Assigned to TRANS & APPROP                                                                                                    FOR COMMITTEE

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

FACT SHEET FOR H.B. 2206

state highway fund bonds

Purpose

            Removes the $1.3 billion allowable cap on the total amount of outstanding Highway User Revenue Fund (HURF) parity bonds.

Background

            The State Transportation Board issues Highway User Revenue Bonds to accelerate the completion of highway construction projects throughout Arizona. The pledged revenues for the bond issues are the HURF funds deposited in the State Highway Fund. The bonds are an obligation of the State Transportation Board and are not obligations of the State of Arizona. Payment is not enforceable from any revenue other than HURF.

            HURF bonds may be issued on a senior or subordinate level.  Bonds issued in the first year may be issued at a senior level with specified rates of return, rights and covenants. Senior level bonds issued in the second year with the same rights and covenants are considered “parity” bonds, or bonds equal to the HURF bonds issued in the first year.

            Current state law caps outstanding HURF bonds at $1.3 billion. According to the Arizona Department of Transportation, $1.28 billion in HURF bonds is currently outstanding, and an additional $46 million has been programmed for construction projects in FY 2006-2007 (a portion of the currently outstanding HURF bonds will be retired in FY 2006-2007).  The total amount due in principal and interest, assuming the bonds are refunded on schedule, is approximately $1.9 billion with a final maturity date in 2025.

            In addition to the $1.3 billion cap, under current statute, the State Transportation Board may not issue parity bonds unless the monies subject to pledge for the bond payment for the preceding one-year period are more than twice the highest annual principal and interest payment on all of the outstanding bonds and the bonds to be issued for the highest one-year period during the life of those bonds. Also, under the State Transportation Board’s HURF bond resolutions, additional senior HURF bonds may only be issued if HURF revenues are four times the maximum annual debt service and additional subordinate HURF bonds may only be issued if HURF revenues are three times the maximum annual debt service.

            There is no anticipated fiscal impact to the state General Fund associated with this legislation.  However, any increase to the outstanding total of bonds would increase HURF debt service payments.

Provisions

1. Removes the $1.3 billion allowable cap on the total principal amount of outstanding HURF parity bonds issued by the State Transportation Board.

2. Makes technical and conforming changes.

3. Becomes effective on the general effective date.

House Action

TRANS           1/19/06     DP     8-0-0-1

APPROP (P)   2/1/06       DP     8-0-0-7

3^rd Read           2/27/06               52-3-5-0

Prepared by Senate Research

March 10, 2006

DG/jas