If that specified revenue source is insufficient to make debt service payments, the state is not legally obligated to appropriate other revenues for debt repayment. In Texas, the issuance of revenue bonds requires legislative, but not voter, approval. Bond issuing authority is either granted by the Legislature for a specific instance or by general statutory authority for the agency to issue revenue bonds. Self-supporting bonds are repaid from revenues generated from the financed project or program. Not self-supporting revenue bonds are repaid with general revenues subject to biennial appropriation by the Legislature.
Advantages There are several advantages to using revenue bonds.
Unlike general obligation bonds, financing is not delayed by the need to seek voter approval in a bond referendum. Also, self-supporting revenue bonds are not counted toward the debt limit. Additionally, self-supporting revenue bonds may be the more appropriate way to finance a public project because the responsibility for repaying the debt is distributed only among the users of the project. Disadvantages Among the disadvantages of using revenue bonds is their higher costs when compared to general obligation bonds. Because the source of repayment is not as legally secure as that of general obligation bonds and the risk of default is considered greater, revenue bonds usually carry higher interest rates.