Account Servicing
Monitoring the status of accounts of indebtedness, monitoring records of current debts, billing for amounts due, collecting amounts due, handling debtor correspondence, performing follow-up functions, and providing accurate reporting of debt portfolios.
Accrue
Process of increasing account value, usually associated with interest or other time-related increases in account value.
Administrative Costs/Charges
Additional costs incurred in processing and handling a debt because it has become delinquent. Costs should be based on actual costs incurred or cost analyses which estimate the average of actual additional costs incurred for particular types of debt at similar stages of delinquency. Administrative costs should be accrued and assessed from the date of delinquency. (See “Delinquency.”)
Administrative Offset
Withholding money payable by the federal government to a person or held by the government for a person or entity in order to satisfy a debt that the person or entity owes the government.
Advance Construction
States or local governments independently raise up front capital required for a federally approved project and preserve eligibility for future federal-aid reimbursement for that project. At a later date, the state can obligate federal-aid highway funds for reimbursement of the federal share. This tool allows states to take advantage of access to a variety of capital sources, including its own funds, local funds, anticipation notes, revenue bonds, bank loans, etc., to speed project completion.
Allowance for Uncollectible Accounts
Account established to reduce receivables for estimates of uncollectible amounts to reflect the assets at their net realizable value.
Amortization
Provision made in advance for the gradual reduction of an amount owed over time.
Appraisal
Formal valuation of property, made by a competent authority.
Asset
Any item of economic value, either physical in nature (such as land) or a right to ownership, expressed in cost or some other value, which an individual or entity owns.
Bad Debt Expense
Estimated cost of losses which may be realized as a result of a failure to collect on receivables. The loss is recorded when information is available that an asset (in this case, receivables) has probably been impaired or a liability incurred and when the amount can be reasonably estimated. For accounting purposes, the bad debt expense estimate is recorded when the allowance account is established or periodically adjusted.
Basis Point
A shorthand financial reference to one-hundredth of one percent (.01 percent) used in connection with yield and interest rates.
Bond Counsel
A lawyer or law firm, with expertise in bond law, retained by the issuer to render an opinion upon the closing of a municipal bond issue regarding the legality of issuance and other matters including the description of security pledged and an opinion as to the tax-exempt status of the bond.
Bond Insurance
A financial guarantee provided by a major insurance company (usually AAA rated) as to the timely repayment of interest and principal of a bond issue.
Book Value
Net amount at which an asset or liability is carried on the books of account (also referred to as carrying value or amount). It equals the gross nominal amount of any asset or liability minus any allowance or valuation amount.
Budget Authority
Authority provided by law to enter into financial obligations that will result in immediate or future outlays of federal government funds. Budget authority includes the credit subsidy costs for direct loan and loan guarantee programs. Basic forms of budget authority include appropriations, borrowing authority, contract authority, and authority to obligate and expend offsetting receipts and collections.
Build/Operate/Transfer
Public-private partnership arrangement involving private construction, private operation for given period of time, and eventual transfer to public ownership.
Call Risk
Risk to the investor associated with prepayments by the issuer of the principal amount of the bonds prior to the stated maturity date, in accordance with the bonds’ redemption provisions.
Capital Appreciation Bonds
Long-term bonds which pay no current interest, but accrete or compound in value from the date of issuance to the date of maturity. CABs differ from zero coupon bonds in that they are issued at an initial amount and compound in value, in contrast to zeroes, which are issued at a deep-discount and compound to par.
Capital Reserves
Funds that remain in a bank and are not loaned out. These funds can be used to support a variety of credit enhancement tools. Capital reserves also can be used to leverage the lending institution, or borrow against reserves to expand the pool of available loan funds.
Capitalization
Process of depositing various funds as seed capital into a lending institution to enable financial services. This pool of money is distributed, through loans and credit enhancements, in such a way to ensure that payments are made back to preserve the corpus.
Capitalized Interest
A specified portion of the original bond proceeds which will be used to pay interest on the bonds until revenue from planned sources becomes available upon completion of construction.
Charge Off
Alternative term to write-off. Write-off is the preferred term. (See “Write-off”.)
Claim
Synonymous with the term “debt,” for purposes of this document. (See “Debt.”) Alternative meanings of the word “claim” include a request (1) submitted by a lender for government payment of a defaulted guaranteed loan; (2) filed with the Department of Justice for the pursuit of litigation and/or enforced collection of an account; or (3) filed with an agency for the payment of an amount considered due to the submitting individual or organization, such as for medical insurance.
