Definition

• A revenue bond is a tool for funding long-term construction projects.
• It is a type of municipal bond that is supported by the revenue generated by the project it funds.
• The City:
  • Issues the bond
  • Acts as a conduit, or facilitator, to help access low-interest bond funding

Funds

The City issues three types of revenue bonds for capital improvement projects.

• Bank-qualified
• Freestanding
• Common Bond Fund (CBF)

Investors

Revenue bonds are sold to two types of investors.

• Large investors
• Banks

Bank-qualified and freestanding bonds

• Revenue bonds for nonprofit projects are appealing to investors because of their tax-exempt status.
• The investor does not pay income taxes on the interest.

Common Bond Fund (CBF)

• CBF bonds are high-quality investments with an "A+" rating from Standard & Poor’s.

Borrowers

Nonprofits and certain manufacturing companies are the borrowers of revenue bonds. 

They are an appealing tool for financing a capital improvement project because:

• You get lower, tax-exempt interest rates.
• You get long-term, fixed-rate financing.
• The loan-to-value may be higher.