What Can Louisiana Issuers Invest Bond Proceeds In? R.S. 33:2955 Rules

Louisiana municipalities, parishes, school boards and other political subdivisions invest bond proceeds under R.S. 33:2955, the statute the Louisiana Legislative Auditor identifies as the exclusive list of investment vehicles for local political subdivisions.

This page is Louisiana's entry in the mGIC guide to permitted investments by state, and it covers the statutory list, the guaranteed investment contract and repurchase agreement rules, the rating conditions, the state pool question and the procurement rules.

Where the question is what an issue's own bond documents allow rather than what the statute lists, the general treatment is on the permitted investments page, and the legal conclusion belongs to the issuer's bond counsel.

What statute governs Louisiana bond-proceeds investments?

R.S. 33:2955 is the governing statute: the Legislative Auditor's investment FAQ, revised August 2026, answers the exclusivity question by stating that R.S. 33:2955 "provides the exclusive list of investment vehicles that local political subdivisions may invest in."

The statute reaches municipalities, parishes, school boards and other political subdivisions.

The MSRB glossary defines permitted investments from the contract's side, as "the instruments in which bond proceeds or other funds may be invested pursuant to the provisions of the bond contract," so the statute and the bond documents are separate layers over the same fund, and which statutory entries an issue's documents adopt is a bond counsel question.

The exclusivity has edges the FAQ itself notes: other statutes, for example for hospital service districts and OPEB trusts, and the Louisiana Constitution add investment authority in specific areas, per the auditor's questions 19 through 22.

What is on Louisiana's permitted investment list?

The Legislative Auditor's summary of the exclusive list includes rated municipal debt, direct repurchase agreements, SEC-registered government-only mutual funds and narrowly conditioned GICs, plus one explicit prohibition.

The table covers the entries this page's sources summarize, not the statute's full text; the auditor's FAQ is the source for the list.

The five-year maturity limit on the municipal-debt entries comes with a carve-out that matters for bond financings: the limitation "shall not apply to ... funds held by a trustee, escrow agent, paying agent, or other third party custodian in connection with a bond issue," and the carve-out reaches only those municipal-debt entries (R.S. 33:2955(A)(1)(j)(iii), (A)(1)(k)(ii)).

Where does federal tax law sit?

State permission is not the end of the yield question: the federal arbitrage rules add limits of their own on what proceeds may earn, on top of the statute's list, and the arbitrage guides carry that layer, starting with yield restriction.

Conduit issuers carry an added version of the point: section 148 generally limits the yield on a purpose investment to the bond yield plus a spread, and IRS Publication 5005 notes that fees charged by the conduit issuer can raise the effective yield on a conduit loan, which is a purpose investment, so conduit issuers generally must keep the loan yield within the permitted spread.

What rules apply to investment agreements, GICs and repos?

Louisiana's guaranteed investment contract authorization is narrow, and the repurchase agreement entry is specific about the securities underneath.

For GICs, the statute allows an investment only "in connection with a financing program for local political subdivisions approved by the State Bond Commission and offered by a public trust having the state as its beneficiary" (R.S. 33:2955(A)(1)(g)).

Two further conditions attach: the term must be 18 months or less, and the contract must contain a downgrade clause allowing penalty-free release or collateralization with U.S. obligations.

The authorization is limited to that program structure rather than a general permission for Louisiana local governments to buy GICs, so whether the (A)(1)(g) route is available to an issuer's program is a threshold question for bond counsel.

For repos, the statute allows "direct security repurchase agreements" of federal book-entry-only Treasury and agency securities (R.S. 33:2955(A)(1)(c)).

For school boards, the FAQ adds a Louisiana Attorney General opinion, No. 97-0533: a school board may invest in flexible repurchase agreements "provided the underlying securities subject to the agreement consist of the federal book-entry-only securities" the statute lists, and the FAQ presents that point as an opinion summary rather than statute text.

On the prohibited side, stripped CMOs, inverse floaters and structured notes are out under R.S. 33:2955(A)(1)(b)(iii).

