Massachusetts rates first or second in the nation on most measures of a state's indebtedness. Yet there is always pressure to take on more big capital projects - for transportation, water, sewers and darinage, and other construction. Big-ticket items like these aren't paid for out of operating budgets, just as most people would not buy a house or car out of their household budgets.
Such purchases generally rely on debt, and governments typically raise money to fund capital projects through the sale of bonds. Bonds are sold to investors in the market, with the promise to repay the principal plus interest at a future time. Debt repayment is usually amortized over 20 or 30 years.
The principal and interest payments on government bonds are referred to as debt service, which is usually funded as part of the operating budget.
One big difference between bonded debt and a mortgage of real property is that a mortgage represents secured debt. A mortgage lender can initiate a process to seize the property for repayment of the loan if the borrower defaults. Government bonds are not secured debt; purchasers gauge their risk, largely on the basis of the bond rating issued by credit agencies such as Moody's and Standard & Poors.
Although government bonds are not secured debt, most investors consider them to be relatively secure. States, however, can experience budgetary problems that affect their ability to repay debt.
Special Development Districts (H159) - second response Sen. Moore July 2008
Special Development Districts (H159) - response Sen. Moore July 2008
Special Development Districts (H159) - Op Ed June 2008