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24 chapter five IdentIfIed ReseaRch needs IntRoductIon This chapter highlights topics for additional research. The primary source of information for these findings is directly from survey respondents. Appendix C lists full responses to the surveyâs qualitative questions. ReseaRch needs Major Issues and areas to Improve Survey respondents raise a variety of concerns with regard to debt-financing issues. Topics include legislative caps, maintaining sufficient funds to pay debt service without sacrificing operational needs, and maintaining a revenue stream coupled with the need for additional high-priced projects. Some states mention the potential for road user charges to replace fuel tax revenues as the pledge for transportation debt, and they express concern about how such a transition would occur. Multiple states note the general decline in fuel tax revenue. Bonding has been relied on more and more to fund larger projects. One state notes that recently enacted bond programs have come without specific designated revenue sources or the designated revenue sources have been insufficient to cover the debt service on outstanding debt, aggravating cash flow issues. Another state expresses concern about bond pricing (interest rates) as a result of declining credit ratings. Respondents also raise concerns over meeting legislative requirements, including requirements to reduce toll road debt, reauthorize state transportation trust funds, and maintain debt within consti- tutional limits while keeping a DOTâs budget balanced. DOT staffs also express concern over com- plying with internal policies, such as debt limitations that restrict debt payments to below a certain percentage of state revenues and other policies regarding how to account for debt. Survey respondents identify the following areas for which debt management practices could be improved: â¢ Expand capital program planning to incorporate consideration of a full range of funding and financing options. â¢ Identify optimal projects for bond proceeds and consider suitability before issuing bonds to meet state match requirements. Incorporate P3 financing arrangements into debt policies and reporting practices. â¢ Avoid excessively long-term debt issuance (more than 30 years) while considering the useful life of the financed asset(s) and maintenance requirements. Potential Research efforts Potential research efforts identified by survey respondents, including members of the synthesis study panel, as beneficial to state DOTs in improving debt management practices include the following: â¢ State DOT Approaches to Managing Debt Affordability and Other Debt Management Policiesâ See Appendix D: Proposed Research Needs Statement.
25 â¢ Exploration of Advance ConstructionâThis research would explain the advance construction (AC) tool and provide information on how states use AC. This would include an explanation of AC as a cash flow tool and how AC is used in combination with GARVEE issuance. â¢ GARVEEs Role in Financing Transportation InvestmentsâThis research would start with an overview of GARVEEs and trend information. This research also would consider the following: â How do reauthorization delays and hurdles and changes in rating agency perspectives change GARVEE use? â How are states issuing GARVEEs and why (for long-term financing, short-term financing, in combination with AC/partial conversion AC)? â How do states integrate GARVEE debt into debt capacity and debt affordability calculations? â What types of investments are states financing with GARVEEs? How do states decide between pay as you go, GARVEEs, and other forms of financing? â¢ Exploration of Institutional Capacity Building in Transportation Agency Debt Managementâ This research would explore how states ensure continuity and depth of knowledge in state and federal transportation agencies related to debt management and financing. Topics considered would include: â Approaches to succession planning; â Approaches to building institutional capacity and a sustainable professional capacity in financing and debt management programs; â Processes to ensure that financing knowledge and practices maintain continuity over time; â Means to further educate personnel to remain up to date on financing techniques and debt management procedures, including postissuance compliance; and â Best practices. â¢ Incorporating Debt Financing into Transportation Planning ProcessesâThis research would explore how states incorporate debt financing into state transportation planning processes, including short-, medium-, and long-range plans. Specific considerations would include: â How is debt handled in fiscally constrained plans? â What is FHWAâs guidance related to how to reflect debt financing in federally required plan- ning documents? â How do states implement and interpret FHWAâs guidance? â What are best practices? â¢ Funding and Financing Option Consideration and Decision Making for Transportation InvestmentsâThis research would consider all the options states have for paying for transpor- tation investments, including pay as you go, short-term and long-term financing, GARVEEs, P3s, and others. This research would specifically consider the following: â At what point in the project development process do states look at financing options? â How do different interest rate environments and construction inflation trends affect decisions related to financing? â How do states assess the benefits and costs of various financing options? â How do available revenue sources relate to the financing options available to the state? â How do states determine the financial feasibility of P3s compared with other forms of project delivery and financing? â The full assortment of investments a state makes in transportation range from new capacity projects, such as new roads or new transit lines, to costs associated with reconstruction, as well as smaller projects such as culverts, curbs, and rolling stock and equipment, all of which have varied useful lives. How is the useful life of an investment (or package of investments) factored into the decision of how projects are funded or financed? â How is the final maturity or term of the financing determined? â What are best practices? â¢ Emerging Opportunities in RevenueâThis research would explore emerging opportunities in the area of generating new revenues and funding for transportation. Examples could include: â Monetizing assets such as right-of-way, â Long-term leases, â Solar, and â Smart roads/technology. It is recognized that this potential research is focused on revenue generation and not debt. Owing to the close relationship between revenue and debt and the importance of emerging revenue oppor- tunities, the panel has chosen to include this research idea in the report.