Close Out
Occurs concurrently with or subsequent to an agency decision to write off a debt for which the agency has determined that future additional collection attempts would be futile.
Cohort
Direct loans obligated or loan guarantees committed by a program in the same year even if disbursements occur in subsequent years. Post-1992 direct loans or loan guarantees will remain with their original cohort throughout the life of the loan, even if the loan is modified. Pre-1992 loans and loan guarantees that are modified shall each, respectively, constitute a single cohort. (OMB Circular No. A-11, “Preparation and Submission of Budget Estimates.” Executive Office of the President, Office of Management and Budget, hereafter cited as OMB Circular No. A-11.)
Collateral
Any property pledged as security for a loan.
Collection Agency
Private sector entity whose primary business is the collection of delinquent debts.
Collection
Process of receiving amounts owed to the federal government, such as payment on a debt.
Commercial
Adjective used to signify a business activity, regardless of whether that activity has been undertaken by an individual or business.
Compromise
Accepting less than the full amount of the debt owed from the debtor in satisfaction of the debt. Also referred to as “settlement.”
Consumer
Adjective used to signify a personal activity. For example, a loan to a farmer to buy an automobile for personal use would be considered a consumer loan.
Contingencies
Existing conditions, situations, or circumstances which involve uncertainty and which could result in gains or losses. For example, guaranteed loans represent contingent liabilities which, in the event of default by the borrowers, the federal government would be liable to cover the losses of the guarantors, and thereby sustain the loss itself.
Contract Authority
A form of budget authority that permits obligations to be made in advance of appropriations or receipts. Contract authority therefore is unfunded and requires a subsequent appropriation or offsetting collection to liquidate (pay) the obligations. The federal-aid highway program has operated under contract authority since 1921.
Cooperative Agreement
Written consent between two parties to define the basic structure and purpose of a financial transaction, including the roles the parties involved and the way in which funds will be administered.
Corpus
The corpus refers to all initial funds, additional, and subsequent revenue deposited for bank capitalization. The corpus is essentially a “body” of funds that is available, on a revolving basis, for use in providing financial assistance to borrowers.
Coverage Margin
The margin of safety for payment of debt service on a revenue bond, reflecting the number of times (e.g., 1.2) by which annual revenues after operations and maintenance costs exceed annual debt service.
Credit Cycle
Complete credit process, composed of four phases: credit extension, account servicing, debt collection, and write-off/close out.
Credit Enhancement
Financial guarantees or other types of assistance that improve the credit of underlying debt obligations. Credit enhancement has the effect of lowering interest costs and improving the marketability of bond issues.
Credit Enhancement
Financing tools – such as letters of credit, lines of credit, bond insurance, debt service reserves, and debt service guarantees -that improve the credit quality of underlying financial commitments. Credit enhancements have the effect of lowering interest costs and improving the marketability or liquidity of bond issues.
Credit Extension
Review and approval of requests for short- and long-term credit.
Credit Program
Federal program that makes loans and/or loan guarantees to non-federal borrowers.
Credit Reporting Bureau
Private sector entity which collects financial information on debtors and whose reports on debtors reflect information received from the public and private sectors.
Credit Score
A statistically-based measure of risk of a particular type of loan to a particular borrower.
Credit
Promise of future payment in kind or of money given in exchange of present money, goods, or services.
Current Discount Rate:
Discount rate used to measure the cost of a modification with respect to the modification of direct loans or loan guarantees. It is the interest rate applicable at the time of modification on marketable Treasury securities with a similar maturity to the remaining maturity of the direct guaranteed loans, under either pre-modification terms, or post-modification terms, whichever is appropriate.
Current Receivable
A receivable on which payment is due within 12 months of the reporting period.
Debt
Synonymous with the term “claim,” for purposes of this document. It refers to an amount of money or property which has been determined by an appropriate federal official to be owed to the U.S. from any person, organization, or entity other than another federal agency.
Included as debts are amounts due the U.S. from fees, duties, leases, rents, royalties, services, sales of real or personal property, overpayments, fines, penalties, damages, taxes, interest, forfeitures, and other sources.
Debt Collection
Recovery of amounts due after routine follow-up fails. This activity includes the assessment of the debtor’s ability to pay, the exploration of possible alternative arrangements to increase the debtor’s ability to repay and other efforts to secure payment.
