1.1.1 Statutory Authority to Borrow

California public agencies are formed by, or pursuant to, state statute. Sometimes these statutes apply to only a single entity, while others apply to a category of entities (such as counties and school districts). In many cases, public agencies derive their power to borrow from these organic statutes.

Whenever state statute authorizes a public agency to incur debt and prescribes how the public agency may take the action, the agency must use that method. This fact is sometimes expressed as “the mode is the measure of the power.” For example, if a statute authorizes a public agency to incur debt and then says that the public agency is to sell that debt through competitive bidding, the public agency must follow that approach.40

As a general rule, public agencies cannot borrow outside of the powers provided by these statutes.