American Institute of Certified Planners (AICP) Practice Exam

In terms of funding, what role do revenue bonds play?

1. They are issued for general governmental use

2. They finance specific capital projects and are repaid through revenue generated

3. They are used exclusively for educational purposes

4. They are solely funded by individual donors

The correct answer is: They finance specific capital projects and are repaid through revenue generated

Revenue bonds are specifically designed to finance particular capital projects, such as infrastructure improvements or construction of facilities, and their repayment is directly linked to the revenue generated from those projects. This means that the funds acquired through the bond issuance are not used for general governmental expenditures but rather earmarked for a designated purpose. The repayment is typically derived from the income produced by the facilities or projects that the bonds finance, such as tolls from a bridge or fees from a public utility. This structure differentiates revenue bonds from general obligation bonds, which are backed by the full faith and credit of the issuing government and can be used for a variety of expenditures. The specificity in funding and repayment mechanisms makes revenue bonds a critical tool for planners looking to develop projects that are self-sustaining over time. The ties to generated revenue ensure that the financial responsibility is closely linked to the project’s operational success, making investors feel more secure about repayment.