1.4.1. By Source of Payment
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 school bond may be financed by an increase in liquor or cigarette taxes.
Special Assessment Bonds. Special assessment bonds 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, also called alternate bonds, are backed by two sources of revenue. The primary source is the revenue from the project being financed. However, the bonds are backed by the full faith and credit of the issuer. This means that if project revenue is insufficient to repay the bonds, the issuer must make up the difference from its general fund.
Moral Obligation Bonds. These are revenue bonds with characteristics similar to double-barreled bonds. They are secured by revenue from the project being financed. The state is morally, but not legally, obligated to provide backup funds if needed. What’s the distinction? Moral obligation bonds do not require voter approval, and the municipality can choose to default if it is willing to lose its credit standing.
Lease Revenue Bonds. These are bonds issued to finance the construction of facilities used by a state or municipality, such as office buildings, schools, and prisons. The revenue stream backing the bonds consists of lease payments made by the government agency that uses the facility. Lease payments are delivered to the government’s financing entity. The financing entity might be a government agency or authority separate from the issuer, created specifically to finance and construct the fac