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  • A
    • Abatement

      A reduction or elimination of a real or personal property tax, motor vehicle excise, a fee, charge, or special assessment imposed by a governmental unit. Granted only on the application of the person seeking the abatement and only by the commitment of the governmental unit.

      Abatement Clause

      A provision of a lease that relieves a lessee of the obligation to make lease payments in the event that the leased property cannot be utilized (e.g., because of construction delays, property damage or other causes).


      Associação Brasileira de Concessionárias de Rodovias/Association of Brazilian Road Concessionaires.


      Serves as the final destination for system transactions. For a pre-paid Account, the User periodically credits funds (from a Fiduciary) to the Account to offset the transaction cost.

      Account Processor

      Third party organization that processes Accounts and transactions for an Issuer. For example, retailers who issue credit cards often contract account processing to third party companies like Payment Tech. In tolling, third-party Account Processors often operate Customer Service Center (CSC) entities.

      Account Servicing

      Monitoring the status of accounts of indebtedness, monitoring records of current debts, billing for amounts due, collecting amounts due, handling debtor correspondence, performing follow-up functions, and providing accurate reporting of debt portfolios.

      Accretion of Discount

      An accounting process by which the book value of a security purchased at a discount from par is increased during the security's holding period. The accretion reflects the increase in the security's value as it approaches the redemption or maturity date. Under a "straight line" accretion method, the amount of the yearly accretion is the same for all years and is equal to the product of the total amount of the discount divided by the number of years to redemption. Under a "constant interest" accretion method, the amount of the yearly accretion increases as the redemption date approaches and for any semi-annual period is equal to (a) the original semi-annual yield to maturity multiplied by the current book value less (b) the current interest payment.


      Process of increasing account value, usually associated with interest or other time-related increases in account value.

      Accrued Interest

      Generally, the amount of interest that has accumulated on a bond since the date of the last interest payment, and in the sale of a bond, the amount accrued up to but not including the date of delivery (settlement date). On a security, the dollar amount of interest, based upon the stated rate or rates of interest, that has accumulated on the security from (and including) the most recent interest payment date (or, in certain circumstances, the dated date or other stated date), up to but not including the date of settlement of the transaction. Accrued interest is paid to the seller by the purchaser. Accrued interest is usually calculated on the basis of a 360-day year (assuming that each month has 30 days), but alternative day counting methods (most commonly based on a 365- or 366-day year counting actual days elapsed) are used for many securities that bear interest at a variable rate and for certain other types of securities (e.g., some municipal notes).

      Additional Bonds

      An issue of bonds having a lien on the revenues or other security pledged to outstanding bonds issued under the same bond contract. Additional bonds typically are issued on parity with the outstanding bonds, although in some cases additional bonds can have either a junior lien or a senior lien on pledged revenues or other security.

      Additional Bonds Covenant or Test

      The financial test, sometimes referred to as a "parity test," that must be satisfied under the bond contract securing outstanding revenue bonds as a condition to issuing additional bonds. Typically, the test would require that historical revenues (plus, in some cases, future estimated revenues) exceed projected debt service requirements for both the outstanding issue and the proposed issue by a certain ratio.

      Administrative Costs/Charges

      Additional costs incurred in processing and handling a debt because it has become delinquent. Costs should be based on actual costs incurred or cost analyses which estimate the average of actual additional costs incurred for particular types of debt at similar stages of delinquency. Administrative costs should be accrued and assessed from the date of delinquency. (see "Delinquency").

      Administrative Offset

      Withholding money payable by the federal government to a person or held by the government for a person or entity in order to satisfy a debt that the person or entity owes the government.

      Advance Capitalization (ACAP)

      Relates to the State Infrastructure Bank (SIB) pilot program only. A Federal-aid funding procedure that permits each SIB pilot state to notify FHWA when it has identified an amount of Federal assistance that it may ultimately convert to a SIB capitalization grant. ACAP simply establishes a baseline from which to calculate the maximum amount of Federal funding that may be deposited into a SIB during succeeding years. The ACAP process is not used in capitalizing transit accounts. Instead, a similar process, in which grantees commit an amount of grant funds to SIB capitalization, is employed.

      Advance Construction

      States or local governments independently raise upfront capital required for a federally approved project and preserve eligibility for future federal-aid reimbursement for that project. At a later date, the state can obligate federal-aid highway funds for reimbursement of the federal share. This tool allows states to take advantage of access to a variety of capital sources, including its own funds, local funds, anticipation notes, revenue bonds, bank loans, etc., to speed project completion.

      Advance Construction/Partial Conversion of Advance Construction (PCAC)

      PCAC is a form of advance construction in which the state converts, obligates, and receives reimbursement for only part of its funding for an advance construction project in a given year. This removes any requirement to wait until the full amount of obligational authority is available. Obligational authority is the ceiling or limit on the total obligations that can be incurred for Federal-aid highway programs during a year. PCAC is used in conjunction with Grant Anticipation Revenue Vehicles (GARVEEs) when Federal funds are obligated for debt service/installment payments over a period of time.

      Advance Refunding

      A financing structure under which new bonds are issued to repay an outstanding bond issue prior to its first call date. For purposes of certain tax and securities laws and regulations, the refunded issue remains outstanding for a period of more than 90 days after the issuance of the refunding issue. The proceeds of the refunding issue are generally invested in Treasury securities or federal agency securities (although other instruments are sometimes used), with principal and interest from these investments being used (with limited exceptions) to pay principal and interest on the refunded issue. Bonds are "escrowed to maturity" when the proceeds of the refunding issue are deposited in an escrow account for investment in an amount sufficient to pay the principal of and interest on the issue being refunded on the original interest payment and maturity dates, although in some cases an issuer may expressly reserve its right (pursuant to certain procedures delineated by the SEC) to exercise an early call of bonds that have been escrowed to maturity. Bonds are considered "prerefunded" when the refunding issue's proceeds are escrowed only until a call date or dates on the refunded issue, with the refunded issue redeemed at that time. The Internal Revenue Code and regulations thereunder restrict the yield that may be earned on investment of the proceeds of a refunding issue.


      A grouping of transactions from Service Providers into a single transaction that is sent to the Fiduciary. To minimize transaction processing costs in electronic toll collection, which can be a significant component of an Issuer's operating costs, Issuers often aggregate. This lowers the transaction cost by splitting the credit card transaction fee across a number of transactions. For example, a Customer Service Center (CSC) may collect all transactions for a period of time, and Aggregate those transactions into a single credit card charge to the User's card account. As a result the Authority pays only a single transaction fee.

      Air Rights

      The right to use, control, or occupy the space above a designated property. Air rights can be often leased, sold or donated to another party.

      Allowance for Uncollectible Accounts

      Account established to reduce receivables for estimates of uncollectible amounts to reflect the assets at their net realizable value.

      American Association of State Highway and Transportation Officials (AASHTO)

      Interest group based in Washington, D.C., involved in research, advocacy, and technical assistance with a primary focus on highways. AASHTO is also a standards-setting organization.


      Provision made in advance for the gradual reduction of an amount owed over time.

      Anchor Tenant

      The major tenant that attracts or generates traffic within a commercial operation. Anchor tenants are strategically placed to maximize business for all tenants. The type of anchor tenant depends on the type of commercial activity.


      Formal valuation of property, made by a competent authority.


      An authorization granted by a town meeting, city council or other legislative body to expend money and incur obligations for specific public purposes. An appropriation is usually limited in amount and as to the time period within which it may be expended.


      As applied to municipal debt, the investment of tax-exempt bonds or note proceeds in higher yielding, taxable securities. Section 103 of the Internal Revenue Service (IRS) Code restricts this practice and requires (beyond certain limits) that earnings be rebated (paid) to the IRS.

      Arbitrage Certificate

      A certified statement requested by bond or note purchasers, and by law firms serving as bond counsel in relevant state that borrowing proceeds of a specified bond issue shall not be used for the purposes of arbitrage.

      Arbitrage Earnings

      Investment earnings on bond proceeds and certain related funds that exceed the bond yield.

      Arbitrage Rebate

      A payment made by an issuer to the federal government in connection with an issue of tax-exempt bonds. The payment represents the amount, if any, of arbitrage earnings on bond proceeds and certain other related funds, except for earnings that are not required to be rebated under limited exemptions provided under the Internal Revenue Code. An issuer generally is required to calculate, once every five years during the life of its bonds, whether or not an arbitrage rebate payment must be made.

      Area Pricing

      A tolling approach where vehicles are charged a fee to travel within a high activity center, such as a downtown or business district. Prices may vary by time of day to encourage motorists to enter the zone during less busy times or to use transit.


      Any item of economic value, either physical in nature (such as land) or a right to ownership, expressed in cost or some other value, which an individual or entity owns.

      Asset Sale

      The transfer of ownership of government assets to the private sector. Usually legislation or an Executive Order defines the transfer price distribution and recoupment priorities. In general, the government has no role in the financial support, management, or oversight of the asset after it is sold. However, if the asset is sold to a company in an industry with monopolistic characteristics, the government may regulate certain aspects of the business, such as utility rates.

      Auction Agent

      A broker-dealer responsible for conducting the Dutch auction used in connection with the periodic interest rate reset and remarketing of auction rate securities.

      Auction Market

      A market for securities, typically found on a national securities exchange, in which trading in a particular security is conducted at a specific location with all qualified persons at that post able to bid or offer securities against orders via outcry. Very few municipal securities are traded in an auction market system.

      Auction Rate Securities

      Variable rate bonds whose interest rate is reset periodically under the Dutch auction process.


      A legal jurisdiction created to operate tolled infrastructure (e.g., E-470 Public Highway Authority, New York State Thruway Authority, North Texas Tollway Authority). Also knows as a "District" in some states.

      Authorization Act

      Basic substantive legislation that establishes or continues Federal programs or agencies and establishes an upper limit on the amount of funds for the program(s) for a certain period (historically, four to six years). The current authorization act for surface transportation programs is the Moving Ahead for Progress in the 21st Century (MAP-21).

      Automated Clearinghouse (ACH)

      A financial transaction network operated by the Federal Reserve. The ACH processes a number of different types of financial transactions including inter-bank transactions, credit card transactions, E-checks (a form of electronic payment), etc.

      Automated Rate Preferred Securities (ARPS)

      Securities issued by a tax-exempt bond fund as preferred shares earning periodic dividend payments based on a rate of return determined through a Dutch auction procedure. Investment earnings realized by the bond fund are applied first to pay dividends on ARPS before being allocated to holders of common shares of the bond fund.

      Average Coupon

      A calculation of the total interest cost for a bond issue expressed as a percentage. The average coupon is equal to the total interest payments of an issue divided by bond year dollars.

