A comprehensive and routine analysis of debt capacity provides assurance that the amount of debt issued by the county is affordable and cost-effective. When a county borrows money by selling bonds, the most important variable that determines the interest cost of the bonds is their bond rating. Bond ratings are an assessment of credit quality or, conversely, the risk that the borrower will not make scheduled payments of principal and interest. Rating agencies base their ratings on a number of key economic, debt, financial, and governmental factors. Debt factors Rating agencies evaluate debt per capita, debt as a percentage of the assessed value of property, debt service as a percentage of annual revenues, payout rate, use of short term or variable rate debt, authorized but unissued debt and the legal structure of the issue's security.
Bonds are the most common form of debt issuance by state and local governments.
Unlimited-tax GO bonds legally obligate the county to levy taxes on all assessed property within its jurisdiction at whatever level necessary to meet the debt service payments. Historically, voter approval has been required to authorize the issuance of GO bonds. However, a growing number of jurisdictions have been given authority to issue limited amounts of GO bonds without a referendum. Revenue Bonds are limited-liability obligations. The security for revenue bond issues is provided by a pledge of a specific revenue stream - usually derived from the project being funded or the enterprise system of which the project is a part.