Residual cost agreements provide security for which type of issues?

Residual cost agreements provide security for which type of issues?

• A. Revenue bond issues
• B. Operating expenses
• C. Pension liabilities
• D. Insurance claims

Answer: (A)

Residual cost agreements are built to ensure debt service is protected by earmarking any remaining project costs to be covered from the airport’s ongoing revenues. This aligns with debt that is secured by specific project revenues—that is, revenue bonds. Since revenue bonds rely on airport-generated receipts (like enplanements, rents, or fees) rather than general taxes, a residual cost agreement provides a backstop to meet debt service if those revenues are insufficient. It isn’t about funding routine operating expenses, pension liabilities, or insurance claims, which are not secured by a dedicated project revenue stream.

Residual cost agreements are built to ensure debt service is protected by earmarking any remaining project costs to be covered from the airport’s ongoing revenues. This aligns with debt that is secured by specific project revenues—that is, revenue bonds. Since revenue bonds rely on airport-generated receipts (like enplanements, rents, or fees) rather than general taxes, a residual cost agreement provides a backstop to meet debt service if those revenues are insufficient. It isn’t about funding routine operating expenses, pension liabilities, or insurance claims, which are not secured by a dedicated project revenue stream.