Payment of debt service obligations

Sec. 10. (a) As used in this section, "debt service obligations of a political subdivision" refers to: (1) the principal and interest payable during a calendar year on bonds; and (2) lease rental payments payable during a calendar year on leases; of a political subdivision payable from ad valorem property taxes. (b) Political subdivisions are required by law to fully fund the payment of their debt obligations in an amount sufficient to pay any debt service or lease rentals on outstanding obligations, regardless of any reduction in property tax collections due to the application of tax credits granted under this chapter. (c) Upon the failure of a political subdivision to pay any of the political subdivision's debt service obligations during a calendar year when due, the treasurer of state, upon being notified of the failure by a claimant, shall pay the unpaid debt service obligations that are due from money in the possession of the state that would otherwise be available for distribution to the political subdivision under any other law, deducting the payment from the amount distributed. A deduction under this subsection must be made: (1) first from local income tax distributions under IC 6-3.6-9; and (2) second from any other undistributed funds of the political subdivision in the possession of the state. (d) This section shall be interpreted liberally so that the state shall to the extent legally valid ensure that the debt service obligations of each political subdivision are paid when due. However, this section does not create a debt of the state.