§ 5. Any city, town or village shall be liable for the repayment of
any loans and interest thereon made by the state to any public
corporation, acting as an instrumentality of such city, town or village.
Such liability of a city, town or village shall be excluded in
ascertaining the power of such city, town or village to become indebted
pursuant to the provisions of this article, except that in the event of
a default in payment under the terms of any such loan, the unpaid
balance thereof shall be included in ascertaining the power of such
city, town or village to become so indebted. No subsidy, in addition to
any capital or periodic subsidy originally contracted for in aid of any
project or projects authorized under this article, shall be paid by the
state to a city, town, village or public corporation, acting as an
instrumentality thereof, for the purpose of enabling such city, town,
village or corporation to remedy an actual default or avoid an impending
default in the payment of principal or interest on a loan which has been
theretofore made by the state to such city, town, village or corporation
pursuant to this article.