Because property owners are usually reluctant to risk losing their holding from unpaid property tax bills, credit rating agencies often consider a general obligation pledge to have very strong credit quality and frequently assign them investment grade ratings.
Between the taxpayer delinquency and the higher property tax rate in the following year, the general obligation pledge requires the local government to pay debt service coming due with its available resources.
State law generally sets the conditions under which a local government can issue general obligation debt, including the type of security that is available: All things being equal, credit rating agencies and investors can consider an unlimited property tax pledge to be materially stronger than a limited-tax pledge.
That perception could thus potentially allow a local government to borrow at a lower interest rate, saving its taxpayers' money over the life of the bonds.
Despite that advantage, many states, such as California under Proposition 13, do not allow local governments to issue unlimited-tax general obligation debt without a public vote.