How are revenue bonds typically retired?

Revenue bonds are typically retired through the revenue generated from the funded project. This means that the money collected from the specific income sources, such as tolls, fees, or service payments associated with the project for which the bonds were issued, is used to pay back the bondholders. This method ties the financial success of the bond directly to the project’s ability to generate sufficient cash flow, making revenue bonds a more flexible and often riskier option than general obligation bonds, which are backed by the full faith and credit of the issuing governmental entity.

Using general tax revenue is not applicable for revenue bonds, as these bonds are specifically designed to be repaid from project-derived income rather than tax dollars. While annual budget surpluses could contribute to broader financial strategies, they do not directly relate to the retirement of revenue bonds. Retiring bonds by issuing new bonds, known as refinancing, may happen in some cases, but it is not the primary method for retiring revenue bonds specifically. Thus, the most accurate description of how revenue bonds are retired is through the revenue generated from the funded project.