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NYS Comptroller

THOMAS P. DiNAPOLI

The Academy for New York State's Local Officials

Capital Planning and Budgeting: A Tutorial for Local Government Officials

Module 2 - The Capital Budget

Financing: Issuing Debt

Issuing debt allows localities to provide vital capital infrastructure and equipment that it might not otherwise be able to afford. However, when governments rely excessively on debt, the long-term costs will impact current and future operating budgets by limiting financial flexibility and the ability to finance essential capital projects in the future. Therefore, borrowing for capital projects requires effective debt management.

Key to effective debt management is the concept of debt affordability, which is a measure of a local government's ability to repay its debt and still meet its current and future capital, operating and other needs. Although local governments in New York State are subject to Constitutional Debt Limits and provisions in the Local Finance Law that regulate the issuance of debt, these limits and laws are not adequate in judging whether debt is unduly burdensome to taxpayers. The community's financial condition and prospects for growth, as well as the severity of need for the capital expenditure, must factor into this decision.

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