Investing Bond Proceeds in New Jersey: Permitted Investments and Rules

New Jersey local units can invest bond proceeds only in the security types N.J.S.A. 40A:5-15.1(a) lists, and only when the local unit's cash management plan approved under N.J.S.A. 40A:5-14 authorizes them.

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," and the state-law layer for New Jersey is what this page covers; how the two interact generally is covered on permitted investments.

New Jersey sits in the closed-list group in the state-by-state comparison of permitted investments by state, and this page sets out what its statutes say.

Which statutes govern New Jersey bond-proceeds investments?

For New Jersey local units the governing statute is N.J.S.A. 40A:5-15.1, as amended by P.L.2017, c.310, approved January 16, 2018, and for school districts it is the parallel list in N.J.S.A. 18A:20-37, amended by §1 of the same law.

Before the amendment, a local unit's authority came from a resolution of its governing body; the amendment replaced it with the cash management plan, while the school district section still authorizes purchases by resolution of a majority of the board.

The text behind this page is the 2018 session law, because the state's codified statute database was not reachable when it was researched, so later amendments were not checked; read the current official text before relying on a section.

N.J.S.A. 40A:5-15.1 carries no bond-proceeds carve-out, and the research behind this page did not verify how it treats funds held under an indenture or whether another New Jersey statute, such as one in the Local Bond Law, addresses bond-proceeds investments.

Which statute governs a given issue, and what the bond documents add, is a determination for bond counsel.

What securities may a New Jersey local unit buy?

N.J.S.A. 40A:5-15.1(a) permits the following eight categories, each subject to the conditions the statute attaches.

After item (5), the statute lets the Division of Local Government Services approve other obligations of 397 days or less.

The list is not the last word on maturities: DLGS Local Finance Notice 2017-24R says a cash management plan may incorporate debt of certain local entities without the 397-day limit, including parking authorities (N.J.S.A. 40:11A-16), sewerage and utilities authorities (40:14A-30 and 40:14B-62), county improvement authorities (40:37A-84), water commissions (40:62-133.12) and municipal port authorities (40:68A-22), among others the notice lists, and it is agency guidance summarizing statutes the research did not open.

What do the New Jersey rules say about investment agreements, GICs and repos?

The statutory list does not mention investment agreements or guaranteed investment contracts; of the eight types it lists, the repurchase agreement in paragraph (a)(8) is the only agreement it names.

Under N.J.S.A. 40A:5-15.1(a)(8)(a) through (e), the agreement must mature in 30 days or less, custody of the collateral must pass to a third party, the underlying securities must be bought through a public depository as defined in C.17:9-41, the Governmental Unit Deposit Protection Act, and a master repurchase agreement must be signed.

The underlying securities must themselves be listed items: (a)(1) U.S. obligations, (a)(3) agency or instrumentality obligations within 397 days, or New Jersey local obligations of 397 days or less, and school districts carry the same rule at N.J.S.A. 18A:20-37(a)(8).

The 30-day maturity cap means a long-dated full-flex repurchase agreement built around a construction draw schedule does not fit paragraph (a)(8) as written; what that product is and how its collateral and margin work is covered on full-flex repo and repo collateral.

On investment agreements and GICs, the research behind this page checked N.J.S.A. 40A:5-15.1 and N.J.S.A. 18A:20-37, neither of which uses those terms, and did not verify any other New Jersey bond-proceeds investment statute.

Whether a guaranteed investment contract fits a given New Jersey issue is a determination for bond counsel; what the product is generally is covered on guaranteed investment contracts.

What rating and collateral requirements apply?

New Jersey puts rating and stability conditions on the two fund types in N.J.S.A. 40A:5-15.1(e) and custody and settlement conditions on purchases in (b) and (c).

A government money market mutual fund under (e)(1) must be an SEC-registered 2a-7 fund that is rated, imposes no liquidity fees or redemption gates, and is limited to U.S. Government securities, New Jersey local securities that are 2a-7 eligible, and repurchase agreements on them; the no-fees-or-gates rule reflects the 2014 SEC money market fund reforms and has not been checked against later SEC amendments.

