what is a revenue bond 
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 understanding revenue bondsa revenue bond repays creditors from income generated by the project that the bond itself is funding such as a toll road or bridge while a revenue bond is backed by a specific revenue stream holders of go bonds are relying on the full faith and credit of the issuing municipality typically since holders of revenue bonds can only rely on the specific project s income it has a higher risk than go bonds and pays a higher rate of interest broadly several types of revenue bonds are commonly issued by state and local governments structure of revenue bondstypically revenue bonds mature in 20 to 30 years and can be issued in various increments including 1 000 and 5 000 the value of the bond is called the bond s face value which is the amount paid to the investor or bondholder at the bond s maturity some revenue bonds have staggered maturity dates and do not mature at the same time these are known as serial bonds investors can purchase a revenue bond by paying the face value amount of the bond upfront and in return are paid interest over the life of the bond at the bond s maturity the face value amount is returned to the investor provided there was sufficient revenue from the project to pay back the bond if there is insufficient revenue generated from the project investors are at risk of losing their total investment for example if a revenue bond is issued to build a new toll road the tolls that are collected from motorists who drive on the road would be used to pay off the bond after the building expenses have been paid a primary reason for using revenue bonds is that they allow the municipality to avoid reaching legislated debt limits an agency that is run solely on tax dollars such as a public school cannot issue revenue bonds since these entities would be unable to pay off the bond using revenues from the specific project real life examplesst louis missouri engages in tax exempt revenue bond financing typical projects funded this way are multi family housing in which a minimum of 20 of the units are set aside for households meeting income guidelines publicly owned facilities pollution control facilities and various fixed assets such as land buildings the maturity of most of the issues is 20 to 30 years and interest earned is generally tax exempt from federal and most state income taxes this also allows the issuer to pay a lower interest rate 1new york s metropolitan transportation authority mta decided to offer green bonds in february 2016 the mta is using the 500 million of proceeds to pay for planned infrastructure renewal projects including upgrades on its railroads the bonds issued under mta s transportation revenue bond are backed by the agency s operating revenue and subsidies received from new york state 2