What characterizes a double barreled security?

A double barreled security is characterized as being paid from the revenues of a project while also having the backing of a general obligation of a municipal government. This means that in addition to the specific revenues generated by the project—such as tolls from a toll road or fees from a parking facility—these securities are also supported by the full faith and credit of the issuing municipal government. This dual backing provides investors with a greater level of security, as they have two sources of payment.

The importance of this characteristic lies in its enhancement of the security's credit quality. Investors are more likely to view these securities as lower risk because they are secured by both project revenues and the government’s capability to raise taxes or use its financial resources to ensure repayment. The combination of dedicated project revenue and the safe harbor provided by the government’s obligation makes double barreled securities an attractive investment in the municipal bond market.

Other choices, while related to aspects of taxation or types of revenue bonds, do not embody the dual nature of both revenue generation and government obligation characteristic of double barreled securities.