There are two main types or ways a municipality can guarantee or back it's bond. One way is through the taxing power of the municipality. This would be called a General Obligation Bond or G.O. Bond. Another is called a Revenue Bond, which uses specific revenue sources to secure the issue.
General Obligation Bonds
These are the most common and normally the better rated issues. A state raising money and backing the bond issue with higher income or sales tax would be considered a G.O. Bond. A school district rasing money through a broker dealer on a municipal bond and securing the bond investors with school or property tax revenue is considered a General Obligation bond as well. Since taxes are the most secure source for money now and in the future, some investors prefer them over most revenue issues.
Revenue Bonds
Issues that rely on the revenue producing ability of a facility or from the issuer through other means are Revenue Bonds. There are several types of issuers. These would include:
Transportation - Bridges, Tolls, and Airports would be good examples
Health care - City or county hospitals
Utility Companies - Electric or water companies could assess usage increases to raise money.
Industrial - Some municipal issuers will work with private companies and use the company's lease payments to the city as a revenue source for bond issues.
General Obligation Bonds
These are the most common and normally the better rated issues. A state raising money and backing the bond issue with higher income or sales tax would be considered a G.O. Bond. A school district rasing money through a broker dealer on a municipal bond and securing the bond investors with school or property tax revenue is considered a General Obligation bond as well. Since taxes are the most secure source for money now and in the future, some investors prefer them over most revenue issues.
Revenue Bonds
Issues that rely on the revenue producing ability of a facility or from the issuer through other means are Revenue Bonds. There are several types of issuers. These would include:
Transportation - Bridges, Tolls, and Airports would be good examples
Health care - City or county hospitals
Utility Companies - Electric or water companies could assess usage increases to raise money.
Industrial - Some municipal issuers will work with private companies and use the company's lease payments to the city as a revenue source for bond issues.
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