Overlapping Debt

Categories: Credit

Think of the different government jurisdictions you deal with on a regular basis. You've got federal and state governments breathing down your neck. Also, your local city government. Plus, there are all sorts of jurisdictions that you probably forget about most of the time. County officials. School districts. Local neighborhood watch patrols. The Intergalactic Federation. And so on.

Overlapping debt is debt that occurs at multiple levels of government at the same time.

Famed popcorn magnate Orville Redenbacher once spent a summer as the tuba player in a marching band that performed at your county courthouse. Hoping to boost tourism, your county government wants to build a statue of him. The statue will pop up...er, be erected...in your town, so the town will also bear some of the cost of its purchase and installation.

The town will share a portion of the debt needed to pay for the statue. Overlapping debt. Both the county and city governments will have some responsibility for the debt once bonds are issued.



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