What do Revenue Anticipation Notes (RANs) rely on for financing?

Revenue Anticipation Notes (RANs) are short-term financial instruments used by municipalities to raise funds in anticipation of future revenues. These notes specifically rely on the promise of future cash flows to pay back the borrowed amount. Among the options presented, utility revenues are a fitting source of financing for RANs, as they can provide a predictable and steady stream of income that municipalities can rely on.

Utility revenues, such as those generated from water, electricity, or gas services, are generally stable and provide municipalities with a reliable means of repayment. When a local government issues RANs against utility revenues, it is effectively borrowing against the expected flow of income from charges for these essential services. This ability to forecast utility revenues allows municipalities to use RANs as a financial tool for bridging short-term cash flow gaps while they await the collection of these revenues.

In contrast, while property tax revenues, sales tax revenues, and general fund availability can be sources of revenue for municipalities, RANs specifically focus on anticipated income from service-based revenues, which tend to be more consistent and immediate in nature.