1.5.2 Charter City Financing

The municipal affairs power of charter cities can affect charter city debt financing in a number of ways:

Ability to issue debt in the absence of statutory authority. “Charter city financings” in the historical, narrow sense referred to debt financings that could be done by charter cities but not by general law cities, especially in the conduit financing arena. These situations have become rarer as state legislation has become more comprehensive, but there can be areas in which statutory authority is limited or the authority has expired and not been reinstated.
Control over the debt approval process. City charters may provide for alternate procedures for the formation of assessment districts and as long as they are consistent with constitutional requirements, assessment procedures, and may impose different standards and requirements for the approval of revenue bonds and other obligations.
Greater revenue generation authority. The authority to levy taxes and impose charges for local purposes may create additional revenues to secure debt obligations and/or allow the issuance of new debt obligations secured by the revenues.
Greater financial control. A charter city may have additional budgeting and expenditure flexibility and may be able to avoid certain state contracting requirements.
Charter imposed limitations. City charters often impose substantive limitations on debt and on spending that are more restrictive than those of general law cities. City charters may also impose approval requirements that are more stringent than those applicable to general law city debt obligations.

Charter city debt financings require a multistep analytical approach:

Examine the general state statutes, the charter city’s authority to incur the debt, and charter imposed substantive and procedural requirements.
If the proposed financing involves the exercise of substantive or procedural powers beyond the statutory powers of general law cities, determine whether the exercise constitutes a “municipal affair”.
Consider state constitutional limitations such as those described above in Section 1.4, Local Government Revenue Sources – Security for and Repayment of Debt.