These bonds are payable from a pledge of the proceeds against a specific tax. This tax could be a gasoline tax, a special assessment, or ad valorem tax levied at a fixed price. Unlike General Obligation bonds and their unlimited ability to raise taxes, with these bonds, the issuer is limited as to its source for the revenue to pay the bonds. These bonds are quite safe. These are payable from the earnings of a revenue producing agency or enterprise.
Examples are water, sewer, school district, airport, etc.
States and their sub-divisions create certain agency's and authorities to perform specific tasks. These bonds are analyzed in terms of historical or potential earnings compared with the bond requirements. Usually, the yield is higher than that of a general obligation bond. This is because taxes are more secure than revenues. These bonds have built up a good record over a long period of time.