Limited tax bonds are muni bonds that are backed by the full faith and credit of the municipality but are secured by only a percentage of revenue from a specific tax or group of taxes. As a result, these bonds are typically slightly higher risk than normal general obligation bonds.
For example, suppose that a municipality wants to issue new bonds to finance new parks in a residential neighborhood. The government may decide to issue limited-tax bonds that are secured by the property taxes of that specific neighborhood.
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