Utah Taxpayer

After speaking with the good folks at the Division of Finance and at the Office of the State Treasurer, we've picked up some more information about the state's capacity for bonding.

The updated state general obligation bond capacity is about $1.69 billion, up from $1.33 billion just twelve months ago. This increase is due to

- an increase in the constitutional bonding limit from $2.784 billion to $2.985 billion, a 7.2% increase (the constitutional bonding limit equals 1.5% of the total taxable property fair market value)

- a decrease in outstanding debt from $1.448 billion to $1.294 billion, a decrease of 10.6%

The difference between the bonding limit and the outstanding debt equals the bond capacity.

According to the State Treasurer's Office, a $1billion GO bond would not hurt Utah's AAA bond rating. So the good news is that the state has the capacity for a large bond for corridor preservation and would be able to maintain its AAA rating.

Of course, the state has to figure out how to pay for this. A $1 billion bond at 5% interest over twenty years would have annual bond payments of $80 million. UDOT officials say that the cost of land acquisition can account for up to 50% of total costs of building a highway, especially if land prices are escalating due to development or approaching development. The state can significantly reduce the cost of total highway construction by buying the land years in advance.

Posted by Utah Taxpayer on Monday, August 07, 2006 at 11:23 AM | Permalink