Almost all municipal bonds are either general obligation or revenue bonds. Both forms of debt are issued by local and state governments in order to fund capital projects and public works.The difference between the two is that revenue bonds are directly attached to a revenue-generating project that will pay the bondholders back, such as a toll road, an airport, or a utility.A general obligation bond, on the other hand, is used for non-revenue-generating projects, such as schools, parks, or general infrastructure. These bonds are repaid using general funds, which are typically collected from property taxes. At times, a general obligation bond may be accompanied by a property tax hike in the municipality.