What are Tax Anticipation Notes (TANs) primarily used for by municipalities?

Tax Anticipation Notes (TANs) are short-term debt instruments issued by municipalities primarily to manage cash flow. They are utilized to fund current operations until expected tax revenues are collected. Municipalities often face timing differences between when they incur expenses and when they receive tax payments. By issuing TANs, they can raise the necessary capital to meet immediate obligations, ensuring that services continue smoothly without interruption.

For instance, if a city knows that it will receive tax revenue in a few months, but it needs funds to pay for salaries, maintenance, and other operating costs now, it can issue TANs to cover these expenses. This helps municipalities maintain liquidity and operational efficiency.

In contrast, financing long-term infrastructure would typically involve long-term bonds, while providing loans to businesses or investing in the stock market falls outside the primary purpose of TANs. Thus, the main function of TANs aligns perfectly with the need for immediate funding to support ongoing operations until tax funds are available.