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25:4 <br />Minn. Stat. § 475.53, subd. 1. <br />Handbook, Chapter 21. <br />Minn. Stat. § 412.301. <br />Minn. Stat. § 410.32. <br />CHAPTER 25 <br />Municipal bonds are low risk because all city assets and resources, <br />including the unlimited power to tax, back the city's contract to pay back <br />the amount of the bond with interest. The security for a GO bond is the <br />pledge of those resources and taxing powers. <br />There are limits on the amount of debt a city may incur through the issue <br />and sale of bonds. Currently the "net debt" limit is 3 percent of the market <br />value of taxable property in the city. In some situations, residents must vote <br />in favor of a bond before a city may issue them, however, there are many <br />exceptions to this requirement. <br />There are other types of bonds, each requiring specific legal procedures, for <br />example: <br />• Revenue bonds —tied to a specific funding stream. <br />• GO revenue bonds —tied to both the full faith and credit of the city and <br />a specific funding stream. <br />• Bonds by purpose —GO bonds issued for a specific purpose. This is not <br />a legal requirement but used for convenience in identifying bonds with <br />an improvement. <br />• Bonds by user —also known as "private activity bonds" and used <br />partially or entirely for private purposes, but still tax exempt. <br />Municipal bonds are attractive to buyers because they are low risk and <br />usually tax exempt. When using bonds to finance local improvements, <br />cities must work with the city attorney and bond counsel to maintain the <br />tax - exempt status of the bonds and ensure compliance with all state and <br />federal financing and bond law. <br />B. Certificates of indebtedness <br />Statutory and charter cities may issue debt in the form of capital notes or <br />certificates of indebtedness to purchase : <br />• public safety equipment, <br />• ambulance and other medical equipment, <br />• road construction and maintenance equipment, and other capital <br />equipment <br />• computer hardware and software, whether bundled with machinery or <br />equipment or unbundled. <br />• The purchased equipment or machinery must have an expected useful <br />life at least as long as the certificates or notes. <br />This chapter last revised 12/1/2012 <br />LEAGUE OF MINNESOTA CITIES <br />