Definition of Revenue bond:
A type of bond which is issued to raise funds for a specific public project, and is redeemable against the projects future revenue.
Debt obligation for which interest and principal payments are derived (directly and solely) from the revenue of the project being financed by that bond issue. Issued typically by municipalities for funding public works (bridges, roads, sewer system), these bonds collateralize the projects assets, and the bondholder has no claim on the issuers assets. In contrast, a general obligation bond is secured by the governments full taxing power.
A revenue bond is a category of municipal bond supported by the revenue from a specific project, such as a toll bridge, highway or local stadium. Revenue bonds that finance income-producing projects are thus secured by a specified revenue source. Typically, revenue bonds can be issued by any government agency or fund that is managed in the manner of a business, such as entities having both operating revenues and expenses.
Revenue bonds, which are also called municipal revenue bonds, differ from general obligation bonds (GO bonds) that can be repaid through a variety of tax sources.
How to use Revenue bond in a sentence?
- For instance, a toll road or utility can be financed with municipal bonds with creditors' interest and principal repaid from the tolls or fees collected.
- Revenue bonds, unlike GO bonds, are project-specific and are not funded by taxpayers.
- Revenue bonds are a class of municipal bond issued to fund public projects which then repay investors from the income created by that project.
Meaning of Revenue bond & Revenue bond Definition