      Average Life

      With respect to an issue of bonds, the weighted period of time required to repay half of the issue through scheduled principal payments (e.g., maturity, sinking fund redemption, etc.). The average life, also referred to as the "weighted average life" or "weighted average maturity," is a reflection of the rapidity with which the principal of an issue is expected to be paid. Under one commonly used calculation method, average life is equal to the total bond years divided by the total number of bonds (one bond equals $1,000 par amount, regardless of actual denomination). Note that this computation method does not take into account the time value of the principal amounts.

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  • B
    • Bad Debt Expense

      Estimated cost of losses which may be realized as a result of a failure to collect on receivables. The loss is recorded when information is available that an asset (in this case, receivables) has probably been impaired or a liability incurred and when the amount can be reasonably estimated. For accounting purposes, the bad debt expense estimate is recorded when the allowance account is established or periodically adjusted.

      Basis Point

      A shorthand financial reference to one-hundredth of one percent (.01 percent) used in connection with yield and interest rates.

      Basis Price

      A price of a security, sometimes referred to as the security's basis or its yield price, expressed in terms of the yield to be realized by the purchaser.

      Bearer Security

      A security that has no identification as to owner. It is presumed to be owned, therefore, by the bearer or the person who holds it. Bearer securities are freely and easily negotiable, since ownership can be quickly transferred from seller to buyer.


      The price at which a buyer will purchase a security.


      A respondent to a Request for Expressions of Interest or an invitation to submit a bid in response to a project brief. Typically, a bidder will be a consortium of parties, each responsible for a specific element, such as constructing the infrastructure, supplying the equipment, or operating the business. The government normally contracts with only one lead party (bidder), who is responsible for the provision of all contracted services on behalf of the consortium.


      A security evidencing the issuer's obligation to repay a specified principal amount on a date certain (maturity date), together with interest either at a stated rate or according to a formula for determining that rate. Bonds are distinguishable from notes, which usually mature in a much shorter period of time. Bonds may be classified according to, among other characteristics, maturity structure (serial vs. term), source of payment (general obligation vs. revenue), issuer (state vs. municipality vs. special district), price (discount vs. premium), rating (rated vs. unrated, or among different categories of ratings) or purpose of financing (transportation vs. health care).

      Bond Anticipation Note (BAN)

      Short-term debt instrument used to generate cash for initial project costs and with the expectation that the debt will be replaced later by permanent bonding. Typically issued for a term of less than one year, BANs may be re-issued for up to five years, provided principal repayment begins after two years.

      Bond Authorization

      The action of State, County, or a city authorizing the executive branch to raise money through the sale of bonds in a specific amount and for a specific purpose. Once authorized, issuance is by the treasurer upon the signature of the mayor, or selectmen.

      Bond Buyer

      A daily trade paper containing current and historical information of interest to the municipal bond business.

      Bond Counsel

      A lawyer or law firm, with expertise in bond law, retained by the issuer to render an opinion upon the closing of a municipal bond issue regarding the legality of issuance and other matters including the description of security pledged and an opinion as to the tax-exempt status of the bond.

      Bond Funds

      Registered investment companies whose assets are invested in a diversified portfolios of bonds.

      Bond Insurance

      A financial guarantee provided by a major insurance company (usually AAA rated) as to the timely repayment of interest and principal of a bond issue.

      Bond Issue

      The actual sale of the entire, or a portion of the, bond amount authorized by a state, county, or city.

      Bond Premium

      The difference between the market price of a bond and its face value (when the market price is higher). A premium will occur when the bond's stated interest rate is set higher than the true interest cost (the market rate). Premiums received at the time of sale must be offset against the stated interest cost in computing the debt exclusion. If receipt of the premium and the payment of interest at maturity of an excluded debt occur in different fiscal years, reservation of the premium for future year's debt service is required at the end of the fiscal year when the premium was received.

      Bond Proceeds

      The money paid to the issuer by the purchaser or underwriter of a new issue of municipal securities. These moneys are used to finance a project or for another purpose for which the securities were issued and to pay certain costs of issuance as may be provided in the bond contract or bond purchase agreement.

      Bond Purchase Agreement (BPA)

      The contract between the underwriter and the issuer setting forth the final terms, prices and conditions upon which the underwriter purchases a new issue of municipal securities in a negotiated sale. A conduit borrower also is frequently a party to the bond purchase agreement in a conduit financing. The bond purchase agreement is sometimes referred to as the "purchase contract" or, less commonly, the "underwriting agreement.".

      Bond Rating (Municipal)

      A credit rating assigned to a municipality to help investors assess the future ability and legal obligation of the municipality (bond issuer) to make timely debt service payments. Stated otherwise, a rating helps prospective investors determine the level of risk associated with a given fixed-income investment. Rating agencies, such as Moody's and Standard and Poor's, use rating systems, which designate a letter or a combination of letters and numerals where AAA is the highest rating and C1 is a very low rating.

      Bond Referendum

      A process whereby the voters of a governmental unit are given the opportunity to approve or disapprove a proposed new issue of municipal securities. An election is most commonly required in connection with general obligation or full faith and credit bonds. Requirements for voter approval may be imposed by state constitution, statute or local ordinance.

      Bond Register

      A record, kept by a transfer agent or registrar on behalf of the issuer that lists the names and addresses of the holders of registered bonds.

      Bond Resolution

      The document or documents in which the issuer authorizes the issuance and sale of municipal securities. Issuance of the securities is usually approved in the authorizing resolution, and sale is usually authorized in a separate document known as the "sale" or "award" resolution. All such resolutions, read together, constitute the bond resolution, which describes the nature of the obligation, the issuer's duties to the bondholders and the issuer's rights with respect to the obligations and the security for the obligations. In certain jurisdictions, the governing body will act by means of an ordinance ("bond ordinance") rather than by resolution.

      Bonds Authorized and Unissued

      The balance of a bond authorization but not yet sold upon completion or abandonment of a project.

      Book Value

      Net amount at which an asset or liability is carried on the books of account (also referred to as carrying value or amount). It equals the gross nominal amount of any asset or liability minus any allowance or valuation amount.


      A person or firm that acts as an intermediary by purchasing and selling securities for others rather than for its own account through agency trades. A broker engaged in the business of effecting agency trades in municipal securities is known as a "municipal securities broker." For purposes of the Securities Exchange Act of 1934, the terms "broker" and "municipal securities broker" generally do not include a bank.


      A general term for a securities firm that is engaged in both buying and selling securities for customers (i.e., agency trades) and also buying and selling for its own account (i.e., principal trades). The term generally would not be used to refer to a dealer bank or a broker's broker.


      A project that focuses on improving, operating, and/or maintaining an existing asset (contrasted with greenfield). P3 brownfield projects in transportation typically are long-term operation and maintenance contracts or lease concessions. Blended greenfield-brownfield projects also exist, for example, improving an existing asset by adding new capacity (e.g., more lanes).

      Budget Authority

      Authority provided by law to enter into financial obligations that will result in immediate or future outlays of federal government funds. Budget authority includes the credit subsidy costs for direct loan and loan guarantee programs. Basic forms of budget authority include appropriations, borrowing authority, contract authority, and authority to obligate and expend offsetting receipts and collections.

      Budget Scoring

      Estimating the budgetary effects of pending and enacted legislation and comparing them to limits set in the budget resolution or legislation. With regard to federal credit assistance, budget authority and outlays are scored on a present-value basis, according to estimated default risks and interest subsidies, rather than a cash-flow basis.

      Build America Bonds (BABs)

      Taxable municipal securities issued through December 31, 2010 under the American Recovery and Reinvestment Act of 2009 (ARRA). BABs may be direct pay subsidy bonds or tax credit bonds.

      Build America Bonds (Direct Payment)

      BABs in which the U.S. Treasury Department pays directly to the state or local government issuers a payment equal to 35 percent of the coupon interest payments on such bonds. Proceeds of these bonds can be used for expenditures, debt service reserve funds and costs of issuing the bonds but not to refinance capital expenditures (so-called refunding issues). The 35 percent U.S. Federal interest subsidy is deeper than the corresponding 25 percent Federal interest subsidy on Build America Bonds (Tax Credit). Fixed-rate and variable-rate bonds can be issued under this program.


      Public-private partnership arrangement involving private construction, private operation for given period of time, and eventual transfer to public ownership.

      Build-Own-Operate (BOO)

      Under a BOO transaction, the contractor constructs and operates a facility without transferring ownership to the public sector. Legal title to the facility remains in the private sector, and there is no obligation for the public sector to purchase the facility or take title. A BOO transaction may qualify for tax-exempt status as a service contract if all Internal Revenue Code requirements are satisfied.

      Build-Operate-Transfer (BOT) or Build-Transfer-Operate (BTO)

      Under the BOT option, the private partner builds a facility to the specifications agreed to by the public agency, operates the facility for a specified time period under a contract or franchise agreement with the agency, and then transfers the facility to the agency at the end of the specified period of time. In most cases, the private partner will also provide some, or all, of the financing for the facility, so the length of the contract or franchise must be sufficient to enable the private partner to realize a reasonable return on its investment through user charges. At the end of the franchise period, the public partner can assume operating responsibility for the facility contract the operations to the original franchise holder, or award a new contract or franchise to a new private partner. The BTO model is similar to the BOT model except that the transfer to the public owner takes place at the time that construction is completed, rather than at the end of the franchise period.

      Bullet Maturity

      A long-term maturity that has no amortization of principal prior to maturity.

      Bus Rapid Transit (BRT)

      High-frequency bus service on dedicated lanes that are separate from general travel. BRT combines the advantages of rail transit - exclusive right-of-way to improve punctuality and frequency - with the advantages of a bus system - low implementation costs and flexibility to serve lower density areas.

      Buy-Build-Operate (BBO)

      A BBO transaction is a form of asset sale that includes a rehabilitation or expansion of an existing facility. The government sells the asset to the private sector entity, which then makes the improvements necessary to operate the facility in a profitable manner.

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  • C
    • Call Date

      The date on which bonds may be called for redemption.

      Call Premium

      A dollar amount, usually stated as a percentage of the principal amount called, paid as a "penalty" or a "premium" for the exercise of a call provision.

      Call Price

      The price, as established in the bond contract, at which securities will be redeemed, if called. The call price is generally at or above par (or the compound accreted value in the case of zero coupon and some deeply discounted original issue discount securities) and is stated as a percentage of the principal amount called.

      Call Protection

      The aspects of the redemption provisions of an issue of callable bonds that partially protect an investor against an issuer's prepayment of the bonds prior to maturity or act as a disincentive to the issuer's exercise of its call privileges. These features include restrictions on an issuer's right to call bonds for a period of time after issuance (for example, an issue that cannot be called for ten years after its issuance is said to have "ten years of call protection") or requirements that an issuer pay a premium call price for bonds called within a certain period of time after issuance.

