Contents
Section 1 – Introduction .........................................................................................................
5
Section 2 – Types of Debt ......................................................................................................
6
a. Bonds ...........................................................................................................................
7
b. Notes ............................................................................................................................
8
c. Financing Leases ...........................................................................................................
8
d. Loan Agreements ..........................................................................................................
9
Section 3 – Types of Issuers ..................................................................................................
10
a. Cities .............................................................................................................................
11
b. Counties........................................................................................................................
11
c. Metropolitan Governments ...........................................................................................
11
d. Health, Educational, and Housing Facility Boards .........................................................
11
e. Housing Authorities ......................................................................................................
11
f. Special School Districts .................................................................................................
11
g. Industrial Development Boards ....................................................................................
11
h. Public Building Authorities ...........................................................................................
11
i. Hospital Authorities ......................................................................................................
11
j. Municipal Energy Authorities .......................................................................................
11
k. Water and Wastewater Treatment Authorities ...............................................................
12
l. Utility Districts ..............................................................................................................
12
m. Emergency Communication Districts ...........................................................................
12
n. Local Government Authorities .....................................................................................
12
i. Airport Authorities ................................................................................................
12
ii. Convention Center Authorities ..............................................................................
12
iii. Port Authorities .....................................................................................................
12
iv. Parking Authorities ................................................................................................
12
v. Sports Authorities ..................................................................................................
12
Section 4 – Types of Security for Local Government Debt .................................................
13
a. General Obligation and Limited Tax Debt ....................................................................
13
b. Revenue Debt ...............................................................................................................
14
Section 5 – Types of Sales of Local Government Debt ........................................................
15
Section 6 – Comptroller Oversight of Short-Term Obligations ..........................................
17
a. Short-Term Obligations Requiring Approval by the Comptroller of the Treasury .........
17
b. Bond Anticipation Notes ..............................................................................................
21
c. Capital Outlay Notes .....................................................................................................
23
d. Grant Anticipation Notes .............................................................................................
27
e. Revenue Anticipation Notes .........................................................................................
29
f. Tax and Revenue Anticipation Notes ............................................................................
31
g. Summary Grid of Notes Authorized Under Title 9, Chapter 21, Tenn. Code Ann. .......
33
h. Financing Leases ...........................................................................................................
34
Section 7 – Other Comptroller Oversight .............................................................................
37
a. Plans of Refunding .......................................................................................................
37
b. State Law Reissuance ....................................................................................................
42
c. Utility and E-911 Plans of Financing .............................................................................
43
d. Balloon Debt ................................................................................................................
43
e. Pledge of Non-Tax Revenues........................................................................................
44
f. Debt Reporting .............................................................................................................
45
g. Default Reporting .........................................................................................................
45
h. Debt Management Policies............................................................................................
45
Section 8 – Federal Oversight of Municipal Bonds .............................................................
46
a. Internal Revenue Service and Tax-Exempt Status .........................................................
46
b. Federal Securities Laws .................................................................................................
48
Section 9 – Best Practices and Other Resources .................................................................
51
a. Seven Keys ...................................................................................................................
51
b. Financial Health Metrics ...............................................................................................
52
c. Technical Assistance Services ........................................................................................
53
d. Debt Coverage ..............................................................................................................
53
e. Rating Agencies ............................................................................................................
54
Appendix .................................................................................................................................
55
1. Bond Anticipation Note Resolution ..............................................................................
56
2. Capital Outlay Note Resolution ....................................................................................
62
3. Grant Anticipation Note Resolution .............................................................................
68
4. Tax Anticipation Note Resolution ................................................................................
74
5. Informal Bid Form .......................................................................................................
79
6. Balloon Debt Law Flowchart ........................................................................................
81
5
Section 1 – Introduction
The purpose of this Tennessee Debt Manual for Local Governments (this “Manual”) is to provide
general information to local government issuers in Tennessee relating to the issuance of debt. This
manual also provides for specific forms and procedures, as is authorized by Tenn. Code Ann. § 4-3-
305, that should be complied with by local government entities to which those forms and procedures
are applicable.
Specifically, this Manual contains the following:
• Sections 2–5 provide general information relating to the issuance of local government debt in
Tennessee.
• Section 6 provides uniform procedures for the issuance of notes by Tennessee’s counties,
metropolitan governments, municipalities, and other local governments authorized to issue
notes pursuant to Title 9, Chapter 21, of Tennessee Code Annotated.
• Section 7 provides refunding and state law reissuance guidance as well as brief descriptions of
other reporting and approval requirements related to local government debt issuance.
• Section 8 provides a brief overview of federal oversight of local government debt.
• Section 9 provides local governments with an introduction to other resources related to best
practices for the issuance of debt.
This Manual, as approved by the State Funding Board on June 27, 2023, is the second edition issued
pursuant to Tenn. Code Ann. § 4-3-305.
This Manual provides general information and is not intended to offer specific financial or legal advice
for local government issuers. If local government issuers have questions regarding matters discussed
in this Manual or the application of this Manual to particular situations, local government issuers
should contact the Division of Local Government Finance in the Comptroller’s Office and/or consult
with the issuer’s legal and financial advisors.
6
Section 2 – Types of Debt
In general, debt refers to borrowing money and repaying it with interest over a period of time. In
Tennessee, the debt of local government entities can be issued for a very short term, such as a few
months, but certain types of debt of local government entities can have a term of up to 40 years.
Local government entities typically issue long-term debt to finance capital projects, such as schools,
courthouses, safety facilities, and other public assets, that will last for many years and may be too
expensive to pay for at the time of construction with current funds. By repaying the debt over a longer
period of time, the cost of the project is spread over its life. Local government entities often issue
short-term debt to finance equipment that has a shorter life when the cost of the equipment needs to
be spread over multiple fiscal years.
If authorized at all, local government entities are generally allowed to borrow for the payment of
operating expenses on a short-term basis, which is usually less than a year. Only in rare circumstances
can local government entities borrow funds to finance or refinance the payment of operating expenses
on a long-term basis.
Like comparable provisions in many other states, Article II, Section 29 of the Tennessee Constitution
prohibits cities and counties from lending their credit for the benefit of private enterprises unless an
election is first held and three-fourths of the votes cast in the election are in favor of the proposal.
Tennessee courts have generally interpreted this provision so that it only applies when a debt is actually
incurred and only when a city or county secures the debt with its taxing power, and not with other
available revenues.
In some states, a local government entity may obtain a court ruling to validate the issuance of a debt
obligation. Validation proceedings are rare in Tennessee, and almost all local government debt is
issued in Tennessee without validation. If a debt obligation is not legally issued by certain local
government entities, the Comptroller’s Office is permitted to work with the local government entity
to bring the obligation into conformity with applicable laws. Sometimes compliance is accomplished
through a corrective action plan, but in some cases, it is necessary for the nonconforming obligation
to be retired early. See Tenn. Code Ann. § 9-21-406.
7
The most common types of debt instruments in Tennessee are the following:
a. Bonds
Bonds are typically long-term debt instruments, although many Tennessee statutes do not provide a
clear distinction between the term of bonds and the term of other debt obligations. Like other debt
obligations, a bond is the issuer’s promise to repay a set amount of money, plus periodic interest, on
a specific date. When bonds are issued by cities, counties, metropolitan governments, and other local
government entities that have strong credit, those bonds are often sold to the public. Typical features
of municipal bonds sold to the public are as follows:
• Such bonds typically have serial maturity dates with a maturity in each year and a
different interest rate for each maturity.
• Such bonds are typically sold in $5,000 denominations so that they can be sold to many
investors.
• Interest on such bonds is typically paid semi-annually.
• Such bonds often cannot be prepaid for a period of time (typically 10 years).
*Please note that not all bond transactions in Tennessee involve a trustee or an underwriter.
8
b. Notes
Notes are typically short-term debt instruments. As with a bond, the issuer of a note promises to
repay the amount of principal borrowed, plus interest, on a certain date.
Notes issued by local government issuers in Tennessee may take many forms. Types of notes issued
by counties, cities, and metropolitan governments include the following:
• Bond anticipation notes, which are notes typically used to fund the construction phase
of a capital project until long-term bonds are issued. Bond anticipation notes are
sometimes issued in a commercial paper format.
• Grant anticipation notes, which are issued to fund initial spending that is later
reimbursed through a grant.
• Tax and revenue anticipation notes, which are issued to provide operating funds until
other taxes or other revenues are collected. Such notes generally must be repaid by
fiscal-year end.
• Capital outlay notes, which are typically issued to finance the purchase of capital assets
that have a shorter economic life, such as vehicles or equipment. Capital outlay notes
may remain outstanding for up to 12 years.
Notes, as listed above, may be issued as internal loans pursuant to Tenn. Code Ann. § 9-21-408. The
Division of Local Government Finance must approve the internal loans listed above (the process is
described below). Electric department interdivisional loans authorized under Tenn. Code Ann. § 7-
52-603, do not require Comptroller approval.
c. Financing Leases
After recent accounting rule changes, most leases will be shown as a liability and an asset on a local
government entity’s balance sheet. The distinction between financing leases and operating leases (or
true leases) has largely been eliminated for accounting purposes.
However, the notion of a financing lease, as opposed to an operating lease, is still a relevant concept
under federal tax law. Under federal tax law, a financing lease typically provides for periodic rent
payments that are effectively principal and interest payments, with the interest component specifically
identified, and further provides for a bargain purchase option by the lessee at the end of the lease.
Financing leases are often marketed to local governments in connection with the sale of equipment,
such as energy savings equipment.
Certain types of local government entities in Tennessee are authorized to enter into financing leases.
A local government entity should confirm with its legal counsel whether it has the legal authority to
enter into a financing lease.
In addition, any financing leases entered into by certain local government entities that are not classified
as exempt under the “Uniformity in Local Government Lease Financing Act of 2021,” must be
reviewed and approved by the Comptroller’s Office prior to approval by the local governing body.
See Section 6h on page 30 for further detail.
9
d. Loan Agreements
In Tennessee, certain local government entities are authorized to borrow funds pursuant to a loan
agreement, in which case the issuance of a bond or note may not be required. As its name suggests,
a loan agreement is an agreement under which an entity agrees to borrow funds from a lender.
In Tennessee, certain types of local government entities can borrow funds through a loan agreement
with another type of local government entity known as a public building authority (also known as a
PBA). PBAs were first authorized in state law in 1971 and were intended to help governments
construct, operate, and maintain public buildings. PBAs are public corporations that are legally
separate from the government or governments that create the PBA (a county or city (or both) is
authorized to create a PBA).
PBAs issue debt to finance capital projects and typically loan the debt proceeds to another local
government entity, such as a city or county. Although PBAs issue revenue debt, the loan agreement
with a county or city may be a general obligation of the county or city. As a result, PBA debt often
has the same credit quality as general obligation bonds issued by the local government borrower from
the PBA.
