What is a Municipality Bond?

What is a Municipality Bond Program?

Bonds are used for a specific period of time and purpose. For this article let’s assume that the bond in discussion is for a city. Though bonds can be used by counties, towns, and states to raise money to fund large projects. A bond is a form of debt that, when issued, provides local government with funds to finance large capital improvements. A Bond Program includes both the authority to issue bonds and a listing of the purposes for which the funds may be used. General Obligation Bond programs require voter approval.

What can General Obligation Bonds be used for?

General Obligation Bonds allow the City to pay for major capital investments having a public purpose, such as public safety facilities, as well as quality of life enhancements related to libraries, and parks and recreation, cultural facilities. Bonds are sold to investors and the proceeds from the sale of these bonds are used to pay for capital projects. Bond funds cannot be used for everyday operating costs for programs such as softball leagues, classes at senior centers, police officers or fire fighters. Such operating expenses are paid for by annual revenue that support the City’s General Fund such as sales tax revenue and fees for service.

What may the Bonds NOT be used for?

Bond funds cannot be used for everyday operating costs; for programs such as softball leagues, classes at senior centers, police officers or fire fighters. Such operating expenses are paid for by annual revenue that support the City’s General Fund such as sales tax revenue and fees for service.

How are the Bonds repaid?

General Obligation Bonds are backed by the “full faith and credit” of the City seeking the money. This means that the City is obligated to pay back the debt plus interest by pledging its ad valorem taxing power. The City uses its property tax revenues to repay the General Obligation Bonds in annual principal and interest payments.

Who determines what Projects are included in the bond program?

The City Council ultimately approves the projects that are included in the proposed bond program. Potential projects are identified through several means including citizens and City Council input. The proposed projects are then vetted by the City Council. Once identified the City Council will issue an approved resolution that will be voted on by the citizens of that city.

Will the projects in the bond program be modified?

The projects included in the bond program represent the priorities of the City Council. The goal of the bond program is to complete the projects in a timely manner and within approved budgets. There are several factors that can influence a project being completed, including land acquisition cost, construction cost, and operating cost. These factors can result in a project being delayed or re-prioritized. Conversely, if costs are low, resulting in budget savings, additional projects/improvements may be possible. All projects are considered individually by City Council and must be approved prior to construction.