Special Tax Bonds vs. Special Assessment Bonds
A city issues municipal bonds to finance the construction of new sidewalks, streetlights, and curbs in a specific residential subdivision. Debt service is funded exclusively by an additional surcharge levied on the homeowners who directly benefit. This bond is classified as a:
Special assessment bonds are backed by taxes levied ONLY on the specific properties or homeowners that directly benefit from the public improvement (e.g. sidewalks, water hookups).
Complete Analysis & Legal Rationale
Special tax bonds are backed by specific non-ad valorem excise taxes (such as fuel, tobacco, alcohol, or hotel occupancy taxes) levied across an entire community. Special assessment bonds target specific benefited property owners.
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:
Assessments on benefited properties specifically fund special assessment bonds.
Special tax bonds are backed by specific excise taxes (tobacco, liquor), not localized property improvements.
Double-barreled bonds carry secondary backing from general taxing authority.
Industrial development bonds benefit private commercial corporations.
Official Standard: Disclosure of discrete revenue sources for assessment bonds.