Limitations on Municipal Indebtedness

Not a single state has seen fit to leave its cities unrestricted in the amount of indebtedness each might incur.\u27 Assuming that the nature of a proposed expenditure is such that it is recognized as a legitimate municipal expense, the limitations imposed upon total indebtedness may yet prevent extension of a city\u27s credit. Thus, a city may have a particular financing scheme invalidated simply because of the circumstance that its present indebtedness is so close to the limit that the contemplated increase would force the total amount to exceed the maximum allowable. Three sources of limitation are commonly found today. By far, most states have a constitutional provision which expressly restricts the amount of indebtedness which their cities may incur. Others by statute impose a similar limitation; still others declare an upper limit by way of the charter of the particular city. Except for the ease with which a specific limitation may be varied, they raise essentially the same problems; they will, therefore, be considered together. It should be apparent, however, that a statute or a charter may further restrict a constitutional limitation, although they cannot, of course, increase it. The most frequently employed device to restrict indebtedness is the so-called debt-to-property ratio