Final answer:
The correct fund for accounting the proceeds from the property tax levy to pay off bond principal and interest is the Debt Service Fund, which is specifically used for long-term debt payments.
Step-by-step explanation:
The city levies a property tax that is legally restricted to pay off the principal and interest on bonds for the construction of a new police headquarters. The fund that should be used to account for the proceeds from the property tax levy is the Debt Service Fund. This fund is used to account for financial resources that are set aside for the payment of general long-term debt principal, interest, and related costs. In contrast, the Capital Projects Fund is used to account for financial resources used for the acquisition or construction of major capital facilities. The General Fund is the main operating fund for a government and is not typically used for restricted purposes such as repaying bond obligations. Lastly, an Enterprise Fund is used when services are provided to the public for a fee, like utilities or public transportation, not for debt service.