Deed-in-Lieu of Foreclosure
A voluntary transfer of marketable title to a property to avoid foreclosure.
Default
Failure to meet any obligation or term of a credit agreement, grant, or contract. Often used to refer accounts more than 90 days delinquent.
Deficiency
Portion of a loan which remains outstanding after pledged property has been liquidated (converted to cash) and applied to the outstanding balance.
Delinquency
Failure of the debtor to pay an obligation or debt by the date specified in the agency’s initial written notification or applicable contractual agreement, unless other satisfactory payment arrangements have been made by that date. Delinquency would also occur if, at any time thereafter, the debtor fails to satisfy the obligations under payment agreement with the agency.
Design-Build
A procurement or project delivery arrangement whereby a single entity (a contractor with subconsultants, or team of contractors and engineers, often with subconsultants) is entrusted with both design and construction of a project. This contrasts with traditional procurement where one contract is bid for the design phase and then a second contract is bid for the construction phase of the project.
Direct Loan
A disbursement of funds by the Government to a non-Federal borrower under a contract that requires repayment of such funds with or without interest. The term includes the purchase of, or participation in, a loan made by a non-Federal lender. The term also includes the sale of a Government asset on credit terms of more than 90 days duration. The term does not include the acquisition of Federally guaranteed non-Federal loans in satisfaction of default or other guarantee claims or the price-support loans of the Commodity Credit Corporation.
Direct Loan Obligation
A legal or binding agreement by a Federal agency to make a direct loan when specified conditions are fulfilled by the borrower. Acquisitions of federally guaranteed non-Federal loans in satisfaction of default or other guarantee claims are not recorded as direct loan obligations.
Direct Loan Subsidy Cost
Estimated long-term cost to the federal government of direct loans calculated on a present value basis, excluding administrative costs. The cost is the present value of present value of estimated net cash outflows at the time the direct loans are discharged. The discount rate used on the calculation is the average interest rate (yield) on marketable Treasury securities of similar maturity to the loan, applicable to the time when the loans are disbursed.
Discharge
Satisfying a debt as a legal obligation through the performance of the obligation(s) imposed under the debt instrument, such as to pay the debt in full, or through another action such as a compromise.
Discretionary Spending
Outlays controllable through the congressional appropriation process. Such outlays result from the provision of budgetary resources (including appropriations and obligation limitations but excluding mandatory spending authority) in appropriation acts. The Budget Enforcement Act establishes annual spending limitations or caps on discretionary appropriations and resulting outlays.
Equity
Commitment of money from public or private sources for project finance, with a designated rate of return target.
Executive Order 12893
An executive order issued by President Clinton in January 1994, establishing infrastructure investment as a priority for the Administration and directing federal agencies to establish programs for more effective capital investment from current federal funds.
Face Amount
The par value (i.e., principal or maturity value) of a security.
Financing Account
A non-budget account associated with each credit program account. The financing account holds fund balances, receives the subsidy cost payment from the credit program account, and includes all other cash flows to and from the government resulting from post-1991 direct loans or loan guarantees. (OMB Circular No. A-11, and OMB Circular No. A-34, “Instructions on Budget Execution,” Part VI, “Credit Apportionment and Budget Execution,” hereafter cited as OMB Circular No. A-34.)
Forbearance
The act of a creditor who refrains from enforcing a debt when it falls due. Various government credit programs, under specific conditions, offer borrowers certain protections against foreclosure.
Force Majeure
Events that are beyond the control of a contractor, such as earthquakes, epidemics, blockades, wars, acts of sabotage, and archaeological site discoveries.
Foreclosure
Method of enforcing payment of a debt secured by a mortgage by seizing the mortgaged property. Foreclosure terminates all rights which the mortgagor has in the mortgaged property upon completion of due process through the courts.
Forgive
To grant relief from all or part of a debt under statutory authority. When an agency forgives a debt, or some portion thereof, it is deciding that the amount being waived is not now part of the government’s claim.
Government Sponsored Enterprise
A shareholder owned and operated financial institution, chartered by the federal government, that facilitates the flow of investment funds to specific economic sectors, thereby providing access to national capital markets. The activities of these private entities are not included in federal budget totals. But because of their special relationship to the government, GSEs provide detailed statements as supplementary information for budget presentation. Examples of GSEs include the Federal National Mortgage Association (Fannie Mae), the Student Loan Marketing Association (Sallie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac).
