DEFINITION of 'Special Assessment Bond'

A special type of municipal bond used to fund a development project. Interest owed to lenders is paid by taxes levied on the community benefiting from the particular bond-funded project.

BREAKING DOWN 'Special Assessment Bond'

For example, if a bond of this sort was issued to pay for sidewalks to be re-paved in a certain community, an additional tax would be levied on homeowners in the area benefiting from this project. Area homeowners get nicer walking paths, and they will probably see the value of their property increase accordingly, but this comes at a price. Their property taxes will increase to pay the interest owed to the bondholders by the municipality.

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