Why would Rhome borrow money or issue bonds?
Rhome may issue bonds to pay for capital projects such as: road construction, city related facilities, water lines, sewer needs, and other infrastructure projects. Bond debt is generally spread out over several years (also known as inter-generational equity), thus – reducing the burden for repayment across the life of the repayment schedule. You may compare this to a family who takes out a mortgage on a home or property in order to pay it back over time. It also allows you to pay in installments rather than emptying your savings account to pay for the building/house/land all up front.
The City may also take out short-term loans to allow for a repayment over a few years rather than expending a large amount of General Fund at one time. This would usually apply to large equipment, vehicles, backhoes, skid steers, etc. It is an effective way to manage tax payer entrusted funds and yet still provide the services the community needs.
The use of longer-term bond debt also means that the repayment of the asset is done over the useful life of the project – such as a waste water treatment plant, roadway replacement/building/maintenance, and facility construction or land purchase. This helps ensure that the residents who live in Rhome as of today (and are paying taxes to the City), do not pay for the entire cost of the project or asset which will then be used for many years. The future residents of Rhome (as the community continues to expand) will also help repay the debt over the next 20, 30 or 40 years. This provides a higher level of equity for all residents.