ABSTRACT
This chapter focuses on the emerging financial management environment, the debt management and policy issues, and the numerous processes and procedures involved in the use of debt financing as an integral component of the capital budgeting process. It highlights some of the critical changes in federal tax policy that have impacted the ability of state and local governments to use this financing option. The chapter discusses the municipal credit markets. It also discusses two critical issues: the appropriateness of borrowing to finance capital projects, and the issue of how much borrowing is appropriate. The chapter then provides the security provisions of municipal bonds and discusses the general characteristics of state and local bonds. It deals with the concept of the rating agencies and the rating process. The chapter also discusses several special topics, including a discussion of refunding, and the distinction between current and advance refundings and economic and legal refundings.