Governmental Purpose Bond
A term in the Internal Revenue Code for a tax-exempt bond which is secured by governmental revenues or whose proceeds are used for a general governmental purpose (as opposed to a private activity bond).
Grant Anticipation Notes (GANs)
Short-term debt that is secured by grant money expected to be received after debt is issued. Financial institutions may buy anticipation notes on behalf of project sponsors in advance of receiving other financial assistance, to enable a faster project start. Helps project sponsors advance projects, especially when unable to access capital markets.
Guarantee
A contract(s) in which a financial institution agrees to take responsibility for all or a portion of a project sponsor’s financial obligations for a project under specified conditions.
Installment Loan
An obligation to repay monies borrowed at fixed intervals over time.
Institutional Investor
A financial institution such as a mutual fund, insurance company, or pension fund that purchases securities in large quantities.
Insurance
Type of guarantee in which any agency pledges the use of accumulated insurance premiums to offset the cost of default on the part of borrowers. “Loan insurance” is considered the equivalent of a “loan guarantee.”
Intelligent Transportation Systems
The application of advanced electronics and communication technologies to enhance the capacity and efficiency of surface transportation systems, including traveler information, public transportation, and commercial vehicle operations.
Interest Method
Method used to amortize the premium or discount of an investment in bonds, or to amortize the subsidy cost allowance of direct loans. Under this method, the amortization amount of the subsidy cost allowance equals the effective interest minus the nominal interest of the direct loans. The effective interest equals the present value of the direct loans times the effective interest rate (the discount rate). The nominal interest equals the nominal amount (face amount) of the direct loans times the stated interest rate (the rate stated in the loan agreements).
Interest Subsidy
A subsidy provided by a financial institutions (such as multi-lateral lenders, state infrastructure banks, or export credit agencies) to lower overall financing costs for project sponsors. With this tool, project sponsors repay loans at less than current market rates. Market rates may be determined by the cost of borrowing through conventional issues of comparable duration.
Interest
Sum paid or calculated for the use of capital. Financing interest is the charge assessed as a cost of extending credit as distinguished from additional interest which is the charge assessed on delinquent debts in order to compensate the federal government for the time value of money owed and not paid when due. Additional interest is accrued and assessed from the date of delinquency.
Investment Grade
Describes the top four rating categories of relatively secure bonds suitable for a conservative investor. Standard & Poor’s rating service looks upon all bonds between the AAA and BBB ratings as investment grade. Generally speaking, any bonds rated below BBB are considered to have speculative features and are deemed sub-investment grade or junk bonds.
Junior Debt
Debt having a subordinate or secondary claim on an underlying security or source of payment for debt service, relative to another issue with a higher priority claim. (See Subordinate Claim.)
Late Charges
Amounts accrued and assessed on a delinquent debt; the term includes administrative costs, penalties, and additional interest.
Letter of Credit
A form of loan from a financial institution to be used only in the instance of a shortfall in net revenue for debt service (i.e., a contingent loan). A letter of credit is security provided directly to the lender/bondholders (via a bond trustee), rather than to the borrower/project sponsor.
Leverage
A financial mechanism used to increase available funds usually by issuing debt (typically bonds) or by guaranteeing or otherwise assuming liability for others’ debt in an amount greater than cash balances.
Leveraging Ratio
Measures the extent to which a given investment attracts additional capital. In the context of this report, the leveraging ratio of federal funds is equal to the total project costs divided by the budgetary cost of providing federal credit assistance.
Liability
Amount owed (i.e., payable) by an individual or entity, such as for terms received, services rendered, expenses incurred, assets acquired, construction performed, and amounts received but not yet earned.
Line of Credit
A form of loan to be used only in the instance of a shortfall in net revenue for debt service or other financial commitments (i.e., a contingent loan). A line of credit, while similar to a letter of credit, is security available directly to the borrower/project sponsor with flexibility in use of the funds.
Liquidation
Process of converting collateral to cash.
Liquidity
Refers to an investor’s ability to sell an investment as a means of payment or easily convert it to cash without risk of loss of nominal value.
Litigation
Legal action or process taken for full or partial debt recovery.
Loan Guarantee Commitment
Binding agreement by a federal agency to make a loan guarantee when specified conditions are fulfilled by the borrower, the lender, or any other party to the guarantee agreement. (OMB Circular No. A-11)
Loan Guarantee
Contingent liability created when the federal government assures a private lender who has made a commitment to disburse funds to a borrower that the lender will be repaid to the extent of a guarantee in the event of default by the debtor.
