Final answer:
The liability for special assessment bonds that carry a secondary pledge of a city's general credit should be reported in the governmental activities accounts, as this reflects the city's overall financial obligation in accordance with GAAP standards.
Step-by-step explanation:
The liability for special assessment bonds that carry a secondary pledge of a city's general credit, if reported in conformity with GAAP, should be reported in the governmental activities accounts. Special assessment bonds are typically used by local governments to fund specific projects and the residents who benefit from the project usually pay the assessments. Since these bonds carry a secondary pledge of the city's general credit, they represent a potential financial obligation for the city and thus, per GAAP (Generally Accepted Accounting Principles) reporting standards, should be recognized in the government-wide financial statements, particularly within the governmental activities column. While it is usual for these liabilities to be recorded in the books of a debt service fund, presenting them in governmental activities accounts is necessary for a full disclosure of the city's financial position. Agency funds, on the other hand, are custodial in nature and do not typically report liabilities related to the government itself but rather those related to the assets they hold on behalf of others. Therefore, the correct answer is option 3, The governmental activities accounts.