2.13.4. Other Types of Municipal Bonds
Special tax bonds. These are revenue bonds payable from the proceeds of a special tax that is unrelated to the project being financed. For example, a highway bond may be financed by an increased property tax on likely users, or a school bond may be financed by an increase in liquor or cigarette taxes.
Special assessment bonds. These are backed by ad valorem taxes assessed only on those who directly benefit from the facilities. Bonds for the repair of sidewalks and streets may be backed by a rise in property taxes via a special assessment on those property owners in the neighborhoods that will benefit from the project.
Double-barreled bonds. These are bonds having characteristics of both a revenue and general obligation bond. Double-barreled bonds are backed by two sources of revenue. The primary source is the revenue from the project being financed. However, tax dollars may be summoned if project revenue is insufficient. Ultimately, this bond is guaranteed by the full faith and credit of the issuing entity.
Private activity bonds. Taxable municipal bonds were created to fund private activities that would no longer qualify for exemption from federal taxes. These are known as private activity bonds. Besides supporting nonpublic functions, private activity bonds may also be issued to refund debt or bolster underfunded pension funds. While the interest on private activity bonds is typically taxable at the federal level, it is often tax-free at the local level and often the state level. Because most private activity bonds are taxable at the federal level, they offer higher interest rates than other tax-exempt municipal bonds.
Alternative minimum tax bonds. Certain private activity bonds continue to be exempt from taxation, however, such as those that finance airports and docks, hazardous waste disposal, water and sewer, schools and charities, green or sustainable building projects, and some residential housing p