June 16, 2014
The main principle of the capital budget is to channel the total distribution of state expenditures for public services. To present the greatest possible outline of current and planned capital investments and assure state governments’ ability to borrow will not increase nor decrease. This paper will discuss how the debt capacity of state is established and then discuss and assess the effect of repaying or reorganizing current debt commitment. This paper will also discuss different funding substitutes that can be used to support debt commitment. This paper will utilized the City of ...view middle of the document...
In most states, the governor or mayor has ultimate responsibility for preparing the capital budget along with the operating budget and then submitting it to the legislature for acceptance. According to Lee, Johnson, & Joyce (2008), Capital budgets assist in deciding how much of each type of investment is necessary, and assist in evaluating available revenues (including loans) to finance those investments.
States and most local governments do not use current revenues to pay for their capital projects. For example, the construction of prisons, school building, or public university. These projects are usually financed from bond revenues. The purchasers of the bond lend the funds to the states that are necessary to finance the project. States, in turn, pledge to pay the bondholders the principal of the loan plus a stipulated rate of return according to Gosling (2002). According to Lee, Johnson, & Joyce (2008), In the United States, although some local governments borrow from banks for temporary operating funds, the main source of debt finance is the issuance of bonds.
Determining Debt Capacity
The City of Toledo has a bond insurance practice, and funds which contains working with fiscal working groups in planning of the Order,...