Need to Know - Municipal Bonds

When a city needs money for an expensive project like the construction or repair of roads, bridges, sewers, etc., they will issue a municipal bond. Municipal bonds are attractive to investors because they are not subject to federal taxes and they tend to be good credit quality investments.

Like a mortgage is a loan to a homeowner, a municipal bond sale is a loan to city. Like all loans, bond debt repayment comes with terms that vary based on the city's creditworthiness and other potential risk factors.