1.2.4 Exceptions to the Debt Limit

1.2.4 Exceptions to the Debt Limit

California courts recognize several exceptions to the constitutional debt limit. The principal debt limit “exceptions” are the following:

1. Current Fiscal Year Exception
   
   
2. Annual Appropriation Exception
   
   
3. Lease Exception (Offner-Dean Lease Exception)
   
   
4. Special Fund Exception
   
   
5. Contingent Obligation Exception
   
   
6. Obligations Imposed by Law Exception

The sections below describe each of these exceptions. Some exceptions are well established and their application to specific debt structures is clearly established by case law. For other exceptions, however, the exception’s applicability to a particular transaction may not be clear and it may be necessary to pursue a validation judgment.43 Validation is most likely to be necessary for transactions under the Contingent Obligation Exception and the Obligations Imposed by Law Exception, which are less well defined than some of the other exceptions.