10
Section 3 – Types of Issuers
Tennessee law authorizes many types of local government entities to issue debt. A list of most local
government entities that have the authority to issue debt in Tennessee follows:
11
*These districts are not legal entities which are authorized to directly issue debt, but they are areas in
which a special assessment or increment tax revenue stream is designated to be available for payment
of debt service by a local government entity. In most cases, such debt would be issued by another
local government entity, such as a city, county, PBA, or industrial development board, depending on
the relevant statutes.
The following is a brief description of some of the local government entities in Tennessee that have
the legal authority to issue debt. Each of these entity types have the authority to issue debt, usually
to finance (either directly or through a loan to a third party) capital projects constructed to further
the purpose for which the entity was formed.
a. Cities—Cities can be created in Tennessee under certain general statutes or by private act.
Most cities have the power to impose property taxes, although not all cities in Tennessee do
impose taxes. If a city forfeits its charter and it has debt outstanding, then the county is
authorized to levy a special tax for the area of the city to repay the debt (Tenn. Code Ann. §
6-52-304).
b. Counties—Counties are created by the Tennessee legislature and are subdivisions of the state.
c. Metropolitan Governments—Tennessee statutes allow for the merger of the city and county
government function into one metropolitan government if approved at a referendum.
d. Health, Educational, and Housing Facility Boards (HEHFB)—HEHFBs are created by
a city and/or county to facilitate growth of health and educational facilities as well as housing.
e. Housing Authorities—Housing authorities are created by cities and/or counties to facilitate
the creation of housing in the area served. Housing authorities may also undertake tax
increment financing (TIF) to assist redevelopment projects.
f. Special School Districts—Special school districts are created by private act of the Tennessee
legislature to provide education to residents of the area of incorporation.
g. Industrial Development Boards (IDB)— IDBs are created by a city and/or county to
provide for industrial development and other commercial and public projects in the area
served by the IDB. IDBs may also undertake tax increment financing for certain economic
development purposes.
h. Public Building Authorities (PBA)—PBAs are created by cities and/or counties to finance,
construct, and maintain public buildings. PBAs also have the legal authority to function as a
lender to other local government entities.
i. Hospital Authorities—Hospital authorities are created by private act or certain general
statutes. Hospital authorities generally operate hospital facilities within their service area.
j. Municipal Energy Authorities—Municipal energy authorities are created by cities and/or
counties to operate, separate from the authorizing city or county, an electric system or other
utility systems.
12
k. Water and Wastewater Treatment Authorities—Water and wastewater treatment
authorities are created by cities, counties, and/or metropolitan governments or by private act
to provide water or sewer services to rate payers in the service area.
l. Utility Districts—Utility districts, which are common in Tennessee, are generally created by
one or more counties with new utility districts being subject to approval by the Tennessee
Board of Utility Regulation (TBOUR). Utility districts generally provide water, sewer, gas, or
fire protection services to the rate payers in their service area.
m. Emergency Communications Districts—Emergency communications districts are created
by cities and/or counties (and may be approved by voter referendum) to provide emergency
communication services (911 calls and dispatch of emergency responders) in the authorized
area.
n. Local Government Authorities
i. Airport Authorities—Various types of airport authorities can be created by cities
and/or counties to own and operate airport facilities.
ii. Convention Center Authorities—Convention center authorities can be created by a
city and/or county to develop tourism, convention, and employment.
iii. Port Authorities—Port authorities can be created by cities and/or counties to
develop ports and the related infrastructure to encourage commerce.
iv. Parking Authorities—Parking authorities can be created by cities and/or counties to
finance, construct, and maintain parking structures and related infrastructure.
v. Sports Authorities—Sports authorities can be created by cities and/or counties to
construct and maintain sports facilities.
13
Section 4 – Types of Security for
Local Government Debt
a. General Obligation and Limited Tax Debt
In Tennessee, local government debt that is secured by a commitment to impose property taxes, to
the extent necessary, to pay such debt is typically referred to as general obligation debt. Because
counties, metropolitan governments, and cities are generally the only local government entities that
have the legal authority to impose property taxes, essentially all general obligation debt issued by local
government entities in Tennessee is issued by counties, metropolitan governments, and cities. General
obligation debt is often described in Tennessee as being backed by the “full faith and credit” of the
county, metropolitan government, or city that is issuing the debt.
General obligation debt is secured by the unlimited taxing power of the local government. Therefore,
notwithstanding any local charter limitations to the contrary, the local government is required to
impose a property tax in whatever amount is necessary to pay the debt. If the local government fails
to do so, the holders of the debt can force the local government, through a court proceeding, to raise
taxes in an amount sufficient to pay the debt service on the general obligation debt.
Certain special school districts in Tennessee, which have been created by private act, are allowed to
collect property taxes imposed by the state legislature, but the amount of that property tax that can be
imposed is typically limited. Debt issued by such special school districts is considered to be secured
by a limited tax commitment because the property tax cannot be imposed in an unlimited amount if
the taxes collected are not sufficient to pay debt payable from such taxes.
Another type of local government debt secured by limited taxes is special assessment debt. While
commonly used in some states, special assessment debt has rarely been issued in Tennessee. However,
as is noted in the Types of Issuers chart on page 6, a few statutes authorize the issuance of special
assessment debt in Tennessee. Under those statutes, a special assessment, which is essentially a type
of limited property tax, can be imposed on a specific district or area, and these assessments are typically
collected by the city or county in which the special assessment district is created. The special
assessments are sometimes used to pay for additional public services with the designated district or
area, but such assessments can also be used to pay debt service on debt incurred to make capital
improvements in the district or area. Because the amount of the special assessment is typically
specified and limited, the debt payable from such special assessments is not typically a general
obligation of the city or county and is more accurately characterized as a limited tax obligation.
14
b. Revenue Debt
Revenue debt is essentially all local government debt that is not payable from property taxes. Revenue
debt can be generally subdivided into two categories—direct revenue debt and conduit revenue debt.
Direct revenue debt is debt payable from revenues created by the local government entity that issues
the debt. Conduit revenue debt is debt issued by a governmental entity on behalf of a third party and
payable by the.
The most common type of direct revenue debt in Tennessee is debt issued by local government entities
that provide utilities and similar public services. Cities frequently issue debt payable from the revenues
of their electric, water, sewer, stormwater, and gas systems. Utility districts and energy authorities are
also frequent issuers of direct revenue debt in Tennessee. This type of direct revenue debt is usually
issued under a bond resolution of the local government issuer under which the issuer pledges the
revenues of the particular utility system (frequently after the payment of operating expenses) to the
payment of the debt being issued to provide improvements to the utility system.
Another common type of direct revenue debt in Tennessee is tax increment debt. In Tennessee tax
increment debt (which is also sometimes called tax increment financing or “TIF”) is generally issued
by housing authorities, to promote redevelopment, or by industrial development boards, to promote
economic development. Tax increment debt is generally payable from the incremental increase in
property taxes from a base year (generally the year before the tax increment plan is approved by the
local governments) and each tax year for which the calculation of the increment is made (less certain
deductions required by state statutes).
The most common issuers of conduit revenue debt in Tennessee are industrial development boards;
health, education, and housing facility boards; and public building authorities. Industrial development
boards and health, education, and housing facility boards frequently are requested to issue bonds to
finance projects for private parties, such as projects for charitable “501(c)(3)” organizations, low-
income housing projects, small manufacturing projects, and solid waste projects, and to loan the
proceeds of those bonds to the private party to finance the particular project. This financing method
is typically used to permit the private party to realize the benefit of tax-exempt financing as is described
in Section 8 of this manual. In this type of financing, the industrial development board or health,
education, and housing facility board has no obligation to pay the issued bonds except from loan
repayments by the private party, so the financing is non-recourse to the local government issuer.
As is discussed in Section 2d on page 5, another common type of conduit revenue debt in Tennessee
is debt issued by public building authorities or PBAs. As with industrial development boards and
health, education, and housing facility boards, debt issued by PBAs is generally only payable from the
loan repayments made to the PBA by another party, which, in this case, would be the local government
entity that borrows the proceeds of debt issued by the PBA. Therefore, the financing is typically non-
recourse to the PBA. However, the underlying loan to the other local government entity may be a
general obligation of the local government that borrows from the PBA, or such underlying loan may
be payable only from specified revenues of that local government entity.
15
Section 5 – Types of Sales of
Local Government Debt
There are generally two methods of sale of local government debt—competitive sale and negotiated
sale. With a competitive sale, parties that are interested in purchasing a local government entity’s debt
compete to offer the lowest interest rate for the debt. With a negotiated sale, a local government
entity negotiates with a single purchaser in an effort to obtain the most favorable terms. General
obligation debt and highly-rated direct revenue debt is usually well suited for competitive sales, while
other types of debt are better suited for negotiated sales.
When a local government entity sells debt using a competitive sale method, the local government
entity will typically publicly advertise the sale through a notice of sale and request bidders to submit
bids to purchase the debt being sold by a specified time. The notice of sale will specify the parameters
for the sale, such as the maturities, maximum principal amount, and maximum interest rate. Once the
bids are submitted, the local government will then award the bonds to the bidder that provides the
lowest interest rate. In most cases, the bidders for the bonds are typically underwriters who resell the
bonds to their customers.
For capital outlay notes (see Section 6c on page 19) issued by cities and counties that do not exceed
$5 million in principal, a modified form of competitive sale, known as the informal bid process, can
be used. Under this alternative, a city or county can seek quotes from financial institutions to purchase
a capital outlay note instead of selling the capital outlay note through a publicly advertised competitive
sale.
Negotiated sales generally take two forms—public underwritings and private placements. With a
public underwriting, a local government entity selects an underwriter and then negotiates the terms
for the sale of the debt of the local government entity, such as interest rates, call provisions, and
purchase price, among other things, with the underwriter. The local government entity and the
underwriter enter into a bond purchase agreement or similar agreement to memorialize these terms
and to provide for the sale of the debt. The underwriter will then typically reoffer the debt, which is
usually in the form of bonds, to its customers.
With a private placement (also sometimes called a direct placement), the purchaser of the debt of the
local government entity is typically a bank or other financial institution, and the debt of the local
government entity is not reoffered to the public but is held by the purchaser of the debt as a loan or
investment. In some cases, the purchaser of the debt may be required to hold the debt until it matures
or may be subject to other restrictions regarding the transfer of the debt. The terms of the debt are
negotiated directly by the local government entity and the purchaser of the debt.
16
The permitted method of sale for local government debt will generally be established by the statutes
that authorize the issuance of the debt. Most general obligation debt in Tennessee is required to be
sold by public competitive sale, and the State of Tennessee through its State Funding Board prefers
to issue its general obligation debt for larger capital projects by competitive sale.
17
Section 6 – Comptroller Oversight
of Short-Term Obligations
a. Short-Term Obligations Requiring Approval by the Comptroller of the Treasury
Types of Obligations
Statute
Bond Anticipation Notes
T.C.A. §§ 9-21-501 et seq.
