Financial Statement Required To Borrow
Training for: Legal Notes
Since 1991, Maine law has required municipal treasurers to prepare a signed financial statement to “accompany” any question submitted to the “electors” for ratification of revenue bonds or general obligation securities. See 30-A M.R.S. § 5404(1-A) and § 5772(2-A), respectively. “Electors” likely means the municipality’s legislative body (town meeting or town or city council). MMA Legal Services has long interpreted these statutes to require that the financial statement appear on the town meeting warrant and on any printed ballot submitted to voters, immediately following the text of the article or question that seeks bonding authority.
Note that recently the law regarding general obligation bonds was amended to allow the financial statement to be printed either on the ballot or as a separate document “made available” to voters. PL 2019, c. 371. However, we continue to recommend, as a matter of conservative practice, that the statement appear on the warrant and on any referendum election ballot. In this way, there can be no question that the statement was provided to voters (state law provides no guidance on what is required to make the statement “available” to voters).
Moreover, the statute concerning revenue bonds continues to require that the financial statement accompany the bond question itself. Given this, inadvertent errors may be avoided by always including the statement on the warrant and any referendum ballot.
It is also the case that many lenders construe the law to require a financial statement accompanying any question involving indebtedness pledging the municipality’s “full faith and credit” (i.e., taxing powers), including mere promissory notes evidencing short-term debt. For that reason, it is prudent to include a financial statement along with any question seeking approval of municipal borrowing generally (other than borrowing in anticipation of taxes, state revenue sharing or state or federal aid, which is exempted under the law). (By S.F.P.)
The law prescribes the contents of these statements. A sample can be found below:
FINANCIAL STATEMENT
MUNICIPALITY OF____________
1. Total Municipal Indebtedness
A. Bonds outstanding and unpaid: $_________
B. Bonds authorized and unissued: $_________
C. Bonds to be issued if this question is approved: $_________
TOTAL $__________
2. Costs:
At an estimated maximum interest rate of ______%, the estimated costs of this bond issue will be: ______ ( ) Years ________
Principal $____________
Interest $_____________
Total Debt Service $____________
3. Validity
The validity of the bonds and of the voters' ratification of the bonds may not be affected by any errors in the above estimates. If the actual amount of the total debt service for the bond issue varies from the estimate, the ratification by the electors is nevertheless conclusive and the validity o
Since 1991, Maine law has required municipal treasurers to prepare a signed financial statement to “accompany” any question submitted to the “electors” for ratification of revenue bonds or general obligation securities. See 30-A M.R.S. § 5404(1-A) and § 5772(2-A), respectively. “Electors” likely means the municipality’s legislative body (town meeting or town or city council). MMA Legal Services has long interpreted these statutes to require that the financial statement appear on the town meeting warrant and on any printed ballot submitted to voters, immediately following the text of the article or question that seeks bonding authority.
Note that recently the law regarding general obligation bonds was amended to allow the financial statement to be printed either on the ballot or as a separate document “made available” to voters. PL 2019, c. 371. However, we continue to recommend, as a matter of conservative practice, that the statement appear on the warrant and on any referendum election ballot. In this way, there can be no question that the statement was provided to voters (state law provides no guidance on what is required to make the statement “available” to voters).
Moreover, the statute concerning revenue bonds continues to require that the financial statement accompany the bond question itself. Given this, inadvertent errors may be avoided by always including the statement on the warrant and any referendum ballot.
It is also the case that many lenders construe the law to require a financial statement accompanying any question involving indebtedness pledging the municipality’s “full faith and credit” (i.e., taxing powers), including mere promissory notes evidencing short-term debt. For that reason, it is prudent to include a financial statement along with any question seeking approval of municipal borrowing generally (other than borrowing in anticipation of taxes, state revenue sharing or state or federal aid, which is exempted under the law). (By S.F.P.)
The law prescribes the contents of these statements. A sample can be found below:
FINANCIAL STATEMENT
MUNICIPALITY OF____________
1. Total Municipal Indebtedness
A. Bonds outstanding and unpaid: $_________
B. Bonds authorized and unissued: $_________
C. Bonds to be issued if this question is approved: $_________
TOTAL $__________
2. Costs:
At an estimated maximum interest rate of ______%, the estimated costs of this bond issue will be: ______ ( ) Years ________
Principal $____________
Interest $_____________
Total Debt Service $____________
3. Validity
The validity of the bonds and of the voters' ratification of the bonds may not be affected by any errors in the above estimates. If the actual amount of the total debt service for the bond issue varies from the estimate, the ratification by the electors is nevertheless conclusive and the validity of the bond issue is not affected by reason of the variance.
Treasurer, Municipality of __________________
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