Authority Bond
When a government issues a bond, it's usually backed by tax revenues. The government is borrowing money from the bond holders and will pay it back (with interest) using the taxes it collects from its citizens.
An authority bond is different. Instead of getting paid back with taxes, the authority bond is issued with some particular project in mind, and the borrowed money will be returned from revenue generated directly from that project.
For instance, a state might want to build a highway. It sets up a highway authority to conduct and oversee the project. In order to pay for the construction, the authority issues bonds, which are backed by revenues from toll booths that will be placed on the highway.
The bonds themselves can be issued by either a government or a corporation (there are some tax and other implications that can depend on exactly who and how the bonds are issued), but authority bonds always relate to some revenue-generating public work.
Related or Semi-related Video
Finance: What is a Banker's Acceptance N...205 Views
Finance a la shmoop, what are bankers acceptance notes and cashier's checks ok
so bankers acceptance note what is it well it's kind of a t-bill but with [Guy holding up the note]
fewer calories that is a bank takes on the risk or promise of a future payment
to be made to a creditor and it's you know backed by the bank and it's kind of [The bank and government building behind the note]
backed by the federal government sorta sound weird well it is bankers
acceptance notices are generally used in foreign trade where the two parties well
just don't trust each other think about it like an escrow account when you buy a [People taking out a for sale sign]
home the funds get released once it's confirmed that the home does not in fact [Bars covering a vault of money open]
have nuclear waste under it the gal who says she's the owner of the home is in
fact the owner and the forward costs of taxes have all been paid like it's a [Escrow account checklist]
good sale the home's legally available to be sold in fact and after all the [Sold sticker is put on the sale sign]
boxes have been checked well then the money releases from the bank to the
seller and all's good while bankers acceptance notes work in [Money going to a person from the bank]
the same fashion like the shipment of Chinese tow traps way more comfortable
than the finger version was in fact found and picked up at the loading dock [Someone putting their finger into the trap]
brought back to the factory and you know tested on chimps sorry Pete oh we're
just keeping it real at that point the bank pays the foreign bank and while [Protesters]
everyone's happy ish why pay the extra fees for a system to work this way like
banks don't pay banks for free well because banks generally quote know each
other unquote better than individuals know
each other across foreign borders US banks trade with banks in whatever Stan [Money going across a map of the Earth]
all the time even when US banks have no idea where whatever stand is or what it
whatever stands for then you've got the kissing cousin of the bankers acceptance
note the cashier's check well the cashier's check is guaranteed
by the bank and drawn against the bank's own cash reserves that check is signed
by a cashier as if the bank itself is buying whatever product is being paid
for with a cashier's check the bank is the entity fully responsible for paying [Tow traps going to the bank]
that amount and because of this quote extremely guaranteed safety unquote
cashier's checks are common in complex or expensive transactions like buying a
home or setting up an initial brokerage so that the odds of the monkey business
happening when it comes time to collect the bananas are low and this is why [Monkeys running around with bananas]
like bananas cashier's checks have appeal... [Guy holding a banana skin in one hand and a cashier's check in the other]
Up Next
What are government bonds? Uncle Sam needs dough. He sells bonds in the form of T-Bills, T-Notes, Treasury paper of all flavors. His credo? The cre...
What are T-Notes, T-Bonds, and TIPS? T-Notes are debt securities (like bonds) that are issued by the government and mature within one to 10 years....
What are Bond Anticipation Notes (BANS), Revenue Anticipation Notes (RANS), and Tax Anticipation Notes (TANS)? BANS, RANS and TANS are all short-te...
What is an Agency Bond? Agencies bonds are issued by government agencies, not the treasury. The typical government bonds (T-bills, T-notes, and suc...