When properly structured, subnational bonds can become an excellent tool for infrastructure financing. A common concern when referring to developing nations, however, is the lack of an adequate bond repayment capacity. This article uses a multinomial regression model to analyze the bond repayment capacity of issuers of municipal bonds in Mexico. The study emphasizes the role that property and land-based taxes have in the enhancement of repayment capacity, as these are highly underutilized levies with important revenue raising potential. The findings show that in spite of this, there is no statistically significant link between such taxes, and the chosen proxy for repayment capacity. We consider this to follow from an institutional and legal framework that creates an artificial environment of fiscal solvency. The Mexican case is instructive on how not to create a subnational bond market.