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Finance

Bonding vs. Pay-Go


Project Number: SPR-1754

Contract Number: 2023-0460

Status: Complete

Start Date: 10/30/2023

End Date: 07/31/2025

Summary:

This research examines the value of financing infrastructure improvements through bonding versus a program of pay-go improvements. Postponed construction becomes more costly in nominal terms because inflation raises the cost of construction over a longer period before construction begins. However, postponements can also create a variety of other situations. For example, postponements add to the level of damage that must be repaired when projects are subsequently let to contract. Both methods of finance encounter factors such as availability of funds and fiscal stability, inflation, population growth, as well as congestion growth rates, to name a few. While there is no one-size fits all answer, understanding how these factors influence the outcomes and when they may be applicable, allows policy makers to make more informed decisions for the future. 

 

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