Which fund is crucial for repaying municipal debt?

The Debt Service Fund plays a crucial role in repaying municipal debt, as it is specifically established to accumulate resources and make scheduled payments on long-term obligations, such as bonds. This fund is dedicated to ensuring that the municipality can meet its principal and interest payment requirements, promoting fiscal responsibility and maintaining the municipality's credit rating.

In contrast, an Operational Fund focuses on funding the day-to-day operations of the municipality and does not directly manage debt repayments. A Capital Project Fund is used for financing specific capital expenditures like infrastructure projects, while a Rainy Day Reserve is intended as a contingency fund for unforeseen events or budget shortfalls, rather than for directed debt repayment. Thus, the Debt Service Fund is essential for managing and ensuring that debt obligations are met timely and effectively.