      Call Risk

      Risk to the investor associated with prepayments by the issuer of the principal amount of the bonds prior to the stated maturity date, in accordance with the bonds' redemption provisions.

      Callable Bonds

      Bonds which are redeemable by the issuer prior to the specified maturity date at a specified price at or above par.

      Capital Appreciation Bonds

      Long-term bonds which pay no current interest, but accrete or compound in value from the date of issuance to the date of maturity. CABs differ from zero coupon bonds in that they are issued at an initial amount and compound in value, in contrast to zeros, which are issued at a deep-discount and compound to par.

      Capital Lease

      A lease that must be reflected on a company's balance sheet as an asset and corresponding liability. Generally, this applies to leases where the lessee acquires essentially all the economic benefits and risks of the leased property.

      Capital Reserves

      Funds that remain in a bank and are not loaned out. These funds can be used to support a variety of credit enhancement tools. Capital reserves also can be used to leverage the lending institution, or borrow against reserves to expand the pool of available loan funds.


      Process of depositing various funds as seed capital into a lending institution to enable financial services. This pool of money is distributed, through loans and credit enhancements, in such a way to ensure that payments are made back to preserve the corpus.

      Capitalized Interest

      A specified portion of the original bond proceeds which will be used to pay interest on the bonds until revenue from planned sources becomes available upon completion of construction. Interest is commonly capitalized for the construction period of a revenue-producing project, and sometimes for a period thereafter, so that debt service expense does not begin until the project is expected to be operational and producing revenues. Capitalized interest is sometimes referred to as "funded interest.".

      Carrying Cost

      The interest expense incurred in financing an inventory of securities. It is considered "negative carry" when the cost incurred in borrowing to finance the holding of securities exceeds the income from the securities and "positive carry" when the yield of the securities is in excess of the interest cost of the funds borrowed to finance the holding of the securities.

      Cash Flow

      Cash receipts minus cash disbursements from a given operation or asset for a given period. A cash flow statement shows all sources and uses of cash reflected in the balance sheet cash account from one period to the next.

      Certificate of Participation (COP)

      An instrument evidencing a pro rata share in a specific pledged revenue stream, usually lease payments by the issuer that are subject to annual appropriation. The certificate generally entitles the holder to receive a share, or participation, in the lease payments from a particular project. The lease payments are passed through the lessor to the certificate holders. The lessor typically assigns the lease and lease payments to a trustee, which then distributes the lease payments to the certificate holders.

      Charge Off

      Alternative term to write-off. Write-off is the preferred term. (see "Write-off").


      Synonymous with the term "debt," for purposes of this document. (see "Debt.) Alternative meanings of the word "claim" include a request (1) submitted by a lender for government payment of a defaulted guaranteed loan; (2) filed with the Department of Justice for the pursuit of litigation and/or enforced collection of an account; or (3) filed with an agency for the payment of an amount considered due to the submitting individual or organization, such as for medical insurance.

      Close Out

      Occurs concurrently with or subsequent to an agency decision to write off a debt for which the agency has determined that future additional collection attempts would be futile.

      Closed Lien or Closed End Lien

      A general characterization of the security provisions on a revenue bond where these provisions preclude the issuer from issuing any additional bonds that have an equal claim on the pledged revenues or other security.


      The exchange of securities for payment in a new issue. This generally involves participation of representatives of the issuer, bond counsel, the underwriter and other relevant parties on the date of delivery of a new issue of municipal securities. On the closing date, the issuer delivers the securities and the requisite legal documents in exchange for the purchase price. In the case of book-entry securities, global certificates typically are delivered to a registered clearing agency in advance of closing, with the registered clearing agency effecting final delivery of the securities to the underwriter on the closing date by means of book entries. Sometimes a "pre-closing" is held before delivery, typically on the day preceding closing, to review the adequacy of the closing procedures and documents.


      Direct loans obligated or loan guarantees committed by a program in the same year even if disbursements occur in subsequent years. Post-1992 direct loans or loan guarantees will remain with their original cohort throughout the life of the loan, even if the loan is modified. Pre-1992 loans and loan guarantees that are modified shall each, respectively, constitute a single cohort. (OMB Circular No. A-11, "Preparation and Submission of Budget Estimates." Executive Office of the President, Office of Management and Budget, hereafter cited as OMB Circular No. A-11.).


      (1) An agreement entered into by the issuer or obligor of variable-rate debt combining an interest rate cap and an interest rate floor. (2) Used typically on variable-rate debt, the maximum and minimum interest rates that establish a range within which the rate of interest to be paid on the debt must remain, regardless of whether the method for determining the variable rate would otherwise provide for a rate of interest above the maximum interest rate or below the minimum interest rate.


      Any property pledged as security for a loan.


      Process of receiving amounts owed to the federal government, such as payment on a debt.

      Collection Agency

      Private sector entity whose primary business is the collection of delinquent debts.

      Comfort Letter

      A letter from an auditor to the underwriter of a new issue of municipal securities stating that financial statements (typically audited statements) appearing in the official statement have been prepared in accordance with applicable auditing standards and that nothing has come to the attention of the auditor to indicate that such financial statements are incorrect or that there have been any material changes since such statements were prepared.


      Adjective used to signify a business activity, regardless of whether that activity has been undertaken by an individual or business.

      Commercial Paper (CP)

      Short-term, unsecured promissory notes, usually backed by a line of credit with a bank, that mature within 270 days. The issuer typically pays maturing principal of outstanding commercial paper with newly issued commercial paper, referred to as a "roll over," thereby borrowing funds on a short-term basis for an extended period of time. Rate reset periods may vary from one to 270 days and different portions of a single issue of commercial paper may simultaneously have different reset periods.

      Committee on Uniform Security Identification Procedures (CUSIP)

      The Committee on Uniform Security Identification Procedures, which was established under the auspices of the American Bankers Association to develop a uniform method of identifying municipal, U.S. government, and corporate securities.

      Competitive Sale

      A method of sale where underwriters submit proposals for the purchase of a new issue of municipal securities and the securities are awarded to the underwriter or underwriting syndicate presenting the best bid according to stipulated criteria set forth in the notice of sale. The underwriting of securities in this manner is also referred to as a "public sale" or "competitive bid." .


      Accepting less than the full amount of the debt owed from the debtor in satisfaction of the debt. Also referred to as "settlement." .

      Concession Benefits

      Rights to receive revenues or other benefits for a fixed period of time.

      Concession Period

      Total construction and operating periods.


      Private entity that assumes ownership and/or operations of a given public asset (e.g., toll road, train station, bus operation) under the terms of a contract with the public sector.

      Conduit Borrower

      A borrower of bond proceeds in a conduit financing.

      Conduit Issuer

      An issuer of municipal securities in a conduit financing.

      Congestion Pricing

      (Also called Value Pricing) refers to variable road pricing (higher prices under congested conditions and lower prices at less congested times and locations) intended to reduce peak-period vehicle trips. Tolls can vary based on a fixed schedule, or they can be dynamic, meaning that rates change depending on the level of congestion that exists at a particular time. It can be implemented when road tolls are implemented to raise revenue, or on existing roadways as a demand management strategy to avoid the need to add capacity. Some highways have a combination of un-priced lanes and Value Priced lanes, allowing motorists to choose between driving in congestion and paying a toll for an un-congested trip (Vickrey, 1994).


      Adjective used to signify a personal activity. For example, a loan to a farmer to buy an automobile for personal use would be considered a consumer loan.

      Consumer Price Index (CPI)

      The statistical measure of changes, if any, in the overall price level of consumer goods and services. The index is often called the "cost-of-living index.".


      Existing conditions, situations, or circumstances which involve uncertainty and which could result in gains or losses. For example, guaranteed loans represent contingent liabilities which, in the event of default by the borrowers, the federal government would be liable to cover the losses of the guarantors, and thereby sustain the loss itself.

      Continuing Disclosure

      Disclosure of material information relating to municipal securities provided to the marketplace from time to time by the issuer of the securities or any other entity obligated with respect to the securities. Such disclosures include, but are not limited to, annual financial information, certain operating information and notices about specified events affecting the issuer, the obligor, the municipal securities or the project financed. Such disclosures are required to be provided by the issuer or obligor to the MSRB's EMMA system for the benefit of bondholders of the issuer's securities under continuing disclosure agreements entered into as contemplated under SEC Rule 15c2-12 or on a voluntary basis.

      Continuing Disclosure Agreement

      The agreement or undertaking by the issuer of municipal securities or an obligated person with respect to such securities to disseminate annual financial information, certain operating information and disclosures concerning certain events to the marketplace as provided for under SEC Rule 15c2-12. A continuing disclosure agreement may also provide for more frequent or additional disclosures beyond those contemplated by Rule 15c2-12.

      Contract Authority

      A form of budget authority that permits obligations to be made in advance of appropriations or receipts. Contract authority therefore is unfunded and requires a subsequent appropriation or offsetting collection to liquidate (pay) the obligations. The federal-aid highway program has operated under contract authority since 1921.

      Cooperative Agreement

      Written consent between two parties to define the basic structure and purpose of a financial transaction, including the roles the parties involved and the way in which funds will be administered.

      Cordon (Area) Tolls

      Fees paid by motorists to drive in a particular area, usually a city center. Some cordon tolls only apply during peak periods, such as weekdays. This can be done by simply requiring vehicles driven within the area to display a pass, or by tolling at each entrance to the area.


      The corpus refers to all initial funds, additional, and subsequent revenue deposited for bank capitalization. The corpus is essentially a "body" of funds that is available, on a revolving basis, for use in providing financial assistance to borrowers.

      Cost-Benefit Analysis

      A decision-making tool that allows a comparison of options based on the level of benefit derived and the cost to achieve the benefit from different alternatives.

      Costs of Issuance

      Expenses associated with the sale of a new issue of municipal securities, including such items as printing, underwriter's discount and financial advisory, bond counsel, other counsel and rating agency fees and other expenses. In certain cases, the underwriter's discount may be considered one of the costs of issuance. The Internal Revenue Code restricts the use of bond proceeds to pay costs of issuance for certain types of tax-exempt bonds, such as private activity bonds.

      Coverage Margin

      The margin of safety for payment of debt service on a revenue bond, reflecting the number of times (e.g., 1.2) by which annual revenues after operations and maintenance costs exceed annual debt service.


      This part of a bond denotes the amount of interest due, and on what date and where the payment is to be made. Bearer coupons are presented to the issuer's designated paying agent or deposited in a commercial bank for collection. In the case of registered coupons (see "Registered Bond"), the interest payment is mailed directly to the registered holder. Coupons are generally payable semiannually.