Capital Outlay Notes
T.C.A. §§ 9-21-601 et seq.
Financing Leases
T.C.A. §§ 9-24-101 et seq.
Grant Anticipation Notes
T.C.A. §§ 9-21-701 et seq.
Revenue Anticipation Notes – Health Care
T.C.A. §§ 9-21-1101 et seq.
Revenue Anticipation Notes – Utilities, Other
T.C.A. §§ 7-34-111; 7-36-113; 7-82-501
Tax and Revenue Anticipation Notes
T.C.A. §§ 9-21-801 et seq.
i. General Requirements for Notes
Limits on Indebtedness
Except for Tax Anticipation Notes, there is no limit on indebtedness imposed on local
governments in the “Local Government Public Obligations Act of 1986” (the “Act”).
Local Government Powers
Local governments have the following powers under the Act: (a) contract debts in
order to make grants, donations, reimbursements or loans to one (1) or more local
governments, local government instrumentalities, or utility districts for the
construction of any public works project; (b) Borrow money for the construction of
any public works project; or (c) Issue bonds or notes to finance such construction,
grant, donation, reimbursement or loan for the construction of any public works
project.
In addition, local governments may pledge the full faith, credit, and unlimited taxing
power of the local government as to all taxable property in the local government or a
portion of the local government, if applicable, to the punctual payment of the principal
of and interest on the bonds or notes issued to finance any public works project, except
bonds or notes and the interest thereon payable exclusively from revenues of a public
works project.
18
Local governments may assess, levy, and collect ad valorem taxes on all taxable
property within the local government or a portion of the local government, if
applicable, sufficient to pay the principal of and interest on the bonds or notes issued
to finance any public works project, except bonds or notes and the interest thereon
payable exclusively from revenues of a public works project.
Tenn. Code Ann. § 9-21-107
Tax-Exemption
Any bonds or notes issued by a local government pursuant to the provisions of the
Act and the income therefrom shall be exempt from all state, county and municipal
taxation except for inheritance, transfer and estate taxes, and except as otherwise
provided in the Tennessee Code Annotated.
Tenn. Code Ann. § 9-21-117
ii. Remedies for Noteholders
Any holder of notes issued pursuant to the Act has the right, in addition to all
other rights:
By mandamus or other suit, action or proceeding in any court of competent
jurisdiction to enforce such holder's rights against the local government, the
governing body of the local government and any officer, agent, or employee
of the local government, including, but not limited to, the right to require the
local government, the governing body and any proper officer, agent or
employee of the local government to assess, levy and collect taxes, and to fix
and collect fees, rents, tolls, or other charges adequate to carry out any
agreement as to, or pledge of, such taxes, fees, rents, tolls, or other charges,
and to require the local government, the governing body of the local
government and any officer, agent or employee of the local government to
carry out any other covenants and agreements, and to perform its and their
duties under this chapter. No holder or holders of notes payable exclusively
from the revenues of a public works project shall ever have the right to compel
the levying and collection of taxes to pay such notes and the interest thereon.
By action or suit in equity to enjoin any acts or things which may be unlawful
or a violation of the rights of such holder or holders of notes.
Tenn. Code Ann. § 9-21-407
19
iii. Public Works Projects Defined by Tenn. Code Ann. § 9-21-105
The following list is a summary and grouping of all public works projects authorized
by Tenn. Code Ann. § 9-21-105:
GENERAL GOVERNMENT
• City and town halls
• Convention and event centers
• Courthouses
• Equipment (including vehicles, technology equipment, and related software) used for
local government purposes
• Facilities for the indigent
• Fire alarm systems
• Local government stables or garages
• Public buildings
• Plazas
• Parking facilities
• Memorials
• Voting machines
PUBLIC SAFETY
• Ambulances
• Corrective, detention, and penal facilities, including, but not limited to, jails and
transition centers
• Fire department equipment and buildings
• Law enforcement and emergency services equipment
HEALTH
• Dispensaries
• Facilities for persons with disabilities
• Health centers and clinics, including medical and mental health centers and clinics
• Hospitals
• Nursing homes
PUBLIC RECREATION
• Acquisitions of land for the purpose of providing or preserving open land
• Auditoriums
• Expositions
• Fairgrounds and fairground facilities
• Greenways
• Museums
• Parks
• Playgrounds
• Public art
20
• Preserves
• Recreation centers and facilities
• Stadiums
• Swimming pools
• Zoos
PUBLIC WORKS
• Facilities for the storage and maintenance of any items of equipment that constitute
public works projects
• Flood control
• Levees
• Reclamation of land
SOLID WASTE
• Garbage collection and disposal systems
• Incinerators
EDUCATION
• Libraries
• Schools
• Transportation equipment for schools
• Technology equipment and related software
TRANSPORTATION
• Airports
• Alleys
• Bridges
• Curbs
• Harbor and riverfront improvements
• Highways
• Highway and street equipment
• Parkways
• Port facilities
• Railroads, including railway beltlines and switches
• Rights-of-way
• River and navigation improvements and roads
• Ship canals
• Sidewalks
• Streets
• Tunnels
• Urban transit facilities
• Wharves
UTILITIES
• Culverts
• Drainage systems, including storm water sewers and drains
21
• Electric plants and systems
• Gas and natural gas systems and storage facilities
• Heat plants and systems
• Reservoirs
• Sewers
• Sewage and wastewater systems, including, but not limited to, collection, drainage,
treatment, and disposal systems
• Thermal transfer generating plants and/or distribution systems
• Viaducts
• Water treatment distribution and storage systems
ECONOMIC DEVELOPMENT
Hotels and supporting or incidental facilities built by local governments which are built
adjacent to, and as a supporting facility of, civic or convention centers located in
municipalities which have created a central business improvement district under the
provisions of the “Central Business Improvement District Act of 1971,” compiled in
Tenn. Code Ann. Title 7, Chapter 84
Improvements made pursuant to a plan of improvement for a central business
improvement district created pursuant to the “Central Business Improvement District
Act of 1971,” compiled in Tenn. Code Ann. Title 7, Chapter 84
• Markets
• Business parks
• Industrial parks
• Urban renewal projects
b. Bond Anticipation Notes
The authority for the issuance of Bond Anticipation Notes (BANs) is found in Title 9, Chapter
21, Part 5 of the Tennessee Code Annotated. BANs are issued for the express purpose of
providing funds in anticipation of the sale of bonds. Pursuant to Tenn. Code Ann. § 9-21-
505, BANs must first be approved by the Comptroller’s Office. See the template BAN
resolution in the Appendix. Template resolutions can also be found on the Comptroller of
the Treasury’s website at tncot.cc/debt – select the “Note Resolutions” tab.
STEP ONE – Submission Requirements for Approval – BAN
Local governments seeking approval to issue BANs shall submit the following information
electronically to the Division of Local Government Finance in the Comptroller’s Office at
1. Request Letter
The letter requesting approval to issue the BANs shall be from and signed by the local
government’s Chief Executive Officer or designee.
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2. Adopted Initial Bond Resolution
A certified copy of the signed and adopted initial bond resolution authorizing the
issuance of general obligation bonds revenue bonds.
3. Statement Regarding Publication of Initial Bond Resolution and Protest Period
• For general obligation bonds, certification of compliance with Tenn. Code
Ann. § 9-21-206 that (a) the initial bond resolution authorizing the issuance of
general obligation bonds has been published in a newspaper of general
circulation; and (b) no protest was made against the initial resolution for
general obligation bonds during the 20-day protest period.
• For revenue bonds, certification of compliance with Tenn. Code Ann. § 9-21-
304 that the initial bond resolution authorizing the issuance of revenue bonds
has been published in full once in a newspaper of general circulation.
4. Adopted Resolution
The resolution shall authorize the issuance of BANs and shall be certified. The
resolution should include the following key elements:
• Clear description of public works project(s) that meet(s) the definition in Tenn.
Code Ann. § 9-21-105, Title 9, Ch 11 or Title 49, Ch 3, Pt 10;
• Not to exceed dollar amount;
• Name of the note;
• Life and term of the note does not exceed 2 years;
o Entity may request subsequent approval to extend BANs for two
additional 2-year periods – Tenn. Code Ann. § 9-21-505.
• Planned amortization of the notes that meets statutory requirements;
o After the first 2-year period, a minimum of 1/20 of the original
principal shall be retired annually.
o The entity may request subsequent waiver of the principal retirement
when requesting BAN Extension – Tenn. Code Ann. § 9-21-505.
• Disclosure of any recurring fees included in the interest rate;
• Not to exceed interest rate that is less than the state usury maximum (Tenn.
Code Ann. § 47-14-103);
• If it is an internal loan, and the entity is lending restricted monies (e.g., money
from the water and sewer fund), then the entity is paying interest – Tenn. Code
Ann. § 9-21-408.
o Interest should be the highest rate currently being earned on other
investments, excluding pension investments.
o If there are no applicable investments, the interest rate is the amount
that could be earned for deposits in the Local Government Investment
Pool administered by the Tennessee State Treasurer.
• Method of sale – competitive or negotiated;
• Security – Tenn. Code Ann. § 9-21-504 – general obligation or revenue;
• Date of approval by governing body; and
• Relevant signatures and certification.
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5. Statement of Monthly Cash Flow Analysis
This requirement only applies for interfund BANs. A monthly cash flow analysis is
required for the lending fund(s). A monthly cash flow analysis Microsoft Excel
template is available on the Comptroller of the Treasury’s website at tncot.cc/debt –
select the “Tools” tab.
STEP TWO – Approval by the Comptroller’s Office – BAN
1. The request will be reviewed within 10 days of receipt by the Division of Local
Government Finance in the Comptroller’s Office. If the submission is incomplete,
the 10-day review period will not begin until the needed information is received.
2. Once the review process is complete, the local government will receive a letter via e-
mail from the Division of Local Government Finance indicating approval or non-
approval.
3. The approval is valid for six months after the date of the letter. If the BANs are not
issued within that time, a new note resolution must be passed and submitted to the
Comptroller’s Office for approval. Please notify [email protected] as soon as possible
if a decision is made not to issue the BANs.
STEP THREE – Submission Requirements after Approval – BAN
1. Debt Report
Pursuant to Tenn. Code Ann. § 9-21-134, a Debt Report shall be completed and filed
with the governing body of the local government no later than 45 days after the
issuance of the BANs and a copy (including attachments, if any) shall be filed with the
Division of Local Government Finance in the Comptroller’s Office. The form should
be completed using the Comptroller’s online application located at tncot.cc/debt-
report. An additional Debt Report will need to be filed once the long-term bonds are
issued.
2. Annual Budget Approval
Within 15 days of adoption, the local government’s annual budget, including
supporting schedules, shall be submitted to the Division of Local Government
Finance in the Comptroller’s Office at [email protected].
c. Capital Outlay Notes
Capital Outlay Notes require the approval of the Comptroller’s Office. The authority for
issuance of Capital Outlay Notes (CONs) is found in Tenn. Code Ann. Title 9 Chapter 21 Part
6. See the template CON resolution in the Appendix. Template resolutions can also be found
on the Comptroller of the Treasury’s website at tncot.cc/debt under the “Note Resolutions”
tab.