Loan Guarantee Subsidy Cost
Estimated long-term cost to the federal government of loan guarantees calculated on a present value basis, excluding administrative costs. The cost is the present value of estimated net cash outflows at the time the guaranteed loans are disbursed by the lender. The discount rate used for the calculation is the average interest rate (yield) on marketable Treasury securities of similar maturity to the loan guarantees, applicable to the time when the guaranteed loans are disbursed.
Loan Servicer
A public or private entity that is responsible for collecting, monitoring, and reporting loan payments. In the context of this report, a loan servicer would also assist in originating the loan.
Loan
Legally binding document which obligates a specific value of funds available for disbursement. The amount of funds disbursed is to be repaid (with or without interest and late fees) in accordance with the terms of a promissory note and/or repayment schedule.
Loan-to-Value Ratio
Represents the proportion of the amount of a loan to the value being pledged to secure that loan. It is derived as follows: total financing costs (i.e., the market value of the collateral plus the financed portion of any closing costs, insurance premiums, or other transaction-related expenses less the borrower’s cash down payment) divided by the market value of the collateral.
Mandatory Spending
Outlays generally not controllable through the congressional appropriation process. Mandatory amounts are budget authority or outlays that cannot be increased or decreased in a given year without a change in substantive law. Entitlement programs (e.g., food stamps, Medicare, veterans’ pensions) are chief examples of mandatory programs, whereby Congress controls spending indirectly, by defining eligibility and setting benefit payment rules, rather than directly through the appropriation process. With regard to the federal-aid highway program, mandatory spending refers to outlays resulting from obligations of contract authority programs not subject to annual obligation limitations, such as Minimum Allocation, Emergency Relief, and Demonstration Project spending.
Modification
Federal government action, including legislation or administrative action, that alters the estimated subsidy cost and the present value of outstanding direct loans (or direct loan obligations), or the liability of loan guarantees (or loan guarantee commitments). Direct modifications change the subsidy cost by altering the terms of existing contracts or by selling loan assets. Indirect modifications are actions that change the subsidy cost by legislation that alters the way in which an outstanding portfolio of direct loans or loan guarantees is administered. The term modification does not include subsidy cost reestimates, the routine administrative workouts of troubled loans, and actions that are permitted within the existing contract terms.
Nominal (or Face or Par) Value or Amount
Amount of a bond, note, mortgage, or other security as stated in the instrument itself, exclusive of interest or dividend accumulations. The nominal amount may or may not coincide with the price at which the instrument was first sold, its present market value, or its redemption price.
Non-Current Receivable
A receivable on which payment will not be due within 12 months of the reporting period.
Non-Federal Match
The commitment of state or other non-federal funds required to receive federal contributions. For example, the U.S. SIB program requires a non-federal match for capitalization funds, which is 25 percent of the amount of federal funds. The match may be lower in states which have a sliding scale rate based on the percentage of federal land in the state.
Obligation Authority
The amount of budgetary resources (including new budget authority, balances of unobligated budget authority carried over from prior years, and obligation limitations) available for obligation in a given fiscal year. With regard to the federal-aid highway program, obligation authority often refers to the amount of federal-aid obligation limitation, established annually by Congress in appropriation acts, that is allocated to the states and controls the amount of apportioned contract authority that can be obligated by the states in a given fiscal year.
Original Discount Rate
Discount rate originally used to calculate the present value of direct loans or loan guarantee liabilities, when the direct or guaranteed loans were disbursed.
Outlays
An outlay represents an official payment of funds.
Parity Debt
Debt obligations issued or to be issued with an equal claim to other debt obligations on the source of payment for debt service.
Pay-As-You-Go Financing
Describes government financing of capital outlays from current revenues or grants rather than by borrowing.
Penalty
Punitive charge assessed for delinquent debts. The rate to be assessed is capped by law.
Personal Property
Tangible, movable assets, such as automobiles, planes, and boats.
Pre-Foreclosure Sale
The opportunity for borrowers who cannot meet their obligation (repayment of a loan) to sell their property in order to avoid foreclosure. Borrowers who agree to sell their property using this method are generally relieved of their loan obligation.
Preliminary Rating
A credit opinion from a rating agency based on a preliminary assessment assigned to a proposed bond issue.
