The general obligation refers to a pledge which is a set of conditions that state how a local or national government can issue or repay general obligation debt, including its securities. More often than not – as already mentioned – the use of land or property taxes and levying these in order to satisfy the borrowing of the debt requirements. Understandably those who own property are reluctant to lose their property because of unpaid taxes therefore the may consider using a credit agency to make a general obligation pledge for strong credit quality and assign a investment grade rating. This basically means that if property owners are late or miss their property tax payments their tax rate increases and the owner will indefinitely have to pay a higher rate the following year.

It is important to note that state laws determine the conditions of which a local government can issue general obligation debt and these have two forms;

• Limited tax general obligation pledge – Local government to levy property tax to meet debt obligations. It’s limited because the government can choose only a section of the tax that it decides to levy.
• Unlimited tax general obligation pledge – Identical to the limited but the government has a free reign to levy any tax rate they feel is necessary.