General Obligation (GO) Bond Backing and Voter Referendum
Which of the following characteristics is UNIQUE to municipal General Obligation (GO) bonds as opposed to municipal Revenue bonds?
General Obligation (GO) bonds are backed by the full faith and taxing power of the issuer (ad valorem property taxes for local governments; income/sales taxes for states) and are subject to statutory debt limits and voter referendums.
Complete Analysis & Legal Rationale
Revenue bonds are backed by user fees (tolls, hospital charges, utility fees), do not require voter referendums, and are not subject to statutory debt limits. GO bonds require voter approval because taxpayers are directly liable for debt service.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Accurately identifies taxing power backing, voter referendum, and debt limit constraints.
User fees back Revenue bonds, not GO bonds.
Protective rate covenants appear in Revenue bond trust indentures.
Feasibility studies analyze Revenue projects (airports, toll roads), not GO tax revenue.
Official Standard: Disclosure standards distinguishing general obligation from revenue pledges.