      Promise of future payment in kind or of money given in exchange of present money, goods, or services.

      Credit Cycle

      Complete credit process, composed of four phases credit extension, account servicing, debt collection, and write-off/close out.

      Credit Enhancement

      Financing tools - such as letters of credit, lines of credit, bond insurance, debt service reserves, and debt service guarantees - that improve the credit quality of underlying financial commitments. Credit enhancements have the effect of lowering interest costs and improving the marketability or liquidity of bond issues.

      Credit Extension

      Review and approval of requests for short- and long-term credit.

      Credit Program

      Federal program that makes loans and/or loan guarantees to non-federal borrowers.

      Credit Ratings

      Credit quality evaluations of bonds and notes made by independent rating services. A higher bond rating generally lowers the interest rate that the borrower must pay and, therefore, overall capital costs.

      Credit Reporting Bureau

      Private sector entity which collects financial information on debtors and whose reports on debtors reflect information received from the public and private sectors.

      Credit Score

      A statistically-based measure of risk of a particular type of loan to a particular borrower.

      Current Discount Rate

      Discount rate used to measure the cost of a modification with respect to the modification of direct loans or loan guarantees. It is the interest rate applicable at the time of modification on marketable Treasury securities with a similar maturity to the remaining maturity of the direct guaranteed loans, under either pre-modification terms, or post-modification terms, whichever is appropriate.

      Current Receivable

      A receivable on which payment is due within 12 months of the reporting period.

      Current Refunding

      A financing structure under which old bonds are called or mature within 90 days of the issuance of new refunding bonds or when the proceeds of the refunding debt are applied immediately to redeem the old debt. That is, the maturity date on the old debt coincides with the issuance date of the new borrowing obligation. (see "Advance Refunding").

      Current Yield

      The ratio of interest to the actual market price of the bond stated as a percentage. For example, a $1,000 bond that pays $80 per year in interest would have a current yield of 8%.

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  • D
    • Dated Date (or Issue Date)

      The date of a bond issue from which the bondholder is entitled to receive interest, even though the bonds may actually be delivered at some other date.


      A person or firm that engages in the business of underwriting, trading and selling securities for its own account acting as principal. A person or firm engaged in the business of effecting principal trades in municipal securities is known as a "municipal securities dealer." Although for purposes of the Securities Exchange Act of 1934 the term "dealer" generally does not include a bank, the term "municipal securities dealer" expressly does include a bank, or a separately identifiable department or division of a bank that is engaged in underwriting, trading and selling municipal securities for its own account, other than in a fiduciary capacity. In colloquial usage, these terms are used to refer to both securities firms and dealer banks.


      Synonymous with the term "claim," for purposes of this document. It refers to an amount of money or property which has been determined by an appropriate federal official to be owed to the U.S. from any person, organization, or entity other than another federal agency.

      Included as debts are amounts due the U.S. from fees, duties, leases, rents, royalties, services, sales of real or personal property, overpayments, fines, penalties, damages, taxes, interest, forfeitures, and other sources.

      Debt Collection

      Recovery of amounts due after routine follow-up fails. This activity includes the assessment of the debtor's ability to pay, the exploration of possible alternative arrangements to increase the debtor's ability to repay and other efforts to secure payment.

      Debt Limit

      The maximum amount of debt that a municipality may authorize for qualified purposes under state law.

      Debt Policy

      Part of an overall state capital financing policy that provides evidence of a commitment to meet infrastructure needs through a planned program of future financing. Debt policies should be submitted to elected officials for consideration and approval.

      Debt Service

      The repayment amounts, usually stated in annual terms and based on an amortization schedule, of the principal and interest on a debt instrument.

      Debt Service Coverage

      The margin of safety for payment of debt service on a revenue bond, reflecting the number of times (e.g.,1.2) by which annual revenues after operations and maintenance costs exceed annual debt service.

      Debt Service Reserve Fund Requirement

      The amount required by the bond contract to be maintained in the debt service reserve fund. A typical debt service reserve fund requirement (sometimes referred to as the "reserve fund requirement" or "reserve requirement") might be 10% of the par value of the issue, although the size and investment of the debt service reserve fund generally is subject to arbitrage regulations.

      Debt Service Schedule

      A table listing the periodic payments necessary to meet principal and interest requirements over the period of time securities are to be outstanding.

      Deed-in-Lieu of Foreclosure

      A voluntary transfer of marketable title to a property to avoid foreclosure.


      A failure to pay principal of or interest on a bond when due or a failure to comply with any other covenant, promise or duty imposed by the bond contract. The most serious event of default, sometimes referred to as a "monetary" default, occurs when the issuer fails to pay principal, interest, or both, when due. Other defaults, sometimes referred to as "technical" defaults, result when specifically defined events of default occur, such as failure to maintain covenants. Technical defaults may include failing to charge rates sufficient to meet rate covenants, failing to maintain insurance on the project or failing to fund various reserves. If the issuer defaults in the payment of principal, interest, or both, or if a technical default is not cured within a specified period of time, the bondholders or trustee may exercise legally available rights and remedies for enforcement of the bond contract.

      Defeasance or Defeased

      Termination of the rights and interests of the bondholders and of their lien on the pledged revenues or other security in accordance with the terms of the bond contract for an issue of securities. This is sometimes referred to as a "legal defeasance." Defeasance usually occurs in connection with the refunding of an outstanding issue after provision has been made for future payment of all obligations under the outstanding bonds through funds provided by the issuance of a new series of bonds. In some cases, particularly where the bond contract does not provide a procedure for termination of these rights, interests and lien other than through payment of all outstanding debt in full, funds deposited for future payment of the debt may make the pledged revenues available for other purposes without effecting a legal defeasance. This is sometimes referred to as an "economic defeasance" or "financial defeasance." If for some reason the funds deposited in an economic or financial defeasance prove insufficient to make future payment of the outstanding debt, the issuer would continue to be legally obligated to make payment on such debt from the pledged revenues.


      Portion of a loan which remains outstanding after pledged property has been liquidated (converted to cash) and applied to the outstanding balance.


      Failure of the debtor to pay an obligation or debt by the date specified in the agency's initial written notification or applicable contractual agreement, unless other satisfactory payment arrangements have been made by that date. Delinquency would also occur if, at any time thereafter, the debtor fails to satisfy the obligations under payment agreement with the agency.


      A procurement or project delivery arrangement whereby a single entity (a contractor with subconsultants, or team of contractors and engineers, often with subconsultants) is entrusted with both design and construction of a project. This contrasts with traditional procurement where one contract is bid for the design phase and then a second contract is bid for the construction phase of the project.

      Design-Build-Operate (DBO)

      In a DBO project, a single contract is awarded for the design, construction, and operation of a capital improvement. Title to the facility remains with the public sector unless the project is a design-build-operate-transfer or design-build-own-operate project. The DBO method of contracting is contrary to the separated and sequential approach ordinarily used in the United States by both the public and private sectors. This method involves one contract for design with an architect or engineer, followed by a different contract with a builder for project construction, followed by the owner's taking over the project and operating it. A simple design-build approach creates a single point of responsibility for design and construction and can speed project completion by facilitating the overlap of the design and construction phases of the project. On a public project, the operations phase is normally handled by the public sector or awarded to the private sector under a separate operations and maintenance agreement. Combining all three phases into a DBO approach maintains the continuity of private sector involvement and can facilitate private-sector financing of public projects supported by user fees generated during the operations phase.

      Design-Build-Finance-Operate-Maintain (DBFOM)

      Under DBFOM, the private sector delivers the design and construction (build) of a project to the public sector. It also obtains project financing and assumes operations and maintenance of an asset upon its completion.

      Developer Financing

      Under developer financing, the private party (usually a real estate developer) finances the construction or expansion of a public facility in exchange for the right to build residential housing, commercial stores, and/or industrial facilities at the site. The private developer contributes capital and may operate the facility under the oversight of the government. The developer gains the right to use the facility and may receive future income from user fees. While developers may in rare cases build a facility, more typically they are charged a fee or required to purchase capacity in an existing facility. This payment is used to expand or upgrade the facility. Developer financing arrangements are often called capacity credits, impact fees, or exactions. Developer financing may be voluntary or involuntary depending on the specific local circumstances.

      Direct Loan

      A disbursement of funds by the Government to a non-Federal borrower under a contract that requires repayment of such funds with or without interest. The term includes the purchase of, or participation in, a loan made by a non-Federal lender. The term also includes the sale of a Government asset on credit terms of more than 90 days duration. The term does not include the acquisition of Federally guaranteed non-Federal loans in satisfaction of default or other guarantee claims or the price-support loans of the Commodity Credit Corporation.

      Direct Loan Obligation

      A legal or binding agreement by a Federal agency to make a direct loan when specified conditions are fulfilled by the borrower. Acquisitions of federally guaranteed non-Federal loans in satisfaction of default or other guarantee claims are not recorded as direct loan obligations.

      Direct Loan Subsidy Cost

      Estimated long-term cost to the federal government of direct loans calculated on a present value basis, excluding administrative costs. The cost is the present value of present value of estimated net cash outflows at the time the direct loans are discharged. The discount rate used on the calculation is the average interest rate (yield) on marketable Treasury securities of similar maturity to the loan, applicable to the time when the loans are disbursed.


      Satisfying a debt as a legal obligation through the performance of the obligation(s) imposed under the debt instrument, such as to pay the debt in full, or through another action such as a compromise.


      The amount by which the purchase price of a security is less than the principal amount or par value.

      Discretionary Spending

      Outlays controllable through the congressional appropriation process. Such outlays result from the provision of budgetary resources (including appropriations and obligation limitations but excluding mandatory spending authority) in appropriation acts. The Budget Enforcement Act establishes annual spending limitations or caps on discretionary appropriations and resulting outlays.

      Distance-Based Tolls

      Fixed toll rates based on distance traveled and vehicle type.

      Double Exemption

      Securities that are exempt from state as well as federal income taxes are said to have double exemption.


      The lowering of a bond rating by a rating agency due to a deterioration of the credit quality of the issue.

      Due Diligence

      The process by which a party to a new issue (typically an underwriter, usually assisted by counsel) investigates an issuer or other party obligated to make payments with respect to a bond issue or the enterprise or revenue stream providing security for such issue. Such inquiry is customarily made by an underwriter to promote the accuracy and completeness of the official statement and to provide the underwriter with a reasonable basis for belief in the accuracy and completeness of the document. Further inquiry may be required if the investigation reveals facts that are incomplete or inconsistent, either on their face or in light of other known facts.

