What is the essential difference between GO bonds and Mello-Roos financing in terms of repayment?

What is the essential difference between GO bonds and Mello-Roos financing in terms of repayment?

• A. General obligation bonds are repaid from private donations; Mello-Roos uses a special tax levy for facilities.
• B. GO bonds repaid from state funds; Mello-Roos by private donations.
• C. General obligation bonds are repaid from general funds; Mello-Roos from lottery funds.
• D. GO bonds repaid from school lunch program revenues.

Answer: (A)

The key distinction is where debt service comes from. General obligation bonds are repaid from the issuer’s taxing power and general funds, effectively backing the debt with the jurisdiction’s credit and property tax revenues. Mello-Roos financing, used through a community facilities district, is repaid from a dedicated special tax levy on properties within the district that benefit from the facilities. This special levy is earmarked specifically for debt service, separate from the general fund. So the essential difference is that GO bonds rely on general tax revenues (broad taxpayers), while Mello-Roos uses a targeted, special property tax levy on benefited properties.

The key distinction is where debt service comes from. General obligation bonds are repaid from the issuer’s taxing power and general funds, effectively backing the debt with the jurisdiction’s credit and property tax revenues. Mello-Roos financing, used through a community facilities district, is repaid from a dedicated special tax levy on properties within the district that benefit from the facilities. This special levy is earmarked specifically for debt service, separate from the general fund. So the essential difference is that GO bonds rely on general tax revenues (broad taxpayers), while Mello-Roos uses a targeted, special property tax levy on benefited properties.