Financing public projects often involves the issuance of bonds by governments and municipalities. Among the various types of bonds, general obligation (GO) bonds and revenue bonds are widely used. These bonds play a crucial role in funding public initiatives, but they have distinct features regarding repayment sources and investor security. In this article by Provident Financial Planning, we will delve into the dissimilarities between general obligation bonds and revenue bonds, providing insights into their characteristics, advantages, and considerations for potential investors.
General obligation bonds are issued by government entities, such as states, cities, or counties, to finance a variety of public projects, including infrastructure improvements, schools, and public facilities. These bonds are backed by the full faith, credit, and taxing power of the issuer. Key features of general obligation bonds include:
Revenue bonds, on the other hand, are issued to finance specific revenue-generating projects, such as toll roads, airports, water and sewer systems, or public utilities. Unlike general obligation bonds, revenue bonds are secured by the revenue generated by the project being financed. Key features of revenue bonds include:
While both general obligation bonds and revenue bonds offer investment opportunities, there are important factors to consider:
General obligation bonds and revenue bonds are distinct types of municipal bonds with different repayment sources and risk profiles. General obligation bonds rely on the full faith, credit, and taxing power of the issuing government entity, while revenue bonds are backed by revenue generated from specific projects.
It is important to evaluate creditworthiness, assess risk levels, and consult with a financial advisor about investing in these bonds. At Provident Financial Planning, we use individual bonds to manage cashflow needs for clients in retirement to secure their future and minimize short term market volatility.
Schedule a free consultation in Dallas, Plano, Southlake, Houston, Atlanta or by Zoom to begin building a wealth management strategy today. Our JD, CPA, CFP® team also files taxes and can help you design your legacy plan.
Guided by our values of faith, service, and transparency, we at Provident Financial Planning are ready to help you navigate your financial journey. Schedule a consultation with us and discover how we can create a personalized financial plan for you.