What is the primary purpose of a General Obligation bond?

The primary purpose of a General Obligation bond is to fund government operations, particularly to finance public projects like schools, roads, and infrastructure improvements, which are considered necessary for the community. These bonds are backed by the full faith and credit of the issuing government entity, meaning that they are repaid through taxation or revenue generation from the government's operational activities.

Unlike bonds issued for specific projects, such as revenue bonds, General Obligation bonds do not tie the financial obligation to a particular income source; instead, they reflect the general creditworthiness of the government, allowing it to secure funding for a range of expenditures. This characteristic provides a stable investment option for bondholders who seek security in the knowledge that the issuing authority is obligated to repay the bonds through various means, such as property taxes or other local revenue streams.

Options that focus on specific projects, corporate funding, or tax exemption do not capture the broader role of General Obligation bonds within government financing, which distinguishes them in terms of purpose and backing.