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STEP ONE – Submission Requirements for Approval – CON
Local governments seeking approval to issue CONs shall submit the following information
electronically to the Division of Local Government Finance in the Comptroller’s Office at
1. Request Letter
The letter requesting approval to issue the CONs shall be from and signed by the local
government’s Chief Executive Officer or designee.
The request must state that the proposed sale is feasible and in the best interest of the
local government and that the entity is able to repay the proposed indebtedness
together with all other obligations of the local government.
2. Resolution
The signed and certified authorizing resolution, and draft note. The resolution should
include the following key elements:
• Clearly described municipal project(s) that meet(s) the definition in Tenn.
Code Ann. § 9-21-105.
• Not to exceed dollar amount.
• Economic life of the project(s) that is reasonable based upon the nature of the
project.
• Method of sale (competitive sale, negotiated, informal bid process, or
interfund). The proposed type of sale must comply with Tenn. Code Ann. §
9-21-607:
o Up to 3 years & any amount = Competitive public sale or private
negotiated sale.
o >3 and up to 12 years & up to $5,000,000 = Competitive (can be local)
or informal bid.
o >3 and up to 12 years & >$5,000,000 = Competitive public sale only.
o Land acquisition notes can be sold to the seller of land in a private
negotiated sale in addition to other permitted methods of sale.
o Interfund loans are not subject to the method of sale requirements in
Tenn. Code Ann. § 9-21-607.
• Name of the note.
• Life/term of the note does not exceed:
o Economic life of the project(s) or 12 years, whichever is less – Tenn.
Code Ann. § 9-21-602(a).
o Economic life of the project(s) or 20 years, whichever is less, for
interfund CON lent from proceeds from the sale of a Tennessee
private act hospital – T.C.A. § 9-21-604(b).
o 10 years for a land purchase (Tenn. Code Ann. § 9-21-607).
o 12 years for interfund loans (Tenn. Code Ann. § 9-21-408 & Title 9,
Chapter 21, Part 6)
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• Planned repayment begins after the first fiscal year the notes are issued and are
repaid, either by maturity or by mandatory redemption. The amortization of
the notes meets statutory requirements of Tenn. Code Ann. § 9-21-604.
o Level debt service payments (specifically, principal and interest does
not exceed any prior year by more than 5%).
o An equal amount of principal in each fiscal year.
o As otherwise approved by the Comptroller’s Office.
o Interfund CON from Tennessee Private Act Hospital sale proceeds—
not less than 1/20 of the original principal amount of the notes.
o The Comptroller’s Office may waive periodic retirement requirement.
• Disclosure of any recurring fees included in the interest rate.
• Not to exceed interest rate that is less than the state usury maximum (Tenn.
Code Ann. § 47-14-103).
• If this is an internal loan and the entity is lending restricted monies (e.g., money
from the water and sewer fund), the entity is paying interest – Tenn. Code
Ann. § 9-21-408).
o Interest should be the highest rate currently being earned on other
investments, excluding pension investments.
o If there are no applicable investments, the interest rate is the amount
that could be earned for deposits in the Local Government Investment
Pool administered by the Tennessee State Treasurer.
o The fixed interest rate may be set on the day of issuance or locked in
up to 60 days prior to the day of issuance, but not prior to the decision
by the local government to execute the project.
• Security – Tenn. Code Ann. § 9-21-603
o Notes shall be direct general obligations of entity; taxing power
pledged.
o If for an income-producing public works (e.g., water utility fund), a
secondary security/pledge payable from revenues of the public works
may be added.
• Placeholder for the date of approval by governing body.
• Placeholders for relevant signatures and certification.
• Interfund CON from the Tennessee Private Act Hospital sale proceeds – the
authorizing resolution may provide that the notes must be subject to
redemption prior to maturity at the option of the local government.
3. Informal Bid Attachment
If seeking informal bid approval, the CON must be for $5 million or less. Tenn. Code
Ann. § 9-21-609. See the sample informal bid form in the Appendix.
4. Statement of Monthly Cash Flow Analysis
This requirement only applies for interfund CONs. A monthly cash flow analysis is
required for the lending fund(s) to demonstrate the lending of fund will not adversely
impact the cash flow/working capital needs of the lending fund
. A monthly cash flow
26
analysis Microsoft Excel template is available on the Comptroller of the Treasury’s
website at tncot.cc/debt – select the “Tools” tab.
5. Copy of Proposed Disclosure Statement, if any
6. Schedule of Estimated Annual Principal and Interest Requirements
7. Detailed Estimated Costs of Issuance
This must include all amounts required to be reported under Tenn. Code Ann. § 9-21-
134, if applicable.
8. List of Projects to be Financed
Please include a detailed list of all proposed projects, including the estimated life of
those projects. A weighted average life calculator is available on the Comptroller of
the Treasury’s website at tncot.cc/debt – select the “Tools” tab.
STEP TWO – Approval by the Comptroller’s Office – CON
1. The request will be reviewed within 10 days of receipt by the Division of Local
Government Finance in the Comptroller’s Office. If the submission is incomplete,
the 10-day review period will not begin until the needed information is received.
2. Approval can only be granted if the issuance of the CONs, as compared to the issuance
of GO bonds, is in the best interest of the local government pursuant to Tenn. Code
Ann. § 9-21-601(b)(4).
• When making this determination, the Comptroller’s Office will consider
whether the life of the project materially exceeds the life of the CON.
• For example, if school construction is being financed for 12 years, and it is
apparent that the entity will not be able to repay the CON within that period
and will need to refund the CON in order to extend maturity to a later date,
then the request cannot be approved.
3. Once the review process is complete, your local government will receive a letter via e-
mail from the Division of Local Government Finance indicating approval or non-
approval.
4. The approval is valid for six months after the date of the letter. If the CONs are not
issued within that time, a new draft note resolution must be prepared and submitted
to the Comptroller’s Office for approval. Please notify [email protected] as soon as
possible if a decision is made not to issue the CONs.
STEP THREE – Submission Requirements after Approval – CON
1. Debt Report
Pursuant to Tenn. Code Ann. § 9-21-134, a Debt Report shall be completed and filed
with the governing body of the local government no later than 45 days after the
27
issuance of the CONs and a copy (including attachments, if any) shall be filed with the
Division of Local Government Finance in the Comptroller’s Office. The form should
be completed using the Comptroller’s online application located at tncot.cc/debt-
report.
2. Annual Budget Approval
Within 15 days of adoption, the local government’s annual budget, including
supporting schedules, shall be submitted to the Division of Local Government
Finance in the Comptroller’s Office at [email protected].
d. Grant Anticipation Notes
Grant Anticipation Notes require the approval of the Comptroller’s Office. The authority for
issuance of Grant Anticipation Notes (GANs) is found in Tenn. Code Ann. Title 9, Chapter
21, Part 7. See the template GAN resolution in the Appendix. Template resolutions can also
be found on the Comptroller of the Treasury’s website at tncot.cc/debt under the “Note
Resolutions” tab.
A local government may issue capital outlay notes or bond anticipation notes for the matching
portion of public works grants, as well as grant anticipation notes issued under Tenn. Code
Ann. Title 9 Chapter 21 Part 7, provided that the proceeds from the sale of any such capital
outlay notes or bond anticipation notes shall not be applied to the payment of such grant
anticipation notes.
STEP ONE – Submission Requirements for Approval – GAN
Local governments seeking approval to issue GANs shall submit the following information
electronically to the Division of Local Government Finance in the Comptroller’s Office at
1. Request Letter
The letter requesting approval to issue the GANs shall be from and signed by the local
government’s Chief Executive Officer or designee.
2. Adopted Resolution
The resolution shall authorize the issuance of GANs and shall be certified as well as
include the draft note. The resolution should include the following key elements:
• Not to exceed dollar amount.
• Name of the note.
• Life/term of the note does not exceed 3 years from the date of issuance, unless
requesting initial Comptroller approval to extend – Tenn. Code Ann. § 9-21-
705.
• Disclosure of any recurring fees included in the interest rate.
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• Not to exceed interest rate that is less than the state usury maximum (Tenn.
Code Ann. § 47-14-103).
• Security – Tenn. Code Ann. § 9-21-704.
o Notes shall not be direct general obligations of entity.
o Pledge to repay principal shall be solely from a state or federal grant
contract/agreement.
o Pledge for interest payment may be from ad valorem taxes.
• Date of approval by governing body.
• Relevant signatures and certification.
• If this is an internal loan and the entity is lending restricted monies (e.g., money
from the water and sewer fund), the entity is paying interest – Tenn. Code
Ann. § 9-21-408.
o Interest should be the highest rate currently being earned on other
investments, excluding pension investments.
o If there are no applicable investments, the interest rate is the amount
that could be earned for deposits in the Local Government Investment
Pool administered by the Tennessee State Treasurer.
3. Copy of Signed Contract and Notice to Proceed with Project Letter
The fully executed contract or agreement between the state or federal agency and the
local government pledging the funds for the public works project and documentation
indicating that a notice to proceed with the project or the equivalent has been received.
4. Statement of Monthly Cash Flow Analysis
This requirement only applies for interfund GANs. A monthly cash flow analysis is
required for the lending fund(s). A monthly cash flow analysis Microsoft Excel
template is available on the Comptroller of the Treasury’s website at tncot.cc/debt
under the “Tools” tab.
STEP TWO – Approval by the Comptroller’s Office – GAN
1. The request will be reviewed within 10 days of receipt by the Division of Local
Government Finance in the Comptroller’s Office. If the submission is incomplete,
the 10-day review period will not begin until the needed information is received.
2. Once the review process is complete, the local government will receive a letter via e-
mail from the Division of Local Government Finance indicating approval or non-
approval.
3. The approval is valid for six months after the date of the letter. If the GANs are
not issued within that time, a new note resolution must be passed and submitted to
the Comptroller’s Office for approval. Please notify [email protected] as soon as
possible if a decision is made not to issue the GANs.
29
STEP THREE – Submission Requirements after Approval – GAN
1. Debt Report
Pursuant to Tenn. Code Ann. § 9-21-134, a Debt Report shall be completed and filed
with the governing body of the local government no later than 45 days after the
issuance of the GANs and a copy (including attachments, if any) shall be filed with the
Division of Local Government Finance in the Comptroller’s Office. The form should
be completed using the Comptroller’s online application located at tncot.cc/debt-
report.
2. Annual Budget Approval
Within 15 days of adoption, the local government’s annual budget, including
supporting schedules, shall be submitted to the Division of Local Government
Finance in the Comptroller’s Office at [email protected].
e. Revenue Anticipation Notes
Pursuant to Tenn. Code Ann. §§ 7-34-111, 7-36-113, and 7-82-501, cities and counties as well
as energy authorities and utility districts can issue certain utility Revenue Anticipation Notes
(RANs), which require the approval of the Comptroller’s Office.
