Book Description

This report presents some findings on the evaluation of bond financing for use in highway finance in Texas. It provides information that can be used by the Texas Department of Transportation (TxDOT) and others in deciding whether or not to include the issuance of bonds in the mix of funding that is available for highway investment. Use of bond financing is not, ultimately, a way of financing expenditures. It is merely a way of changing the timing of expenditures or reallocating the use of revenues over time. Eventually, the bonds plus interest and other charges associated with the bond issue must be repaid with revenues from either existing taxes or, possibly, new revenue sources. Because bond financing is an expenditure strategy as opposed to being a basic revenue source, the criteria for evaluating bonds are somewhat different from those typically used for evaluating alternative revenue sources. This report presents two main findings on the use of bonds. First, new analyses of the impact of bonds on the highway system and motorists are made using the Highway Performance Monitoring System investment analysis. These findings indicate that use of bonds will lead to deterioration of the highway system over time if available revenues remain at current levels, in real dollars. The negative impact is forecasted to increase dramatically at higher levels of bond use. Second, a public opinion survey of Texas residents was conducted to determine public attitudes toward bond financing and other means of highway finance. This survey indicates that the public supports the use of bonds by the State to finance highways in Texas. There is some indication that they are less favorably inclined toward bonds when they realize that use of bonds reduces future funding by about twice the level of the bond issue because of interest and other bond costs. There also is some indication that the public may support bonds more for specific facilities, as opposed to facilities in general. Research findings suggest that the Texas Department of Transportation should be very cautious in using bonds to finance transportation, unless new basic revenue sources are available to pay for the bonds.