Revenue bond (redirected from limited obligation bond)
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Related to limited obligation bond: Moral obligation bond
, Limited Tax General Obligation Bond
A bond issued
by a municipality to finance
either a project or an enterprise in which the issuer
pledges to the bondholders
the revenues generated by the operation of the projects financed. Examples are hospital revenue bonds and sewer revenue bonds.
A municipal bond
that is not secured
by the issuer's
but instead by the revenue of the project it intends to finance
. For example, a city may issue
a revenue bond to finance improvements to the local sewer system. It expects to be able to pay back the bond
raised from citizens' water bills
. Generally speaking, a revenue bond is riskier
than other municipal bonds because the project has no power to tax on its own. However, it is usually a fairly safe investment
. See also: Authority Bond
A municipal debt on which the payment of interest and principal depends on revenues from the particular asset that the bond issue is used to finance. Examples of such projects are toll roads and bridges, housing developments, and airport expansions. Revenue bonds are generally considered of lower quality than general obligation bonds, but there is a great amount of variance in risk depending on the particular assets financed. Compare authority bond
Revenue bonds are municipal bonds issued to finance public projects, such as airports and roadways. The bonds are backed by revenue to be generated by the project.
For example, if the construction of a tunnel is financed with municipal revenue bonds, the tolls paid by motorists are used to pay back the bondholders. However, bondholders usually have no claims on the bond issuer's other assets or resources.