A Bond which is to be repaid from a specific source of revenues, typically those produced by the facility or system for which the Bond is issued. The Issuer’s full faith and credit is not pledged to a Revenue Bond. Conduit Bonds are also typically Revenue Bonds. Revenue Bonds may be project-based or tax-based. In the case of Revenue Bonds that are not Conduit Bonds, although the Debt Service is not payable from the general taxing power of the Issuer, depending on state law, the Bonds may still constitute a debt of the Issuer.

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Project-Based Revenue Bonds

Project-based Revenue Bonds are secured by the revenues derived from a specific enterprise, system or facility, such as a utility system, hospital, toll bridge, transportation facility or higher education system.  There is no Pledge of the general taxing power of the Issuer should the enterprise, system or facility fail to generate sufficient revenues to pay Debt Service.

Conduit Bonds

Bonds issued by an Issuer in a conduit financing.

Mortgage Revenue Bond

A bond issued by a state, certain agencies or authorities or political subdivisions to make or purchase loans with respect to single-family or multifamily residences.

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Tax-Based Revenue Bonds

Tax-based Revenue Bonds are secured by revenues derived from one or more designated taxes levied for a specific purpose, including income taxes, excise taxes (such as taxes on tobacco, alcoholic beverages, fuel, etc.), Special Assessments, hotel occupancy taxes and sales taxes.  These are sometimes referred to as Special Tax Bonds or “special obligation bonds.”  Unlike General Obligation Bonds, Special Tax Bonds are not secured by the general taxing power or the full faith and credit of the Issuer. Special Tax Bonds generally do not require voter approval; however, voter approval of the underlying taxes may be required. Common examples of Special Tax Bonds include sales tax Revenue Bonds and hotel occupancy tax Revenue Bonds.

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See Also

General Obligation (“GO”) Bond

A bond backed by the full faith and credit and taxing power of the issuer.

Revenue Fund

A fund into which pledged revenues may be required to be deposited as received and from which disbursements are made to pay allowable operations and maintenance expenses and to meet debt service requirements and deposit requirements to other funds.