Notes on Demand: Which statement is true?

• A. They may issue notes payable on demand
• B. They are not restricted in any way
• C. They are payable on demand only in emergencies
• D. Municipalities SHALL NOT issue any notes payable on demand

Answer: (D)

Notes on Demand are about how a government borrows and when it must repay. For municipalities, debt is expected to have a definite maturity and a planned debt service schedule tied to its revenues and budget. A note that can be demanded for payment at any time creates unpredictable cash needs and weakens fiscal planning, making it risky and hard to manage. Because of that, there is a blanket prohibition: municipalities shall not issue any notes payable on demand. The other statements would either grant permission, claim there’s no restriction, or limit the rule to emergencies, none of which align with the standard practice of keeping debt terms definite and controllable.