When private companies sell revenue bonds through a local government entity, some investors can get confused about what they’re buying.

That’s the case for some people who purchased more than $55 million in revenue bonds sold by The Glebe retirement community through the Roanoke County Industrial Development Authority in 2003.

A municipal bond is typically considered a safe investment  because such a bond is usually issued by a city, county or other local government  and is secured by that government’s taxing authority.

“When it’s a true municipal bond … then it’s considered a pretty good investment,” said Bonnie France, a Richmond lawyer who acts as Roanoke County’s bond council.

But not all bonds issued through an industrial development authority are backed by a local government.

Some,  such as those sold by The Glebe  and are now in default, are the sole responsibility of the organization and can be riskier investments. They’re issued through local government agencies because not-for-profit organizations must get approval from an industrial development authority to issue tax-exempt bonds, which offer lower interest rates than conventional taxable bonds.

But understanding the difference can be confusing to people, said France, “because they’re considered municipal bonds but they’re not backed by the locality.”

Doug Chittum, Roanoke County’s director of economic development, said private entities  such as The Glebe that sell bonds through the county typically repay investors and are considered good investments.

“It is very rare that there’s a default on these. It’s the only one that I’ve experienced,” said Chittum.

— Jay Conley