N.Y. Const. art. VIII, § 2: Restrictions on indebtedness of local subdivisions; contracting and payment of local indebtedness; exceptions

§ 2. No county, city, town, village or school district shall contract

any indebtedness except for county, city, town, village or school

district purposes, respectively. No indebtedness shall be contracted for

longer than the period of probable usefulness of the object or purpose

for which such indebtedness is to be contracted, or, in the alternative,

the weighted average period of probable usefulness of the several

objects or purposes for which such indebtedness is to be contracted, to

be determined by the governing body of the county, city, town, village

or school district contracting such indebtedness pursuant to general or

special laws of the state legislature, which determination shall be

conclusive, and in no event for longer than forty years. Indebtedness or

any portion thereof may be refunded within either such period of

probable usefulness, or average period of probable usefulness, as may be

determined by such governing body computed from the date such

indebtedness was contracted.

No indebtedness shall be contracted by any county, city, town, village

or school district unless such county, city, town, village or school

district shall have pledged its faith and credit for the payment of the

principal thereof and the interest thereon. Except for indebtedness

contracted in anticipation of the collection of taxes actually levied

and uncollected or to be levied for the year when such indebtedness is

contracted and indebtedness contracted to be paid in one of the two

fiscal years immediately succeeding the fiscal year in which such

indebtedness was contracted, all such indebtedness and each portion

thereof from time to time contracted, including any refunding thereof,

shall be paid in annual installments, the first of which, except in the

case of refunding of indebtedness heretofore contracted, shall be paid

not more than two years after such indebtedness or portion thereof shall

have been contracted, and no installment, except in the case of

refunding of indebtedness heretofore contracted, shall be more than

fifty per centum in excess of the smallest prior installment, unless the

governing body of the county, city, town, village or school district

contracting such indebtedness provides for substantially level or

declining debt service payments as may be authorized by law.

Notwithstanding the foregoing provisions, indebtedness contracted by

the city of New York and each portion of any such indebtedness from time

to time so contracted for the supply of water, including the acquisition

of land in connection with such purpose, may be financed either by

serial bonds with a maximum maturity of fifty years, in which case such

indebtedness shall be paid in annual installments as hereinbefore

provided, or by sinking fund bonds with a maximum maturity of fifty

years, which shall be redeemed through annual contributions to sinking

funds established and maintained for the purpose of amortizing the

indebtedness for which such bonds are issued. Notwithstanding the

foregoing provisions, indebtedness hereafter contracted by the city of

New York and each portion of any such indebtedness from time to time so

contracted for (a) the acquisition, construction or equipment of rapid

transit railroads, or (b) the construction of docks, including the

acquisition of land in connection with any of such purposes, may be

financed either by serial bonds with a maximum maturity of forty years,

in which case such indebtedness shall be paid in annual installments as

hereinbefore provided, or by sinking fund bonds with a maximum maturity

of forty years, which shall be redeemed through annual contributions to

sinking funds established and maintained for the purpose of amortizing

the indebtedness for which such bonds are issued.

Notwithstanding the foregoing provisions, but subject to such

requirements as the legislature shall impose by general or special law,

indebtedness contracted by any county, city, town, village or school

district and each portion thereof from time to time contracted for any

object or purpose for which indebtedness may be contracted may also be

financed by sinking fund bonds with a maximum maturity of fifty years,

which shall be redeemed through annual contributions to sinking funds

established by such county, city, town, village or school district,

provided, however, that each such annual contribution shall be at least

equal to the amount required, if any, to enable the sinking fund to

redeem, on the date of the contribution, the same amount of such

indebtedness as would have been paid and then be payable if such

indebtedness had been financed entirely by the issuance of serial bonds,

except, if an issue of sinking fund bonds is combined for sale with an

issue of serial bonds, for the same object or purpose, then the amount

of each annual sinking fund contribution shall be at least equal to the

amount required, if any, to enable the sinking fund to redeem, on the

date of each such annual contribution, (i) the amount which would be

required to be paid annually if such indebtedness had been issued

entirely as serial bonds, less (ii) the amount of indebtedness, if any,

to be paid during such year on the portion of such indebtedness actually

issued as serial bonds. Sinking funds established on or after January

first, nineteen hundred eighty-six pursuant to the preceding sentence

shall be maintained and managed by the state comptroller pursuant to

such requirements and procedures as the legislature shall prescribe,

including provisions for reimbursement by the issuer of bonds payable

from such sinking funds for the expenses related to such maintenance and

management.

Provisions shall be made annually by appropriation by every county,

city, town, village and school district for the payment of interest on

all indebtedness and for the amounts required for (a) the amortization

and redemption of term bonds, sinking fund bonds and serial bonds, (b)

the redemption of certificates or other evidence of indebtedness (except

those issued in anticipation of the collection of taxes or other

revenues, or renewals thereof, and which are described in paragraph A of

section five of this article and those issued in anticipation of the

receipt of the proceeds of the sale of bonds theretofore authorized)

contracted to be paid in such year out of the tax levy or other revenues

applicable to a reduction thereof, and (c) the redemption of

certificates or other evidence of indebtedness issued in anticipation of

the collection of taxes or other revenues, or renewals thereof, which

are not retired within five years after their date of original issue. If

at any time the respective appropriating authorities shall fail to make

such appropriations, a sufficient sum shall be set apart from the first

revenues thereafter received and shall be applied to such purposes. The

fiscal officer of any county, city, town, village or school district may

be required to set apart and apply such revenues as aforesaid at the

suit of any holder of obligations issued for any such indebtedness.

Notwithstanding the foregoing, all interest need not be paid annually

on an issue of indebtedness provided that either (a) substantially level

or declining debt service payments (including all payments of interest)

shall be made over the life of such issue of indebtedness, or (b) there

shall annually be contributed to a sinking fund created pursuant to this

section, the amount necessary to bring the balance thereof, including

income earned on contributions, to the accreted value of the obligations

to be paid therefrom on the date such contribution is made, less the sum

of all required future contributions of principal, in the case of

sinking fund obligations, or payments of principal, in the case of

serial obligations. When obligations are sold by a county, city, town,

village or school district at a discount, the debt incurred for the

purposes of any debt limitation contained in this constitution, shall be

deemed to include only the amount of money actually received by the

county, city, town, village or school district, irrespective of the face

amount of the obligations.