Definition of Net Debt to Assessed Valuation

In a municipal bond problem, a ratio measuring the value of the town’s net debts compared to the specified value of the real estate being purchased as assessed for tax purposes.

Net Debt to Assessed Valuation

This is one of the factors which determine the high top quality of a municipal bond problem. The reduced a town’s debts are compared to the assessed value of its residence, the less dangerous its ties are considered to be since there is less risk of US government being not capable to finance refund of the bond problem. A higher ratio may indicate a situation in which the sale of the underlying assets may not be sufficient to pay off the debts. When analyzing the safety and high top quality of a municipal GO bond it is significant to recognize how much debt the town has released compared to the value of the residence within the issuer’s boarders. The income to hold up the issuer’s debts service comes from residence taxes. The reduced the net debts are compared to the assessed value of the residence the more secure the ties are.