STEP ONE – Submission Requirements for Approval – RAN
Local governments seeking approval to issue RANs shall submit the following information
electronically to the Division of Local Government Finance in the Comptroller’s Office at
1. Request Letter
The letter requesting approval to issue the RANs shall be from and signed by the local
government’s Chief Executive Officer or designee.
2. Adopted Resolution
The resolution shall authorize the issuance of RANs and shall be certified as well as
include the draft note. The resolution should include the following key elements:
• Name of the note.
• Not to exceed dollar amount.
• The next two requirements only apply to RANs issued for construction, etc.
of public works systems pursuant to Tenn. Code Ann. § 7-34-111 (a)-(b):
o Economic life of the project(s) that is reasonable based upon the
nature of the project.
o Life/term of the note does not exceed economic life of the project(s)
and does not exceed 5-years.
• Planned amortization of the notes that meets statutory requirements.
30
o Maximum 12 months for gas and/or power purchases – Tenn. Code
Ann. §§ 7-34-111(d), 7-36-113(d), and 7-82-501. Note: The 12-month
period does not have to mirror the entity’s fiscal year.
o Maximum 5 years for construction-related – Tenn. Code Ann. § 7-34-
111(a)-(b).
• Not to exceed interest rate that is less than the state usury maximum (Tenn.
Code Ann. § 47-14-103).
• Date of approval by the governing body.
• Relevant signatures and certification.
3. Copy of Budget
For RANs issued to fund gas and/or power purchases, budget showing amount of
budgeted electric power or gas purchases that will be used to calculate the 60%
limitation – Tenn. Code Ann. §§ 7-34-111(d), 7-36-113(d), and 7-82-501.
STEP TWO – Approval by the Comptroller’s Office – RAN
1. The request will be reviewed within 10 days of receipt by the Division of Local
Government Finance in the Comptroller’s Office. If the submission is incomplete,
the 10-day review period will not begin until the needed information is received.
2. RANs issued for gas/power purchases must comply with the following requirements:
• The amount requested for approval is 60% or less than the total budgeted for
the purchase of gas or electricity – Tenn. Code Ann. §§ 7-34-111(d), 7-36-
113(d), and 7-82-501.
• The entity has a positive ending net position for the last fiscal year audit and a
positive change in net position in one of the last three fiscal years.
• Revenue projections in the budget appear realistic in that the RANs may be
retired within 12-months after issuance.
3. Once the review process is complete, the local government will receive a letter via e-
mail from Division of Local Government Finance indicating approval or non-
approval.
4. The approval is valid for six months after the date of the letter. If the RANs are not
issued within that time, a new note resolution must be passed and submitted to the
Comptroller’s Office for approval. Please notify [email protected] as soon as possible
if a decision is made not to issue the RANs.
STEP THREE – Submission Requirements after Approval – RAN
1. Debt Report
Pursuant to Tenn. Code Ann. § 9-21-134, a Debt Report shall be completed and filed
with the governing body of the local government no later than 45 days after the
issuance of the RANs and a copy (including attachments, if any) shall be filed with the
31
Division of Local Government Finance in the Comptroller’s Office. The form should
be completed using the Comptroller’s online application located at tncot.cc/debt-
report.
2. Annual Budget Approval
Within 15 days of adoption, the local government’s annual budget, including
supporting schedules, shall be submitted to the Division of Local Government
Finance in the Comptroller’s Office at [email protected].
f. Tax and Revenue Anticipation Notes
Tax and Revenue Anticipation Notes (TRANs) require the approval of the Comptroller’s
Office. The authority for issuance of TRANs is found in Tenn. Code Ann. Title 9, Chapter
21, Part 8. See the template TRAN resolution in the Appendix. Template resolutions can also
be found on the Comptroller of the Treasury’s website at tncot.cc/debt – select the “Note
Resolutions” tab.
STEP ONE – Submission Requirements for Approval – TRAN
Local governments seeking approval to issue TRANs shall submit the following information
electronically to the Division of Local Government Finance in the Comptroller’s Office at
1. Request Letter
The letter requesting approval to issue the TRANs shall be from and signed by the
local government’s Chief Executive Officer or designee. It must identify the amount
of the TRAN and whether it is an internal or external loan.
2. Adopted Resolution
The resolution shall authorize the issuance of TRANs and shall be certified as well as
include the draft note. The resolution should include the following key elements:
• Approved and certified resolution and draft note.
• Not to exceed dollar amount.
• Borrowing Fund.
• Life/term of the note does not exceed beyond appropriation fiscal year.
• Name of the note.
• Not to exceed interest rate that is less than the state usury maximum (Tenn.
Code Ann. § 47-14-103).
• Date of approval by the governing body.
• Relevant signatures and certification.
3. Statement of Monthly Cash Flow Analysis for the Borrowing Fund
A monthly cash flow analysis is required for the borrowing fund (the fund anticipating
the future tax or other revenue). A monthly cash flow analysis Microsoft Excel
32
template is available on the Comptroller of the Treasury’s website at tncot.cc/debt –
select the “Tools” tab.
4. Statement of Monthly Cash Flow Analysis for the Lending Fund (for Internal Loans)
This requirement only applies for interfund TRANs. A monthly cash flow analysis is
required for the lending fund(s). A monthly cash flow analysis Microsoft Excel
template is available on the Comptroller of the Treasury’s website at tncot.cc/debt –
select the “Tools” tab.
STEP TWO – Approval by the Comptroller’s Office – TRAN
1. The request will be reviewed within 10 days of receipt by the Division of Local
Government Finance in the Comptroller’s Office. If the submission is incomplete,
the 10-day review period will not begin until the needed information is received.
2. Approval can only be granted if the following requirements are met:
• The amount requested for approval is 60% or less than the total budgeted
appropriations for the fund – Tenn. Code Ann. § 9-21-801.
• Any prior year TRANs have been repaid and the entity sent proof to the
Division of Local Government Finance in the Comptroller’s Office at
• The cash flow for the borrowing fund: (1) appears reasonable/realistic; (2)
demonstrates need; and (3) demonstrates ability to repay.
3. Once the review process is complete, the local government will receive a letter via e-
mail from the Division of Local Government Finance indicating approval or non-
approval.
4. The approval is valid through the end of the fiscal year identified in our approval letter.
STEP THREE – Submission Requirements after Approval – TRAN
1. Debt Report
Pursuant to Tenn. Code Ann. § 9-21-134, a Debt Report shall be completed and filed
with the governing body of the local government no later than 45 days after the
issuance of the TRANs and a copy (including attachments, if any) shall be filed with
the Division of Local Government Finance in the Comptroller’s Office. The form
should be completed using the Comptroller’s online application located at
tncot.cc/debt-report.
2. Annual Budget Approval
Within 15 days of adoption, the local government’s annual budget, including
supporting schedules, shall be submitted to the Division of Local Government
Finance in the Comptroller’s Office at [email protected].
33
3. Repayment Requirement
The local government must repay the TRANs no later than June 30 of the fiscal year
of borrowing and provide the Division of Local Government Finance in the
Comptroller’s Office at [email protected] with documentation within 15 days of, but
not later than June 30 of the fiscal year of, borrowing.
g. Summary Grid of Notes Authorized Under Tenn. Code Ann. Title 9,
Chapter 21
34
h. Financing Leases
Lease financing agreements meeting certain criteria must be approved by the Comptroller’s
Office. Tenn. Code Ann. § 9-24-101 et seq. This approval requirement applies to individual
lease financing agreements with principal amounts greater than $100,000 and to individual
lease financing agreements that are $100,000 or less if the principal amount, together with the
principal amount of all exempt lease financings issued by the public entity in the same fiscal
year exceeds $100,000. A lease is defined as an agreement for the use of property under which
a public entity is the lessee, and a lease financing includes one of the following elements: (a)
rental payments include an identifiable interest component; or (b) the local government has
the right to purchase the property that is subject to the lease at a price that is not based upon
the fair market value of the property at the time of the purchase.
STEP ONE – Submission Requirements for Approval – Financing Lease
Local governments seeking approval to enter into Financing Leases shall submit the following
information electronically to the Division of Local Government Finance in the Comptroller’s
Office at [email protected]:
1. Request Letter
The letter requesting approval to enter into a Financing Lease shall be from and signed
by the local government’s chief executive officer or designee.
2. Plan of Lease Financing
The Plan of Lease Financing is a certified copy of the draft lease agreement that
includes the following key elements:
Lease information summary sheet available on our website: tncot.cc/debt.
• Not to exceed dollar amount.
• Schedule of estimated annual principal and interest requirements.
• Detailed estimated costs of issuance, including one-time fees and recurring
administrative or similar fees paid over the life of the lease.
• Lease terms that are reasonable and comparable to debt being issued in the
current markets.
Interest rates and other borrowing costs from two additional lenders for the
same amount and maturity of the proposed lease financing.
• A weighted average maturity of the lease principal payments that does not
exceed the estimated weighted average life of the property being financed –
Tenn. Code Ann. § 9-24-104(a)(2). A weighted average life calculator is
available on the Comptroller of the Treasury’s website at tncot.cc/debt – select
the “Tools” tab.
• A lease term that does not exceed the maximum term of debt that could be
issued by the public entity to finance the proposed project – Tenn. Code Ann.
§ 9-24-104(a)(3).
• Description of the project(s) to be financed with the following minimum
information:
o Estimated useful life (or lives).
35
o Authorizing law to incur indebtedness for the project [Tenn. Code
Ann. § 9-24-104(a)(3)].
• The lease is payable from all or any portion of the revenues of the public entity,
pursuant to applicable law [Tenn. Code Ann. § 9-24-104(a)(4)].
• Not to exceed interest rate that is less than the state usury maximum (Tenn.
Code Ann. § 47-14-103).
3. Initial Resolution
If the lease is payable from or secured by property taxes, and the term of the lease
exceeds the maximum term of a capital outlay note that may be issued for the same
project, the entity must adopt and publish an initial resolution with respect to the lease
financing consistent with Tenn. Code Ann. Title 9, Ch. 21, Pt. 2, as applicable with
respect to the type of property that is being financed [Tenn. Code Ann. § 9-24-
104(a)(5)]. A statement that the local government complied with this provision, as
applicable, should be included in the request letter.
4. Balloon Indebtedness
Is the lease considered balloon indebtedness as defined in Tenn. Code Ann. § 9-21-
133?
• If it is balloon indebtedness, a separate request to issue balloon debt is required
pursuant to “State Funding Board Guidelines for Comptroller Approval of
Balloon Indebtedness.”
• If it is not balloon indebtedness because it meets an exception, please include
the nature of the exception.
STEP TWO – Approval by the Comptroller’s Office – Financing Lease
1. The request will be reviewed within 15 days of receipt by the Division of Local
Government Finance in the Comptroller’s Office. If the submission is incomplete,
the 15-day review period will not begin until the needed information is received.
