Public Purpose Bond

AAA

DEFINITION of 'Public Purpose Bond'

This type of bond is used by municipalities to finance public works facilities and improvements. However, the vast majority of the benefit provided by the project being financed by a public purpose bond must be directed at the public at large, and not at private individuals. Public Purpose Bonds are generally employed to fund such projects as road construction and maintenance, libraries, swimming pools and other municipal facilities.

INVESTOPEDIA EXPLAINS 'Public Purpose Bond'

As with all other types of municipal bonds, the interest paid from Public Purpose Bonds is exempt from federal income taxes (and often state and local taxes as well). Public Purpose Bonds were first defined in the Tax Reform Act of 1986. Municipalities that are authorized to issue this type of bond must have the ability to tax their residents, plus eminent domain or police power.

RELATED TERMS
  1. Straight Bond

    A bond that pays interest at regular intervals, and at maturity ...
  2. Municipal Bond Fund

    A mutual fund that invests in municipal bonds, or "munis." Municipal ...
  3. Interest

    1. The charge for the privilege of borrowing money, typically ...
  4. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  5. Private Purpose Bond

    A type of municipal bond that is issued to finance a project ...
  6. Holacracy

    A holacracy is a system of governance where members of a team ...
RELATED FAQS
  1. Where can I buy government bonds?

    The type of bond determines where you can purchase it, so you need to decide which type of bond you would like to purchase ... Read Full Answer >>
  2. How can I increase my standard of living in my retirement years?

    If you're decades away from retirement, the best way to ensure a decent standard of living during your golden years is to ... Read Full Answer >>
  3. What is each party's role in a reverse repurchase agreement?

    There are two principal parties in a reverse repurchase agreement. The first party, often called the seller, is offering ... Read Full Answer >>
  4. Can I get a tax credit from conducting research and development?

    It is possible for a company to qualify for a research and development tax credit for conducting research and development. ... Read Full Answer >>
  5. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  6. What happens to the company stock if a subsidiary gets spun off?

    When a subsidiary gets spun off, the company's stock tends to drop. However, the investor in the stock does not lose any ... Read Full Answer >>
Related Articles
  1. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  2. Bonds & Fixed Income

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  3. Taxes

    Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.
  4. Savings

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  5. Economics

    What is a Resident Alien?

    A resident alien is a foreigner who is a permanent resident of the country in which he or she resides but does not have citizenship.
  6. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  7. Economics

    Explaining Protectionism

    Protectionism is government measures that limit imports into a country to protect commerce within that country against foreign competition.
  8. Economics

    Understanding Organizational Behavior

    Organizational behavior is the study of how humans interact in group environments.
  9. Economics

    What is a Leasehold Improvement?

    A leasehold improvement is an alteration made to a rented space that customizes the space for the tenant.
  10. Fundamental Analysis

    Understanding the Profitability Index

    The profitability index (PI) is a modification of the net present value method of assessing an investment’s attractiveness.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!