THE SHORT ANSWER
Tennessee issuers invest bond proceeds under T.C.A. §5-8-301 for counties, §6-56-106 for municipalities or §7-82-108 for utility districts. The county statute's list includes Treasuries, secured bank deposits, repurchase agreements, the state investment pool, state bonds rated A or higher and nonconvertible FHLB, FNMA, FFCB and FHLMC debt in the top rating category, with some investments requiring prior approval from the Comptroller's Division of Local Government Finance.
Tennessee issuers invest bond proceeds under the statute that reaches their entity: T.C.A. §5-8-301 for counties, §6-56-106 for municipalities and §7-82-108 for utility districts, with some investments requiring prior approval from the Comptroller's Division of Local Government Finance.
Tennessee is one state on the wider map of permitted investments by state, and the instrument categories behind lists like this one are compared on the permitted investments page.
A sourcing note runs through the page: the county statute is read here only through the University of Tennessee's County Technical Assistance Service (CTAS) summary.
Which statutes govern bond-proceeds investments in Tennessee?
Three statutes govern by entity type, and the Tennessee Comptroller of the Treasury's Investments page names T.C.A. §5-8-301 for county investments, §6-56-106 for municipal investments and §7-82-108 for utility district investments.
| Entity type | Statute | What this page's research read |
|---|---|---|
| Counties | T.C.A. §5-8-301 | CTAS summary, including its bond-proceeds category |
| Municipalities | T.C.A. §6-56-106 | Not opened in this page's research |
| Utility districts | T.C.A. §7-82-108 | Not opened in this page's research |
The same Comptroller page requires local officials for counties, metropolitan governments, municipalities and utility districts to receive approval from the Division of Local Government Finance prior to executing certain investments, and it does not identify them.
CTAS's summary of the county statute reports that §5-8-301 recognizes three categories of idle county funds: funds derived from bond proceeds, funds from the sale of assets, settlements or other infrequent occurrences, and other idle county funds.
All three categories may use the statute's list, so a county's bond-proceeds question starts from the same list its other idle funds use.
What is on Tennessee's permitted investment list?
For a county, the list in the CTAS summary of §5-8-301 includes U.S. Treasury obligations and obligations guaranteed by the United States, secured bank deposits, repurchase agreements, the state investment pool, state bonds rated A or higher, nonconvertible FHLB, FNMA, FFCB and FHLMC debt in the top rating category, and the county's own bonds, with commercial paper and banker's acceptances added for larger counties.
| Entry in the CTAS summary of §5-8-301 | Conditions the summary reports |
|---|---|
| U.S. Treasury obligations and U.S.-guaranteed obligations | No conditions recorded in this page's research |
| Secured bank deposits | Secured, with no percentage recorded in this page's research |
| Repurchase agreements on U.S. obligations | Comptroller (or designee) approval, State Funding Board procedures, term shorter than the security's maturity, market value above the amount invested |
| The state investment pool | Listed for all three idle-fund categories |
| State of Tennessee bonds | Rated A or higher |
| FHLB, FNMA, FFCB and FHLMC debt | Nonconvertible, top rating category |
| The county's own bonds | Listed for idle funds |
| Commercial paper and banker's acceptances | Larger counties, per the summary |
No entry this page's research records names a guaranteed investment contract or an investment agreement, which leaves the next section's question about those products open on this page's sources.
What rules apply to investment agreements, guaranteed investment contracts and repurchase agreements?
Repurchase agreements carry detailed conditions in the county summary, and guaranteed investment contracts are not named in the entries this page's research records for it.
CTAS reports that counties may invest in repurchase agreements on U.S. obligations only if the comptroller of the treasury or the comptroller's designee approves them as an authorized investment, and the agreements must follow State Funding Board procedures.
The summary attaches two structural conditions: the repo's term must be shorter than the maturity of the underlying security, and the security's market value must exceed the amount invested.
Guaranteed investment contracts and investment agreements appear in no entry this page's research records for the summary, and whether a bond-specific statute or the issue's own documents admits one for a given issue was not checked in that research and is a determination for the issuer's bond counsel.
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, which is what puts the bond order, resolution or indenture next to the statute in the reading.
Where an issue uses an indenture, the same glossary describes it as a contract between the issuer and a trustee for the bondholders' benefit, it notes that many governmental issues, especially general obligation bonds, may not use one, and whether a particular agreement fits a particular issue's statute and bond documents is a determination for the issuer's bond counsel.
What rating and collateral requirements attach?
The rating screens in the CTAS summary sit on two entries, state bonds and FHLB, FNMA, FFCB and FHLMC debt, and the collateral conditions sit on secured deposits and repurchase agreements.
State of Tennessee bonds enter the list when they are rated A or higher.
FHLB, FNMA, FFCB and FHLMC debt enters in nonconvertible form within the top rating category the summary names.
Bank deposits enter as secured deposits and the repo condition requires the security's market value to exceed the amount invested, with no percentage for either recorded in this page's research.
Margin calls and shortfall cures over a repo's life are on the repo collateral page.
Can Tennessee bond proceeds go into the state investment pools?
The state investment pool is on the CTAS county list, and the Tennessee Department of Treasury runs two pools for local governments.
