Industrial development revenue bonds are backed by which entity?

Industrial development revenue bonds are typically backed by the corporation that leases the facility. These bonds are issued by a municipality, but the revenues generated from the facility—such as lease payments from the corporation—are what ultimately secure the bondholders’ interests. The municipality issues the bonds to finance the construction or improvement of a specific project, such as a factory or industrial facility, but it is the leasing corporation that directly repays the bonds through the lease payments it makes. This mechanism allows a municipality to facilitate industrial development while minimizing its own financial risk.

Other options suggest that the backing comes from local municipal districts, states, or a combination of different entities, which can be misleading. While the municipality may play a key role in the issuance and facilitation of the bonds, it is the corporation that provides the revenue needed to pay back the bondholders through its lease obligations. Thus, understanding that the responsibility for repayment lies primarily with the corporation clarifies why this choice is the most accurate representation of how industrial development revenue bonds function.