Overlapping debt occurs when a single financial obligation falls into numerous different jurisdictions when it comes to taxation or other legal matters. Oftentimes, municipalities experience overlapping debt when taxpayers in each jurisdiction must pay their fair share.
For example, suppose that a municipal bond is issued to finance a new school that is located in City A but serves Cities A and B. In this case, City A is only required to pay its proportional share of the overlapping debt, with City B being responsible for the remainder of that debt.
