§ 2. No county, city, town, village or school district shall contract
any indebtedness except for county, city, town, village or school
district purposes, respectively. No indebtedness shall be contracted for
longer than the period of probable usefulness of the object or purpose
for which such indebtedness is to be contracted, or, in the alternative,
the weighted average period of probable usefulness of the several
objects or purposes for which such indebtedness is to be contracted, to
be determined by the governing body of the county, city, town, village
or school district contracting such indebtedness pursuant to general or
special laws of the state legislature, which determination shall be
conclusive, and in no event for longer than forty years. Indebtedness or
any portion thereof may be refunded within either such period of
probable usefulness, or average period of probable usefulness, as may be
determined by such governing body computed from the date such
indebtedness was contracted.

No indebtedness shall be contracted by any county, city, town, village
or school district unless such county, city, town, village or school
district shall have pledged its faith and credit for the payment of the
principal thereof and the interest thereon. Except for indebtedness
contracted in anticipation of the collection of taxes actually levied
and uncollected or to be levied for the year when such indebtedness is
contracted and indebtedness contracted to be paid in one of the two
fiscal years immediately succeeding the fiscal year in which such
indebtedness was contracted, all such indebtedness and each portion
thereof from time to time contracted, including any refunding thereof,
shall be paid in annual installments, the first of which, except in the
case of refunding of indebtedness heretofore contracted, shall be paid
not more than two years after such indebtedness or portion thereof shall
have been contracted, and no installment, except in the case of
refunding of indebtedness heretofore contracted, shall be more than
fifty per centum in excess of the smallest prior installment, unless the
governing body of the county, city, town, village or school district
contracting such indebtedness provides for substantially level or
declining debt service payments as may be authorized by law.

Notwithstanding the foregoing provisions, indebtedness contracted by
the city of New York and each portion of any such indebtedness from time
to time so contracted for the supply of water, including the acquisition
of land in connection with such purpose, may be financed either by
serial bonds with a maximum maturity of fifty years, in which case such
indebtedness shall be paid in annual installments as hereinbefore
provided, or by sinking fund bonds with a maximum maturity of fifty
years, which shall be redeemed through annual contributions to sinking
funds established and maintained for the purpose of amortizing the
indebtedness for which such bonds are issued. Notwithstanding the
foregoing provisions, indebtedness hereafter contracted by the city of
New York and each portion of any such indebtedness from time to time so
contracted for (a) the acquisition, construction or equipment of rapid
transit railroads, or (b) the construction of docks, including the
acquisition of land in connection with any of such purposes, may be
financed either by serial bonds with a maximum maturity of forty years,
in which case such indebtedness shall be paid in annual installments as
hereinbefore provided, or by sinking fund bonds with a maximum maturity
of forty years, which shall be redeemed through annual contributions to
sinking funds established and maintained for the purpose of amortizing
the indebtedness for which such bonds are issued.

Notwithstanding the foregoing provisions, but subject to such
requirements as the legislature shall impose by general or special law,
indebtedness contracted by any county, city, town, village or school
district and each portion thereof from time to time contracted for any
object or purpose for which indebtedness may be contracted may also be
financed by sinking fund bonds with a maximum maturity of fifty years,
which shall be redeemed through annual contributions to sinking funds
established by such county, city, town, village or school district,
provided, however, that each such annual contribution shall be at least
equal to the amount required, if any, to enable the sinking fund to
redeem, on the date of the contribution, the same amount of such
indebtedness as would have been paid and then be payable if such
indebtedness had been financed entirely by the issuance of serial bonds,
except, if an issue of sinking fund bonds is combined for sale with an
issue of serial bonds, for the same object or purpose, then the amount
of each annual sinking fund contribution shall be at least equal to the
amount required, if any, to enable the sinking fund to redeem, on the
date of each such annual contribution, (i) the amount which would be
required to be paid annually if such indebtedness had been issued
entirely as serial bonds, less (ii) the amount of indebtedness, if any,
to be paid during such year on the portion of such indebtedness actually
issued as serial bonds. Sinking funds established on or after January
first, nineteen hundred eighty-six pursuant to the preceding sentence
shall be maintained and managed by the state comptroller pursuant to
such requirements and procedures as the legislature shall prescribe,
including provisions for reimbursement by the issuer of bonds payable
from such sinking funds for the expenses related to such maintenance and
management.

Provisions shall be made annually by appropriation by every county,
city, town, village and school district for the payment of interest on
all indebtedness and for the amounts required for (a) the amortization
and redemption of term bonds, sinking fund bonds and serial bonds, (b)
the redemption of certificates or other evidence of indebtedness (except
those issued in anticipation of the collection of taxes or other
revenues, or renewals thereof, and which are described in paragraph A of
section five of this article and those issued in anticipation of the
receipt of the proceeds of the sale of bonds theretofore authorized)
contracted to be paid in such year out of the tax levy or other revenues
applicable to a reduction thereof, and (c) the redemption of
certificates or other evidence of indebtedness issued in anticipation of
the collection of taxes or other revenues, or renewals thereof, which
are not retired within five years after their date of original issue. If
at any time the respective appropriating authorities shall fail to make
such appropriations, a sufficient sum shall be set apart from the first
revenues thereafter received and shall be applied to such purposes. The
fiscal officer of any county, city, town, village or school district may
be required to set apart and apply such revenues as aforesaid at the
suit of any holder of obligations issued for any such indebtedness.

Notwithstanding the foregoing, all interest need not be paid annually
on an issue of indebtedness provided that either (a) substantially level
or declining debt service payments (including all payments of interest)
shall be made over the life of such issue of indebtedness, or (b) there
shall annually be contributed to a sinking fund created pursuant to this
section, the amount necessary to bring the balance thereof, including
income earned on contributions, to the accreted value of the obligations
to be paid therefrom on the date such contribution is made, less the sum
of all required future contributions of principal, in the case of
sinking fund obligations, or payments of principal, in the case of
serial obligations. When obligations are sold by a county, city, town,
village or school district at a discount, the debt incurred for the
purposes of any debt limitation contained in this constitution, shall be
deemed to include only the amount of money actually received by the
county, city, town, village or school district, irrespective of the face
amount of the obligations.