Revenue Bond Definition

Definition

A revenue bond is a municipal bond backed primarily by income from a specific project, facility, or enterprise rather than the issuer's general taxing power.

Why it matters on the Series 7

Series 7 questions often ask you to separate the repayment source for a revenue bond from a general obligation bond. The clue is usually a toll road, airport, utility, hospital, housing project, or another enterprise that generates revenue.

Example

If a city issues bonds to build a toll bridge, debt service may be paid from bridge tolls. The bondholder is relying on project revenue, not broad property-tax backing.

Common mistakes

• Assuming all municipal bonds are backed by taxes.
• Choosing ad valorem taxes when the stem names a self-supporting project.
• Ignoring feasibility and revenue-flow risk because the issuer is a municipality.