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Types of revenue bonds based on the underlying projects or revenue source.
Airport revenue bonds finance the construction of airports. In the US, most public airports are owned, managed, and maintained directly by the municipalities or public authorities created for that purpose. Revenue sources for this type of bond are landing fees, concession fees, airline fueling fees, and lease payments for using facilities such as terminals or hangars.
Hospital revenue bonds are used in the construction and renovation of hospitals, as well as to buy equipment or latest technologies. The majority of security for hospital revenue bonds generally depends on federal or state reimbursement programs, such as Medicare and Medicaid. Individual patient payments are also a source of revenue.
Single-family housing mortgage revenue bonds are generally secured by mortgages and loans repayments on single-family homes issued under Federal Housing Administration (FHA), Veterans Administration (VA), or private mortgage insurance.
Multi-family housing revenue bonds are issued for multi-family housing projects for senior citizens and low-income families. The credit quality of the bonds are enhanced by additional security or insurance offered by the federal government; others receive federal government operating subsidies or interest cost subsidies.
Public projects such as industrial parks, factories, and stadiums are usually financed by industrial revenue bonds. Fees, revenue, concessions, and lease payments provide the backing. Industrial bonds are generally issued on behalf of individual corporations and businesses. The key factors for these bonds are the economic stability of the particular business and corporation.
Public power revenue bonds finance power plants. Proceeds from the sale of electricity provide the cash flow to repay the bonds and interest. Some public power bonds are for a single issuer, who constructs and operates the power plant and sells the electricity. Some, on the other hand, are issued by a group of public and private investors, who own facilities for the joint financing of the construction of power plants.
Water revenue bonds finance the construction of water treatment plants, sewer projects, pumping stations, and distribution systems. Connection fees and usage fees or charges paid are the revenue source for the project.
Highway revenue bonds are used to build revenue-producing transportation facilities such as bridges, highways, tunnels, and toll roads. Toll taxes are the main sources of revenue for these bonds.
College and university revenue bonds fund the construction of centers of higher learning such as colleges and universities. Bondholder security can include tuition payments, dormitory room rental fees and fines, as well as the general assets of the college or university.
Special tax bonds are supported by excise taxes, such as those on liquor and cigarettes. In some cases, they are also backed by special assessments on the beneficiaries of the particular project.