Gross Revenue Pledge
Categories: Accounting
When a local government wants to fund a project (building a hospital or hosting the annual harvest moon blood atonement), they might turn to the bond market to raise the money. They sell bonds to investors, who hand over cash in exchange for a promise that the money will get paid back with interest.
These muni bond investors want to make sure they get paid. As a result, the government might back the bonds with revenue of some kind, often revenue generated from the project getting funded by the bonds.
A gross revenue pledge means the first priority of these revenues will be to pay off the bonds. Before any other bills get paid, the bond holders will get their cut.
This structure is opposed to a net revenue pledge. In that set up, revenues first get used to pay associated expenses, then bond holders have dibs on what’s left.