Investing Bond Proceeds in Michigan: Permitted Investments and Rules

Michigan issuers invest bond proceeds under MCL 129.91, which lets a governing body authorize, by resolution, investment in instruments including U.S. and agency obligations, repos of those instruments, 1940 Act mutual funds, commercial paper meeting a two-rating and 270-day test, and pools under Michigan's two public-fund pool acts.

Michigan's bond statute adds a second layer: the Revised Municipal Finance Act routes refunding proceeds deposited in trust to a short list of U.S., Treasury-program strip and REFCORP securities and gives debt retirement funds their own accounting and pooling rules.

The permitted investments by state hub sets Michigan next to the other states, and this page works through the governing statutes, the authorized list, the repo and pool rules, the bidding rules and mGIC's services and record.

Which statutes govern Michigan bond proceeds investments?

Two Michigan statutes carry the verified state rules: MCL 129.91, the general authorized-investments statute for Michigan public corporations, and the Revised Municipal Finance Act, 2001 PA 34, whose codified sections run from MCL 141.2101 through MCL 141.2821.

MCL 129.91, last amended by 2012 PA 152, lets a governing body authorize its investment officer, by resolution, to invest in the instruments the section lists.

MCL 129.95 addresses process: a governing body, in consultation with the investment officer, must adopt an investment policy that, at a minimum, covers purpose, scope and objectives, delegation of authority, a list of authorized instruments, and safekeeping, custody and prudence.

On the bond side, the Revised Municipal Finance Act supplies the fund-specific rules: MCL 141.2601(5) says a municipality "may invest the proceeds of a refunding security as provided in section 607(2)", MCL 141.2705 gives debt retirement funds separate accounting and same-category pooling rules, and MCL 141.2315 lets the authorizing resolution make principal and interest payable from taxes or revenues, from bond proceeds, or from "earnings on proceeds of the municipal security or other funds held for payment of the municipal security."

The same subsection of MCL 141.2315 lets the municipality authorize insurance, letters of credit, remarketing and other credit enhancement agreements and pay their costs from proceeds.

State lists are one layer only: 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," so a fund held under a trustee or fiscal agent reads its list from those documents as well.

Which list controls a given Michigan fund, the statute's or the bond contract's, is a determination for the issuer's bond counsel.

What is on Michigan's permitted investment list?

MCL 129.91(1) is the general list a governing body can authorize by resolution, and the table below covers the six subdivisions verified for this page; subdivisions (b), (e), (f) and (h) are not shown and are outside this page's scope.

Michigan's bond-specific list is much shorter: MCL 141.2601(5) routes refunding proceeds to MCL 141.2607(2), which lets proceeds deposited in trust buy direct obligations of the United States, "direct noncallable and nonprepayable obligations that are unconditionally guaranteed by the United States government as to full and timely payment of principal and interest," strips issued under Treasury programs, and Resolution Funding Corporation bonds and strips, in amounts sized to pay the refunded securities.

Once the escrow is funded, MCL 141.2607(3) provides that the municipality's pledge and covenants on the refunded securities are "considered to have been fully and legally performed and defeased."

Two scope limits matter: the statute names no SLGS separately, although SLGS are obligations of the U.S. Treasury, and the escrow list covers refundings rather than new-money project funds.

Debt retirement funds get accounting rules rather than a list of their own: MCL 141.2705(1)(a) through (c) requires them to be accounted for separately and used only to retire the securities they were created for, and they "may be pooled or combined for deposit or investment purposes only with other debt retirement funds created for the same category of debt," whether voted debt, nonvoted debt other than special assessment, or special assessment debt.

The same-category pooling rule carries an exception for a school district's common debt retirement fund under MCL 380.1223, and MCL 141.2707 requires refunding securities subject to mandatory redemption to carry sinking funds accounted for separately.

The Revised Municipal Finance Act attaches no separate permitted-investment list to debt retirement funds, so the general list in MCL 129.91 is the only permitted-investment list verified for Michigan.

What do Michigan's rules say about GICs and repurchase agreements?

The verified Michigan provisions authorize repurchase agreements in one form and name no guaranteed investment contracts.

MCL 129.91(1)(d) authorizes "Repurchase agreements consisting of instruments listed in subdivision (a)," so the collateral must be the U.S. and agency obligations listed in subdivision (a).

The section sets no repurchase agreement term and no margin requirement.

mGIC's full-flex repurchase agreement and repo collateral guides describe how draw flexibility, collateral and margin work in bond-proceeds repos.

No subdivision of MCL 129.91 verified for this page names guaranteed investment contracts or investment agreements, and no GIC or investment agreement authority was found in the Revised Municipal Finance Act sections reviewed.