      Dutch Auction

      A process by which securities are sold at the highest price at which sufficient bids are received to sell all securities offered. Generally, the securities will be sold at the clearing price established by the Dutch auction to all investors placing bids at or above the clearing price. In the municipal securities market, Dutch auctions may be used as a method of distributing or remarketing variable rate demand obligations. Dutch auctions also are sometimes used in the secondary market to sell out an investor's large position in a security.

      Dynamic Congestion Pricing

      Tolls that change based on real-time travel conditions. For example, when traffic volumes go up, so do the tolls. Rates are lowered as demand eases.

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  • E
    • Electronic Funds Transfer

      Process by which payments associated with toll passage, parking fees, etc. are communicated from the Authority maintaining the Customer account to the Authority providing the service.

      Electronic Toll Collection (ETC)

      The collection of tolls based on the automatic identification and classification of vehicles using electronic systems.


      Commitment of money from public or private sources for project finance, with a designated rate of return target.

      Executive Order 12893

      An executive order issued by President Clinton in January 1994, establishing infrastructure investment as a priority for the Administration and directing federal agencies to establish programs for more effective capital investment from current federal funds.

      Express Lane

      A popular naming convention used to depict and differentiate it from other types of Electronic Toll Collection (ETC) lanes, where vehicles pass the collection point (gantry, plaza, road-side unit) at highway speeds without stopping.

      Extraordinary Redemption

      Differentiated from optional redemption or mandatory redemption in that it occurs under an unusual circumstance such as destruction of the facility financed.

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  • F
    • Face Amount

      The par value (i.e., principal or maturity value) of a security.

      Federal Aid Anticipation Note (FAAN)

      Short-term debt instrument used to generate cash with the expectation that the debt will be paid from anticipated federal aid. FAANS are typically issued for a term of less than one year.

      Fee Simple

      An absolute and unqualified estate providing the owner with all incidence of ownership, including the unconditional power of disposition.


      A bank, credit card company, etc. that functions as the funds source to replenish the User's Account.

      Financial Advisor

      An individual or institution that assists municipalities in the issuance of tax exempt bonds and notes. The public finance department of a commercial bank or a non-bank advisor usually provides this service.

      Financing Account

      A non-budget account associated with each credit program account. The financing account holds fund balances, receives the subsidy cost payment from the credit program account, and includes all other cash flows to and from the government resulting from post-1991 direct loans or loan guarantees. (OMB Circular No. A-11, and OMB Circular No. A-34, "Instructions on Budget Execution," Part VI, "Credit Apportionment and Budget Execution," hereafter cited as OMB Circular No. A-34.).

      Fixed-Rate Bond

      A long-term bond with an interest rate fixed to maturity.

      Fixed-Schedule Congestion Pricing

      Tolls charged at predetermined rates reflective of demand levels at different times of day; rates can be based on hour of the day, day of the week, direction of travel and vehicle type.

      Fixed Tolls

      Toll rates that do not change. They are typically used to pay for the bridge or road on which they are charged.

      Flexible Match

      Any non-Federal match that is allowed under Federal laws and regulations other than state and local cash contributions to a project. Flexible matches permitted include use of private cash and in-kind contributions, publicly owned right-of-way, and funds from other Federal agencies.

      Floating-Rate bond

      A long-term bond for which the interest rate is adjusted periodically according to a predetermined formula, based upon specific market indicators.


      The act of a creditor who refrains from enforcing a debt when it falls due. Various government credit programs, under specific conditions, offer borrowers certain protections against foreclosure.

      Force Majeure

      Events that are beyond the control of a contractor, such as earthquakes, epidemics, blockades, wars, acts of sabotage, and archaeological site discoveries.


      Method of enforcing payment of a debt secured by a mortgage by seizing the mortgaged property. Foreclosure terminates all rights which the mortgagor has in the mortgaged property upon completion of due process through the courts.


      To grant relief from all or part of a debt under statutory authority. When an agency forgives a debt, or some portion thereof, it is deciding that the amount being waived is not now part of the government's claim.

      Full Faith and Credit

      The pledge of the full taxing and borrowing powers of a government to pay its debt obligations.

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  • G
    • General Obligation (GO) Bond

      A security backed by the full faith and credit of a state, locality, or other governmental authority. In the event of a default, holders of general obligation bonds have the right to compel a tax levy, other borrowing, or legislative appropriation in order to satisfy the debt obligation.

      Government Sponsored Enterprise

      A shareholder owned and operated financial institution, chartered by the federal government that facilitates the flow of investment funds to specific economic sectors, thereby providing access to national capital markets. The activities of these private entities are not included in federal budget totals. But because of their special relationship to the government, GSEs provide detailed statements as supplementary information for budget presentation. Examples of GSEs include the Federal National Mortgage Association (Fannie Mae), the Student Loan Marketing Association (Sallie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac).

      Governmental Purpose Bond

      A term in the Internal Revenue Code for a tax-exempt bond which is secured by governmental revenues or whose proceeds are used for a general governmental purpose (as opposed to a private activity bond).

      Grant Anticipation Note (GAN)

      Short-term debt that is secured by grant money expected to be received after debt is issued. Financial institutions may buy anticipation notes on behalf of project sponsors in advance of receiving other financial assistance, to enable a faster project start. Helps project sponsors advance projects, especially when unable to access capital markets.

      Grant Anticipation Revenue Vehicle (GARVEE)

      Any bond or other form of debt repayable, either exclusively or primarily, with future Federal-aid highway funds under Section 122 of Title 23 of the United States Code. Although the source of payment is Federal-aid funds, GARVEEs cannot be backed by a Federal guarantee, but are issued at the sole discretion of, and on the security of, the state issuing entity.

      Ground Lease

      A lease for the use and occupancy of land only, usually for a long period of time. It is also called a land lease.


      A contract(s) in which a financial institution agrees to take responsibility for all or a portion of a project sponsor's financial obligations for a project under specified conditions.

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  • H
    • High Occupancy Toll (HOT) Lanes

      High Occupancy Vehicle (HOV) lanes that also allow access to low occupancy vehicles if drivers pay a toll. It is a type of managed lane. This allows more vehicles to use HOV lanes while maintaining an incentive for mode shifting and raising revenue. HOT lanes are often proposed as a compromise between HOV lanes and Road Pricing.

      High Occupancy Vehicle (HOV) Lanes

      Lanes typically reserved for vehicles with two or more occupants.

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  • I
    • Indenture

      A contract between the issuer of bonds and the bondholders that stipulates the terms of the bond issue such as maturity date, coupon rate, etc.

      Installment Loan

      An obligation to repay monies borrowed at fixed intervals over time.

      Institutional Investor

      A financial institution such as a mutual fund, insurance company, or pension fund that purchases securities in large quantities.


      Type of guarantee in which any agency pledges the use of accumulated insurance premiums to offset the cost of default on the part of borrowers. "Loan insurance" is considered the equivalent of a "loan guarantee.".

      Intelligent Transportation Systems

      The application of advanced electronics and communication technologies to enhance the capacity and efficiency of surface transportation systems, including traveler information, public transportation, and commercial vehicle operations.


      Sum paid or calculated for the use of capital. Financing interest is the charge assessed as a cost of extending credit as distinguished from additional interest which is the charge assessed on delinquent debts in order to compensate the federal government for the time value of money owed and not paid when due. Additional interest is accrued and assessed from the date of delinquency.

      Interest Method

      Method used to amortize the premium or discount of an investment in bonds, or to amortize the subsidy cost allowance of direct loans. Under this method, the amortization amount of the subsidy cost allowance equals the effective interest minus the nominal interest of the direct loans. The effective interest equals the present value of the direct loans times the effective interest rate (the discount rate). The nominal interest equals the nominal amount (face amount) of the direct loans times the stated interest rate (the rate stated in the loan agreements).

      Interest Subsidy

      A subsidy provided by a financial institutions (such as multi-lateral lenders, state infrastructure banks, or export credit agencies) to lower overall financing costs for project sponsors. With this tool, project sponsors repay loans at less than current market rates. Market rates may be determined by the cost of borrowing through conventional issues of comparable duration.

      Investment Grade

      Describes the top four rating categories of relatively secure bonds suitable for a conservative investor. Standard & Poor's rating service looks upon all bonds between the AAA and BBB ratings as investment grade. Generally speaking, any bonds rated below BBB are considered to have speculative features and are deemed sub-investment grade or junk bonds.


      A state, political subdivision, agency or authority which borrows money through the sale of bonds or notes.

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  • J
    • Junior Debt

      Debt having a subordinate or secondary claim on an underlying security or source of payment for debt service, relative to another issue with a higher priority claim. (see "Subordinate Claim").

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  • L
    • Late Charges

      Amounts accrued and assessed on a delinquent debt; the term includes administrative costs, penalties, and additional interest.


      A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and amount of rent.

      Lease-Develop-Operate (LDO) or Build-Develop-Operate (BDO)

      Under these partnership arrangements, the private party leases or buys an existing facility from a public agency; invests its own capital to renovate, modernize, and/or expand the facility; and then operates it under a contract with the public agency. A number of different types of municipal transit facilities have been leased and developed under LDO and BDO arrangements.


      An installment-purchase contract. Under this model, the private sector finances and builds a new facility, which it then leases to a public agency. The public agency makes scheduled lease payments to the private party. The public agency accrues equity in the facility with each payment. At the end of the lease term, the public agency owns the facility or purchases it at the cost of any remaining unpaid balance in the lease. Under this arrangement, the facility may be operated by either the public agency or the private developer during the term of the lease. Lease-purchase arrangements have been used by the General Services Administration for building federal office buildings and by a number of states to build prisons and other correctional facilities.

      Leasehold Estate

      An estate in real property held by a lessee/tenant under a lease.

      Legal Opinion

      An opinion concerning the validity of a securities issue with respect to statutory authority, constitutionality, procedural conformity and usually the exemption of interest from federal income taxes. The legal opinion is usually rendered by a law firm recognized as specializing in public borrowings, often referred to as "bond counsel.".

      Letter of Credit

      A form of loan from a financial institution to be used only in the instance of a shortfall in net revenue for debt service (i.e., a contingent loan). A letter of credit is security provided directly to the lender/bondholders (via a bond trustee), rather than to the borrower/project sponsor.


      A financial mechanism used to increase available funds usually by issuing debt (typically bonds) or by guaranteeing or otherwise assuming liability for others' debt in an amount greater than cash balances.

      Leveraged Leasing

      An arrangement under which the owner of a capital facility obtains the tax benefits of ownership of an asset by arranging debt financing and leasing the facility to a party who pays rent from revenues generated by the facility.

      Leveraging Ratio

      Measures the extent to which a given investment attracts additional capital. In the context of this report, the leveraging ratio of federal funds is equal to the total project costs divided by the budgetary cost of providing federal credit assistance.


