A state created a Housing Authority to provide financing for low-income housing.The Authority issues bonds and uses the proceeds for that purpose.Currently the Authority has outstanding $200 million in bonds backed by the State's promise to cover debt service shortages should they arise.The State Constitution specifically limits the State to no more than $2 million in general obligation debt.How can the state officials defend the $200 million in debt outstanding?

Question

Quizplus · Accepted Answer

The state officials can argue that the debt is not general obligation debt, the State is only morally obligated, and the debt is technically the debt of the Authority, not the State.

A State Created a Housing Authority to Provide Financing for Low-Income