For a particular issue, whether an investment agreement is available means reading the bond documents and the applicable statutes, and that determination belongs to bond counsel.

mGIC's guaranteed investment contract guide takes up how GICs are structured, credit-protected and bid in general.

For escrows, the MCL 141.2607(2) list names securities the escrow owns rather than contracts with a provider.

What rating and collateral conditions apply in Michigan?

Michigan's verified list attaches a rating condition to commercial paper, limits mutual funds to 1940 Act funds that invest only in legal investments, sets no repurchase agreement term or margin, and handles escrow quality through its list of U.S., strip and REFCORP securities.

Commercial paper must carry the 2 highest classifications from at least 2 rating services and mature within 270 days, under MCL 129.91(1)(c).

MCL 129.91(1)(g) admits 1940 Act mutual funds limited to legal investments, and a policy that authorizes mutual funds must state, under MCL 129.95, whether only $1.00 net asset value funds may be used under it.

The Michigan policy minimums themselves come from MCL 129.95(1)(a) through (d), and the investment policy guide takes up what a bond-proceeds policy covers beyond the statute's floor.

For repurchase agreements, MCL 129.91 writes no term and no margin, so those terms come from the repurchase agreement and the fund's own documents rather than from the statute.

The refunding escrow list handles quality by naming only U.S. direct obligations, noncallable U.S.-guaranteed obligations, Treasury-program strips and REFCORP bonds and strips.

Can Michigan issuers use a state investment pool?

Pool interests appear on the MCL 129.91 list twice: subdivision (1)(i) names pools under the Surplus Funds Investment Pool Act, codified at MCL 129.111 through MCL 129.118, and subdivision (1)(j) names pools under the Local Government Investment Pool Act, codified at MCL 129.141 through MCL 129.150.

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.

The local government investment pool guide covers pools for bond proceeds generally, and the state pool versus GIC comparison takes up the pool-versus-bid question for a given draw schedule.

For a Michigan pool specifically, mGIC's Michigan CLASS guide covers that pool's terms and disclosures in detail.

Whether a particular bond fund may be placed in a pool depends on the fund's own documents, which is a reading for bond counsel.

How are bond-proceeds investments bid and procured in Michigan?

None of the Michigan provisions cited on this page adds a state bid-count or solicitation rule for bond-proceeds investments.

The federal tax rules supply the standard for bidding guaranteed investment contracts and investments bought for yield-restricted defeasance escrows: Treasury Regulation §1.148-5(d)(6)(iii) treats the purchase price as fair market value on the purchase date when all of its conditions are met, and the fair-market-value safe harbor guide explains how the rule works.

Within that safe harbor, paragraph (iii)(A) requires a bona fide solicitation, which means written bid specifications sent to potential providers on a timely basis, all material terms included, only commercially reasonable terms used, and electronic specifications permitted.

The regulation draws the materiality line itself: "A term is material if it may directly or indirectly affect the yield or the cost of the investment."

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

Refunding escrows add the roles GFOA describes: an escrow agent, typically a commercial bank, holds the escrow investments; a verification agent, typically a CPA firm, confirms that the escrow is sufficient and, where yield is limited, that the escrow yield does not exceed the permitted yield; and an escrow bidding agent solicits bids for open-market escrow securities, which GFOA notes a municipal advisor, if engaged, may be able to fill.

The bid specifications and Bidding Agent guides take that solicitation work apart.

Which representative transactions does mGIC name in Michigan?

None of the representative transactions mGIC names publicly is a Michigan deal, and the names, from Pocahontas Parkway in Virginia to the Grand River Dam Authority in Oklahoma, span transportation, public power, aviation, higher education and water.

The firm's record spans 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, and the transaction names are published without deal terms.

For an issuer, mGIC's work breaks into three services: reinvestment advisory that reviews fund objectives, permitted investments, draw schedules, credit terms, market conditions and timing; Bidding Agent services covering bid specifications, soliciting qualified providers, managing questions, and receiving and comparing bids on rate and non-rate terms; and documentation and settlement that coordinates the provider's counsel and the financing team and delivers Bidding Agent and provider certifications to bond counsel.

The products it evaluates and competitively bids are guaranteed investment contracts, full-flex repurchase agreements and structured Treasury portfolios, and it sells none of them and acts as no principal in the investments it evaluates.

Its fee is paid by the winning provider rather than the issuer, at or below the safe-harbor maximum in the Treasury arbitrage regulations, with the fee disclosed.

For an independent read on how a Michigan fund's investments line up with its documents and the arbitrage rules, mGIC offers Michigan reinvestment help through a free, no-obligation review or conversation.

Final determinations about what a Michigan fund may hold, and how the federal tax rules treat its yield, belong to 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.