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Federal Debt Financing Tools

Other Bonding and Debt Instruments


NHS Act Provision

Section 311 of the NHS Act replaces 23 U.S.C. 122 and expands the Federal eligibility of bond related costs. The previous section 122 allowed certain types of projects to be approved as bond issue projects. Similar to advance construction, these projects were advanced as Federal-aid projects without any commitment of Federal funds until the bonds matured and the State converted the projects to regular Federal-aid. The section also allowed for reimbursement of bond interest costs on certain Interstate construction projects.

The new section 122 makes bond related costs eligible for Federal reimbursement on any Federal-aid project eligible under title 23, U.S.C. The definition of construction is also revised in 23 U.S.C. 101 to include a reference to bond related costs.

Eligible Projects

Bond related costs are an eligible cost of construction on projects authorized under title 23, U.S.C., including ISTEA demonstration projects, which are authorized by FHWA on or after November 28, 1995.

Bond projects authorized prior to November 28, 1995, under 23 U.S.C. 115, Advance Construction, and under section 122, Payment to States for Bond Retirement, are subject to the requirements in effect on the date of project authorization.

Eligible Costs

Eligible costs include interest payments under an eligible debt financing instrument, the retirement of principal of an eligible debt financing instrument, the cost of the issuance of an eligible debt financing instrument, the cost of insurance for an eligible debt financing instrument, and any other cost incidental to the sale of an eligible debt financing instrument.

Eligible debt financing instrument means a bond or other debt financing instrument, including a note, certificate, mortgage, or lease agreement, issued by a State or political subdivision of a State or a public authority, the proceeds of which are used for an eligible Federal-aid project.

Questions regarding the eligibility of debt instruments or incidental costs should be submitted to the FHWA division office and forwarded to the Office of Fiscal Services for an eligibility determination.

Federal reimbursement will be based on the amount of bond proceeds actually applied to Federal-aid projects. General costs relating to a debt financing instrument will be equitably distributed to Federal-aid and non Federal-aid projects.


The eligibility of a debt financing instrument for reimbursement does not constitute a commitment, guarantee, or obligation of Federal funds to provide for payment of principal or interest; or create any right of a third party against the Federal government for payment.

[Questions relating to this guidance should be directed to Dale Gray, Director of Financial Management, Federal Highway Administration, 202-366-0978.]

Federal Highway Administration | 1200 New Jersey Avenue, SE | Washington, DC 20590 | 202-366-4000
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