Final answer:
School districts, as smaller local governments, use property tax revenues to meet their debt service obligations on general obligation bonds. These bonds are backed by the full faith and credit of the issuing government, and are typically used for funding capital projects such as new school construction.
Step-by-step explanation:
For smaller local governments, such as school districts, general obligation bonds are issued to raise funds to cover various expenses, including the construction of new schools or other municipal facilities. These bonds are backed by the full faith and credit of the issuing government, which often means that they are guaranteed by the revenue that the local government is able to generate, primarily through the collection of property taxes. To meet the debt service on general obligation bonds, school districts will use property tax revenues in addition to any other revenues specifically earmarked for debt repayment.
School districts, being special districts, have the authority to levy taxes within their boundaries to fund their operations and pay back their debts. Therefore, when it comes to meeting the debt service obligations of these general obligation bonds, property taxes collected from residents within the district are usually the primary source of revenue for making interest payments and eventually retiring the debt at maturity.