General Obligation Bond - GO
Categories: Bonds, Muni Bonds
A municipal bond backed by the full faith and credit of the municipality that issued the bond.
"Full faith and credit" means that a municipality will pay you the principal plus interest on the bond, because they can collect taxes and raise money. That is, the city pledges to pay "no matter what," double pinky swear...and that "what" can mean that the city itself goes bankrupt. And, in fact, that bizarroland phenomenon is starting to happen more and more around the country.
General Obligation Bonds are usually used for...general things. Like sewage treatment plants, infrastructure maintenance, cops, firemen, and the like. The main thread linking these is that they're activities that don't themselves generate revenue. And the city pays off the bonds from its general flow of revenues, like fishing licenses, parking tickets, income and property taxes, medicinal marijuana franchise license fees, and so on.
Since GO bonds are backed by the full faith and credit, those responsible for the full faith in such credit must approve their issuance. And who might those be? The citizens of the locality that is issuing them (that would be you).
Most GO bonds get paid out of property taxes, the $5 word for which is ad valorem. So see: Ad Valorem.