Analysis of General Obligation (GO) Bonds
Chapters in this video
- 0:00 Why a shrinking town makes a GO bond riskier
- 1:19 Full faith, credit, and the issuer's vital signs
- 2:08 Net direct debt: pulling out self-supporting revenue bonds
- 2:56 Overlapping debt: counties yes, state never
- 3:58 Net overall debt and unfunded pension liabilities
- 5:19 The four municipal debt ratios that decide credit quality
- 7:10 Rapid-fire exam recap
What this video covers
- Why a general obligation (GO) bond is backed by the full faith, credit, and taxing power of the issuer, not by project revenue
- How to calculate net direct debt by stripping self-supporting revenue bonds out of total direct debt
- What overlapping debt includes (counties, school districts, special districts) and the iron rule that state debt is never overlapping debt
- How net overall debt combines net direct debt plus overlapping debt to show the true burden on the local tax base
- The four key municipal debt ratios: net debt to assessed valuation, net debt per capita, debt service to total budget, and tax collection ratio
- Why a declining population or falling assessed valuation makes per-capita and per-dollar debt ratios worse, not better
- How unfunded pension liabilities and a weak tax collection rate signal deteriorating credit quality on a GO bond
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