20% cushion rule

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20% cushion rule

Guideline that revenues from facilities financed by municipal bonds should exceed the operating budget plus maintenance costs and debt service by at least 20% to allow for unforeseen expenses.

20% Cushion Rule

A rule of thumb for municipal bonds. Under the rule, the revenue a municipal bond raises should exceed the proposed budget of the project the bond intends to fund by at least 20%. This allows the bond to account for unforeseen expenses. Following a cushion rule is especially important because municipal bonds are ultimately financed by taxpayer money.