Community Development Municipal Bonds FRBSF Community Investments (pdf, 65 kb)
Barbara Rose VanScoy, CRAFund Advisors
Municipal bond is a general term referring to securities issued by states, cities, towns, counties and special districts. A primary feature of these securities is that interest on them is generally exempt from federal income taxation and, in some cases, state income taxation. Because of this feature, the interest rates on municipal bonds are lower than interest rates on other types of bonds, but when taking into account one’s income taxes, often provide a comparable, or better, rate of return. Revenue bonds are municipal bonds secured and repaid only from a specified stream of non-tax revenues. Examples of revenues include tolls, utility charges or charges and use fees from a facility being constructed with the proceeds of a bond issue, such as a sports facility or a housing project.