Revenue bonds are secured by what specific source?

Revenue bonds are specifically secured by a designated stream of income generated from particular projects or activities. This means that the repayment of the bond is contingent upon the revenue produced by that specific source rather than being backed by the overall taxing power of the municipality or government entity.

For example, a revenue bond might be backed by revenues from a toll road, a public utilities system, or a water/sewer system. The critical aspect is that these bonds are tied to the earnings of the dedicated project, which provides investors with a clear expectation of how their investment will be funded. Understanding this distinction is essential for grasping different types of government financing instruments and their associated risks and benefits.