A local government investment pool under (e)(2) must be managed under the Governmental Accounting Standards Board's principles for such pools, rated in the highest category, and subject to the same prohibition on liquidity fees and redemption gates and the same limit on holdings, and it may not hold instruments with high price volatility or indexes that do not support a stable net asset value.

DLGS Local Finance Notice 2017-24R explains that New Jersey pools moved from the 2a-7 standard to the GASB standard, pointing to GASB Statement 79, and the statute lets the Local Finance Board adopt rules for pools.

On custody and settlement, (b) requires a third-party custodial agreement for securities the local unit does not hold physically, and (c) requires purchases of investment securities to settle delivery versus payment.

How these money market fund screens compare with other states' is on money market funds.

What is the state pool option in New Jersey?

The list's pooled options are local government investment pools under (a)(6) and deposits with the State of New Jersey Cash Management Fund under (a)(7), cited as C.52:18A-90.4.

The MSRB glossary describes a local government investment pool as a pool established by a state or local governmental entity to invest the public funds of participating governmental units, with participants buying shares or units.

For a New Jersey local unit, a pool must also meet the (e)(2) definition above: GASB-based management, a rating in the highest category, no liquidity fees or redemption gates, and holdings limited to U.S. Government securities, New Jersey local securities that are 2a-7 eligible, and repurchase agreements on them.

This page does not name any specific New Jersey pool as meeting that definition, and it carries no current yield, rating or balance for any pool, because those figures change and belong to the pool itself.

Pool mechanics, and how a pool deposit compares with a bid investment, are covered on local government investment pools and state pool or GIC.

What do New Jersey procurement rules require?

Investments run through the cash management plan: N.J.S.A. 40A:5-14, as amended by P.L.2018, c.40, approved June 14, 2018, requires each local unit to adopt a plan approved each year by a majority of its governing body and administered by its chief financial officer.

The plan designates depositories, funds and authorized investments, sets selection policies covering preservation of capital, liquidity, returns, diversification, maturity, and costs and fees based on a chief financial officer's cash-flow analysis, and is subject to annual audit.

It must also match instruments to purposes: bonds maturing in more than one year must "approximate the prospective use of the funds invested."

On competition, the statute says, "All investments shall be made on a competitive basis insofar as practicable," and it does not define the term or fix a number of bids.

The statute adds oversight around the plan:

• the governing body receives a monthly report on the plan.
• the custodian official is relieved of liability for losses on investments the plan authorizes.
• officials must disclose material relationships with sellers.
• a selling brokerage's registered principal must sign an acknowledgment that they reviewed the plan.

Purchases must also run through listed channels: unless the local unit buys directly from the issuer, a qualifying fund, a pool or the Cash Management Fund, it must trade through an in-state bank, a broker-dealer registered for at least two years with at least $25 million in capital, or a primary dealer.

Subsection (f) of N.J.S.A. 40A:5-15.1 says these investments are not subject to the Local Public Contracts Law, and the school district section carries the parallel exemption from the Public School Contracts Law.

How plan contents map onto a bond-proceeds investment policy generally is on investment policy.

Where a refunding escrow is funded with open-market securities, GFOA's guidance describes an escrow bidding agent that solicits bids, and notes that a municipal advisor, if engaged, may be able to act in that role.

How a bond-proceeds solicitation is run is the subject of the competitive bidding guide, and the Bidding Agent page covers the role itself.

Representative transactions in the state

mGIC's published record is 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.

The representative transactions named on this page sit in states other than New Jersey: Pocahontas Parkway in Virginia and the Grand River Dam Authority in Oklahoma; this page adds no detail beyond the names.

mGIC is Municipal Government Investors Corp. of Scottsdale, Arizona, founded in 2002, an independent, SEC-registered municipal advisor that does not sell a proprietary investment product or act as principal, and whose fee is paid by the winning provider rather than the issuer.

Its three services are bond-proceeds reinvestment advisory, Bidding Agent services, and documentation and settlement through to a compliance file, and it helps issuers evaluate and competitively bid guaranteed investment contracts, full-flex repurchase agreements and structured portfolios of U.S. Treasury securities.

An issuer weighing a New Jersey fund against this framework can ask for New Jersey reinvestment help to open a no-obligation reinvestment review or conversation.

Which investments a given New Jersey issue may hold, under the statute, the cash management plan and the bond documents, is a final determination for 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.