Synthesis of Information Related to Highway Problems. Topic 47-07. Evolving Debt Finance Practices for Surface Transportation

Transportation investment represents the largest category of capital spending at the state level, accounting for 59% of all state capital expenditures in fiscal year 2012. More than 90 percent of states have issued debt to help finance their transportation spending. Among these states, however, debt finance practices vary widely, and basic principles of debt issuance for surface transportation - addressing, for example, the nuances of transportation revenue streams, the unique cash flow aspects of transportation construction programs vis-à-vis the federal funding partnership, and the transparent treatment of long-term commitments to make "availability payments" to concessionaires under public private partnerships - have not yet been compiled into a single source of information. For state borrowers, debt should be issued to accomplish critical goals under acceptable financing terms. Like federal decision makers (who administer funds now widely used to secure state debt), state borrowers also want to sustain robust pay-as-you-go spending programs into the future. Examples of debt management choices include the following: (1) When is it appropriate to use debt to finance capital (and operating) expenses? (2) What criteria or benchmarks could be set to determine how much debt to issue and how it should be used? (3) What principles should be employed to guide decisions about the debt type and term? (4) Might debt limits be set on a comprehensive basis (e.g., across all government programs) or for individual funding sources (e.g., a road fund) - or a combination of aggregate and individual limits? (5) How do debt covenants fit into debt management choices? (6) In what ways should availability payments be treated differently, and the same, as debt issuances? (7) What should be the federal government's policy role in the issuance of state and local debt backed by federal transportation funds? The proposed study would update and extend the 2009 National Cooperative Highway Research Progam (NCHRP) Synthesis 395, Debt Finance Practices for Surface Transportation, in which most states reported a need for assistance in developing prudent debt management practices for their transportation programs. Based on state feedback, Synthesis 395 identified many topics for further research, including the following: (1) A critical need for the development and sharing of transportation-specific debt affordability measures, as distinct from general obligation and statewide measures; (2) Guidance on the effective use of debt and of nontraditional products such as derivatives; (3) Policy development regarding the evaluation of debt in the context of ongoing operations and maintenance demands; (4) Optimization of pay-as-you-go programs versus Grant Anticipation Borrowing (for highways) and other debt structures; and (5) Tools to educate lawmakers on both the advantages and disadvantages of debt financing. Indicative of the interest in these questions, the Transportation Research Board (TRB) will host an April 2015 webinar, sponsored by the Committee on Revenue and Finance, to identify critical debt management issues and potential research topics. An updated Synthesis would provide an indispensable platform for specific research efforts developed by webinar participants. To identify current debt management practices and concerns, this study should survey State Department of Transportation to discover debt management policies and analyze how these policies are integrated with the relevant state's overall debt affordability review. The survey could include all states or representative samples based on population, level of borrowing, or other relevant criteria. In addition, the Study could include representative case studies of major state-level highway bond programs and local government initiatives, highlighting effective practices. The study will also include state debt obligations through review of Federal Highway Administration's (FHWA's) Highway Statistics series and other public sources. Researchers could consult public sector organizations such as the Government Finance Officers Association, the National Governors Association, the National Association of State Treasurers, the National Conference of State Legislatures, and the National Association of State Budget Officers. The private sector firms that comprise the capital market - institutional investors, investment banks, rating agencies, financial advisories and counsel - would offer essential perspectives.


  • English


  • Status: Proposed
  • Funding: $45000.00
  • Contract Numbers:

    Project 20-05, Topic

  • Sponsor Organizations:

    Federal Highway Administration

    1200 New Jersey Avenue, SE
    Washington, DC  United States  20590

    American Association of State Highway & Transportation Officials (AASHTO)

    444 North Capitol Street, NW, Suite 225
    Washington, DC  United States  20001

    National Cooperative Highway Research Program

    Transportation Research Board
    500 Fifth Street, NW
    Washington, DC  United States  20001
  • Project Managers:

    Williams, Jon

  • Start Date: 20150701
  • Expected Completion Date: 0
  • Actual Completion Date: 0
  • Source Data: RiP Project 39643

Subject/Index Terms

Filing Info

  • Accession Number: 01562862
  • Record Type: Research project
  • Source Agency: Transportation Research Board
  • Contract Numbers: Project 20-05, Topic
  • Files: TRB, RIP
  • Created Date: May 13 2015 1:00AM