NCJ Number
102093
Date Published
1986
Length
12 pages
Annotation
Ohio's innovative method for financing prison construction -- the leasing of prison facilities by the Department of Rehabilitation and Corrections and the use of securities with a variable interest rate -- offers advantages worthy of consideration by other States planning prison construction.
Abstract
Public resistance to tax increases has made the financing of prison construction increasingly difficult. Ohio's constitutional debt limit led to the creation of the Ohio Building Authority, an agency that finances the construction of public facilities by leasing to State and local agencies. Lease bonds are the only type of securities which may be issued. Ohio officials determined that substantial savings could be realized through variable rate demand bonds. Leasing avoids the debt limit requirement because this does not create an ongoing obligation for the leasing government agency. Unlike general obligation bonds (the traditional financing method), lease bonds do not require voter approval. Additional advantages are flexibility, a relatively short time to arrange financing (45-day average), and pooled financing (a number of jurisdictions may make an agreement with a single financing entity). Disadvantages include no new tax revenues, risk associated with variable interest rates, and voters' ire at bypassing their approval. 11 notes.