What factors should be considered when assessing debt affordability?

When assessing debt affordability, it is crucial to evaluate annual revenue and long-term financial obligations. Annual revenue provides insight into the municipality's capacity to generate income, which is essential for covering both existing debts and potential new borrowing. Understanding the predictability and stability of revenue sources helps in making informed decisions about taking on additional debt.

Long-term financial obligations, such as existing debt payments, pension liabilities, and operational costs, must also be carefully examined. These obligations impact the overall financial health of the municipality and dictate how much additional debt it can safely incur without jeopardizing fiscal sustainability.

Together, a thorough analysis of annual revenues alongside long-term obligations allows for a comprehensive view of the municipality's financial flexibility and limits, ensuring that any new debt taken on does not exceed prudent thresholds for affordability and risk management.