limited-tax general obligation bond

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Limited-tax general obligation bond

A general obligation bond of a government backed by specified or constrained revenue sources.

Limited-Tax General Obligation Bond

A municipal bond with two distinguishing features. First, as a general obligation bond, it is secured by all revenues the issuing municipality generates that are not otherwise secured. That is, unless a municipality's revenue specifically secures another bond, the municipality must theoretically use all of its other revenue to pay the bond. Secondly, because it is a limited-tax bond, its provisions place a maximum possible tax increase that the municipality can levy if its other revenues come up short. The first provision reduces the bond's risk, while the second provision increases it.

limited-tax general obligation bond

A municipal bond that is secured by some limited taxing power of the issuer. For example, a bond may be secured by a municipality's property tax subject to a maximum rate at which the tax may be levied. Although a limited-tax general obligation bond is considered a general obligation of the issuer, because of the limited taxing power, this bond is somewhat more risky than a general obligation bond secured by full taxing power.