DEBT CAPACITY AND DEBT LIMITS: A STATE ROAD FUND PERSPECTIVE

State governments are facing major transportation infrastructure financing challenges as highway or Road Fund revenue growth has slowed and resistance to tax increases has strengthened. As a result, state transportation officials have turned to other financing methods to maintain momentum in meeting highway construction and maintenance needs. Among the financing methods being considered is the expansion of bond or debt financing. Changes in federal legislation that permits states to "pre-obligate" future federal funds, among other considerations, has made debt financing an attractive alternative for the states. As states consider the expanded use of this financing strategy, several financial management questions arise including the appropriate role of debt financing, debt capacity and whether to establish limits on their use of debt financing. Unfortunately, limited research has been carried out to address these issues as the state debt financing literature has focused on state General Fund debt management issues. This study focused on the debt management issues associated with the use of state highway or Road Fund revenues as the source of debt service support for new bond issues. Among the issues assessed (through a national survey) were whether states have developed separate debt policies or limits for highway or Road Funds, the ratios of debt service payments to total state Road Fund revenues and other debt management issues. The study results suggest that the states have begun to focus on these issues and are actively setting and managing debt policies for their Road Funds and are including debt financing as part of their overall state highway financing strategies.

• Record URL:
  • https://doi.org/10.13023/KTC.RR.2004.16
• 
• Corporate Authors:

  University of Kentucky, Lexington

  Kentucky Transportation Center
  College of Engineering, 176 Raymond Building
  Lexington, KY  United States  40506-0281

  Kentucky Transportation Cabinet

  200 Mero Street
  Frankfort, KY  United States  40622

  Federal Highway Administration

  1200 New Jersey Avenue, SE
  Washington, DC  United States  20590
• Authors:
  • Hackbart, M
  • Sapp, S P
  • Hur, Y
• Publication Date: 2004-6

Language

• English

Media Info

• Pagination: 49 p.

Subject/Index Terms

• TRT Terms: Bonds; Construction and maintenance; Debt; Financing; Infrastructure; State government; Transportation
• Subject Areas: Finance; Transportation (General); I10: Economics and Administration;

Filing Info

• Accession Number: 00977135
• Record Type: Publication
• Source Agency: University of Kentucky, Lexington
• Report/Paper Numbers: KTC 04-16/TA5-03-1F,, Final Report
• Contract Numbers: TA5-03
• Files: TRIS, USDOT, STATEDOT
• Created Date: Aug 13 2004 12:00AM