      Amount owed (i.e., payable) by an individual or entity, such as for terms received, services rendered, expenses incurred, assets acquired, construction performed, and amounts received but not yet earned.

      Limited Tax Bond

      A bond secured by a pledge of a tax or category of taxes limited as to rate or amount.

      Line of Credit

      A form of loan to be used only in the instance of a shortfall in net revenue for debt service or other financial commitments (i.e., a contingent loan). A line of credit, while similar to a letter of credit, is security available directly to the borrower/project sponsor with flexibility in use of the funds.


      Process of converting collateral to cash.


      Refers to an investor's ability to sell an investment as a means of payment or easily convert it to cash without risk of loss of nominal value.


      Legal action or process taken for full or partial debt recovery.


      Legally binding document which obligates a specific value of funds available for disbursement. The amount of funds disbursed is to be repaid (with or without interest and late fees) in accordance with the terms of a promissory note and/or repayment schedule.

      Loan Guarantee

      Contingent liability created when the federal government assures a private lender who has made a commitment to disburse funds to a borrower that the lender will be repaid to the extent of a guarantee in the event of default by the debtor.

      Loan Guarantee Commitment

      Binding agreement by a federal agency to make a loan guarantee when specified conditions are fulfilled by the borrower, the lender, or any other party to the guarantee agreement. (OMB Circular No. A-11) .

      Loan Guarantee Subsidy Cost

      Estimated long-term cost to the federal government of loan guarantees calculated on a present value basis, excluding administrative costs. The cost is the present value of estimated net cash outflows at the time the guaranteed loans are disbursed by the lender. The discount rate used for the calculation is the average interest rate (yield) on marketable Treasury securities of similar maturity to the loan guarantees, applicable to the time when the guaranteed loans are disbursed.

      Loan Servicer

      A public or private entity that is responsible for collecting, monitoring, and reporting loan payments. In the context of this report, a loan servicer would also assist in originating the loan.

      Loan-to-Value Ratio

      Represents the proportion of the amount of a loan to the value being pledged to secure that loan. It is derived as follows total financing costs (i.e., the market value of the collateral plus the financed portion of any closing costs, insurance premiums, or other transaction-related expenses less the borrower's cash down-payment) divided by the market value of the collateral.

      Long-Range Transportation Plan

      The transportation plan covers a 20-year period and includes both short- and long-term actions that develop and maintain an integrated, intermodal transportation system. The plan must conform to regional air quality implementation plans.

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  • M
    • Maintenance

      A project phase that includes keeping the project in a state of good repair, which includes filling potholes, repaving or rebuilding roadways, and ensuring the integrity of bridges and highways.

      Major Project

      Based on the Safe, Accountable, Flexible, Efficient Transportation Equity Act A Legacy for Users (SAFETEA-LU), signed into law on August 10, 2005, "a project with a total estimated cost of $500 million or more that is receiving financial assistance." Generally the Project Owner is the Transportation Agency (STA), but major projects can also be developed by other State Agencies (Toll Agencies), Local Public Agencies, and/or Private Ventures (e.g. Public Private Partnerships).

      Mandatory Spending

      Outlays generally not controllable through the congressional appropriation process. Mandatory amounts are budget authority or outlays that cannot be increased or decreased in a given year without a change in substantive law. Entitlement programs (e.g., food stamps, Medicare, veterans' pensions) are chief examples of mandatory programs, whereby Congress controls spending indirectly, by defining eligibility and setting benefit payment rules, rather than directly through the appropriation process. With regard to the federal-aid highway program, mandatory spending refers to outlays resulting from obligations of contract authority programs not subject to annual obligation limitations, such as Minimum Allocation, Emergency Relief, and Demonstration Project spending.


      A measure of the ease with which a security can be sold in the secondary market.


      The date when the principal amount of a security becomes due and payable.

      Mileage-Based Fee or Mileage Tax

      Tax on vehicle use based upon miles driven rather than fuel consumption.

      Mixed-Use Lane

      A toll lane in which different kinds of means of payments are accepted (e.g. card-based and electronic toll transactions).


      Federal government action, including legislation or administrative action, that alters the estimated subsidy cost and the present value of outstanding direct loans (or direct loan obligations), or the liability of loan guarantees (or loan guarantee commitments). Direct modifications change the subsidy cost by altering the terms of existing contracts or by selling loan assets. Indirect modifications are actions that change the subsidy cost by legislation that alters the way in which an outstanding portfolio of direct loans or loan guarantees is administered. The term modification does not include subsidy cost reestimates, the routine administrative workouts of troubled loans, and actions that are permitted within the existing contract terms.

      Moral Obligation Bond

      A revenue bond which, in addition to its primary source of security, possesses a structure whereby a state pledges to make up shortfalls in a debt service reserve fund, subject to legislative appropriation. There is no legal obligation for the state to make such a payment, but market participants recognize that failure to honor the "moral" pledge would have negative consequences for the state's own creditworthiness.

      Municipal Bonds

      Interest bearing obligations issued by state or local governments to finance operating or capital costs. The principal characteristic that has traditionally set municipal bonds apart from other capital market securities is the exemption of interest income from Federal income tax.

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  • N
    • Net Present Cost (NPC)

      Estimated present value of expected future cash flows associated with Public Sector Comparator (PSC) and shadow bid analysis without considering revenues.

      Net Present Value (NPV)

      Present value of the expected future revenues minus the net present cost.

      Nominal (or Face or Par) Value or Amount

      Amount of a bond, note, mortgage, or other security as stated in the instrument itself, exclusive of interest or dividend accumulations. The nominal amount may or may not coincide with the price at which the instrument was first sold, its present market value, or its redemption price.

      Non-Callable Bond

      A bond that cannot be called either for redemption by or at the option of the issuer before its specified maturity date.

      Non-Current Receivable

      a receivable on which payment will not be due within 12 months of the reporting period.

      Non-Federal Match

      The commitment of state or other non-federal funds required to receive federal contributions. For example, the U.S. SIB program requires a non-federal match for capitalization funds, which is 25 percent of the amount of federal funds. The match may be lower in states which have a sliding scale rate based on the percentage of federal land in the state.


      Short-term promises to pay specified amounts of money, secured by specified sources of future revenues, such as taxes, federal and state aid payments and bond proceeds.

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  • O
    • Obligation

      The Federal government's legal commitment (promise) to pay or reimburse the states or other entities for the Federal share of a project's eligible costs.

      Obligation Authority

      The amount of budgetary resources (including new budget authority, balances of unobligated budget authority carried over from prior years, and obligation limitations) available for obligation in a given fiscal year. With regard to the federal-aid highway program, obligation authority often refers to the amount of federal-aid obligation limitation, established annually by Congress in appropriation acts, that is allocated to the states and controls the amount of apportioned contract authority that can be obligated by the states in a given fiscal year.

      Offering Price

      The price at which members of an underwriting syndicate for a new issue will offer securities to investors.

      Official Statement

      Document prepared by the issuer that gives in detail security and financial information about the issue.

      Open Barrier Systems

      A tolling system often designed to have toll barriers across the mainline plazas, but without ramp toll barriers on all of the interchanges, typically allowing some local traffic movements toll-free.

      Open Road Tolling System (ORT)

      An electronic Toll Collection System without toll plazas, where drivers are charged the toll without having to stop, slow down, or stay in a given lane.

      Open Toll Section

      Section of a toll road where a fixed amount is paid that is not dependent on the distance traveled or on where the vehicle enters or exits the road.

      Operating Lease

      A lease, normally involving equipment, whereby the contract is written for considerably less than the life of the equipment and the lessor handles all maintenance and servicing. Also called service leases, operating leases are the opposite of capital leases, whereby the lessee acquires essentially all the economic benefits and risks of ownership.

      Operations and Maintenance

      A public partner (federal, state, or local government agency or authority) contracts with a private partner to provide and/or maintain a specific service. Under the private operation and maintenance option, the public partner retains ownership and overall management of the public facility or system.

      Operations, Maintenance, and Management

      A public partner (federal, state, or local government agency or authority) contracts with a private partner to operate, maintain, and manage a facility or system providing a service. Under this contract option, the public partner retains ownership of the public facility or system, but the private party may invest its own capital in the facility or system. Any private investment is carefully calculated in relation to its contributions to operational efficiencies and savings over the term of the contract. Generally, the longer the contract term, the greater the opportunity for increased private investment because there is more time available in which to recoup any investment and earn a reasonable return.

      Optional Redemption

      A right to retire all or part of an issue prior to the stated maturity during a specified period of years, often at a premium. The right can be exercised at the option of the issuer.

      Original Discount Rate

      Discount rate originally used to calculate the present value of direct loans or loan guarantee liabilities, when the direct or guaranteed loans were disbursed.

      Original Issue Discount

      A bond, issued at a dollar price less than par which qualifies for special treatment under federal tax law. Under that law, the difference between the issue price and par is treated as tax-exempt income rather than a capital gain, if the bonds are held to maturity.


      Actual cash payment made to the states or other entities. Outlays are provided as reimbursement for the Federal share for approved highway program activities.

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  • P
    • Par Value

      The principal amount of a bond or note due at maturity.

      Parity Debt

      Debt obligations issued or to be issued with an equal claim to other debt obligations on the source of payment for debt service.


      A partnership is a legal relationship existing between two entities contractually associated as joint principals in a business.

      Partial Conversion of Advance Construction (PCAC)

      Process allowing states to begin a project with their own source of funding, and then incrementally obligate Federal funds.

      Pay-As-You-Go Financing

      Describes government financing of capital outlays from current revenues or grants rather than by borrowing.

      Paying Agent

      Place where principal and interest are payable. Usually a designated bank or the office of the treasurer of the issuer.

      Peak Period

      The busiest travel time of the day, also known as commute time or rush hour. Typical the morning and afternoon commute times are the two peak periods each weekday.


      Punitive charge assessed for delinquent debts. The rate to be assessed is capped by law.

      Personal Property

      Tangible, movable assets, such as automobiles, planes, and boats.

      Pre-Foreclosure Sale

      The opportunity for borrowers who cannot meet their obligation (repayment of a loan) to sell their property in order to avoid foreclosure. Borrowers who agree to sell their property using this method are generally relieved of their loan obligation.

      Preliminary Rating

      A credit opinion from a rating agency based on a preliminary assessment assigned to a proposed bond issue.


      The amount by which the price of a security exceeds its principal amount.


      Partial or full repurchase or other advance deposits of outstanding loan principal and interest by the borrower/debtor. The repurchase may be made at a discount from the current outstanding principal balance.

