What distinguishes public use revenue bonds from other bonds?

Public use revenue bonds are specifically structured to be payable from the earnings generated by a particular project, rather than from general tax revenues. This means that the revenue derived from the operation of that specific project, such as tolls from a toll road or fees from a public facility, is designated to cover the bond repayments. This structure allows issuers to raise funds for projects that may not be supported by general tax revenues, reinforcing the idea that these bonds are closely tied to the financial performance of the intended project.

In contrast, options discussing tax relief or full faith and credit do not accurately represent the nature of public use revenue bonds. While some bonds may offer tax benefits, public use revenue bonds specifically focus on revenue generated by the project. Additionally, many bonds may carry the backing of government credit, but public use revenue bonds do not typically come with such guarantees; they rely instead on the financial success of the specific initiatives they fund. Lastly, while it is important for any investor to understand the features of redemption, the presence or absence of redemption options does not serve as a defining characteristic of public use revenue bonds. The core distinction lies in the dependence on project earnings for bond repayment.