What is a special assessment in bond financing?

A special assessment in bond financing refers specifically to a type of tax or charge that is levied on properties within a defined area to help finance public projects that benefit those properties. This can include infrastructure improvements such as sidewalks, sewers, or streetlights. When a municipality issues special assessment bonds, the revenue generated through special assessments is used to repay these bonds.

In this context, the correct choice highlights the relationship between the special assessment and the funding mechanism used to redeem these specific types of bonds. This is distinct from general taxes, loans, or maintenance fees, which do not specifically connect the assessment to the repayment of bonds designated for particular improvements. The focus here is on how these assessments are tied directly to the financing and repayment structure of projects benefiting certain properties, thus making it a vital aspect of bond financing.