What must local governments do if they fail to pay debt?

When local governments fail to pay their debt, activating a notification process is essential as it helps ensure transparency and communication with stakeholders. This process typically involves informing bondholders, creditors, and possibly the public about the situation regarding the missed payments. It is vital for maintaining trust and understanding among those impacted by the government's financial difficulties.

By notifying relevant parties, local governments can outline their current financial status, explain the reasons behind the missed payment, and discuss potential solutions. This proactive approach can help mitigate concerns among investors and the community, allowing for a more organized and strategic response to the fiscal challenges faced.

Other options, such as filing for bankruptcy, may be drastic and not always the first course of action. Offering a public apology or restructuring the debt portfolio might be necessary steps later on, but they wouldn't address the immediate requirement of informing those affected by the failure to pay, which makes the notification process a priority when facing such circumstances.