The National Academies

NCHRP 19-15 [Anticipated]

Guidebook for Effective Debt Management Policies and Practices for Surface Transportation

  Project Data
Source: Arizona
Funds: $300,000
Staff Responsibility: Lawrence D. Goldstein
Fiscal Year: 2018

This project has been tentatively selected and a project statement (request for proposals) is expected in July 2017. The project statement will be available on this world wide web site. The problem statement below will be the starting point for a panel of experts to develop the project statement.

Given an increase in the amount and types of financings being used to pay for transportation investments coupled with an increasingly complex regulatory environment for municipal debt, state DOTs are facing a number of challenges in administering and managing their debt programs. These challenges include: (1) maintaining an affordable level of debt; (2) complying with post issuance compliance requirements; (3) determining the appropriate debt tool to use to meet financing needs; (4) determining when it is appropriate to refund existing debt; (5) selecting qualified advisors including bond counsel, financial advisors, investment bankers, and trustees among others; (6) selecting the appropriate issuance method; and (7) communicating to stakeholders parameters affecting debt affordability. To overcome such challenges, state DOTs regularly seek to improve debt management policies and procedures.

State DOTs have a wide range of policies in place to guide the management of their debt programs. Such policies cover types of debt and related security, debt affordability beyond bond covenant and statutory limitations, method of sale, refunding savings guidelines, use of variable rate debt guidelines, selection of advisors, use of derivatives, debt structuring practices, debt issuance practices, use of credit ratings and selection of ratings services, practices related to investment of proceeds, disclosure practices, post issuance compliance practices, and market and investor relations efforts, among others. Developing and adhering to effective debt management policies that provide guidelines and restrictions regarding the amount and type of debt issued, the issuance process, and the management of the debt portfolio will improve the quality of decisions and provide justification for the use and structure of debt while identifying and monitoring adherence to stated policy goals.

NCHRP Synthesis Topic 47-07, “Evolving Debt Finance Practices for Surface Transportation,” highlighted that state DOTs are issuing an increasing amount of debt and using an increasing variety of financing mechanisms. This increase is occurring while state DOTs find that they are facing greater regulatory scrutiny.

The primary objective of the proposed research is to develop a deeper understanding of the debt issuance and management policies that states follow related to transportation debt. The final deliverable will be a guidebook to help state DOTs develop and implement effective debt management policies. The primary audience for the guidebook will be state DOT financial managers but will also include elected officials, state DOT chief executive officers, and other agencies with a role in providing technical assistance and oversight affecting state DOT financial management.

Based on findings from the earlier NCHRP Synthesis Topic 47-07, and the increasing complexity of debt mechanisms in the broader context of a changing regulatory environment, it is apparent that most DOTs would benefit from access to detailed guidance on debt issuance and potential management policies.

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