1. Borrowing & Limits on Debt Types of Borrowing –General Obligation Bonds (full faith & credit; taxes must be raised to repay) (Flushing) –Revenue bonds (income stream from project) (structure to assure revenue) –“Moral obligation” bonds (Nussbaum) (is it debt? if contingent possibility of additional back-up funding should revenue not be there?)

2. Constraints on Debt Why limit debt? How limit debt? –Administrative oversight –Substantive limit (debt to property value ratio) –Referendum requirement –Tax limitations (indirectly limit debt since limit repayment?) –Federal tax law (limits on deductibility or eligibility for deduction?)

3. Limitation Avoidance Techniques Lease & lease-back (Bulman) –Build specific builds on state owned land –Pay “rent” –Get building in the end –Tests? Lessor’s duties: pay taxes, repair, fix damage Recoup full investment/building title in end? Does type of building matter? Certificates of participation?

4. Limitation Avoidance Techniques Contingent financing (Mass transit/Metro) Compact among states Revenue bonds to pay for capital costs Contribution to operating expenses (including debt service) in return for services If anticipated shortfall in ability to cover operating expenses pay “service payment” Is this “debt” if “contingent”? Yes: if structural deficit and really covering bonds No: if tie to measure of services, miles

5. Other options to avoid limits Other approaches to avoiding limitations: –Special fund? –Special district? (Not covered by debt limit; additional borrowing capacity? Service functions costly so off-load?)

6. Other approaches to cost constraints Balanced budget requirements Property tax rate limit Total revenues limit Property tax relief Other sources of funds (e.g. lottery)