Debt is often used to finance major capital projects; this is another
reason for having a special process for capital budgeting. When a jurisdiction’s
officials decide to issue long-term debt to finance a project, they
obligate future officials to raise the money to pay annual principal and
interest installments on the debt for many years in the future. In other
words, present officials exercise authority over those who follow them—
a fact that should cause the current officials to take great care in making
capital project and financing decisions. In some places, certain types of
debt—for example, general obligation or tax-secured bonds—must be
approved by a community’s voters in a referendum before the debt is
issued. Officials taking a proposed bond referendum to the voters can use
capital budgeting to make sure the projects to be financed with the bonds
are well conceived and planned.