What do Grant Anticipation Notes rely on for funding?

Grant Anticipation Notes are short-term debt instruments that local governments or municipalities issue in anticipation of future funds they expect to receive from grants provided by federal or state governments. These notes are typically used as a financing tool to fund projects upfront while waiting for the actual grant payments to be received. Since the repayment of these notes depends directly on the expected disbursement of grants, the reliance on forthcoming federal or state grants is essential to their function.

In contrast, existing fund balances, loan repayments, and revenue from local taxes do not apply to Grant Anticipation Notes in terms of the primary sourcing of funds for their issuance. Existing fund balances are funds that have already been accumulated, loan repayments refer to the return of borrowed funds, and local tax revenue is usually more stable and predictable rather than being contingent on grant funding. Therefore, the correct choice emphasizes the primary nature of these notes, which is to leverage anticipated grant income.