Bonded debt represents the portion of a municipality’s debt that is represented by bonds that it has issued or debt that it contracted under the obligation of a bond. Oftentimes, these levels are used to assess a municipality’s solvency or ability to issue additional debt.
For example, a municipality that has $100 million in outstanding bond principal and owed interest might have difficulty issuing additional debt if that amount is roughly equal to its total assets, since new bondholders wouldn’t be secured by any assets.