What typically pays the interest for revenue bonds?

Revenue bonds are a specific type of municipal bond that are secured by the revenue generated from a specific project or facility. The primary purpose of these bonds is to finance projects such as toll roads, bridges, airports, and public utilities.

In this context, the interest on revenue bonds is typically paid from the earnings generated by the facility that the bonds have financed. For instance, if a revenue bond is used to build a toll road, the tolls collected from vehicles using that road will be used to pay back bondholders. This creates a direct link between the revenue generated and the obligation to pay interest on the bonds.

Choosing the correct answer reflects an understanding of how specific revenue-generating projects work in the context of public financing. In contrast, other options may suggest funding sources unrelated to the direct revenue from the project itself. Tax revenues from state and local governments, for example, typically pertain to general obligation bonds and are not the primary source for repaying revenue bonds. Similarly, investors' capital contributions or general revenue from all public services do not specifically account for the financing of individual projects, unlike the earnings from the facility funded by the bonds. Understanding these distinctions is crucial when navigating the bond market and public finance.