Revenue bond - Financial definition

Revenue bonds are typically used to fund infrastructure projects such as toll roads, bridges, airports, and water treatment facilities, where the revenue generated from the usage fees or service charges is used to repay bondholders. These bonds are attractive to investors because they offer a clear revenue stream tied to a specific project, reducing the risk compared to other bonds reliant on general tax revenues.

For example, a city might issue a revenue bond to build a new toll bridge, with the toll fees collected from users earmarked for bond repayment. Revenue bonds are common in public finance and are often preferred when the project can generate sufficient revenue to cover its costs, thus minimizing the financial burden on taxpayers.