What typically funds revenue bonds?

What typically funds revenue bonds?

• A. Tax revenues from property
• B. User fees or service charges
• C. General sales tax revenues
• D. State government allocations

Answer: (B)

Revenue bonds are typically funded through user fees or service charges. This type of bond is issued by municipalities or other governmental entities to finance specific projects such as toll roads, bridges, or utilities. The primary source of repayment for these bonds comes not from general tax revenues, but rather from the income generated by the project itself. For instance, revenue from tolls collected on a road or fees charged for water usage go directly towards servicing the debt on the revenue bonds. The emphasis on user fees distinguishes revenue bonds from general obligation bonds, which are backed by the taxing power of the issuing authority. Hence, revenue bonds are more reliant on the success and income of the specific infrastructure or service they are funding, making this method of financing particular to projects designed to generate revenue.

Revenue bonds are typically funded through user fees or service charges. This type of bond is issued by municipalities or other governmental entities to finance specific projects such as toll roads, bridges, or utilities. The primary source of repayment for these bonds comes not from general tax revenues, but rather from the income generated by the project itself. For instance, revenue from tolls collected on a road or fees charged for water usage go directly towards servicing the debt on the revenue bonds.

The emphasis on user fees distinguishes revenue bonds from general obligation bonds, which are backed by the taxing power of the issuing authority. Hence, revenue bonds are more reliant on the success and income of the specific infrastructure or service they are funding, making this method of financing particular to projects designed to generate revenue.