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Overview of state borrowing
With limited exceptions, the Ohio Constitution prohibits the incurrence or assumption of debt by the state without a popular vote. The state may incur debt to cover casual deficits or failures in revenues, or to meet expenses not otherwise provided for, but this power is limited in amount to $750,000. The Constitution expressly precludes the state from assuming the debts of any county, city, town or township, or of any corporation (though an exception in both cases is for debts incurred to repel invasion, suppress insurrection, or defend the state in war). Issuance of direct debt paid from the State's general fund is also subject to the Constitutional 5% limitation on debt service.
General Obligation Debt
By 18 constitutional amendments approved from 1921 to present, Ohio voters have authorized the incurrence of state general obligation (GO) debt and the pledge of taxes and excises to its payment. Exceptions or limitations are for highway user receipts which may only be used to pay debt service on bonds issued for highway projects and net state lottery proceeds which may only be used for debt service for public primary and secondary education facilities.
The Ohio Public Facilities Commission and the Treasurer of State are the only currently authorized issuers of the State's GO debt.
Ohio Public Facilities Commission
The Ohio Public Facilities Commission (OPFC) issues tax-supported general obligation debt for the following purposes: primary and secondary education, higher education, natural resources and conservation, coal research and development, infrastructure improvements, third frontier research and development, and site development. Each of these currently authorized purposes is described below.
- Primary and Secondary Education. A 1999 constitutional amendment authorizes the issuance of general obligation debt, in amounts authorized by the General Assembly, for the purpose of paying costs of capital facilities for a system of common (public) schools throughout the State. The amount of authorized debt is determined by the General Assembly in each state capital bill, with no prescribed constitutional limitations on the amount that may be issued annually or outstanding.
- Higher Education. That same 1999 constitutional amendment also authorizes the issuance of general obligation debt, in amounts authorized by the General Assembly, for the purpose of paying the cost of capital facilities for state supported and assisted institutions of higher education. The amount of authorized debt is determined by the General Assembly in each state capital bill with no prescribed constitutional limitations on the amounts that can be issued annually or outstanding.
- Natural Resources. A 1993 constitutional amendment authorizes the issuance of general obligation debt to finance capital facilities for parks and natural resources improvements. Not more than $50 million may be issued in any fiscal year, and no more than $200 million may be outstanding at any time.
- Conservation. A 2000 constitutional amendment authorizes the issuance of general obligation debt to finance preservation of green space, development of recreational trails and protection of farmland, all through partnerships with local governments. Not more than $50 million may be issued in any fiscal year, and no more than $200 million may be outstanding at any time.
- Coal Research and Development. A 1985 constitutional amendment authorizes the issuance of general obligation debt to finance grants or make or guarantee loans for research and development of coal technology that will encourage the use of Ohio coal. Those grants or loans are available to any individual, association, or corporation doing business in the State, or to any educational or scientific institution located in the State. Not more than $100 million may be outstanding at any time.
- Infrastructure Improvements. A 1995 constitutional amendment authorizes the issuance of up to $1.2 billion of general obligation debt to finance or assist the financing of public infrastructure capital improvements of municipal corporations, counties, townships, and other government entities as designated by law. No more than $120 million may be issued in any fiscal year. A 2005 constitutional amendment authorizes an additional $1.35 billion of general obligation debt as a ten-year extension of this program, with an increase in the annual issuance amount in the last five-years from $120 million to $150 million.
- Third Frontier Research and Development. A 2005 constitutional amendment authorizes the issuance of $500 million of general obligation debt in support of Ohio industry, commerce and business. Not more than $100 million may be issued in each of the first three fiscal years and not more than $50 million in any other fiscal year.
- Development of Sites. A 2005 constitutional amendment authorizes the issuance of $150 million of general obligation debt for the development of sites for industry, commerce, distribution, and research and development. Not more than $30 million may be issued in each of the first three fiscal years and not more than $15 million in any other fiscal year.
Treasurer of State
The Treasurer of State issues tax-supported general obligation debt for highway construction. The currently authorized program is described below.
- Highway (Capital Improvements). A 1995 constitutional amendment authorizes the issuance of general obligation debt for highway construction. No more than $220 million may be issued in any fiscal year, and not more than $1.2 billion may be outstanding at any time. Although secured by the State's general obligation pledge, highway capital improvement debt is also secured by a pledge of and has always been paid from highway user receipts (including the motor vehicle fuel tax) that are constitutionally restricted in use to highway related purposes.
Special Obligation Lease-Rental Debt
State special obligation debt, the owners or holders of which are not given the right to have excises or taxes pledged to the payment of debt service, is authorized for specified purposes by Section 2i of Article VIII of the Ohio Constitution. Debt service payments are subject to biennial appropriations made in the State's operating budget under leases or agreements entered into by the State. The Ohio Building Authority and the Treasurer of State are the current issuers of the State's special obligation lease-rental bonds.