      Present Value (PV)

      The value of future cash flows discounted to the present at certain interest rate (such as the entity's cost of capital or funds), assuming compounded interest. The GAO definition of present values is as follows The worth of a future stream of returns or costs in terms of money paid immediately (or at some designated date). A dollar available at some date in the future is worth less than a dollar available today because the latter could be invested and earn interest in the interim. In calculating the net present value, prevailing interest rates provide the basis for converting future amounts into their "money now" equivalents. Under credit reform, the subsidy cost of direct loans and loan guarantees are to be computed on a present value basis and included as budget outlays at the time the direct or guaranteed loans are disbursed.


      A tolling concept where the level of toll (price) is used to change travel behavior.


      Amount loaned to the borrower and owed to the federal government which excludes interest, penalties, administrative costs, loan fees, and prepaid charges.

      Private Activity Bond (PAB)

      Type of financing that provides private developers and operators with access to the tax-exempt bond market, lowering the cost of capital significantly.

      Program Account

      Budget account into which an appropriation to cover the subsidy cost of a direct loan or loan guarantee program is made and from which such cost is disbursed to the financing account. Usually, a separate amount for administrative expenses is also appropriated to the program account.

      Project Revenues

      All rates, rents, fees, assessments, charges, and other receipts derived by a project sponsor from a project.

      Public-Private Partnership (P3)

      Under a public-private partnership, sometimes referred to as a public-private venture, a contractual arrangement is formed between public and private sector partners. These arrangements typically involve a government agency contracting with a private partner to renovate, construct, operate, maintain, and/or manage a facility or system, in whole or in part, that provides a public service.

      Under these arrangements, the agency may retain ownership of the public facility or system, but the private party generally invests its own capital to design and develop the properties. Typically, each partner shares in income resulting from the partnership. Such a venture, although a contractual arrangement, differs from typical service contracting in that the private-sector partner usually makes a substantial cash, at-risk, equity investment in the project, and the public sector gains access to new revenue or service delivery capacity without having to pay the private-sector partner.

      Public Sector Comparator (PSC)

      Represents the most efficient public procurement cost (including all capital and operating costs and share of overheads) after adjustments for competitive neutrality, retained risk, and transferable risk to achieve the required service delivery outcomes. This benchmark is used as the baseline for assessing the potential value for money of private party bids in projects.


      If a borrower is in default for at least 60 days (SBA terms), the lender can request the Agency to honor its guarantee by purchasing SBA's pro-rata share of the debt outstanding to the lender. The purchase amount includes principal and up to 120 days (SBA terms) accrued interest.

      Purchase Rate

      Total actual and projected dollars purchased, including principal and interest, on a guaranteed loan as a percentage of the total dollars disbursed for a given cohort of loans.

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  • Q
    • Qualified Use of Proceeds

      IRS Section 141(e), tax-exempt qualified private activity bonds, are distinguished from taxable private activity bonds based largely upon the bond proceeds being used, or allocated, for one of several listed qualified purposes. As a general rule, qualified private activity bonds must satisfy a use test whereby 95% or more of them net proceeds of the bond issue must be used to finance the qualified purpose for which the bonds were issued. If the 95% use test applicable to a particular qualified purpose (as described under sections 142 through 145, and 1394 of the Code) is not satisfied, the result is a loss of the tax-exempt qualified status of the bond issue. Hence, the bonds become taxable private activity bonds. In applying these tests, the term "net bond proceeds" means the proceeds of a bond issue reduced by amounts allocated to a reasonably required reserve or replacement fund.

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  • R
    • Ramp-Up Phase

      The phase in a project's life cycle immediately following construction. It is during this phase, the early years of operation, that a project's revenue stream is established.

      Rate Covenant

      A contractual agreement in the legal documentation of a bond issue requiring the issuer to charge rates or fees for the use of specified facilities or operations at least sufficient to achieve a stated minimum debt service coverage level.

      Rating Agency

      An organization that assesses and issues opinions regarding the relative credit quality of bond issues. The three major municipal bond rating agencies are Fitch Investors Service, Moody's Investors Service, and Standard and Poor.


      Designations used by rating services designed to give relative indications of credit quality.

      Real Property

      Tangible, non-movable assets, such as land and buildings.


      Amount owed to a lender by an individual, organization, or other entity to satisfy a debt or a claim. Examples of receivables generated by government activities include amounts due for taxes, loans, the sale of goods and services, fines, penalties, forfeitures, interest, and overpayments of salaries and benefits.


      Rights of a holder in due course of a financial instrument (such as a loan) to force the endorser on the instrument to meet his or her legal obligations for making good the payment of the instrument if dishonored by the maker or acceptor.


      The dollars collected subsequent to a purchase, net of expenses, on a guaranteed loan.

      Recovery Rate

      The total actual and projected collections net of expenses subsequent to a purchase as a percentage of the total projected dollars purchased for a given cohort of guaranteed loans.


      Estimates of the subsidy costs performed subsequent to their initial estimates made at the time of a loan's disbursement.

      Registered Bond

      A bond whose owner is registered with the issuer or its agent either as to both principal and interest or as to principal only. Transfer of ownership can only be accomplished when the securities are properly endorsed by the registered owner.

      Repayment Agreement

      Agreement that establishes the terms and conditions governing the recovery of a debt of the lender and borrower when credit is initially extended or a debt is rescheduled.

      Request for Proposals (RFP)

      An RFP is an announcement, often by a government agency, of a willingness to consider proposals for the performance of a specified project or program component. A request for proposals is often issued when proposals for a specific research project are being sought.

      Request for Qualifications (RFQ)

      An RFQ is a procurement tool routinely used by state and local governments and the private sector to select partners in major systems acquisitions, mainly those involving real estate development transactions. This approach differs from the traditional request for proposals approach in that it places greater emphasis on the actual qualifications of the potential contractor - his or her track record - rather than how well the potential contractor responds to detailed project specifications and requirements.


      Procedure of establishing new terms and conditions to facilitate repayment of a debt. Also called restructuring, refinancing, and reamortizing, rescheduling includes establishing new terms as a result of changes in authorizing legislation (e.g., congressional action allowing farmers to have an additional 5 years to pay off their loans).

      Revenue Anticipation Note (RAN)

      A short-term loan issued to be paid off by revenues, such as tax collections and state aid.

      Revenue Bonds

      Bonds whose principal and interest are payable exclusively from earnings of a public enterprise.

      Revenue Leakage

      Assumed annual revenue losses for a tolling facility.

      Revolving Loan Fund

      Financing tool that recycles funds by providing loans, receiving loan repayments, and then providing further loans.

      Risk Allocation

      The process of assigning operational and financial responsibility for specific risks to parties involved in the provision of services under P3. (see also "Risk Transfer").

      Risk Category

      Subdivisions of a cohort of direct loans or loan guarantees into groups of loans that are relatively homogeneous is cost, given the facts known at the time of obligation or commitment. Risk categories will group all loans obligated or committed for a program during the fiscal year that share characteristics predictive of defaults and other cost.

      Risk Transfer

      The process of moving the responsibility for the financial consequences of a risk from the public to the private sector.

      Risk Unbundling

      A means of facilitating the development of public-private partnerships for the development of capital improvement projects. It calls for the segregation of private and public risks, with the private sector preferring to assume those risks that are of a commercial nature and can be appraised and controlled, leaving the residual risks to governmental entities.

      Road Pricing

      Also called Value Pricing. A system by which congestion and improved roadways can be managed through different levels of toll rates at peak and non-peak hours.

      Routine Maintenance

      Work that is planned and performed on a routine basis to maintain and preserve the condition of the highway system or to respond to specific conditions and events that restore the highway system to an adequate level of service.

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  • S
    • Salary Offset

      Process of collecting a debt by deducting part or all of the debt from an employee's current pay at one or more officially established pay intervals without his or her consent.


      A financial arrangement in which the owner of a facility sells it to another entity, and subsequently leases it back from the new owner. Both public and private entities may enter into sale-leaseback arrangements for a variety of reasons. An innovative application of the sale-leaseback technique is the sale of a public facility to a public or private holding company for the purposes of limiting governmental liability under certain statutes. Under this arrangement, the government that sold the facility leases it back and continues to operate it.

      Section 129 Loan

      Section 129 of Title 23 of U.S. Code permits states to use Federal-aid funds to make loans to any Federally eligible project. The loans must be repaid with a dedicated, non-Federal source.

      Secured Debt

      Debt for which collateral has been pledged.

      Senior Debt

      Debt obligations having a priority claim on the source of payment for debt service.


      Entity under contract to a lender or agency to perform account servicing functions.


      Resolving a debt or claim.

      Shadow Tolls

      Per vehicle amounts paid to a facility operator by a third party such as a sponsoring governmental entity and not by facility users.

      Short-Term Debt

      Outstanding balance, at any given time, on amounts borrowed with a maturity date of 12 months or less.

      Soft Loan

      Loan provided to a project sponsor with flexible repayment terms. Soft loans are generally subordinate to other debt, can have variable repayment schedules and extended terms, and subsidized interest rates.

      Special Tax Bond

      A bond secured by a special tax, such as a gasoline tax.

      Start-Up Project

      A separate, free-standing and new facility dependent on its own revenue stream to generate earnings to cover operating and capital costs.

      State Infrastructure Bank (SIB)

      A state or multi-state revolving fund that provides loans, credit enhancement, and other forms of financial assistance to surface transportation projects.

      State Transportation Improvement Program

      A short-term transportation planning document covering at least a three-year period and updated at least every two years. The STIP includes a priority list of projects to be carried out in each of the three years. Projects included in the STIP must be consistent with the long-term transportation plan, must conform to regional air quality implementation plans, and must be financially constrained (achievable within existing or reasonably anticipated funding sources).

      State Transportation Plan

      The transportation plan covers a 20-year period and includes both short- and long-term actions that develop and maintain an integrated, intermodal transportation system. The plan must conform to regional air quality implementation plans and be financially constrained.

      Stress Test

      A financial test applied by rating agencies to assess the claims-paying ability of municipal bond insurers. The stress test subjects a bond insurer's portfolio to a severe and prolonged economic downturn that produces an extraordinary level of bond defaults. In order to receive a AAA rating on its claims-paying ability, a bond insurer must be able to pay all projected claims through the peak years of the stress period and be left with sufficient resources to write new business when more stable economic conditions resume.

      Subordinate Claim

      A claim on an underlying source of payment for debt service which is junior or secondary to that securing another debt obligation. (see "Junior Debt").

      Subsidy Cost

      The estimated long-term cost to the federal government of providing credit assistance (e.g., direct loans or loan guarantees), calculated on a net present value basis at the time of disbursement and excluding administrative costs.

