General Obligation Bonds
General Obligation Bonds are municipal Bonds issued by states, cities, or other governmental entities that are backed by the full faith and Credit of the issuing authority. This means they are secured by the issuer’s ability to levy taxes and generate Revenue to repay bondholders. Unlike Revenue-Bonds/">Revenue Bonds, which are repaid from specific Revenue sources (like tolls or utility fees), general obligation Bonds rely on the overall financial strength and taxing power of the issuer.
Examples of General Obligation Bonds include:
- City Bonds: A city may issue general obligation Bonds to finance public projects like parks, schools, or Infrastructure improvements, with the assurance that Property Taxes will be used to pay off the debt.
- State Bonds: A state might issue general obligation Bonds to fund Capital Expenditures, such as building highways or bridges, supported by state income and sales taxes.
Cases where General Obligation Bonds are utilized include:
- Public School Funding: A school district may issue Bonds to construct new school facilities, promising to use property tax Revenues for repayment.
- Infrastructure Development: A county could issue general obligation Bonds to improve local roads and public transportation systems, financed by a combination of local taxes.