Prepayment
Partial or full repurchase or other advance deposits of outstanding loan principal and interest by the borrower/debtor. The repurchase may be made at a discount from the current outstanding principal balance.
Present Value (PV)
The value of future cash flows discounted to the present at certain interest rate (such as the entity’s cost of capital or funds), assuming compounded interest. The GAO definition of present values is as follows: The worth of a future stream of returns or costs in terms of money paid immediately (or at some designated date). A dollar available at some date in the future is worth less than a dollar available today because the latter could be invested and earn interest in the interim. In calculating the net present value, prevailing interest rates provide the basis for converting future amounts into their “money now” equivalents. Under credit reform, the subsidy cost of direct loans and loan guarantees are to be computed on a present value basis and included as budget outlays at the time the direct or guaranteed loans are disbursed.
Principal
Amount loaned to the borrower and owed to the federal government which excludes interest, penalties, administrative costs, loan fees, and prepaid charges.
Program Account
Budget account into which an appropriation to cover the subsidy cost of a direct loan or loan guarantee program is made and from which such cost is disbursed to the financing account. Usually, a separate amount for administrative expenses is also appropriated to the program account.
Project Revenues
All rates, rents, fees, assessments, charges, and other receipts derived by a project sponsor from a project.
Purchase Rate
Total actual and projected dollars purchased, including principal and interest, on a guaranteed loan as a percentage of the total dollars disbursed for a given cohort of loans.
Purchase
If a borrower is in default for at least 60 days (SBA terms), the lender can request the Agency to honor its guarantee by purchasing SBA’s pro-rata share of the debt outstanding to the lender. The purchase amount includes principal and up to 120 days (SBA terms) accrued interest.
Ramp-Up Phase
The phase in a project’s life cycle immediately following construction. It is during this phase, the early years of operation, that a project’s revenue stream is established.
Rate Covenant
A contractual agreement in the legal documentation of a bond issue requiring the issuer to charge rates or fees for the use of specified facilities or operations at least sufficient to achieve a stated minimum debt service coverage level.
Rating Agency
An organization that assesses and issues opinions regarding the relative credit quality of bond issues. The three major municipal bond rating agencies are Fitch Investors Service, Moody’s Investors Service, and Standard and Poor.
Real Property
Tangible, non-movable assets, such as land and buildings.
Receivable
Amount owed the to a lender by an individual, organization, or other entity to satisfy a debt or a claim. Examples of receivables generated by government activities include amounts due for taxes, loans, the sale of goods and services, fines, penalties, forfeitures, interest, and overpayments of salaries and benefits.
Recourse
Rights of a holder in due course of a financial instrument (such as a loan) to force the endorser on the instrument to meet his or her legal obligations for making good the payment of the instrument if dishonored by the maker or acceptor.
Recovery
The dollars collected subsequent to a purchase, net of expenses, on a guaranteed loan.
Recovery Rate
The total actual and projected collections net of expenses subsequent to a purchase as a percentage of the total projected dollars purchased for a given cohort of guaranteed loans.
Reestimates
Estimates of the subsidy costs performed subsequent to their initial estimates made at the time of a loan’s disbursement.
Repayment Agreement
Agreement that establishes the terms and conditions governing the recovery of a debt of the lender and borrower when credit is initially extended or a debt is rescheduled. (See “Reschedule.”)
Reschedule
Procedure of establishing new terms and conditions to facilitate repayment of a debt. Also called restructuring, refinancing, and reamortizing, rescheduling includes establishing new terms as a result of changes in authorizing legislation (e.g., congressional action allowing farmers to have an additional 5 years to pay off their loans).
Revolving Loan Fund
Financing tool that recycles funds by providing loans, receiving loan repayments, and then providing further loans.
Risk Category
Subdivisions of a cohort of direct loans or loan guarantees into groups of loans that are relatively homogeneous is cost, given the facts known at the time of obligation or commitment. Risk categories will group all loans obligated or committed for a program during the fiscal year that share characteristics predictive of defaults and other cost.
Salary Offset
Process of collecting a debt by deducting part or all of the debt from an employee’s current pay at one or more officially established pay intervals without his or her consent.
Secured Debt
Debt for which collateral has been pledged.
Senior Debt
Debt obligations having a priority claim on the source of payment for debt service.
Servicer
Entity under contract to a lender or agency to perform account servicing functions.
Settle
Resolving a debt or claim.
