20% cushion rule(redirected from Twenty Percent Rule)
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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
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