What a guaranteed investment contract is, and how a full-flex repurchase agreement differs from it, are product questions this page does not take up.

What rating and collateral requirements apply?

Louisiana attaches its credit conditions at the same entries the authorizations sit in: provider ratings and a downgrade remedy at the GIC entry, and rating floors at both municipal-debt entries.

At the GIC entry, the provider must be rated in the two highest short-term categories by S&P or Moody's, and the contract's downgrade clause must allow penalty-free release or collateralization with U.S. obligations (R.S. 33:2955(A)(1)(g)).

How downgrade provisions work in the market generally is the subject of GIC credit protection.

At the municipal-debt entries, Louisiana debt must be rated at least Baa3/BBB- (R.S. 33:2955(A)(1)(j)(iii)), and other states' debt at least A3/A-, with the further requirement that the purchase run through an SEC-registered investment adviser or a qualifying trust department (R.S. 33:2955(A)(1)(k)(ii)).

The conditions above come from the auditor's FAQ summary of the statute.

Can Louisiana bond proceeds go into a state investment pool?

No state investment pool appears among the R.S. 33:2955 entries this page's sources cover, and whether Louisiana has a pool under some other statute is a question these sources do not answer and a bond counsel question.

Where a state does operate one, the MSRB glossary defines the vehicle: a local government investment pool is 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, whose participants buy shares or units, often in a trust.

How pools work generally is on the local government investment pool guide, and the choice between a state pool and a bid investment is compared in state pool or GIC.

How are bond-proceeds investments procured in Louisiana?

Louisiana's own requirement is the mandatory investment policy: "it is mandatory that all local political subdivisions develop an investment policy" (R.S. 33:2955(D)), with the statute's emphasis on safety first, liquidity second and yield third.

When proceeds are invested through a competitively bid investment, federal tax law adds a fair market value safe harbor alongside the state's requirements: the solicitation must be bona fide, with written bid specifications sent to potential providers on a timely basis, specifications that include all material terms, meaning any term that may directly or indirectly affect the yield or the cost of the investment, and only commercially reasonable terms (Treasury Regulation §1.148-5(d)(6)(iii)(A)(1), (2), (4)).

Electronic specifications are permitted, and for yield-restricted defeasance escrows the hold-firm period must be no longer than reasonably required.

The bid specifications and fair market value safe harbor guides take the requirements apart.

Where a refunding escrow is funded with open-market securities, GFOA describes an escrow bidding agent that solicits bids for the securities used in the escrow, alongside the escrow agent who holds the investments and the verification agent who confirms the escrow is sufficient and, where yield is limited, that escrow yield does not exceed the permitted yield.

GFOA adds that a municipal advisor, if engaged, may be able to act as the escrow bidding agent, and running a solicitation is defined work for a Bidding Agent more broadly.

What representative transactions does mGIC list in Louisiana?

None of the representative transactions mGIC names is a Louisiana transaction.

What its record supports is broader: mGIC, founded in 2002 and based in Scottsdale, Arizona, has invested more than $60 billion in bond proceeds and executed swap notional in more than 1,000 transactions for issuers in more than 40 states.

The named deals sit in other states, among them the Pocahontas Parkway in Virginia, the Grand River Dam Authority in Oklahoma and the Birmingham Water Works, and the individual transactions are on the representative transactions page.

For a Louisiana issuer the practical move is a conversation about the fund in front of it: mGIC's work is reinvestment advisory, Bidding Agent services and documentation and settlement, it evaluates and bids guaranteed investment contracts, full-flex repurchase agreements and structured Treasury portfolios without selling any of them, and its fee is paid by the winning provider rather than the issuer, at or below the safe-harbor maximum in the Treasury arbitrage regulations, and is disclosed under those regulations' disclosure requirement.

Louisiana issuers who want a read on a fund can ask for Louisiana reinvestment help through a free, no-obligation reinvestment review.

Which investments an issue's bond documents and the statute permit, and how the arbitrage rules treat its proceeds, are determinations for the issuer's 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.