SIE Exam Question 506: Answer and Explanation

Question: 506

Which of the following municipal issues would most likely have more than one source of revenue?

• A. Bonds issued by the county to improve the municipal courthouse.
• B. Bonds issued by the state to cover general working expenses.
• C. Bonds issued by a turnpike authority to improve roads.
• D. Bonds issued by a town to improve school buildings.

Correct Answer: C

Explanation:

C: Bonds issued by a turnpike authority to improve roads would be revenue bonds and the debt service would be supported through the collection of tolls. If the collection of tolls were not sufficient to cover the bond interest, the issuing state or county may cover the shortfall out of the general revenue. Of the choices listed, the bond is the most likely to have two sources of revenue backing the payments.