Title 45
Towns and Cities

Chapter 12
Indebtedness of Towns and Cities

§ 45-12-1. Payment of indebtedness.

(a) The outstanding notes, bonds, and contracts of cities and towns shall be paid and fulfilled according to their tenor, and all public works now authorized to be prosecuted shall be prosecuted, and all indebtedness now authorized to be incurred on account thereof may be incurred, according to the tenor of the authority therefor. The power and obligation of each city and town to pay its general obligation bonds and notes, whether or not issued pursuant to this chapter, shall be unlimited, and each city and town shall levy ad valorem taxes upon all the taxable property within the city or town for the payment of the general obligation bonds or notes and interest on these bonds or notes, without limitation of rate or amount, except as otherwise provided by or pursuant to law. The faith and credit ad valorem taxes, and general fund revenues of each city, town and district shall be pledged for the payment of the principal of, premium and the interest on, all general obligation bonds and notes of the city or town whether or not the pledge is stated in the bonds or notes, or in the proceedings authorizing their issue and shall constitute a first lien on such ad valorem taxes and general fund revenues. Each city, town and district shall annually appropriate a sum sufficient to pay the principal, premium and interest coming due within the year on all its general obligation bonds and notes to the extent that moneys for the general obligation bonds and notes are not otherwise provided. If that sum is not appropriated, it shall nevertheless be added to the annual tax levy. Annual appropriations for payment of financing leases and obligations securing bonds, notes or certificates (“other financing obligations”), shall also have a first lien on ad valorem taxes and general fund revenues commencing on the date of each annual appropriation. Amounts appropriated or added to the tax levy to pay principal of, premium and interest on, general obligation bonds or notes and payments of other financing obligations shall be applied to the payment of such obligations. Any municipal or district employee or official who intentionally violates the provisions of this section shall be personally liable to the city, town or district for any amounts not expended in accordance with such appropriations. The superior court shall have jurisdiction to adjudicate claims brought by any city, town or district hereunder and to order such relief as the court may find appropriate to prevent further violations of this section. Any municipal or district employee or official who violates the provisions of this section shall be subject to removal.

(b) Notwithstanding any provision of any other law, including the uniform commercial code, title 6A of the Rhode Island general laws:

(1) The pledge of ad valorem taxes and general fund revenues to the payment of the principal, premium and interest on general obligation bonds and notes and payment of other financing obligations, whether or not issued pursuant to this chapter, is valid and binding, and deemed continuously perfected from the time the bonds or notes or other financing obligations are issued;

(2) No filing need be made under the uniform commercial code or otherwise to perfect the first lien on ad valorem taxes or general fund revenues;

(3) The pledge of ad valorem taxes and general fund revenues is subject to the lien of the pledge without delivery or segregation, and the first lien on ad valorem taxes and general fund revenues is valid and binding against all parties having claims of contract or tort or otherwise against the city or town, whether or not the parties have notice thereof.

(4) The pledge shall be a statutory lien effective by operation of law and shall apply to all general obligation bonds and notes and other financing obligations of cities, towns and districts heretofore or hereafter issued and shall not require a security agreement to be effective. Such pledge shall not constitute a security agreement under Rhode Island law.

(c) The pledge of ad valorem taxes and general fund revenues to the payment of principal, premium and interest on general obligation bonds and notes, under this section constitutes a sufficient appropriation for the purposes of any provision for appropriation, and the ad valorem taxes and general fund revenues may be applied as required by the pledge without further appropriation; provided, however, that this subsection (c) shall not apply to other financing obligations which are subject to annual appropriation.

(d) As used in this section, the following words shall have the following meanings:

(1) “Ad valorem taxes” shall mean all ad valorem taxes levied by cities, towns and districts on property, including motor vehicle excise taxes, except for “project revenues” as defined in § 45-33.2-3.

(2) “Pledge” shall mean a first lien on, and a grant of a security interest in, ad valorem taxes and general fund revenues.

(3) “General fund revenues” shall mean all taxes, fees, assessments, charges, receipts and other monies (including unrestricted fund balance) derived from any source, to the extent that such monies are deposited or required to be deposited to the general fund of the city, town, or district, and all accounts and rights to receive the ad valorem taxes and general fund revenues and the proceeds thereof.

(e) If any provision of this section or the application thereof shall for any reason be judged invalid, that judgment shall not affect, impair or invalidate the remainder of the law, but shall be confined in its effect to the provisions or application directly involved in the controversy giving rise to the judgment.