Revenue Bond
A municipal bond backed by revenue generated from a specific project or facility rather than general tax revenue.
What is Revenue Bond?
A revenue bond is a type of municipal bond repaid from the income generated by a specific project — such as tolls from a highway, fees from an airport, water utility charges, or hospital revenues. Unlike general obligation bonds, revenue bonds are not backed by the government's taxing power. This means they carry higher credit risk than GO bonds if the project's revenue stream underperforms expectations. Revenue bonds are widely used to finance self-supporting public infrastructure and do not require voter approval in most jurisdictions. They are evaluated on the basis of projected revenue coverage ratios — how many times over the revenue covers the required debt service.
Example
The Port Authority of New York and New Jersey regularly issues revenue bonds backed by airport fees, bridge and tunnel tolls, and port revenues. Investors analyze the Port Authority's traffic and revenue projections carefully, since payment depends entirely on whether those revenues materialize — not on any government guarantee. Stronger revenue coverage ratios result in better credit ratings and lower yields.