Revenues to Reduce the Cost of Borrowing
Long-term indebtedness involves a financial plan and a repayment plan. Typically, repayment is made from the governmental general fund in the form of an annual appropriation to the government entity occupying the facility or to a government agency that has a general responsibility for the financing of public buildings. The appropriation is keyed to the financial plan and may take the form of an appropriation to pay a rental to an authority or corporation holding title to the facility, or it may take the form of a debt service appropriation. The payment to investors from this appropriation may go directly from the responsible government entity to a trustee who makes individual distributions to investors, or the payment may be routed to the trustee or fiscal agent through a public authority or an intermediary corporation.
As the costs of long-term borrowing are high, many methods are used to reduce the burden on the general fund. All of these options are circumscribed by law, so it is necessary for a court manager to ascertain the permissible alternatives in his or her jurisdiction and to make a determination as to which, if any, are feasible.
One method of reducing the size of the appropriations for debt repayment is to create a revenue stream within the building. The most common sources of revenue include:
- Rentals of space to public agencies.
- Rental of space to private tenants, for example, where a condominium arrangement exists.
- Fees for parking spaces.
- Fees paid for housing prisoners of other governments in a jail located within a facility housing courts.
Appropriations from Earmarked Fees
Some jurisdictions collect fees from litigants for support of court facilities. These fees may not be placed in a special fund for court facilities or may be too small in amount to be of much use for capital financing. In some jurisdictions, however, these fees go into special funds intended for courthouse construction and can be used for purposes of repaying loans, most commonly in the form of certificates of participation.
Some states have state-level special funds that are fed by fees collected at the trial court level and made available to counties that undertake to construct or renovate court facilities or to state agencies to construct justice facilities. Locally imposed court costs may also be used to fund state-level facilities.
Special Tax Levies
State law often permits the imposition of a surtax for some specific purpose, such as the construction of a public building. Such surtaxes usually require voter approval of the amount and purpose and frequently have sunset provisions. Some of these additions to the tax burden are on sales taxes, others on property taxes. The former is often more popular because it falls in part on persons who are transients rather than property owners.
One option is to collect such taxes in advance to obviate the need for borrowing, but often the decision is made to use the tax proceeds either to reduce the amount being borrowed or to expedite the defeasance of bonds, thus reducing interest costs.
Some states reimburse counties for their expenditures on court facilities, either by building debt service into a rental fee paid to the county or by using state capital funds to reimburse counties.