Evaluation of Bonds for Financing State Highway Expenditures in Texas: Preliminary Findings
Author(s):
W.F. McFarland, J.L. Memmott
Publication Date:
November 1994
Abstract:
This is an interim report giving some preliminary findings on the evaluation of the use of bond financing for State highway investment in Texas. Criteria for evaluating use of bond financing include the following standard criteria for rating alternative revenue sources: (1) equity considerations; (2) economic efficiency; (3) revenue potential and stability; (4) acceptability; (5) administrative feasibility; and (6) applicability. Two additional criteria that are of interest evaluating bond financing are pay-as-you-go criteria and rate-of return analysis. Different interpretations of the pay-as-you-go criteria are discussed. Among the factors that may influence the decision about whether to use bond financing is the rate of return that can be gotten from the increased spending made possible by bond issues. A spreadsheet program was used with output from the Highway Performance Monitoring System (HPMS) program output to develop rates of return for different types of projects. Using the latest available (1992) HPMS data set for Texas, simulation runs were made for several levels of funding. The base level of funding was set at a relatively low level, indicated by expected state highway revenues for construction categories covered by the HPMS model and several alternative levels, and were run representing the situation if current spending were supplemented with funds from bond financing. The rate-of-return analysis indicates that the rate-of-return on additional highway investment in Texas is from 16 to 33 percent.
Report Number:
1362-1
Electronic Link(s):
Document/Product
http://tti.tamu.edu/documents/1362-1.pdf
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