What is the purpose of Bond Anticipation Notes?

Bond Anticipation Notes (BANs) are short-term debt instruments issued by municipalities to provide temporary funding in anticipation of future bond sales. The primary purpose of BANs is to bridge the financing gap until the long-term bonds can be issued. This allows municipalities to meet immediate capital needs for projects while waiting for the longer-term financing to be finalized. When the long-term bonds are issued, the proceeds from the bonds are typically used to pay off the BANs.

The option highlighting operational expenses does not align with the nature of BANs, as they are not typically used for everyday operational funding. Similarly, replacing emergency financing transactions does not accurately represent the role of BANs, which focus specifically on anticipated bond proceeds rather than acting as a substitute for emergency funds. Lastly, providing funding for federal grants falls outside the scope of what BANs are designed to achieve, as they are meant for financing capital projects rather than grant-related expenses.