How are RANs typically structured in relation to utility revenues?

RANs, or Revenue Anticipation Notes, are short-term debt instruments typically issued by municipalities to provide temporary funding based on anticipated revenues. When structured in relation to utility revenues, RANs are specifically designed to secure financing that can be used in various ways to support the utility's operations.

The rationale behind this is that municipalities expect to receive certain utility revenues that can be anticipated reliably. By issuing RANs against these expected revenues, the municipality can access cash flow upfront, allowing it to manage liquidity and fund immediate needs before the anticipated revenue is actually received. This practice is crucial for maintaining the ongoing operations of utilities and ensuring that they have the necessary liquidity to address short-term financial obligations.

This structure does not primarily focus on funding operational deficits, nor does it relate directly to compliance with state laws or covering unforeseen expenses. Instead, the primary intent is to provide a reliable stream of financing secured against future utility revenues, ensuring that the municipality can meet its financial commitments effectively while waiting for actual revenue collection.