I need an economist or accountant to explain this to me.

[lastlib]

3. Bonds can be financed from a variety of sources.

"General Obligation" bonds are paid from whatever source is available to the payer (I'm assuming in all this that we are discussing municipal bonds--which is any bond issued by a state or political subdivision, eg, city, county, water district...) The repayment is pretty much a line item in the budget, just like parks, sewers, roads, etc. But that "line item" cannot be taken out of the budget or reduced--so if the city gets into financial difficulties, they may have to forego spending on the other things to be able to pay off the bond. An "industrial revenue" bond is repaid from money raised by a specific project--other funds can't be used to pay it off. So if that project goes belly-up, bondholders would be left holding the bag; taxpayers wouldn't be on the hook for the money, unless some other provision of the bond contract (called an indenture) kicked in.

that's a short answer--there's a lot more to it. Municipal finance can be a fascinatingly complex subject.