Soft Loan
Loan provided to a project sponsor with flexible repayment terms. Soft loans are generally subordinate to other debt, can have variable repayment schedules and extended terms, and subsidized interest rates.
Start-Up Project
A separate, free-standing and new facility dependent on its own revenue stream to generate earnings to cover operating and capital costs.
State Infrastructure Bank
A state or multi-state revolving fund that provides loans, credit enhancement, and other forms of financial assistance to surface transportation projects.
State Transportation Improvement Program
A short-term transportation planning document covering at least a three-year period and updated at least every two years. The STIP includes a priority list of projects to be carried out in each of the three years. Projects included in the STIP must be consistent with the long-term transportation plan, must conform to regional air quality implementation plans, and must be financially constrained (achievable within existing or reasonably anticipated funding sources).
State Transportation Plan
The transportation plan covers a 20-year period and includes both short- and long-term actions that develop and maintain an integrated, intermodal transportation system. The plan must conform to regional air quality implementation plans and be financially constrained.
Stress Test
A financial test applied by rating agencies to assess the claims-paying ability of municipal bond insurers. The stress test subjects a bond insurer’s portfolio to a severe and prolonged economic downturn that produces an extraordinary level of bond defaults. In order to receive a AAA rating on its claims-paying ability, a bond insurer must be able to pay all projected claims through the peak years of the stress period and be left with sufficient resources to write new business when more stable economic conditions resume.
Subordinate Claim
A claim on an underlying source of payment for debt service which is junior or secondary to that securing another debt obligation. (See Junior Debt.)
Subsidy Cost
The estimated long-term cost to the federal government of providing credit assistance (e.g., direct loans or loan guarantees), calculated on a net present value basis at the time of disbursement and excluding administrative costs.
Suspend Collection Action
Placing collection action temporarily in abeyance due to the existence of a particular set of circumstances.
Tax Refund Offset
Reduction of a debtor’s tax overpayments by the amount of legally enforceable debt owed to a federal agency. A tax refund offset is a type of administrative offset.
Taxpayer Identification Number (TIN)
Social Security Number (SSN) for individuals or the Employee Identification Number (EIN) for business organizations or non-profit entities.
TE-045 Innovative Finance Initiative
A research program begun by the Federal Highway Administration in 1994 in response to Executive Order 12893. This finance initiative is designed to increase investment, accelerate projects, promote the use of existing innovative finance provisions, and establish the basis for future initiatives by waiving selected federal policies and procedures, thus allowing specific transportation projects to be advanced through the use of non-traditional finance mechanisms.
Terminate Collection Action
Ceasing active collection of a debt. The act of removing the debt from accounting records is to “write off.” A decision to terminate collection action occurs concurrently with the write-off.
Title 23 of the United States Code
Highway title that includes many of the laws governing the federal-aid highway program. The title embodies substantive provisions of law that Congress considers permanent and need not be reenacted in each new highway authorization act.
Title 49 of the United States Code
Transportation title that includes laws governing various transportation-related programs and agencies, including the Department of Transportation, general and intermodal programs, interstate commerce, rail and motor vehicle programs, aviation programs, pipelines, and commercial space transportation.
Turnkey
A generic term for a variety of public/private partnership arrangements whereby a public sector entity awards a contract to one or more private firms to undertake the development, construction, and/or operation of an infrastructure project for a predetermined period of time before turning the project back over to the public entity. Turnkeys may take various forms, including design-build-transfer and build-operate-transfer.
Unobligated Balance
The portion of obligation authority (including new budget authority and balances of unobligated budget authority carried over from prior years) that has not yet been obligated. With regard to the federal-aid highway program, the term generally refers to balances of apportioned contract authority that the states have been unable to obligate due to annual obligation limitations imposed by Congress.
Workout Group
Group established within an agency, whose sole purpose is to resolve or attempt to resolve troubled debts, including those debts which demand that extreme measures be taken to protect the government’s interests.
Write-Off
(Preferred term to “Charge Off”) Occurs when an agency official determines, after all appropriate collection tools have been used, that a debt is uncollectible. Active collection on an account creases and the account is removed from an entity’s receivables.
Zero Coupon Bond
A bond that is originally issued at a deep discount from its par or face amount and which bears no current interest. The bond is bought at a discount price which implies a stated rate of return calculated on the basis of the bond being payable at par at maturity. (See Capital Appreciation Bond.)
