Debt Limit
A legal cap on the amount of debt a city can carry, typically expressed as a percentage of assessed property value.
How It Works
Most states impose debt limits on cities, commonly set at 5-15% of the total assessed value of taxable property. These limits are designed to prevent cities from over-borrowing. Some types of debt (like revenue bonds or pension obligations) may be exempt from the limit, which can allow effective debt to exceed the stated cap. Cities approaching their debt limits face constrained ability to fund capital projects.
Related Terms
- General Obligation Bond (GO Bond) — A municipal bond backed by the full faith, credit, and taxing power of the city — meaning the city pledges to raise taxes if necessary to repay bondholders.
- Assessed Value — The value assigned to a property by a government assessor for the purpose of calculating property taxes, which may differ from market value.
- Debt Per Capita — A city's total outstanding debt divided by its population — a key metric for comparing debt burdens across cities of different sizes.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.