Public finance law includes state and federal laws and regulations governing the financing of public organizations and projects. For example, public finance laws and regulations govern the sale and purchase of bonds to build or improve schools, parks, roads, airports, cultural facilities, recreational facilities, entertainment venues (sports arenas), and other public works projects.
Bonds are debts issued by governments (the debtor), for example, to purchasers of the bonds (the creditors), with a promise to pay the bondholder interest (a coupon) and repay the principal amount upon a certain date (maturity date)—similar to an IOU or loan agreement. Bonds are securities that can often be traded (bought and sold) to and from others on the secondary market.
In Texas, public finance law is governed by both state statutes and federal regulations. These laws oversee the issuance and management of public debt, including the sale and purchase of bonds for financing various public projects such as schools, parks, roads, and cultural facilities. The Texas Public Finance Authority (TPFA) is one of the key state agencies responsible for issuing and managing state debt. Bonds issued by the state or local governments in Texas are essentially loans where the government, as the debtor, promises to pay back the bondholders, who are the creditors, with interest by a specified maturity date. These bonds can be general obligation bonds, which are backed by the full faith and credit of the issuing government entity, or revenue bonds, which are repaid from a specific revenue source. Federal laws, including securities regulations enforced by the Securities and Exchange Commission (SEC), also apply to the trading of these bonds in the secondary market to ensure transparency and protect investors. It is important for entities involved in public finance to comply with both state and federal regulations to ensure the lawful issuance and trading of these securities.