Current Issuers of the State's Special Obligation Lease-Rental Bonds
State special obligation debt, the owners or holders of which are not given the right to have excises or taxes pledged to the payment of debt service, is authorized for specified purposes by Section 2i of Article VIII of the Ohio Constitution. Debt service payments are subject to biennial appropriations made in the State's operating budget under leases or agreements entered into by the State. The Ohio Building Authority and the Treasurer of State are the current issuers of the State's special obligation lease-rental bonds.
- Ohio Building Authority. The Ohio Building Authority (OBA) issues special obligations for facilities to house branches and agencies of state government and their functions, including: state office buildings and facilities for the Department of Administrative Services (DAS) and others (including school district technology and security facilities); the Department of Transportation (ODOT) and the Department of Public Safety (DPS); juvenile detention facilities for the Department of Youth Services (DYS) and other governmental entities; Department of Rehabilitation and Correction (DRC) prisons and correctional facilities including certain local and community-based facilities; and office buildings for the Bureau of Workers' Compensation (BWC) and Department of Natural Resources (DNR).
- Treasurer of State. The Treasurer (replacing the OPFC for the purpose in 2000 and OBA in 2005) issues obligations for mental health, parks and recreation, and cultural and sports facilities purposes.
Debt service on special obligations is generally paid from the GRF, with the exception of debt issued for ODOT and DPS facilities which is paid the state Highway Operating Fund and the Highway Safety Fund, respectively, and for BWC facilities which is paid from the BWC Administrative Cost Fund.
Other Obligations (Payable from state Revenue)
- Economic Development. These bonds are issued by the Treasurer of State for various economic development assistance programs administered by the State's Department of Development. These bonds provide funds for direct loans and loan guarantees for projects within the State. The bonds are secured by and payable from state profits derived from the sale of spirituous liquor.
- Clean Ohio Revitalization Program. These bonds are issued by the Treasurer of State to fund projects approved by the Clean Ohio Council, which consists of the directors of the Department of Development, Environmental Protection Agency, Public Works Commission, four members of the Ohio General Assembly, and seven citizens appointed by the Governor. The bonds provide financing for grants and loans to projects that provide for the environmentally safe and productive development and use or reuse of publicly and privately-owned lands within the State. These bonds are also payable from state profits derived from the sale of spirituous liquor.
- Highway Infrastructure Bank. The Treasurer of State issues Grant Anticipation Revenue Vehicles (or GARVEE) bonds for the Ohio Department of Transportation for selected highway construction projects that have been approved by the U.S. Department of Transportation. The debt service charges are secured by and paid from federal transportation funds allocated to the State.
Certificates of Participation
State agencies have also entered into lease-purchase agreements with terms ranging from 7 to 20 years in order to participate in buildings and equipment, information systems and non-highway transportation projects that have local as well as state use and benefit. Certificates of Participation (COPs) have been issued that represent fractionalized interests in or are payable from state payments made under those agreements. Payments by the state are subject to biennial appropriations by the General Assembly, and the holders or owners of the COPs have no right to have excises or taxes levied to make those payments. The OBM Director's approval of such agreements is required if COPs are to be publicly-offered in connection with those agreements.
Revenue Bonds
Revenue bonds are used by the state to finance a specific project or category of projects. Debt service is secured by and paid from revenues or fees that are charged for the use of facilities. Various state authorities and commissions have been created by the General Assembly to issue revenue bonds. These include the Ohio Turnpike Commission, the Ohio Housing Finance Agency, the Ohio Water Development Authority, and the Petroleum Underground Storage Tank Release Compensation Board. The funds borrowed by these authorities and the funds for the debt service payments on their obligations are outside the state treasury and are not appropriated by the legislature.
The Department of Development, the Ohio Water Development Authority, or the Ohio Air Quality Development Authority, the Ohio Housing Finance Agency and the Ohio Higher Education Facilities Commission also issue so-called "conduit" bonds for economic development, pollution control and solid waste, housing and private higher education projects, the debt service on which is paid solely by the benefited business or entity.
Terms of Use and Disclaimers
Please read carefully before using this area of this Web site. Use of this area of site constitutes acknowledgment and acceptance of the following terms and conditions:
Information in this Debt Management area of the OBM Web site is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
You are entering Web pages that contain information relating to debt management and bonds or other obligations of the state of Ohio. The purpose of this section is to provide general information about the state of Ohio and its debt management and borrowing programs. The information is provided for quick reference only and is not a summary or a compilation of information for any particular bond issue. It does not purport to include every item which may be of interest, nor does it purport to present full and fair disclosure within the meaning of applicable securities law with respect to any of the matters or programs addressed. Investment decisions should be made only after full review of the official statement and other relevant matters in connection with a particular bond issue.
The Ohio Office of Budget and Management (OBM) maintains the following Web pages, and OBM has not undertaken nor has any obligation to update any information included on these pages. The documents available on these pages set forth information as of their respective dates and the posting of these documents or other information on these Web pages does not imply that there has been no change in the affairs of the state of Ohio since the date of posting that information. Any addresses of or links to other Web sites which may be contained herein are given solely for the convenience of the user only. OBM has not participated in the preparation, compilation or selection of information on any other Web site, and assumes no responsibility or liability for the contents thereof.
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