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LeoGlossary: Maximum Annual Debt Service

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Maximum annual debt service is the upper limit of available capital to make principal and interest payments on municipal bonds over a one-year period. Often, municipalities set aside cash to cover the maximum annual debt service to avoid any interruptions.

For example, a municipality with a maximum annual debt service of $50 million will not be able to issue municipal bonds that have principal and interest obligations of greater than $50 million over a one-year period, otherwise it may be at risk of defaulting on those payments.

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