Bonding

The State of Connecticut, similar to all states, raises money for certain projects, such as the construction of public buildings, by issuing bonds. As Connecticut's State Comptroller notes, “bonds are a form of debt. They are sold to investors and obligate the state to pay a specified rate of interest during the life of the bond and to repay the principal or face value of the bond on a set date in the future.”

In Connecticut, there are two primary types of bonds, general obligation (GO) bonds and revenue bonds: 

  • General obligation bonds are secured by the State's power to tax. The State pledges its full faith and credit for payment of principal and interest to investors.
  • Revenue bonds are secured by a specific revenue source for payment of principal and interest, identified by the State.

Since fiscal year 2000, Connecticut's bond allocations have nearly doubled, increasing from $1.8 billion to $3.4 billion in fiscal year 2016. Currently, half ($1.67 billion) of all Connecticut bonds are issued to support buildings, facilities, and grounds. This includes school construction, municipal construction projects, and the upkeep of state facilities. Despite increasing from $1.1 billion in fiscal year 2000, bonds for buildings, facilities, and grounds now make up a smaller percentage of the State's total bonding allocations — decreasing from 62.9 percent in fiscal year 2000 to 50 percent in fiscal year 2016.

The second largest category of bond allocations are bonds issued to support infrastructure projects, such as sewers, roads, bridges, and dams. From fiscal year 2000 to fiscal year 2016, the total amount of bonds issued for infrastructure projects grew from $480 million to $757 million — a 57.7 percent increase.

Additionally, as bond allocations have increased, so have the State's required debt service payments. Debt service payments are payments made to investors on bonds that have been previously issued to fund state and local building projects, equipment and information technology, and infrastructure construction. Debt service expenditures have increased from roughly $930 million in fiscal year 2000 to $2 billion in fiscal year 2016 — an increase of more than $1 billion or 112 percent.

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