limited-tax general obligation bond(redirected from Limited-Tax General Obligation Bonds)
Limited-tax general obligation bond
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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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.