Utah Foundation today released a report examining the role of bonds in Utah, specifically the benefits and limitations of the billions of dollars Utah state government borrows to finance large capital projects such highway construction, water projects, and state buildings.
Bonding will be an essential tool in helping Utah finance future capital projects in preparation for an additional two million residents by 2050.
“It is critical for the state to be educated and informed on the ways to fund the expanding needs of our growing population,” said Stephen Kroes, Utah Foundation’s president. “Through prudent use of bonds, the state can prepare for growth without the current population carrying an unfair burden.”
In pursuit of this goal,Utah Foundation has determined that projects must be prioritized and compromises must be made to ensure Utah’s infrastructure will support its growing needs and Utah will maintain its fiscal discipline.
Based on the report findings, Utah Foundation shares four key discoveries on the state’s bonding practices:
Utah typically issues shorter-term bonds. This raises more capital at lower borrowing costs, essentially saving the state millions in interest payments.
Other states with AAA bond ratings also tend to issue shorter-term bonds, though Utah’s average bond length is by far the shortest.
Lengthening bond terms to match the useful life of projects ensures more equitable repayment: more users would pay for projects from which they benefit.
Utah may have room to extend the average term of bonds which would allow for the completion of larger projects with larger economic impacts.
Other highlights from the report include:
Current state debt is 25 percent higher than the State Treasurer’s recommended level of $850 per capita (currently at $1,063, down from its 2012 peak of $1,221).
Utah’s formal and informal financial practices help maintain its AAA status.
Being downgraded from a AAA bond rating to a AA+ and maintaining the current level of debt would cost an additional $1.5 million annually.
In addition to the research report, Utah Foundation will host a “Bacon, Biscuits, and Bonds” breakfast event with the following speakers discussing the state’s upcoming major funding requests:
State Treasurer Richard Ellis
Senator Wayne Harper
Representative V. Lowry Snow
Senator Jerry Stevenson
Phil Dean, Manager of Budget and Policy at the Governor’s Office of Management and Budget
The public is invited to attend the event on Wednesday, November 19from 7 – 9 a.m. at the State Office Building auditorium at the State Capitol.
To register for the Bacon, Biscuits, and Bonds Breakfast, or view of the research report, visit www.utahfoundation.org.