when the debt of a municipal authority is shared with another government the debt is referred to as an overlapping debt for example a bond that funds a project in a county school district could be considered overlapping debt to a town located within that school district the town is only responsible for its proportional share of the overlapping debt this proportional share plus the municipality s direct debt together make up the municipality s overall net debt the municipality s overall net debt is an important factor in its ability to obtain future debt financing also taxpayers are responsible for paying their share of the debt from each jurisdiction 
overlapping debt is often greater than the direct debt of a municipal government and is determined by the ratio of assessed valuation of taxable property lying within the corporate limits of the municipality to the assessed valuation of each overlapping district having overlapping debt may affect one or both governments ability to repay economic implications of overlapping debteconomic research has shown the practice of having multiple overlapping local authorities that can issue overlapping debt to fund their activities can have significant fiscal effects on local governments empirical analyses have found that overlapping of local jurisdictions that can spend and issue overlapping debt tends to creates a bias toward more total public sector spending other researchers have found that overlapping local fiscal authorities tend to treat the available tax base and total ability to raise funds from the market via bond issuance as common pool resources with associated tragedy of the commons problems 1 this means that the widespread practice of overlapping governmental authorities issuing overlapping debt tends to increase the size and fiscal burden of local government as overlapping authorities compete against one another on a political area to exploit the same tax base various authorities responding to different sets of voters and interest group demands for public spending thus end up overexploiting the tax base in a region while taking on more total debt and spending more on public programs and infrastructure than voters in the region as a whole actually want 