Debt Limits

If you only read one thing A debt limit is a legal cap, usually set by state law, on how much debt a government may incur, often expressed as a percentage of assessed property value.

Why This Matters

This is the first of three closely related concepts, debt limit, debt margin, and overlapping debt, that get confused with each other constantly. Each one answers a different question, and this page covers just the first.

What’s Actually Going On

A statutory debt limit caps the amount of debt a government may legally incur, typically set by state law as a percentage of the total assessed value of taxable property within its boundaries. Maine, like most states, imposes limits like this on municipalities and school districts to prevent overborrowing against a fixed tax base.

The limit is calculated against a specific base, usually assessed valuation, not market value or any other measure, so two governments with similar property but different assessment practices can have meaningfully different legal borrowing capacity.

How This Applies

Before assuming a district has room to issue more debt, check the actual statutory limit and the base it’s calculated against, not just a general sense of “we haven’t borrowed that much.” The limit is a specific, calculated number, not a rule of thumb.