General obligation bond

A general obligation bond is a debt security issued by a government that uses all available resources to pay back investors. These bonds are considered to have less credit risk than bonds that are supported only by specific revenue streams, and so typically carry lower effective interest rates.  The terms associated with this type of bond may require the issuer to increase property tax rates in order to fund any shortfalls in bond payments. The funds raised through the issuance of a general obligation bond are generally targeted at projects that will benefit the entire base of taxpayers, rather than a smaller group, since all taxpayers are repaying the bond. The laws of the governing state set the rules under which general obligation bonds are issued.

Related Courses

Governmental Accounting 
Treasurer's Guidebook