General Obligation Bonds

General obligation bonds

Municipal securities secured by the issuer's pledge of its full faith, credit, and taxing power.

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General Obligation Bonds

Also called "GO." In the United States, municipal bonds whose issuing locality pledges to pay bondholders by using all revenues at its disposal, including the raising of property taxes. If so many residents do not pay their property taxes that it impacts revenue payable to bondholders, the terms of the bond legally require the municipality to raise property taxes to make up the shortfall. There are two basic types of general obligation bonds. A limited GO allows for the raising of property taxes up to a certain percentage, while an unlimited GO theoretically allows the municipality to levy taxes of up to 100% of a property's value. Because an unlimited general obligation bond provides a great incentive to pay property tax on time, and because many states only allow such a bond to be issued following a vote on the matter, credit ratings agencies usually rate them higher. However, both types of GO are generally rated highly.