Texas Bond Review Board DEBT PRIMER Prepared by staff of the Texas Bond Review Board Robert C. Kline Executive Director Introduction The Texas Bond Review Board (BRB) consists of the Governor, the Lieutenant Governor, the Comptroller of Public Accounts (voting members) and the Speaker of the House of Representatives (non-voting member). The BRB is responsible for the approval of all state bond issues and lease purchases with an initial principal amount greater than $250,000 or of a term longer than five years with the exception of Permanent University Fund Debt, Tax and Revenue Anticipation Notes issued by the Comptroller of Public Accounts and general obligation debt issued by university systems that have an unenhanced long-term rating of at least AA- or its equivalent. In addition, the BRB is responsible for collecting, analyzing and reporting debt information for local political subdivisions in Texas. The BRB is also charged with the administration of the state’s Private Activity Bond Allocation Program. The BRB’s statutory authority is provided in Texas Government Code Chapters 1231 and 1372. This Debt Primer is intended to provide basic knowledge of debt for government officials and other interested parties. It covers topics such as types of debt issued by the state of Texas, the state's constitutional debt limit and policy implications of debt issuance. The Debt Primer concludes with a glossary of terms. What is a Bond? A bond is a long-term debt security issued to evidence a loan between a lender and a borrower specifying the: due date for the loan called the term or maturity, e.g. 20 years; interest rate, e.g. 5%; debt service (repayment) schedule, e.g. monthly, semi-annually or annually; and revenue source pledged to repay the debt. Common Terms for Debt Securities Par 100% of the face value of a security. – Premium the amount by the price paid for a security exceeds par value. – Discount the amount by which the price paid for a security is less than par value. – Maturity date the date the principal is due. – Coupon the interest rate paid on a security. – interest rate - an interest rate that does not fluctuate during the life of a security. Variable interest rate - an interest rate that fluctuates based on a predetermined index or formula.
Texas Bond Review Board DEBT PRIMER Prepared by staff of the Texas Bond Review Board Robert C. Kline Executive Director Introduction The Texas Bond Review Board (BRB) consists of the Governor, the Lieutenant Governor, the Comptroller of Public Accounts (voting members) and the Speaker of the House of Representatives (non-voting member). The BRB is responsible for the approval of all state bond issues and lease purchases with an initial principal amount greater than $250,000 or of a term longer than five years with the exception of Permanent University Fund Debt, Tax and Revenue Anticipation Notes issued by the Comptroller of Public Accounts and obligation debt issued by university systems that have an unenhanced long-term rating of at least AA- or its equivalent. In addition, the BRB is responsible for collecting, analyzing and reporting debt information for local political subdivisions in Texas. The BRB is also charged with the administration of the state’s Private Activity Bond Allocation Program. The BRB’s statutory authority is provided in Texas Government Code Chapters 1231 and 1372. This Debt Primer is intended to provide basic knowledge of debt for government officials and other interested parties. It covers topics such as types of debt issued by the state of Texas, the state's constitutional debt limit and policy implications of debt issuance. The Debt Primer concludes with a glossary of terms. What is a Bond? A bond is a long-term debt security issued to evidence a loan between a lender and a borrower specifying the: due date for the loan called the term or maturity, e.g. 20 years; interest rate, e.g. 5%; debt service (repayment) schedule, e.g. monthly, semi-annually or annually; and revenue source pledged to repay the debt. Common Terms for Debt Securities Par – 100% of the face value of a security. Premium – the amount by the price paid for a security exceeds par value. Discount – the amount by which the price paid for a security is less than par value. Maturity date – the date the principal is due. Coupon – the interest rate paid on a security. interest rate - an interest rate that does not fluctuate during the life of a security. Variable interest rate - an interest rate that fluctuates based on a predetermined index or formula. general
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