2. Approval can only be granted if the issuance of the lease, as compared to debt being
issued in the current markets, is in the best interest of the local government pursuant
to Tenn. Code Ann. § 9-24-104. When making this determination, the Comptroller’s
Office will consider the following:
• Do the lease terms appear reasonable and comparable to debt being issued in
the current markets?
• Does the weighted average maturity of the lease principal payments exceed the
estimated weighted average life of the property being financed? Tenn. Code
Ann. § 9-24-104(a)(2).
• Does the term of the lease not exceed the maximum term of debt that could
be issued by the public entity to finance the proposed project? Tenn. Code
Ann. § 9-24-104(a)(3).
36
3. Once the review process is complete, the local government will receive a letter via e-
mail from the Division of Local Government Finance indicating approval or non-
approval.
4. The approval is valid for six months after the date of the letter. If the Financing Lease
is not issued within that time, a new plan of lease financing must be prepared and
as soon as possible if a decision is made not to issue the Financing Lease.
STEP THREE – Submission Requirements after Approval – Financing Lease
1. Debt Report
Pursuant to Tenn. Code Ann. § 9-21-134, a Debt Report shall be completed and filed
with the governing body of the local government no later than 45 days after the
issuance of the Financing Lease and a copy (including attachments, if any) shall be
filed with the Division of Local Government Finance in the Comptroller’s Office. The
form should be completed using the Comptroller’s online application located at
tncot.cc/debt-report.
2. Annual Budget Approval
Within 15 days of adoption, the local government’s annual budget, including
supporting schedules, shall be submitted to the Division of Local Government
Finance in the Comptroller’s Office at.
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Section 7 – Other Comptroller Oversight
a. Plans of Refunding
Requirements for a Plan of Refunding
Tennessee statutes require local governments to submit a plan of refunding (the “Plan”) to
the Comptroller’s Office for review prior to the adoption of a resolution authorizing the
issuance of refunding bonds. The Comptroller’s Office may present the local government
with a report on the Plan (“Refunding Report”) that must be submitted to the governing body
and reviewed at the public meeting during which the refunding bond authorizing resolution is
considered for adoption.
A fillable and downloadable form of a Refunding Plan can be found on the
Comptroller’s website at tncot.cc/debt. Please contact the Comptroller’s Office with
any questions about this online form.
Statutory Sections Requiring Plans
The following Plans are required to be filed with our office:
• Tenn. Code Ann. § 9-21-612—To issue Capital Outlay Notes (CONs) to refund
CONs;
• Tenn. Code Ann. § 9-21-903—To issue General Obligation Bonds to refund General
Obligation and/or Revenue debt;
• Tenn. Code Ann. § 9-21-1003—To issue Revenue Refunding Bonds to refund
Revenue debt; and
• Tenn. Code Ann. § 12-10-116—To issue Public Building Authority Loans to refund
any General Obligation and/or Revenue Debt.
Developing the Plan
Write the Plan to communicate the narrative of the refunding in easy-to-understand language.
Clearly state the objectives for the refunding and explain, in detail, how the refunding will
accomplish the objectives. There may be multiple objectives; however, list each objective
individually and describe them in order of importance.
Objectives of the potential refunding must be clearly stated and may include:
• Debt service savings;
• Reduction of risk;
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• Removal of restrictive covenants; or
• Payment of outstanding debt to prevent a default.
Method of Submission
• Requests for Refunding Reports shall be submitted online via the Comptroller of the
Treasury’s website at tncot.cc/debt. Please select the “Refunding Plan” tab, fill
out the online form, upload supporting documentation, and hit the “Submit”
button. Your request will automatically be emailed to LGF@cot.tn.gov.
• As an alternative, requests may be manually e-mailed to [email protected]. Please
note that all Refunding Plans must be submitted in the standard format as shown in
the online form under the “Refunding Plan” tab on tncot.cc/debt. Please contact
the Comptroller’s Office if you have questions about the online form.
Please do not send hardcopies of Requests for Refunding Reports to the Comptroller’s
Office.
Minimum Requirements for a Request for a Refunding Report:
Plan of Refunding
The Plan of Refunding must include all relevant portions as explained in the following
Narrative. A fillable and downloadable form of a Refunding Plan can be found on the
Comptroller’s website at tncot.cc/debt. Please contact the Comptroller’s Office
with any questions about the online form.
Narrative
1. State the objective of the refunding and provide a detailed explanation of how
the refunding will achieve the objective.
a. Cost savings (see savings schedule requirements on page 35).
i. Describe how the refunding’s cost savings meets the
requirements of the local government’s adopted debt
management policy.
ii. Quantify and state savings in dollars and as a percentage of the
amount of the refunded debt.
iii. Describe how any change in structure and/or interest rate
impacts savings.
iv. Justify refunding if total combined net present value (NPV)
debt service savings are less than 2.5 times the costs of issuance
(including underwriter’s discount and bond insurance as costs
of issuance). Include a sentence that states: NPV Savings are
“______” times costs of issuance.
v. If multiple bonds are being refunded and the refunding of a
candidate does not produce positive NPV or gross savings,
describe why the bond is being included in the refunding.
b. Restrictive covenant removal or change (describe the restrictive
covenant).
c. Payment of outstanding debt to prevent a default (explain in detail).
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d. Reduction or elimination of risk (list and describe risk(s) and how it is
(they are) reduced or eliminated.
2. Security of debt issue (general obligation, revenue, general obligation &
revenue, or other [please specify]).
3. Type of sale (competitive or negotiated: if GO bonds are planned to be
negotiated, see page 36 for specific requirements).
4. If the refunding bonds contain a feature where the holder of the debt can
“put” the bond or loan to the local government at a predetermined date,
provide the details of this put option and see State Funding Board’s Guidelines
on Balloon Indebtedness, which is available on the Comptroller of the
Treasury’s website at tncot.cc/debt – select the “Balloon Debt” tab.
5. Maximum authorized amount, and anticipated size of issue.
6. Description of each refunded candidate including the following:
a. Call date and premium (if any).
b. Maturities being called.
c. Par amount originally issued.
d. Dated date.
e. Current amount outstanding.
f. Amount to be refunded.
g. Tax status (and explanation if status has changed).
h. Purpose for which the bonds were issued (Projects).
7. Type of refunding for each refunded candidate:
a. Current.
b. Advance, in which case provide a statement of the feasibility of an
advance refunding under current market conditions including
assumptions.
8. Balloon Indebtedness (as defined in Tenn. Code Ann. § 9-21-133) provide one
of the following:
a. Statement that the refunding does not constitute Balloon Indebtedness
and provide the reason; or
b. Statement that a separate Plan of Balloon Indebtedness was submitted
as prescribed by the State Funding Board (see State Funding Board
Guidelines on Balloon Debt, which is available on the Comptroller of
the Treasury’s website at tncot.cc/debt – select the “Balloon Debt”
tab.).
c. Statement, with applicable documentation, that a State Funding Board
waiver is being used.
9. Please specify if a derivative is associated with the refunded debt. If a
derivative instrument is associated with the refunding, please contact the
Comptroller’s Office for separate submission requirements.
Schedules
10. Savings schedule, if refunding for savings, or a cost schedule, if restructuring.
For each individual refunding bond and an aggregate report, both containing
at a minimum:
a. A comparison of refunded and anticipated refunding debt service.
b. Gross savings amount.
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c. Net present value savings (NPV) amount (see calculation information
in e below).
d. NPV as a percent of refunded principal.
e. NPV should be calculated using the arbitrage yield or all in true interest
cost (TIC) and should show the discounted difference between total
refunded debt service and new refunding debt service for each yearly
period: calendar year, fiscal year, or any 12-month recurring period may
be used (do not calculate NPV savings using less than a 12-month
period).
f. Any cost of issuance paid from sources other than bond proceeds and
any cash contributed to the escrow other than bond proceeds must be
subtracted from savings; only rounding amount up to a whole bond
may be included in the final savings amount.
11. Before and after overall debt portfolio schedule (in tabular and chart format)
for the security of the bonds (General Obligation/Revenue, or paying source,
e.g., water, gas, etc.); showing the effect of the refunding on the overall
portfolio.
12. Refunding bond schedules:
a. Amortization schedule including principal, interest, and total debt
service.
b. Average coupon, arbitrage rate, all in cost, and TIC
c. Weighted average maturity/average life.
d. Minimum and maximum debt service payment.
13. Refunded bond schedules for each refunding candidate:
a. Amount to be refunded.
b. Amortization schedule of refunded maturities, including maturity date,
principal, interest, and total debt service.
c. Average coupon.
d. Call date.
e. Weighted average maturity/average life.
f. Amortization schedule of un-refunded maturities.
g. Savings schedule for each bond being refunded.
14. If multiple refunded bonds, include an aggregate schedule of all refunded
bonds, including Parts a–d of #13 above.
15. Sources and uses schedule.
16. Detailed costs of issuance schedule (identify firms associated with respective
cost, or TBD if to be determined).
17. If the refunding will extend the maturity of the refunded bonds, either by more
than 6 months after the date the last maturity is due or the weighted average
maturity increases by more than 2%, provide a detailed statement as to why
the extension is in the public’s interest.
18. Requirements for negotiated sale of general obligation refunding bonds:
a. Approval by the Comptroller’s Office is required for general obligation
refunding bonds, including revenue and tax bonds.
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b. The request for approval of a negotiated sale should be included as
part of the request letter for a plan of refunding and must state and
demonstrate the private negotiated sale is:
i. in the best interest of the local government,
ii. feasible, and
iii. the proposed bonds can be amortized with all other obligations
outstanding.
At a minimum, the following shall be included with the request for
approval:
i. Draft copy of the proposed resolution authorizing the issuance
of the refunding bonds;
ii. Copy of the proposed disclosure statement, if any; and
iii. Documentation and analysis that supports the three assertions
at 18(b)i-iii above.
The preceding items must be included in a Plan; however, the minimum required information
for a Plan must be sufficient to provide an understanding of the transaction, outline the costs,
risks, and benefits, and communicate the transaction to your governing body and citizens thus
requiring more than the preceding items in the narrative and in any supporting schedules or
documents. Additional information may be required to support the planned refunding. The
narrative should include an explanation of the information and schedules that support the
refunding. The Comptroller’s Office may request additional information.
The Comptroller’s Office has 15 days from the date of receipt of a complete plan to provide
a report. If, due to time constraints, a local government needs the report sooner than 15 days,
please contact your Analyst in the Comptroller’s Division of Local Government Finance and
request an expedited review.
The report issued for a plan will be relevant for 90 days after the date of the report. If the
proposed bond issue has not priced during this period, and the local government wishes to
continue with the pricing, a new plan (with current assumptions) will need to be submitted for
review. Requests for 30-day extensions may be granted on a case-by-case basis and only if the
extension is needed due to extenuating circumstances. Please contact the Comptroller’s Office
if you need to request a 30-day extension.
