Municipal Bonds: Revenue Bonds vs General Obligation Bonds

Municipal bonds are those bonds issued by municipalities like states or local counties. As iterated in the title, there are revenue as well as general obligation bonds. Both offer tax advantages for an investor depending on the state in which he or she lives.

Revenue Bonds

Revenue bonds are financed by the income-generating facilities that the bonds are for. A revenue bond could be issued for, for example, the drilling of an oil site.

General Obligation Bonds

General obligation bonds, or GOs, are municipal bonds that are financed by the municipal tax revenue. A general obligation bond could be for the funding of low-income housing or schools.

GOs have debt limits to protect taxpayers from higher taxes. The municipality will choose a total debt limit for the estimated monetary value of, for instance, a public school project. What's more, GOs have an official statement that analyzes the financial condition of the ordinance taking place.

These official statements assess the future financial needs of the municipal project or ordinance. The bond also has a debt statement that includes the estimated full valuation of taxable property, the estimated value of property and the assessment percentage.

 

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