General obligation bonds are issued for municipal projects that do not generate revenue (such as a government office building). They can be used for surface transportation projects. These bonds are backed by the "full-faith-and-credit" of the issuer. Many bonds issued by states, cities, or county districts also have the added security that they can raise property taxes to assure payment. This guarantee is of an unlimited nature. The issuer can raise taxes as high as they want to pay the bonds. If the property tax is not paid, the property can be sold at auction giving the bond holder a superior claim above mortgages, mechanical liens, and other encumbrances.
California Proposition 1B Transportation Bond Program
In November 2006, voters in California passed the largest general obligation bond package ever placed on a single ballot. The $37.3 billion package comprised four separate sectors of state infrastructure: transportation, housing, education, and flood control. The largest of the bonds was for transportation-Proposition 1B, the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006. A total of $19.925 billion in new funding for transportation was made available to a broad range of new and existing programs including highway and local road improvements, transit, goods movement and air quality improvements, and safety and security projects. These general obligation bonds represented a significant increase in state funding for transportation in California and have been spent over the 10 years since passage, as dictated by the bond act.