Types of Bonds: Debt Certificates/Installment Contracts

January 14, 2015 by Enzo Incandela, Associate | James M. Snyder, Partner
Types of Bonds: Debt Certificates/Installment Contracts

There are a number of different forms of bonds/debt that a school district may issue to meet its financing needs. 

Debt Certificates/Installment Contracts. School districts are authorized to borrow money by entering into installment finance agreements. There are statutory specifications as to what constitutes an installment contract. The Debt Reform Act authorizes school districts to purchase or lease either real or personal property through the use of installment contracts not exceeding 20 years in length. Debt certificates may be issued by
a governmental unit to evidence the payment obligations of the governmental unit under a lease or installment contract subject to statutory debt limit. There is generally, however, no separate tax levy available for the purpose of making such payments lease or installment payments, it is considered a promise to pay by way of budgetary appropriation. However, a school district not subject to the Limitation Law may enter into an  installment contract payable from the levy of a direct, unlimited ad valorem property tax sufficient to pay the installments if certain backdoor referendum requirements are satisfied. The debt certificates are valid regardless of whether an annual appropriation is included in any annual or supplemental budget adopted by the district.

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