Why would a government issue revenue bonds (which generally are issued at a higher rate of interest than general obligation bonds) even though the government knows that if revenues from the project are not sufficient to cover principal and interest payments, the government will use resources from general government activities to fund the principal and interest payments?
A) Revenue bonds may not require approval of the voters.
B) Revenue bonds may not be considered in legal debt limitations.
C) Revenue bonds may permit the interest costs to be passed on to the users of the services financed.
D) All of the above.

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Quizplus · Accepted Answer

Revenue bonds offer several advantages despite their higher interest rates. They often do not require voter approval, which can expedite the financing process. They may also not count against legal debt limitations, allowing governments to undertake additional projects without exceeding debt caps. Furthermore, the interest costs of revenue bonds can typically be passed on to the users of the financed services, directly linking the beneficiaries of the service to its costs.

Why Would a Government Issue Revenue Bonds (Which Generally Are