revenue bond

a bond issued, as by a municipal utility, to finance a specific project, the income from which will be used for repaying the bond. Cf. general-obligation bond.

[1855-60]

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or limited obligation bond

Bond issued by a municipality, state, or public agency authorized to build, acquire, or improve a revenue-producing property such as a waterworks, electric generating plant, or railroad.

Unlike general-obligation bonds, which are repaid through a variety of tax sources, revenue bonds are payable from specified revenues only, usually the revenues from the facility for which the bond was originally issued. Revenue bonds typically pay interest rates higher than those of general-obligation bonds. The separation of the revenue bond obligation from a municipality's other bond obligations allows the municipality to circumvent legislated debt limits.

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▪ government finance

also called  limited obligation bond 

       bond issued by a municipality, state, or public agency authorized to build, acquire, or improve a revenue-producing property such as a mass transit system, an electric generating plant, an airport, or a toll road. Unlike general obligation bonds, which carry the full faith and credit of the issuing agency and are repaid through a variety of tax revenues, revenue bonds are payable from specified revenues only, usually the revenues from the facility for which the bond was originally issued.

      This separation of the revenue bond obligation from a municipality's (municipality) direct and general bond obligations allows the municipality to circumvent legislated debt limits. Viewed in this light, revenue bonds can be considered a municipality's corporate bonds, since they are free of ceilings, pay interest (often at rates higher than general obligation bonds), and are paid only from the profits of a revenue-producing property. In exchange for this freedom from debt limitation, municipalities are scrutinized on their use of revenues generated by the sale of the bonds.

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