Investing Bond Proceeds in Arizona: Permitted Investments and Rules

Arizona issuers investing bond proceeds start from A.R.S. §35-323, the statute on investment of public monies, which directs the treasurer to invest public monies in eligible investments with a maximum maturity of five years.

State law is one of three layers around the money: the bond contract defines the issue's permitted investments, the state list bounds what an Arizona treasurer holds, and the federal arbitrage rules cap yield and shape bidding on top.

This page is the Arizona entry in mGIC's guide to permitted investments by state, and it covers the statute's eligible list, its treatment of investment agreements and repos, deposit collateral, the state pool, the bidding rules and what mGIC's published record says about Arizona.

Which statute governs, and what does it say?

The governing statute is A.R.S. §35-323, whose opening subsection directs an Arizona treasurer to invest and reinvest public monies in securities and deposits with a maximum maturity of five years, all in eligible investments.

Of the subsections this page draws on, §35-323(A)(5) covers pooled investment funds maintained under A.R.S. §35-326, the state's local government investment pool; §35-323(A)(6) covers obligations issued or guaranteed by the United States or any of the senior debt of its agencies; §35-323(A)(13) covers investment companies registered under the Investment Company Act of 1940, including ETFs, whose underlying investments are permitted by state law; and §35-323(N)(1) provides that public operating fund monies may not be invested beyond five years.

Two limits on what this statute answers matter for bond proceeds: no bond-proceeds or indenture carve-out appears in §35-323, and the research behind this page did not extend to whether other Arizona statutes govern bond proceeds.

Which statute and which documents control a particular Arizona fund is a determination for bond counsel.

The bond-contract layer has a definition of its own: the MSRB glossary defines permitted investments as the instruments in which bond proceeds or other funds may be invested pursuant to the provisions of the bond contract.

That contract may take the form of an indenture, which the same glossary defines as a contract between the issuer and a trustee for the bondholders' benefit, while noting that many governmental issues, especially general obligation bonds, may not use one; the guide to the bond indenture takes up what one says about investing proceeds.

The third layer is federal tax law: IRS Publication 5005 notes that conduit issuer fees can raise the effective yield on a conduit loan, which is a purpose investment, and that Section 148 generally limits purpose-investment yield to the bond yield plus a spread; the guide to yield restriction takes up those rules.

What is on Arizona's eligible investment list?

The eligible list in A.R.S. §35-323 includes United States and agency obligations, the State Treasurer's pooled funds, registered investment companies, repurchase agreements and deposits, all inside the five-year maximum maturity except that repurchase agreements carry a 180-day cap.

Subsection (A) runs longer than the categories quoted here, so the statute itself is the controlling text for any specific purchase.

Certificates of deposit enter through the statute's treatment of deposits, and subsection (B) attaches an award rule to them that the procurement section below covers.

What rules apply to investment agreements, GICs and repurchase agreements?

A.R.S. §35-323(A)(4) admits repurchase agreements with a maximum maturity of 180 days, and the eligible list the statute sets out does not name guaranteed investment contracts.

A 180-day maximum maturity means each agreement ends within 180 days, so a fund drawing over several years would hold a series of short agreements rather than a single multi-year one; the guide to full-flex repurchase agreements covers how repo terms are built for bond proceeds.

Two limits stated under the governing-statute question apply here too: no bond-proceeds or indenture carve-out appears in §35-323, and the research behind this page did not check whether other Arizona statutes govern bond proceeds.

A category missing from the §35-323 list is not, for that reason, a category the statute forbids, and whether an investment agreement is available for a particular Arizona issue is a determination for bond counsel under the bond documents.

Where an issue's documents do provide for one, the guaranteed investment contract guide covers the instrument, and its bid follows the federal solicitation rules described below.

What rating and collateral requirements apply to Arizona public deposits?

A.R.S. §35-323(G) requires an eligible depository to deliver collateral equal to at least 102 percent of a deposit before receiving more than the insured amount, while the parts of the statute this page draws on do not address rating requirements, so the statute itself is the controlling text on that point.

Eligible collateral under that subsection includes a surety bond, obligations of the United States and its agencies, state and municipal bonds, safekeeping receipts and Federal Home Loan Bank letters of credit.

Rating terms for a specific issue's investments sit where its bond documents and bid specifications put them, which the general treatment of permitted investments covers in depth.

Does Arizona have a state investment pool option?

Yes: A.R.S. §35-323(A)(5) makes pooled investment funds maintained under A.R.S. §35-326 eligible investments, which is the statutory footing of the state's local government investment pool.

The MSRB glossary describes a local government investment pool as an investment pool established by a state or local governmental entity or instrumentality that serves as a vehicle for investing public funds of participating governmental units, with participants buying shares or units, often in a trust.

Pool yields change daily, so this page states none of them and leaves current figures to the pool's own disclosures; the guide to local government investment pools takes up when a pool fits bond proceeds, as does the state pool versus bid GIC comparison.

How are Arizona public monies bid?

A.R.S. §35-323(B) requires certificates of deposit to be bought from the eligible depository bidding the highest permissible rate, and it provides that monies over $100,000 may not be awarded at any interest rate less than 103 percent of the equivalent bond yield of the offer side of United States Treasury bills having a similar term.

Subsection (D) breaks tie bids, subsection (E) makes submitted bids irrevocable, and subsection (F) requires bid records to be kept for two years.

That bidding mandate covers certificates of deposit, not investment agreements; how an investment agreement is solicited on a particular issue follows its bond documents and the federal tax rules, which the guide to competitive bidding collects.

For investments within the federal arbitrage rules, Treasury Regulation §1.148-5(d)(6)(iii)(A) describes a bona fide solicitation as written bid specifications timely sent to potential providers, containing all material terms and only commercially reasonable terms, with electronic form permitted; the bid specifications guide takes up what those specifications contain.

The regulation defines a material term as one that may directly or indirectly affect the yield or the cost of the investment.

For yield-restricted defeasance escrows, the same provision requires the hold-firm period to be no longer than reasonably required.

Refunding escrows add the division of labor GFOA describes: an escrow agent, typically a commercial bank, holds the escrow investments; a verification agent, typically a CPA firm, confirms the escrow is sufficient and, where yield is limited, that escrow yield does not exceed the permitted yield; and an escrow bidding agent solicits bids for open-market escrow securities, a role GFOA says a municipal advisor may be able to fill if one is engaged, which the Bidding Agent guide covers from the issuer's side.

Which representative transactions in Arizona does mGIC publish?

None of the representative transactions mGIC names on its site is an Arizona project; the named deals sit in other states, while mGIC itself was founded in 2002 and is based in Scottsdale, Arizona.

The record mGIC publishes covers more than $60 billion in bond proceeds invested and swap notional executed across more than 1,000 transactions for issuers in more than 40 states.

Its representative transactions pages are names only, among them Pocahontas Parkway, the Grand River Dam Authority and the DHL air cargo hub at CVG, with no deal-level detail on size, structure, provider, rate or result.

For an Arizona issue, the working questions are which statute and which bond documents govern each fund, what the eligible list means for the instrument a fund can hold, and how the federal bidding rules shape the solicitation; mGIC, an independent, SEC-registered municipal advisor, provides Arizona reinvestment help through a free, no-obligation review of a fund's permitted investments, draw schedule and bid documents.

Final legal and tax conclusions on any Arizona issue belong to its bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.