Does not substantially increase a community's long-term buying power, thus some properties still at risk. Municipal Bonds and Bonding Municipalities may borrow and repay debt over a number of years for projects they cannot afford to pay for out of operating budgets. Long-term borrowing is often viewed as an equitable way to spread out the burden of paying for capital projects that will be enjoyed by future residents. Capital expenditures, including land acquisition, generally have an expected useful life of 20 years or more, although long-term borrowing may be authorized for any period greater than two years. A bond is an interest-bearing certificate of debt representing the obligation of a government body to repay a certain sum by a specific date.
Interest rates are general fixed for the term, or date of maturity of the bond.
Bonds are issued by a government to finance long-term projects such as the acquisition of buildings or land, and construction or maintenance of capital facilities. It is the total annual principal and interest payment related to a particular bond issue. The amount of the debt service depends upon the value of the bond and the interest rate secured at the time it is issued. In larger bond issues, the debt service can be substantial, especially if the initial interest rates are high. For this reason, financial advisors frequently wait to market large bond issues until favorable conditions prevail.