Since municipalities are frequently indebted to the permissible extent of the constitutional, statutory, and charter debt limitations, they are constantly seeking methods of finance which avoid the debt limits. Three devices have received judicial sanction. First: Where a separate and distinct. corporation such as a school or drain district has been created it may operate with a separate debt limit over the same territory as the governing municipality. Second: Where the project to be financed is income-producing, the financing bond issue, if made self-liquidating, will not Gome within the debt limitations. Although incorporated authorities have been extensively used to administer self-liquidating bond issues, the "special fund" doctrine has permitted cities to finance self-liquidating, income-producing projects without farming the job out to an authority. Third: Where a city makes a long term lease for recurring needs, which is not a disguised contract of purchase, only the yearly instalment and not the aggregate rental is considered a debt for purposes of limitations.
Joseph F. Gricar S.Ed.,
MUNICIPAL CORPORATIONS-CIRCUMVENTING MUNICIPAL DEBT LIMITATIONS,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol48/iss7/8