Which type of bonds are secured by a special assessment or tax on properties within a defined area?

Special District/Assessment Bonds are specifically designed to be secured by a special assessment or tax levied on properties within a defined geographical area. This form of financing is commonly used to fund public projects or services that will benefit those properties, such as infrastructure improvements, roads, or utilities.

The rationale behind this bond type is that the properties receiving the direct benefits from the project will contribute financially to the repayment of the bonds through these assessments. This creates a direct correlation between the bond proceeds, the improvements financed, and the stakeholders who are affected, thereby enhancing the likelihood of repayment.

Other types of financing mentioned, such as Tax Increment Financing Bonds, work differently, primarily relying on future increases in property tax revenues anticipated as a result of the development rather than direct assessments. Debt service reserve funds are mechanisms used to ensure that sufficient funds are available to cover the bond's debt service but are not a type of bond themselves. Low interest loans typically refer to other financing and lending mechanisms and do not involve the specific security of property assessments to ensure repayment like Special District/Assessment Bonds do. This makes Special District/Assessment Bonds uniquely suited for projects that benefit specific properties within a defined area.