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HomePublic Utilities CodeDiv. 10Pt. 13Ch. 6Art. 2§ 101221 District Borrowing For Initial Expenses

§ 101221 District Borrowing For Initial Expenses

Public Utilities Code·California
AI Summary·Official Text·Key Terms·Related Statutes·References
AI SummaryVerified

§ 101221 District Borrowing For Initial Expenses

This law lets a new district borrow money for up to two years to cover startup costs, like building things or running the district. They can borrow up to half of the tax money they expect to get next year and must pay it back in four years with interest.

Key Takeaways

  • •The district can only borrow money for the first two years after it's created.
  • •They can borrow up to half of the tax money they expect to get next year.
  • •The money must be paid back in four years with interest, and the interest can't be more than 7% per year.
  • •This money is for startup costs like building, buying, or running things the district needs.

Example

A new school district needs money to build schools and hire teachers right away.

The district can borrow money now, using next year's tax money as a promise to pay it back. They can't borrow more than half of what they think they'll get in taxes next year.

How to Calculate

Maximum Borrow Amount = 50% of Estimated Tax Revenue for Next Year

  1. Find out how much tax money the district expects to get next year (let's call this 'Estimated Tax Revenue').
  2. Calculate 50% of that amount. This is the most they can borrow.
  3. Make sure the borrowed money is paid back within four years, with interest no higher than 7% per year.

A new district expects to get $1,000,000 in taxes next year.

Result: The district can borrow up to $500,000.

AI-generated — May contain errors. Not legal advice. Always verify source.

Official Source
View on CA.gov

§ 101221 District Borrowing For Initial Expenses

The board may, within a period of two years from and after the formation of the district, pursuant to a resolution adopted by it for the purpose, borrow money on certificates of indebtedness, promissory notes, or other evidences of indebtedness, in anticipation of the estimated tax revenue for the following fiscal year, to be repaid within four years from the date of borrowing with interest at a rate not to exceed 7 percent per annum, in order to enable the district to meet all of its necessary initial expenses of organization, construction, acquisition, maintenance, and operation. The total amount of money borrowed and indebtedness incurred under this section during this two-year period shall not exceed 50 percent of the total amount of estimated tax revenue as estimated by the county auditor for the following fiscal year. The form of the notes, and the proceedings relating to their issuance and sale, shall be governed by the applicable provisions contained in Article 7 (commencing with Section 53820), Chapter 4, Part 1, Division 2, Title 5 of the Government Code. (Added by Stats. 1971, Ch. 1161.)

Last verified: January 11, 2026

Key Terms

certificates of indebtednesspromissory notesestimated tax revenue7 percent per annum50 percent

Related Statutes

  • § 100350 Vta Employee Transfer Rights
  • § 100351 Pension Rights In Acquisitions
  • § 101220 District Short-Term Borrowing Limits
  • § 101222 Transit Facility Funding Authority
  • § 101223 District Debt Authority Expansion

References

  • Official text at leginfo.legislature.ca.gov
  • California Legislature. Public Utilities Code. Section 101221.
View Official Source