What does legal debt capacity primarily consider?

Legal debt capacity primarily considers assessed or market value as it determines the maximum amount of debt that a government or entity can legally incur based on the value of its taxable assets. This assessment ensures compliance with statutory limits that are often set by state or local laws, which typically define how much debt can be taken on as a function of the value of the overall property or revenue-generating assets within a jurisdiction.

By evaluating assessed or market value, officials can ensure that future debt obligations are sustainable and that they align with the jurisdiction's ability to generate revenue to service that debt effectively. This focus on asset value helps create a framework that protects both the entity's financial health and the interests of taxpayers.

In contrast, while historical bond market trends, current interest rates, and projected revenue growth are important factors in debt management and planning, they are not primary considerations for determining legal debt capacity. Historical trends and current rates may influence the timing and terms of debt issuance, and projected revenue growth can assist in budgeting and forecasting, yet they do not dictate the legal limits imposed on borrowing based on asset value.