, ‘Why didn’t anyone else think of this?'”