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 new bond allocations have increased from $1.7 billion to $2.6 billion in fiscal year 2017. Currently, nearly 41 percent of all Connecticut bonds are issued to support infrastructure projects, such as sewers, roads, bridges, and dams. From fiscal year 2000 to fiscal year 2017, the total amount of new bonds issued for infrastructure projects grew from $463 million to $1.07 billion — an increase of $606 million or 131 percent.

The second largest category of new bond allocations are bonds issued to support buildings, facilities, and grounds. This category includes school construction, municipal construction projects, and the upkeep of state facilities. Bonds for buildings, facilities, and grounds accounted for $811 million (30.9 percent) of the new bonds Connecticut allocated in fiscal year 2017, a decrease of $274 million from fiscal year 2000 when the category accounted for $1.09 billion (63.5 percent) of the State's new bond allocations.

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 $1.85 billion in fiscal year 2000 to $2.6 billion in fiscal year 2017 — an increase of $750 million or 40.5 percent.

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