What are revenue bonds backed by?

Revenue bonds are specifically backed by the income generated from specific projects or revenue-generating entities. These bonds are typically issued to fund projects such as transportation systems, water and sewer systems, or public utilities, and the primary source of repayment for these bonds comes from the revenue generated by the project itself, rather than from general taxation or government support.

This distinction is crucial because it reflects the risk and benefit directly tied to the success of the project funded. If the project underperforms and fails to generate the anticipated revenue, the ability to meet the bond obligations is compromised, thereby placing greater risk on investors. In contrast to bonds backed by taxation or general fund allocations, revenue bonds are more closely tied to the economic viability and profitability of the specific project.