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General Obligation Debt Limits

The page provides information on the state constitutional and statutory limits on general obligation (GO) debt and the permitted uses of local government debt. These provisions set the maximum amount of GO debt that a local government can have outstanding at any one time. Debt limits also restrict how much of this capacity can be used for various purposes. (Note: there are no debt limits for revenue or special assessment debt.)

Constitutional Debt Limits

Local government is authorized to issue debt in the Washington State Constitution in article 8, section 6. The authority to borrow also provides for a limitation on the amount of debt that may be incurred based on a percentage of taxable property values. The level of debt authority (limitation) provided in the constitution is uniform for all jurisdiction types and is separated into non-voted and voted debt:

  • Non-voted (also called councilmanic) debt cannot be greater than 1.5% of assessed value (AV) of taxable properties in the jurisdiction.
  • Total debt cannot be greater than 5.0% of AV (which means that 3.5% or more must be voted on by the people)

Cities and towns can increase their debt limit by an additional 5% with voter approval for water, lights, and sewers when those facilities are controlled by the municipality.

Statutory Debt Limits

While constitutional debt limits represent the maximum debt a jurisdiction would ever be allowed, statutory debt limits are usually set at a lower level based on the legislature’s perception of what is a safe and reasonable amount of debt load to carry. When setting debt limits, the legislature also takes into consideration the cumulative debt impacts of overlapping taxing districts on local communities.

The authority for local government to borrow using any type of debt is provided for in Title 39 RCW. RCW 39.36.020 provides for general limitations on the amount of indebtedness and there is specific statutory authority for individual jurisdictions such as cemetery districts, library districts, ports, and transit authorities to name a few (see table below). The percentage of assessed valuation allowed varies from one jurisdiction type to another as does the ratio between non-voted and voted debt. See the debt limits table below for more information.

Cities, under RCW 39.36.020(4), are provided with two additional authorities for debt capacity. One for municipally owned water, sewer, or electric facilities and one for providing open space and parks. Each of these additional debt authorities are in the amount of 2.5% of assessed valuation and require a vote of the public. An election must be held, at which 60% of the people must vote favorably. In addition, the voter turnout must be equal to at least 40% of the voter turnout at the last general election. For more, see Overview of Voter Approval Requirements for Unlimited Tax General Obligation Bonds, by Foster Pepper, PLLC.

Calculating Remaining GO Debt Capacity

Since there are separate limitations on both non-voted (councilmanic) and total debt, it is important to understand how these limitations interact. Let’s say that a jurisdiction has a non-voted debt limit of 1.5% of AV and a total debt limit of 2.5% of AV. The council can decide to use this non-voted capacity on any type of debt it wishes to incur up to the 1.5%. If the council uses the councilmanic capacity to the maximum, then there is only 1% of AV of general purpose capacity left that can be used if the voters approve (2.5% – 1.5% = 1%). Conversly, if the jurisdiction has issued voter-approved debt in excess of 1%, say 1.5%, then the non-voted debt limit would effectively be 1% of AV, since total debt can never exceed the 2.5% limit. Because the debt service on non-voted debt must be paid from the general fund revenues, some councils, through their local debt policies, set non-voted debt capacity limits that are lower than those allowed by statute.

Statutory Limitations on GO Debt

This table outlines the general obligation debt limits for various types of local governments in Washington State. The limits are expressed as a percent of total assessed valuation of taxable properties in the jurisdiction (RCW 39.36.015). For all debt limit statutes, "voter approval" is defined as requiring approval by 3/5ths of the voters.

Entity RCW Non-voted Total Notes
Counties 39.36.020(2)(a)(ii) 1.5% 2.5% Unless acting as metropolitan municipal corporation under chapter 36.56 RCW
Cities 39.36.020(2)(a)(ii)
39.30.010
 
1.5% 2.5% Debt includes conditional sales contracts and long-term leases for real or personal property
Cities - for city-owned lights, water and sewer 39.36.020(4)   2.5% In addition to debt authorized by RCW 39.36.020(2)(a)(ii). Must be authorized by vote.
Cities - for open space, parks, and economic development facilities 39.36.020(4)   2.5% In addition to debt authorized
RCW 39.36.020(2)(a)(ii). Must be authorized by vote.
 
Metropolitan municipal corporation 35.58.450 .75% 5%  
Metropolitan municipal corporation that has been assumed by a county 35.58.450
39.36.020(2)(b)
2.25% 5% Counties authorized to assume MMC under chapter 36.56 RCW
Cemetery Districts 68.52.310 .01125% .01125%  
Fire Districts 52.16.061 and 52.16.080 .375% .75%  
Hospital Districts 39.36.020(2)(a)(i)
and 39.36.020(2)(b)
.375% 2.5%  
Library Districts for purposes other than purchasing real or personal property 27.12.222 .1% .5% Maximum term of non-voted debt is 6 yrs.
Library Districts for purchasing real or personal property 39.30.010 .75% .75% Total library debt limits, including debt authorized under RCW 27.12.122
Metropolitan Park District 35.61.100 and 35.61.110 .25% 2.5% Bonds not to exceed 20 years.
Port Districts 53.36.030(1)(a) and
53.36.030(2)
.25% .75% GO Bonds. RCW 39.28.030 includes additional debt authority for emergency public works
Port Districts with < $800 million in taxable property value during 1991 53.36.030(1)(b) .375% .75% Must have comprehensive plan for harbor improvements or industrial development and long-term financial plan approved by Commerce in order to exceed 1/4%
Public Utility District 54.24.018 .75%   For acquisition or improvement of property. No bonds may exceed maturities of 30 years
Transit Agencies 81.112.130 1.5% 5%  
General 39.36.020(1) .375% 1.25% Applies to local entities whose debt limits are not otherwise specified in state statute

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Last Modified: July 26, 2016