The Securities and Exchange Commission notes that local bonds generally fall under 2 classifications:. These bonds count on the "full faith and credit" of their companies without being secured by any assets. Government issuers, nevertheless, have complete authority to tax their residents in order to pay their shareholders. These bonds do not depend on a federal government's authority to tax homeowners; instead, the bonds are paid from the income that the bonded task generates.

These bonds require voting approval prior to issuance. Bond offerings needing citizen approval or not include funding for tasks such as enhancing a state's infrastructure, consisting of highways and bridges; funding a company's operations; building health centers, schools and libraries; and repairing water/wastewater facilities. Various types of bonds have different maturity dates, which are the dates on which the bond issuer repays its investors their complete principal amount.

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