Article XI, sec. 3(2), Wis. Const., states in relevant part that no city or village "may become indebted in an amount that exceeds an allowable percentage of the taxable property located therein equalized for state purposes as provided by the legislature. In all cases the allowable percentage shall be 5 percent except as specified in pars. (a) and (b)." Section 3(3) requires any village incurring indebtedness under art. XI, sec. 3(2), to collect, before or at the time of doing so, a direct annual tax sufficient to pay the interest on the debt as it falls due and also to pay and discharge the principal of the debt within 20 years from the time the debt was contracted. Section 67.03(1), Wis. Stats., mirrors art. XI, sec. 3(2). Wis. Const., and provides that in municipalities the "aggregate amount of indebtedness, including existing indebtedness, of any municipality shall not exceed 5 percent of the value of the taxable property located in the municipality as equalized for state purposes …."

In City of Hartford v. Kirley, 172 Wis.2d 191, 493 N.W.2d 45 (1992), the Wisconsin Supreme Court recognized that there are several indicia of debt in the constitutional sense:

First, debt is an undertaking to pay money or its equivalent. Thus, the fact that a municipality must certainly provide some municipal service does not create a present debt, even though it will require the expenditure of money. Second, debt is a voluntary undertaking …. Third, debt must be certain in amount. Fourth, it must be an absolute undertaking; if the municipality may avoid its obligation or if there remain conditions precedent to it, there is no indebtedness . . . . Fifth, it must be an undertaking enforceable by the creditor against the municipality or its assets.

493 N.W.2d at 51, n. 13 (quoting William J. Kiernan, Jr., Wisconsin Municipal Indebtedness: Part 1: The Power to Become Indebted and its Limits, 1964 Wis.L.Rev. 173, 197).

As the Wisconsin Supreme Court has explained in its decisions interpreting art. XI, sec. 3(2), the constitutional debt limitation "is intended to prevent the creation of excessive municipal debt and to protect taxpayers from the consequent oppression of burdensome, if not ruinous taxation. It seeks to impose the burden of debt repayment upon those who create the obligations, not upon future generations." City of Hartford, 493 N.W.2d at 51; Dieck v. Unified School District of Antigo, 165 Wis.2d 458, 477 N.W.2d 613, 618 (1991).