General Obligation Bonds differ from Revenue Bonds in that GO Bonds are secured by which source?

• A. The taxing power of the issuer
• B. The revenue generated by a project
• C. Both A and B
• D. Neither A nor B

Answer: (A)

General Obligation bonds are secured by the issuer’s taxing power—the full faith and credit pledge that the issuer can raise taxes to meet debt service. This contrasts with Revenue bonds, which are backed by the specific revenues generated by a project (tolls, fees, leases, etc.). Because GO bonds rely on tax receipts rather than project income, the backing comes from the issuer’s ability to levy taxes (within legal limits) to ensure debt service. That’s why the source of security for GO bonds is the taxing power. (Note: in some cases bonds can be structured as double-barreled and include additional security, but the standard distinction is tax-based backing for GO bonds.)