Special Assessment Bond and Special Purpose Bonds
A special assessment bond is firstly a type of municipal bond, which as we have covered in previous articles are debt security bonds issued by a state or municipality to finance capital expenditure. Special assessment bonds are used to financially back a development project and the interest is payable to the investors through taxes levied on the community whom are supposedly benefiting from the specific assessment bond funded project.
In essence, this is a type of municipal bond that is repaid by taxes collected from those who are appreciating (hopefully) the development or service that the project was funded for. An assessment bond is also sometimes referred to as a special purpose bond since the projects that they often fund are for the good of the community. An example; A local community sees their local facilities improved and a recreation facility produced. This not only increases the value of their homes as their neighbourhood sees a rise in value, it benefits them as individuals. However, with increased value come increased taxes, which of course are used to fund the project in the first place.
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