How Do Revenue Bonds Work

The bonds are repaid through the revenue earned by the transportation system.

How do revenue bonds work. They ve been used for decades to help localities improve their roadways and infrastructure. Transportation revenue bonds are issued to finance local public transportation projects such as buses subway systems toll roads and airport systems. Revenue bonds explained. In the case of education or school systems bonds issued for colleges and universities are generally backed by income or other progressive taxes.

These buyers are credit worthy but may have low incomes or low liquidity making it hard for them to qualify for a standard mortgage. Revenue bonds are most often issued to finance a revenue generating public works project such as bridges tunnels sewer systems education e g. How revenue bonds work a public referendum may be required before a revenue bond can be issued. A revenue bond repays creditors from income generated by the project that the bond itself is funding such as a toll road or bridge.

In other words the money raised by the bond offering directly finances the project and the project once complete generates the revenues to pay back the interest and principal on the bonds to investors. College dorms and or student loans. In most jurisdictions public transit systems are authorized by statute or ordinance to issue debt secured with a variety of revenue sources such as motor vehicle registrations sales taxes property taxes farebox revenues and anticipated grant receipts. Through the state s mrb program proceeds from bonds can be allocated to provide low interest loans to qualified borrowers.