. A community’s
wealth and economic growth and the ability of a local government to generate
revenues from its local economy ultimately underlie the local government’s
debt capacity. Certain debt ratios are at the heart of determining the capacity
of a jurisdiction to issue and repay debt. One set of ratios pertains to net debt.
Net debt consists of any debt that is repaid from generally available revenues.
Such debt includes most GO bonds, much capital lease debt, and some special
or limited obligation debt. Net debt excludes revenue bonds. One key ratio is
annual debt service (principal repayment and annual interest) on net debt as
a percentage of general fund and other general-purpose spending. Some
authorities say that this ratio should not exceed 15 to 20 percent, depending
on a jurisdiction’s size and financial strength (Standard & Poor’s 2007)