Financing With and Without Debt
The decision to finance a court facility project does not necessarily entail incurring long-term debt or any debt at all.There are three basic options when it comes to financing a courthouse construction project:
With Short-Term Debt
When the amount of indebtedness is not large and the time frame necessary to retire the debt is not long, it is possible to use short-term debt instruments:
- Grant Anticipation Notes (GANs)
- Tax Anticipation Notes (TANs)
- Bond Anticipation Notes (BANs)
- Lines of credit
- Bonds to be retired in less than five years
Short term debt is best used when there is a need to get a project started quickly. Short term debt may be used to bridge the gap until more substantial funding can be arranged. Some of the things for which this type of debt may be used include early planning studies, needs assessments, and early conceptual design and master planning.
With Long-Term Debt
In most instances large court facility improvement projects will require long-term debt. The term to maturity on most bonds for courthouse construction tends to be in the fifteen- to twenty-year range.
There are two options for financing long-term debt.
- Public financing such as: Traditional general obligation bond financing, and Revenue bonds issued through a public entity such as a public building authority, judicial building authority, industrial development association, or local building commissions.
- Private financing like that used in lease-purchase arrangements. The financing may be provided through a commercial bank, or the builder may set up a financing mechanism such as a non-profit corporation that issues bonds or COPs and holds the title to the property during the pendency of the debt.
Without Incurring Debt
It is difficult but not impossible to finance capital improvements from operating funds.
Some jurisdictions may be able to identify funds that could be made available for courthouse construction:
- Proceeds from the sale of a public building
- Accumulated funds in a jail improvement fund
- Accumulated proceeds from a property surtax
- Additions to the sales tax
- Accelerating tax payments
Sometimes, unexpected damage to a courthouse from major calamities of nature provides a basis for funding renovation or new construction.
Some states permit the collection of filing fees that may be used to cover courthouse improvements and some states have special taxes that may be levied for capital improvement projects. See Revenues to Reduce the Cost of Borrowing.
See Court Facility Funding Considerations for information about economic, political and legal constraints and opportunities; property considerations; up-front professional costs; and the possibility of inter-governmental cooperation.