One is a short-term Local Government Investment Pool with an average maturity of about 90 days, and the other is an Intermediate-Term Investment Fund with an average maturity of about 3 years, as described on the Comptroller's Investments page.
Those average maturities may change, so current pool terms belong to the state's own disclosures.
The MSRB glossary describes the vehicle type: an investment pool established by a state or local governmental entity or instrumentality that serves as a vehicle for investing the public funds of participating governmental units, with participants buying shares or units, often in a trust.
How pools work in general is on the local government investment pool page, and the trade-off against a competitively bid agreement is the state pool or GIC comparison.
What procurement and approval rules apply?
Approval runs through two Tennessee layers, the Comptroller's Division of Local Government Finance and the county's own governing process, while the federal layer adds a fair-market-value safe harbor for guaranteed investment contracts and investments bought for yield-restricted defeasance escrows.
On the first layer, the Comptroller's Investments page requires approval from the Division of Local Government Finance prior to executing certain investments, and CTAS identifies repurchase agreements as one type, under State Funding Board procedures.
At the county level, CTAS reports that investments must be approved by the legislative body, follow its adopted investment policy, or be approved by an investment committee, under T.C.A. §5-8-301 and §5-8-302, and what a proceeds policy adds to those rules is on the investment policy page.
On the federal layer, Treasury Regulation §1.148-5(d)(6)(iii)(A) conditions the fair-market-value safe harbor on a bona fide solicitation: 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, with electronic specifications permitted.
For yield-restricted defeasance escrows, the same regulation adds a timing condition: the hold-firm period stated in the specifications must be no longer than reasonably required.
The elements of a solicitation document are on the bid specifications page, and the safe harbor's full set of conditions is on the fair market value safe harbor page.
Refunding escrows add roles of their own: GFOA describes an escrow agent, typically a commercial bank, holding the escrow investments, a verification agent, typically a CPA firm, confirming the escrow is sufficient and that escrow yield does not exceed the permitted yield where yield is limited, and an escrow bidding agent soliciting bids for open-market escrow securities.
GFOA notes that a municipal advisor, if engaged, may be able to act as the escrow bidding agent, and the Bidding Agent guide covers the role across solicitation, questions and bid comparison.
Which mGIC transactions and services reach Tennessee issuers?
mGIC's representative transaction list names projects in other states, among them Pocahontas Parkway and the Grand River Dam Authority, each profiled on the transactions page, so this page names none in Tennessee.
Behind the list, mGIC reports 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.
mGIC is an independent, SEC-registered municipal advisor that sells no investment product and acts as no principal, and as a registered advisor it owes its municipal clients a fiduciary duty.
For a Tennessee issue the work takes three shapes: reinvestment advisory on fund objectives, permitted investments, draw schedules, credit parameters and timing; Bidding Agent services on bid specifications, soliciting qualified providers and comparing bids on rate and non-rate terms; and documentation and settlement ending with certifications delivered to bond counsel.
The products it evaluates and bids are guaranteed investment contracts, full-flex repurchase agreements and structured portfolios of U.S. Treasury securities, and it sells none of them.
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 it is disclosed.
Tennessee issuers and their counsel who want an independent read on how a fund's investments line up with the county statutes, the bond documents and the draw schedule can start through Tennessee reinvestment help.
Final determinations about what a Tennessee statute and an issue's bond documents permit belong to the issuer's bond counsel and tax counsel.
Frequently asked questions
Does Tennessee law authorize guaranteed investment contracts for county bond proceeds?
The CTAS summary of the county statute names no guaranteed investment contracts or investment agreements in the entries this page's research records; those entries include Treasuries and secured bank deposits, repurchase agreements, the state pool, state bonds rated A or higher, nonconvertible FHLB, FNMA, FFCB and FHLMC debt in the top rating category and the county's own bonds. Whether a contract fits a given issue is a determination for the issuer's bond counsel.
Which Tennessee investments need approval from the Comptroller?
The Comptroller's Investments page says local officials must receive Division of Local Government Finance approval prior to executing certain investments and does not name them. CTAS identifies repurchase agreements as one type, available to counties only with the Comptroller's or a designee's approval and under State Funding Board procedures.
Do Tennessee municipal and utility district statutes mirror the county list?
This page cannot say. The research behind it read the county statute only through CTAS's summary, and the municipal (T.C.A. 6-56-106) and utility district (7-82-108) sections were not verified. That is a statement about the research records, not a conclusion about what those statutes say.
Where can I read the text of the Tennessee investment statutes?
The Comptroller's Investments page links to Lexis public access for the code text, and CTAS publishes its county summary alongside the statute citations. Reading the current official text before relying on a section is the sound habit.
Does Tennessee set a state bidding procedure for bond-proceeds investments?
This page's research recorded none: the county facts it holds carry approval rules but no bidding procedure, which is a statement about the research records rather than about Tennessee law. Separately, Treasury Regulation §1.148-5(d)(6)(iii) treats the purchase price of a guaranteed investment contract, or of an investment bought for a yield-restricted defeasance escrow, as fair market value on the purchase date if all of its requirements are met, including a bona fide solicitation.
Sources
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.
