What does the cash/pay as you go financing approach rely on?

The cash or pay-as-you-go financing approach relies on current resources on hand, including fund balances. This method is about funding capital projects using available cash from current revenues, eliminating the need to create debt obligations through borrowing. By utilizing existing funds, an entity can maintain financial stability and avoid interest costs associated with loans or other forms of debt financing.

This approach emphasizes prudent financial management, allowing projects to be funded with available cash, thus simplifying fiscal planning. It reflects a commitment to sustainable financing practices, where an organization only undertakes projects when adequate resources are available. By doing so, it can also mitigate risks associated with external funding sources, such as fluctuations in interest rates or dependency on future revenues.

Other financing methods, such as relying on long-term loans, future tax revenues, or state and federal grants, introduce complexities such as obligations to repay loans, variability in projected revenues, and the uncertainty of grant availability. Hence, emphasizing current resources provides a simpler, more direct means of funding capital needs responsibly.