American Institute of Certified Planners (AICP) Practice Exam

What do General Obligation Funds require before they can be used?

1. Approval from the state legislature

2. Voter approval to sell bonds for capital improvements

3. Approval from federal agencies

4. Permission from local businesses

The correct answer is: Voter approval to sell bonds for capital improvements

General Obligation Funds are typically associated with financing public projects through the issuance of bonds that are secured by the full faith and credit of the issuing government. Before these bonds can be sold, it is essential to obtain voter approval. This requirement is in place because general obligation bonds often increase local taxes to repay the debt, making public buy-in a critical aspect of the funding process. The need for voter approval serves to ensure that the community supports the funding decision for specific capital improvements or projects, aligning government spending with the desires and needs of the populace. Other forms of approval, such as from the state legislature or federal agencies, are generally not necessary for General Obligation Funds specifically; while they may play a role in other funding mechanisms, they do not pertain directly to the voter approval requirement. Similarly, permission from local businesses is not a requirement tied to the issuance of general obligation bonds, as the primary concern is the responsibility to the voters and taxpayers within the jurisdiction.