Contact List
The contact list must include the name, title, firm name, address, phone number, and email
address for the following individuals, as applicable:
1. Local Government Issuer:
a. Mayor or Executive
b. Each member of the governing body
c. Chief Financial Officer
2. Municipal Advisor
3. Bond Counsel
4. Underwriter
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If professional services are not retained, please state the reason, and identify the individual
who prepared the plan of refunding.
After Issuance
Within 45 days of the issuance of refunding bonds, a Debt Report must be completed and
presented to the governing body and a copy shall be filed with the Comptroller’s Office. We
recognize that the information provided in the Plan submitted to the Comptroller’s Office is
based on preliminary analysis and estimates and that actual results will be determined by
market conditions at the time of sale. However, if it is determined prior to the issuance of the
debt that the actual results will significantly differ from the information provided in the
submitted Plan, and the local government decides to proceed with the issue, the governing
body and the Comptroller’s Office should be notified after the sale by either the Chief
Executive Officer or the Chief Financial Officer of the local government regarding these
differences and that the Chief Executive Officer was aware of the differences and determined
to proceed with the issuance of the debt.
Notification will be necessary only if there is a change of ten percent (10%) or more in any of
the following:
1. An increase in the principal amount of the debt issued;
2. An increase in costs of issuance; or
3. A decrease in the cumulative savings or increase in the loss.
The notification must include an explanation for any significant differences and the
justification for change of ten percent (10%) or more from the amounts in the plan. This
notification should be presented to the governing body and the Comptroller’s Office with the
required filing of the Debt Report.
b. State Law Reissuance
Pursuant to Tenn. Code Ann. § 9-21-901(e), the modification of an outstanding obligation
must be deemed a refunding of the modified obligation, and such refunding must be required
to comply with this chapter, if the modification is of such significance that the obligation
would be deemed to be reissued for federal tax law purposes, whether or not the outstanding
obligation is tax-exempt for purposes of federal tax laws.
In other words, if the terms of an outstanding obligation are materially changed and would be
deemed a reissuance for federal tax law purposes, then the obligation is a refunding and must
comply with the requirements of Tenn. Code Ann. Title 9, Chapter 21, including the
submission of a plan of refunding to the Comptroller’s Office as well as submission of a new
Debt Report to the governing body and copy to the Comptroller’s Office not later than 45
days following the reissuance.
An example of significant modification would be the change in timing of payments due under
the tax-exempt obligation such as an extension of the final maturity or a deferral of payments
prior to maturity. Another potential modification is a significant change in the interest rate;
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however, in no event shall an outstanding obligation be deemed significantly modified and rise
to the level of a state law reissuance, if the original obligation allows for and contemplates a
modification of the rate of interest of the outstanding obligation at any time during its
existence.
c. Utility and E-911 Plans of Financings
Pursuant to Tenn. Code Ann. §§ 7-36-113, 7-82-501, 7-86-114, 68-221-611, and 68-221-1311,
Municipal Energy Authorities, Utility Districts, E-911 Districts, Water & Wastewater
Authorities, and Regional Water & Wastewater Authorities must submit a plan of finance to
the Division of Local Government Finance in the Comptroller’s Office at [email protected]
prior to issuance of any debt so the Comptroller’s Office can report on it. The plan of finance
will be reviewed within 15 days of receipt by the Division of Local Government Finance in
the Comptroller’s Office. The local government must publish the Comptroller’s Report in
accordance with state law prior to issuing the debt.
Requests for reports should include the following:
1. Request letter signed by the General Manager/President of the Board.
2. Complete Plan of Finance, including the following key elements:
• Pro forma financial statements for the three fiscal years subsequent to the most recent
audit.
• Copy of Preliminary Official Statement (for bonds) and draft resolution.
• For refundings – please refer to “Plans of Refunding” in Section 7a on page 33 for
specific requirements. The purpose of the refunding must be for savings, removal or
modification of restrictive covenant change, elimination or mitigation of risk due to
interest rate changes, or to prevent default. See Tenn. Code Ann. § 9-21-1001(b).
Please note: These restrictions do not apply to E-911 districts.
• For refundings – please refer to “Plans of Refunding” in Section 7 (a) for specific
requirements. If the debt is being extended beyond the current maturity, there is a
legitimate reason for the extension, and the maturity does not extend beyond the
project life.
• If the objective/purpose for the refunding is for savings, does the % of savings comply
with the entity’s debt management policy?
3. Is the debt considered Balloon Indebtedness as defined in Tenn. Code Ann. § 9-21-133?
• If balloon, a separate request to issue balloon debt is required pursuant to “State
Funding Board Guidelines for Comptroller Approval of Balloon Indebtedness.”
• If not balloon indebtedness because it meets an exception, include the nature of the
exception.
d. Balloon Debt
Pursuant to requirements outlined in the “Tennessee State Funding Board Guidelines –
Comptroller Approval of Balloon Indebtedness,” all requests for approval of balloon
indebtedness should include a request letter and plan of balloon indebtedness and be
submitted to the Division of Local Government Finance in the Comptroller’s Office at
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[email protected] for review and approval. The Comptroller’s Office has 15 days to review.
Incomplete plans are not considered received. For further illustration of what constitutes
balloon indebtedness, see the balloon debt flowchart in the Appendix.
Request Letter
The letter must be signed by the Mayor/Executive or designee and clearly describe the public
purpose for the balloon repayment structure and why it is in the public’s interest. See Tenn.
Code Ann. § 9-21-133(f). It must also include contact information, including e-mail addresses,
for all professionals working on the issuance.
Plan of Balloon Indebtedness including the following key elements:
• Not to exceed dollar amount and/or estimated amount of issuance.
• Name of the debt issuance.
• Security.
• Project.
• Material terms of transaction.
• Amortization schedule(s).
• Multiple series of debt to be issued simultaneously that will finance the same project
must be reviewed in the aggregate and included in one plan.
• New money debt must be evaluated separately from any refunding debt when issued
at the same time.
e. Pledge of Non-tax Revenues
Municipalities or counties that have created a Tourism Development Authority may pledge
non-ad valorem taxes and revenues toward the payment of bonds issued pursuant to Tenn.
Code Ann. § 7-69-111. Prior to authorization by the creating municipalities and/or counties,
approval must be requested from our Office.
Requests for approval should include the following:
• Signed request letter from the Mayor, County Executive, City Manager, or Finance
Director
• Proposed resolution authorizing the bonds or notes
• Proposed disclosure statement; if any
• Schedule showing the estimated annual principal and interest requirements
• Detailed statement showing the estimated cost of issuance
• Listing of projects to be financed
• Detailed description of non-ad valorem tax revenue pledge including a listing of individual
revenues pledged
• Five-year history of the pledged revenues
• Five-year proforma balance sheet, income statement, and cash flow analyses for the
project showing the estimated inflow and outflows of revenues, expenses, cash, and the
effects on net assets and cash balance
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f. Debt Reporting
In Tennessee, any governmental entity that issues debt must complete a Debt Report once the
debt is issued. The report must be submitted to the governmental entity’s governing body
(e.g., the county commission) within 45 days after the issuance, and an additional copy must
be filed with the Comptroller’s Office. Please visit the Comptroller’s website at tncot.cc/debt-
report for specific requirements and filing information.
As approved by the Tennessee State Funding Board, the Debt Report includes various
information about the debt incurred, such as:
• the type of debt – bond, note, loan, or lease financing – and the purpose of the debt
issuance (e.g., general government, education, refunding or refinancing of prior debt);
• the par value of the debt and any discount or premium;
• the interest cost, and whether the interest is taxable or tax-exempt; and
• the method of sale, cost of issuance, and professionals involved on the financing team.
g. Default reporting
A local government defaults when it fails to pay bond interest or principal on time or does not
comply with other provisions in the bond contract. Local governments in Tennessee that
have defaulted on debt must report to the Comptroller’s Office within 10 business days of the
default. The Debt Default Reporting Form can be found at tncot.cc/default. You can contact
your Analyst in the Comptroller’s Division of Local Government Finance for assistance with
the form. Please email the completed form to LGF@cot.tn.gov. In addition, industrial
to State Funding Board Guidelines found at tncot.cc/idc.
h. Debt Management Policies
Pursuant to Tenn. Code Ann. § 9-21-134(b)(1), the State Funding Board is authorized to
develop model financial transaction policies for local governments in Tennessee. Local
governments incurring or issuing debt shall have an adopted debt management policy (DPM)
that complies with the guidance from the State Funding Board found on our website.
The DMP shall be fitted to the local government’s needs and reviewed and amended as
needed. The DMP should be reviewed at a minimum each time there are legislative changes
that impact your policy and when there is a change in the administration.
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Section 8 – Federal Oversight of
Municipal Bonds
a. Internal Revenue Service and Tax-Exempt Status
The interest paid on debt obligations issued by local governmental entities may be exempt
from federal income taxation. Very complex provisions of the Internal Revenue Code,
together with hundreds of pages of regulations issued by the Internal Revenue Service, provide
guidance as to whether the interest on a debt obligation of a governmental entity is exempt
from federal income taxation. If the interest on a debt obligation of a governmental entity is
exempt from federal income taxation, that type of debt obligation is frequently referred to as
a tax-exempt bond, whether the obligation is a bond, note, loan agreement, or financing lease.
For purposes of this Section, all debt obligations that are tax-exempt (i.e., the interest on the
debt obligation is exempt from federal income taxation) are referred to as tax-exempt bonds
irrespective of the type of debt obligation.
It is often beneficial for a local government entity to issue a debt obligation that is a tax-exempt
bond when undertaking a borrowing. Because the holder of the tax-exempt bond does not
pay federal income tax on the interest of the tax-exempt bond, the holder should charge a
lower interest rate on the tax-exempt bond. The interest rate on a tax-exempt bond is usually
20% to 30% less than a comparable taxable debt obligation. Therefore, it is often in the best
interests of the local government entity to ensure that a debt obligation qualifies as a tax-
exempt bond.
A debt obligation issued by a local government entity is never automatically a tax-exempt
bond. Although many debt obligations issued by local government entities can be tax-exempt,
a local government entity must meet certain requirements of the Internal Revenue Code and
the related regulations to qualify a debt obligation as a tax-exempt bond. For example, in
connection with any tax-exempt bond, a notice filing must be made with the Internal Revenue
Service. Because these requirements can be very complex, many local government entities
retain bond counsel that has experience with tax-exempt bond issues to provide an opinion
that a debt obligation is tax-exempt, and many purchasers of tax-exempt debt also require the
receipt of such an opinion.
