Revenue bonds are typically backed by what?

Revenue bonds are typically backed by revenues generated from specific projects or enterprises. This means that the funds used to repay the bondholders come from the money produced by the project for which the bonds were issued, such as tolls from a highway, fees from a utility service, or revenue from a public facility like a sports arena. The primary characteristic of revenue bonds is that their security relies on the income generated by the specific venture rather than general government revenues.

This structure allows municipalities and other public entities to finance capital projects without having to pledge general tax revenues. It also makes it possible for investors to assess the viability and risk of the project based on its expected revenue stream. In contrast to general obligation bonds, which are backed by the creditworthiness and taxing power of the issuer, revenue bonds focus solely on the financial performance of the designated revenue-generating source.