Definition of special assessment bond

municipal bond that is repaid from taxes imposed on those who benefit directly from the neighborhoodoriented public works project funded by the bond; also called special assessment limited liability bond, special district bond, special purpose bond, special tax bond. For example, if a bond finances the construction of a sewer system, the homeowners and businesses hooked up to the sewer system pay a special levy that goes to repay the bonds. The interest from special assessment bonds is tax free to resident bondholders. These are not normally general obligation bonds, and the full faith and credit of the municipality is not usually behind them. Where the full faith and credit does back such bonds, they are called general obligation special assessment bonds.