Can you explain the difference between Net Revenue and Gross Revenue Pledge on my Series 7 Exam?

A net revenue pledge requires the issuer of a municipal bond to use the surplus revenues from a project to repay its lenders after covering operational costs. In contrast, a gross revenue pledge mandates that the issuer pays off the bondholders' debt before covering any operational expenses. This means that in a gross revenue pledge, the issuer allocates funds for debt payments first, which can lead to higher operational costs and potentially lower the project's sustainability. In contrast, a net revenue pledge ensures that the project remains operational while still meeting its debt obligations, promoting both financial stability and investor confidence