      Surety Bond

      A performance bond that protects the municipality against any financial loss arising from a breach of public trust by an employee who collects money on behalf of the community.

      Suspend Collection Action

      Placing collection action temporarily in abeyance due to the existence of a particular set of circumstances.


      Simply, the sale of a block of bonds and the purchase of another block of similar market value. Swaps may be made to achieve many goals, including establishing a tax loss, upgrading credit quality, extending or shortening maturity, etc.

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  • T
    • Tapered Match

      Permitting the Federal/non-Federal share of payments to vary over the life of a project, as long as the appropriate matching ratio is achieved by the end of the project.

      Tax Anticipation Notes (TAN)

      A short-term note issued to provide cash to cover operating expenses in anticipation of tax proceeds.

      Tax-Exempt Lease

      An arrangement where a public partner finances capital assets or facilities by borrowing funds from a private investor or financial institution. The private partner generally acquires title to the asset, but then transfers it to the public partner either at the beginning or end of the lease term. The portion of the lease payment used to pay interest on the capital investment is tax exempt under state and federal laws. Tax-exempt leases have been used to finance a wide variety of capital assets, ranging from computers to telecommunication systems and municipal vehicle fleets.

      Tax-Exempt Private Activity Bonds

      Tax-exempt bonds issued by a state or local government, the proceeds of which are used for a defined qualified purpose by an entity other than the government issuing the bonds (the "conduit borrower"). For a private activity bond to be tax-exempt, 95% or more of the net bond proceeds must be used for one of the several qualified purposes described in sections 142 through 145, and 1394 of the Code.

      Tax Increment Financing Exemption (TIF)

      A property tax exemption negotiated between a community and a private developer, typically implemented over a period up to 20 years, and intended to encourage industrial/commercial development.

      Tax Refund Offset

      Reduction of a debtor's tax overpayments by the amount of legally enforceable debt owed to a federal agency. A tax refund offset is a type of administrative offset.

      Taxpayer Identification Number (TIN)

      Social Security Number (SSN) for individuals or the Employee Identification Number (EIN) for business organizations or non-profit entities.

      Technical Risk

      Risks arising from deviations from the project's original technical assumptions, specifications, or requirements.

      TE-045 Innovative Finance Initiative

      A research program begun by the Federal Highway Administration in 1994 in response to Executive Order 12893. This finance initiative is designed to increase investment, accelerate projects, promote the use of existing innovative finance provisions, and establish the basis for future initiatives by waiving selected federal policies and procedures, thus allowing specific transportation projects to be advanced through the use of non-traditional finance mechanisms.

      Terminate Collection Action

      Ceasing active collection of a debt. The act of removing the debt from accounting records is to "write off." A decision to terminate collection action occurs concurrently with the write-off.

      TIFIA Credit Program

      As part of its 1998 enactment of the Transportation Equity Act for the 21st Century (TEA 21), Congress created the Transportation Infrastructure Finance and Innovation Act (TIFIA) credit program as part of its 1998 enactment of the Transportation Equity Act for the 21st Century (TEA-21, P.L. 105-78), as amended by the TEA-21 Restoration Act (Title IX of P.L. 105-206) and Safe, Accountable, Flexible, Efficient Transportation Equity Act A Legacy for Users (SAFETEA-LU, P.L. 109-59). Section 1502 of TEA-21 states that "a Federal credit program for projects of national significance can complement existing funding resources by filling market gaps, thereby leveraging substantial private co-investment." Codified in Sections 601 through 609 of Title 23, United States Code, the TIFIA program provides Federal credit assistance to surface transportation projects of national or regional significance in order to attract substantial non-Federal public and private co-investment. Private investment can be in the form of debt or equity. Debt can be in the form of bonds, sold as taxable or tax-exempt investments in the United States (U.S.) capital markets, or private bank loans.

      On July 6, 2012, Moving Ahead for Progress in the 21st Century Act (MAP-21, P.L. 112-141) 2012 reauthorized and amended the TIFIA credit program. New provisions for "rural infrastructure projects", which include a reduced interest rate as well as lowering the minimum project cost from $50 million to $25 million. The maximum loan amount has been increased. Other changes include a rolling admissions process and removal of discretionary selection criteria. Pursuant to MAP-21, the DOT announced availability of funding authorized in the amount of $1.75 billion ($750 million in Federal Fiscal Year (FY) 2013 funds and $1 billion in FY 2014 funds (and any funds that may be available from prior fiscal years) to provide TIFIA credit assistance for eligible projects such as highway, transit, rail, and intermodal freight projects including seaports. The FY 2013 and FY 2014 funds are subject to an annual obligation limitation that may be established in appropriations law, as well as annual reobligation requirements. MAP-21 greatly expanded TIFIA's lending capacity. The Department estimates that this budget authority can in turn be leveraged to provide approximately $17 billion in credit assistance to help fund up to $50 billion for surface transportation investment. The program offers three types of financial assistance featuring maturities up to 35 years after substantial completion of the project. Secured loans are direct Federal loans providing long-term financing of capital costs with flexible repayment terms. Loan guarantees provide full-faith-and-credit guarantees by the Federal Government of a portion of project loans made by institutional investors. Standby lines of credit represent secondary sources of funding in the form of contingent Federal loans that can supplement project revenues during the first 10 years of project operations. Public or private highway, transit, rail and port projects are eligible to apply for TIFIA assistance, typically up to 33% of eligible project costs. For more information, visit the TIFIA website at https//

      Time-of-Day Pricing

      A tolling approach that varies by the time-of-day in order reduce congestion at peak hours; rates are higher at peak hours than at off-peak.

      Title 23 of the United States Code

      Highway title that includes many of the laws governing the federal-aid highway program. The title embodies substantive provisions of law that Congress considers permanent and need not be reenacted in each new highway authorization act.

      Title 49 of the United States Code

      Transportation title that includes laws governing various transportation-related programs and agencies, including the Department of Transportation, general and intermodal programs, interstate commerce, rail and motor vehicle programs, aviation programs, pipelines, and commercial space transportation.


      A fee charged by a toll facility operator in an amount set by the operator for the privilege of traveling on said toll facility.

      Toll Collection System (TCS)

      The combination of elements and components that constitute the means to collect a fee for use of a tolled facility.

      Toll Credits

      Section 1044 of the Intermodal Surface Transportation Efficiency Act permitted states to apply the value of certain highway expenditures funded with toll revenues toward the required state match on current Federal-aid projects. States may only substitute toll credits for state match if they demonstrate a "maintenance of effort" (MOE). The MOE test requires that a state's prior-year highway spending equaled or exceeded the average of the previous three years' expenditures.

      Toll Lane

      Restricts traffic flow to facilitate either the automatic or manual collection of tolls.

      Toll Plaza

      An area, with restricted traffic flow, where tolls are collected from drivers, either manually or electronically.

      Toll Revenue Bonds

      A type of municipal bond where the principal and interest are secured by tolls paid by the users of the facility that is built with the proceeds of the bond issue.

      Trade Date

      The date when a bond transaction is executed.


      Traffic and revenue.

      Transferable Risk

      The value of any risk that is transferable to the bidder.


      The in-vehicle device component of a dedicated short-range corporation (DSRC) (or ETC) system. A receiver or transceiver permits the Operator's Road-Side Unit to communicate with, identify, and conduct an electronic toll transaction. Also call On-Board Unit and Tag.

      Transportation Infrastructure Finance and Innovation Act (TIFIA)

      See TIFIA Credit Program


      A bank designated by the issuer as the custodian of funds and official representative of bondholders. Trustees are appointed to ensure compliance with the trust indenture and represent bondholders to enforce their contract with the issuers.


      A generic term for a variety of public-private partnership arrangements whereby a public sector entity awards a contract to one or more private firms to undertake the development, construction, and/or operation of an infrastructure project for a predetermined period of time before turning the project back over to the public entity. Turnkeys may take various forms, including design-build-transfer and build-operate-transfer.

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  • U
    • Unobligated Balance

      The portion of obligation authority (including new budget authority and balances of unobligated budget authority carried over from prior years) that has not yet been obligated. With regard to the federal-aid highway program, the term generally refers to balances of apportioned contract authority that the states have been unable to obligate due to annual obligation limitations imposed by Congress.

      Unit Investment Trust (Municipal)

      A fixed portfolio of tax-exempt bonds sold in fractional undivided interests.

      Unlimited Tax Bond

      A bond secured by the pledge of taxes that are not limited by rate or amount.


      Any driver driving on a Toll Facility. The User is the holder of an account and On-Board Unit. The User may use the On-Board Unit to pay for tolls or services. In toll collection terms the User may be referred to as the "motorist.".

      User Charge

      Payment of a given sum of money that allows the use of a service for a certain time period.

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  • V
    • Value for Money (VfM)

      The procurement of a P3 project represents VfM when - relative to a public sector procurement option - it delivers the optimum combination of net life-cycle costs and quality that will meet the objectives of the project (Virginia Office of Transportation Public-Private Partnerships, 2011).

      Value Pricing

      Using pricing of parking and road usage to manage congestion; a system by which congestion and improved roadways can be managed through different levels of toll rates at peak and non-peak hours. (see also "Road Pricing") .

      Variable Message Sign (VMS)

      Changeable message boards located on a facility that display to customers text information such as weather and road conditions that may affect traffic conditions and travel times. Also knows as Dynamic Message Sign (DMS).

      Volume Cap Limit

      For certain qualified private activity bonds, as set forth in section 146 of the Code, limits an issuing authority to a maximum amount of tax-exempt bonds that can be issued to finance a particular qualified purpose during a calendar year. If, during a given year, an issuing authority issues qualified private activity bonds in excess of its applicable volume cap limit, the tax-exempt status of those bonds is jeopardized.

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  • W
    • Workout Group

      Group established within an agency, whose sole purpose is to resolve or attempt to resolve troubled debts, including those debts which demand that extreme measures be taken to protect the government's interests.

      Write-Off (Preferred term to "Charge Off")

      Occurs when an agency official determines, after all appropriate collection tools have been used, that a debt is uncollectible. Active collection on an account creases and the account is removed from an entity's receivables.

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  • Y
    • Yield to Call

      A yield on a security calculated by assuming that interest payments will be paid until the call date, when the security will be redeemed at the call price.

      Yield to Maturity

      A yield concept designed to give the investor the average annual yield on a security. It is based on the assumption that the security is held to maturity and that all interest received over the life of the security can be reinvested at the yield to maturity.

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  • Z
    • Zero Coupon Bond

      A bond that is originally issued at a deep discount from its par or face amount and which bears no current interest. The bond is bought at a discount price which implies a stated rate of return calculated on the basis of the bond being payable at par at maturity. (see "Capital Appreciation Bond").

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