No local unit shall adopt a bond ordinance for a capital project or expenditure unless it has already adopted a capital budget as part of the annual Current Fund budget which includes the project or expenditure; adopted a temporary capital budget which includes the project or expenditure and which subsequently will be included in its capital budget; or if the need is determined after adoption of the annual budget, by adoption of amendment to the capital budget for the capital project or expenditure.

No local unit shall adopt a bond ordinance for a capital project or expenditure unless it has already adopted a capital budget as part of the annual Current Fund budget which includes the project or expenditure; adopted a temporary capital budget which includes the project or expenditure and which subsequently will be included in its capital budget; or if the need is determined after adoption of the annual budget, by adoption of amendment to the capital budget for the capital project or expenditure.

• A. True
• B. False
• C. It must have a capital plan only
• D. It requires a referendum

Answer: (A)

The point being tested is that a local unit must tie any bond issuance for a capital project to an approved funding plan. You can’t lock in debt for a project unless that project is already included in a capital budget or is covered by a temporary budget that includes it, or if the need arises after the annual budget is adopted, you can amend the capital budget to include the project. This ensures the debt is backed by an approved source of funds before it is authorized, keeping the project within the municipality’s spending framework. There are three acceptable paths that satisfy the rule: the capital project is part of the annual capital budget included with the Current Fund budget; or there is a temporary capital budget that includes the project and will later be rolled into the capital budget; or the need is discovered after the annual budget, in which case an amendment to the capital budget is adopted to include the project. Thus, the statement is true because it reflects the requirement that bond ordinances for capital projects must be supported by an approved capital funding plan, whether already in place, temporarily in place, or added by amendment if the need arises after the budget.

The point being tested is that a local unit must tie any bond issuance for a capital project to an approved funding plan. You can’t lock in debt for a project unless that project is already included in a capital budget or is covered by a temporary budget that includes it, or if the need arises after the annual budget is adopted, you can amend the capital budget to include the project. This ensures the debt is backed by an approved source of funds before it is authorized, keeping the project within the municipality’s spending framework.

There are three acceptable paths that satisfy the rule: the capital project is part of the annual capital budget included with the Current Fund budget; or there is a temporary capital budget that includes the project and will later be rolled into the capital budget; or the need is discovered after the annual budget, in which case an amendment to the capital budget is adopted to include the project.

Thus, the statement is true because it reflects the requirement that bond ordinances for capital projects must be supported by an approved capital funding plan, whether already in place, temporarily in place, or added by amendment if the need arises after the budget.