This section of the BATIC Institute website provides information on the approvals and authorization legislation needed at the state and local level in order for departments of transportation to issue debt financing. This type of legislation also codifies the process and procedures for doing so. As such, it must reflect the unique institutional structures that are in place from state to state. While debt authorization legislation can be expected to cover the same general issues, the specific arrangements used to address vary by state. Often these measures authorize the use of debt finance to support specific programs rather than blanket permission for state or local DOTs and transit agencies to issue debt.
Several examples since 2015 illustrate programmatic bond authorizations for certain amounts or durations. More general debt authorization legislation examples follow for Arizona, Florida, and Virginia.
The Arizona Regional Area Road Fund (RARF) is bond program for Arizona counties. This legislation allows counties with 1.2 million or more people (currently only Maricopa County) to authorize and issue bonds or incur long-term obligations payable in whole or in part from monies in a regional area road fund. RARFs are funded with transportation excise tax monies.
This section of state law allows registered voters to approve an incremental tax on business activities within the county for a period of up to 20 years. These funds are then deposited in the RARF. Originally authorized for the period 1986-2005, the tax was renewed in 2004 for another 20 years through 2025.
The county in which transportation excise taxes are levied has the beneficial interest in the regional area road fund. This state has no beneficial interest in the regional area road fund except as an obligee for reimbursement of state monies that are advanced as salaries or expenses by this state or the department and that are to be repaid by the regional area road fund.
An appropriation of any nature shall not be required before the expenditure of monies from the regional area road fund. Monies in the bond proceeds account or construction account of a regional area road fund may be obligated for payment in future years for the purpose of right-of-way acquisition subject to the certain limitations. The following legislation formulates the program:
28-6301 - Definitions
28-6302 - Transportation excise tax distribution; counties with one million two hundred thousand or more persons; regional area road fund
28-6303 - Regional area road fund; separate accounts
28-6304 - Bond account; expenditures
28-6305 - Construction account; expenditures; construction contracts
28-6306 - Account expenditures; elections
28-6307 - Regional area road fund; plan
28-6308 - Regional transportation plan; transportation corridor priority list
28-6309 - Interim roadway pursuant to agreement
28-6310 - Interim roadway by city or town
28-6311 - Construction contract
28-6312 - Roadway and highway maintenance
The mechanism for raising RARF bonds is described in the following sections:
28-7561 - Bonds payable from transportation excise taxes
28-7562 - Bond requirements
28-7563 - Bond payment; security
28-7564 - Pledges; liens
28-7565 - Liability; bond validity
28-7566 - Bond purchase
28-7567 - Notice; bond issuance
28-7568 - Bond proceeds; distribution; expenditures
28-7569 - Agreement of state and county
28-7570 - Taxation exemption
28-7571 - Attorney general bond certification
28-7572 - Bond obligations of the board
28-7573 - Bonds; legal investments
When local governments implement transit projects, they usually utilize a mixture of revenue sources. Because of this, it is often difficult to pledge these various monies against bonds. In Florida, local governments can pass those funds onto the state which then issues a bond using the state transportation trust fund to pledge the full amount. This technique (Fla. Stat. § 215.615) capitalizes the greater credit worthiness of the state and is much more attractive to the financial markets.
This Florida Constitutional Amendment allows debt financing for the purchase of land and the construction of bridges. The Amendment was passed by popular vote. Its rationale was based on the fact that bridges - and the benefits they bring - last for a long period of time and that in high-growth areas such as Florida, land costs historically increase in value. For these reasons, Florida voters believed that it was appropriate for the state to issue debt for these assets. The amount of money that can be bonded is capped and is limited to a percentage of the revenues coming into the state transportation trust fund.
The Virginia Public Finance Act of 1991, Va. Code Ann. §§15.2-2600 et seq., codifies the process through which local governing bodies may issue bonds, subject to the approval of a majority of voters within local jurisdictions. The procedures described in this Act are typical of those governing the issuing of local public debt in other states.