In determining whether a debt obligation of a local government entity can be a tax-exempt
bond, the Internal Revenue Code distinguishes between two types of obligations—
governmental bonds and private activity bonds. Almost all governmental bonds can be tax-
exempt bonds, while many private activity bonds cannot be tax-exempt bonds. A
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governmental bond is essentially any debt obligation issued by a local government entity that
is not a private activity bond. Very generally, a private activity bond is a debt obligation issued
by a local government entity if (i) more than 10% of the proceeds of the debt obligation will
be used by a private party or the federal government and (ii) more than 10% of the debt
service on the debt obligation is payable by a private party or the federal government. Very
complex regulations interpret this general rule, but in most cases, debt obligations issued by
traditional governmental entities, such as counties, cities, school districts, and utility districts,
will not be private activity bonds and instead will be governmental bonds that can be tax-
exempt.
If a debt obligation of a local government entity is a private activity bond, it likely will be a
taxable obligation, but under certain circumstances, it still might qualify as a tax-exempt bond.
The following categories of private activity bonds may be eligible to be tax-exempt bonds
provided all other relevant requirements are met:
• Bonds for non-profit entities that are exempt from taxation under Section 501(c)(3)
of the Internal Revenue Code. Under this exemption, bonds issued for many
hospitals, private schools and colleges, and other non-profit institutions can be tax-
exempt.
• Bonds issued to finance low-income housing, even if privately owned.
• Bonds issued to finance airport facilities, even if privately used or owned.
• Bonds issued to finance certain small manufacturing facilities, even if privately owned
(generally facilities with a total capital cost of less than $20 million).
• Bonds issued to finance certain solid waste disposal facilities, even if privately owned.
Most private activity bonds are issued by local government instrumentalities, such as industrial
development boards and health, education, and housing facility boards, and not traditional
local government entities. In these cases, the issuing entity usually issues bonds at the request
of a private party and loans the proceeds of the bonds to the private party. This type of
financing is frequently referred to as a conduit bond financing because the local government
entity is just serving as a conduit for the financing in order to obtain tax-exempt status, and
the local government entity generally has no liability to pay the bonds except from payments
made by the private party.
As previously mentioned, complex rules apply to all tax-exempt bonds. The most complex
rules address issues relating to arbitrage, which means the investment of proceeds of tax-
exempt bonds at a higher interest rate than the interest rate being paid on the bonds. Because
bond proceeds can be invested in taxable investments, the interest rate on the investments can
sometimes exceed the interest rate paid on the tax-exempt bonds, and this difference is
considered arbitrage by the Internal Revenue Service. Some types of arbitrage are acceptable,
and other types are not. An issuer’s bond counsel should assist the issuer in complying with
any arbitrage rules.
Many other rules apply to tax-exempt bonds, particularly private activity bonds that are tax-
exempt bonds. Those additional rules include the following:
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• The applicable rules may limit the amount of bond proceeds that a local government
issuer can use to reimburse itself for expenditures that were made prior to the bonds
being issued. This rule applies to governmental bonds and private activity bonds.
• A volume cap allocation from the State or a State agency may be required for certain
private activity bonds including bonds for low-income housing.
• Most private activity bonds must be approved by the highest elected official in the
jurisdiction in which the financed project is located.
• Most tax-exempt bonds are subject to a requirement that average weighted maturity
of the bonds cannot exceed 120% of the average economic life of the assets financed,
either through the arbitrage rules or a specific rule applicable to private activity bonds.
• Private activity bonds are generally subject to a limit on financed issuance costs.
• Tax-exempt bonds cannot be refinanced with other tax-exempt bonds more than 90
days before the refinanced tax-exempt bonds can be redeemed. In other words,
“advance refundings,” which at one point were fairly common for governmental
bonds, can no longer be issued as tax-exempt bonds.
Notes issued for working capital purposes, such as tax anticipation notes, can be issued as tax-
exempt obligations if a number of requirements are met. The most significant requirement is
that the issuer must demonstrate that a cash flow deficit is expected to occur in order to justify
the working capital borrowing. Except under the most unusual of circumstances, working
capital borrowings must be short-term in order to be tax-exempt.
Many tax-exempt bonds issued by smaller issuers are also “bank qualified” obligations under
the Internal Revenue Code. “Bank qualified” obligations are a subset of tax-exempt bonds.
The interest on “bank qualified” bonds is exempt from federal income taxation just like other
tax-exempt bonds, but there are some additional tax benefits to banks and other financial
institutions to buy “bank qualified” bonds. Therefore, a bank may offer a particularly
attractive interest rate to purchase a tax-exempt bond that is also “bank qualified.” Bond
counsel can advise as to whether a tax-exempt bond issue can also be “bank qualified.”
The Internal Revenue Service can audit a debt obligation of a local government entity in a
manner similar to an audit of a tax return for an individual or a corporation. The audit process
can be complex, and a local government should consider obtaining professional assistance if
an issuer’s tax-exempt bond is the subject of an audit. In the worst-case scenario, the Internal
Revenue Service could determine that a debt obligation is not eligible to be a tax-exempt bond,
in which case the holders of the obligation would have to pay tax on the interest on the
obligation (and would likely seek relief against the local government issuer or other parties
involved).
b. Federal Securities Laws
When private entities publicly sell debt and/or equity, private entities are frequently required
to submit a registration statement relating to the debt and/or equity to the federal Securities
and Exchange Commission (“SEC”). Local government entities are generally exempt from
such registration requirements in connection with the sale of debt. Therefore, only in very
rare circumstances will a local government entity be required to file a registration statement
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with the SEC. Generally, official statements and other offering documents of local
government entities are not required to be submitted to or approved by the SEC or any other
government entity prior to the sale of the debt.
While local government entities are generally exempt from registration requirements, local
government entities are not exempt from the anti-fraud regulations that have been issued by
the SEC. Under these regulations, the issuer of debt must not make fraudulent statements or
engage in certain other abusive practices in connection with the sale of securities, and
municipal bonds and other types of municipal debt are typically considered securities for this
purpose. If a local government entity makes a material misstatement in connection with the
sale of its debt, the local government entity could be the subject of an enforcement action by
the SEC or could by sued by the purchasers of its debt. It is therefore essential that the official
statement or other offering document pursuant to which a local government entity offers to
sell debt be as accurate as is possible.
Many local government entities rely on a municipal advisor (also known as a financial advisor)
to prepare the disclosure relating to the local government entity that is included in the official
statement or other offering document. Even though a third party prepares this information,
the local government still remains primarily responsible for the accuracy of the information in
the official statement or other offering document, and the Chief Executive Officer and/or
Chief Financial Officer should carefully review all offering documents as to the accuracy of
the information contained therein. Some local government issuers retain legal counsel, which
is known as disclosure counsel, to assist in ensuring that requirements of the securities laws
are met in connection with disclosure of a debt offering. Disclosure counsel may be the same
law firm as bond counsel or may be another law firm hired specifically for that purpose. Unless
bond counsel is asked to also assist with the accuracy of disclosure relating to a local
government, bond counsel generally has no role in that regard, and bond counsel’s
involvement with the official statement or other offering document is limited to describing
the debt being sold (and not the information relating to the issuer).
If a local government entity sells debt in a public sale, the local government will become
obligated to provide updated financial information to the holders of the debt on at least an
annual basis under Rule 15c2-12 issued by the SEC. If the local government entity has less
than $10 million in public debt outstanding, the local government entity may only be required
to file its audit each year, and if the local government entity has more than $10 million in public
debt outstanding, the local government entity will likely have to provide additional financial
information. These annual updates are filled on a financial reporting website with the acronym
“EMMA,” which is maintained by the Municipal Securities Rulemaking Board (“MSRB”).
Many local government entities rely on a dissemination agent to make annual disclosure filings,
but the primary responsibility for making such filings remains with the local government entity.
Failure to make such annual filings can make the future offering of public debt by the issuer
more difficult and possibly more expensive.
While the federal government does not generally have the right to exercise direct oversight
over the issuance of debt by local government entities, the federal government, through the
MSRB, exercises broad regulatory oversight over underwriters and municipal advisors. Under
50
MSRB regulations, underwriters must comply with a number of rules relating to the purchase
and sale of municipal securities, such as the delivery of official statements. In order to comply
with these rules, underwriters will require local government entities, in connection with the
purchase of debt, to provide certain information and meet certain requirements to allow the
underwriter to comply with MSRB requirements. The MSRB also regulates municipal advisors
and regulates the standards of conduct of municipal advisors.
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Section 9 – Best Practices and
Other Resources
Various resources are available to local government entities to assist with the issuance of debt. The
resources referenced in this section will be helpful to local government entities that are not conduit
debt issuers and that issue debt based upon their own credit.
a. Seven Keys
The Seven Keys to a Fiscally Well-Managed Government is a document produced by the
Comptroller’s Office that outlines various characteristics present in financially well-managed
governments. Follow this link for a printable copy for your board and for related videos:
tncot.cc/7keys
Building a Strong Budget for a Resilient Government
Structurally Balanced Budget
A budget is structurally balanced when recurring revenues are sufficient to pay recurring expenditures.
Recurring revenues can be relied on every year (property taxes, sales taxes, wheel taxes). Recurring
expenditures are those required for normal governmental operations (debt payments, salaries, pension
payments). Using overly optimistic revenue projections or underestimating expenditures, as well as
relying on one-time revenue from selling assets, restructuring debt, spending savings, or deferring
maintenance, indicate the budget is not structurally balanced. [Tenn. Code Ann. § 9-21-403]
Cash Flow Management
A local government’s ability to track how much revenue is coming into the government and how
much is going out is vital to its fiscal health. Local governments that rely heavily on property taxes
will need larger cash reserves to fund governmental services until tax revenue is received. Prior to its
adoption, the budget must contain adequate revenues along with cash on hand to fund the government
throughout the year. In addition, local governments need to have plans in place if additional sources
of liquidity either internally (interfund tax anticipation note “TAN”) or externally (bank issued TAN)
prove to be necessary. [Tenn. Code Ann. § 9-21-801]
Forecasting Budgetary Amounts
Mechanisms for forecasting revenues and expenditures that consider economic trends and growth
rates provide for reliable revenue estimates. Local governments that do not routinely forecast
budgetary amounts may find revenues overstated and expenditures understated. [Tenn. Code Ann. §
9-21-403]
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Planning for Unknowns
Rainy Day Reserve
Beyond liquidity management, local governments need to have reserves for unforeseen events like
natural disasters or economic downturns. A government that creates a rainy day fund should at times
expect to use the reserves but also have a policy for replacing the funds.
Contingency Spending Plans
Knowledge of what part of a budget is discretionary and can be legally and practically cut is necessary
for dealing with unforeseen circumstances. If an event decreases a significant revenue source or
increases spending during a year, and revenues cannot be adjusted quickly, then cuts to expenditures
are necessary. Prior planning as to what cuts will be made will expedite the recovery.
Planning for Tomorrow
Long-Term Liability Planning
Debt, pension, and OPEB payments are set amounts in the annual budget. The larger these payments
are, the less ability the governing body has to make changes to the budget. Ongoing decisions of
whether to issue additional debt or to make changes to benefits have a direct budgetary impact that
must be considered. When the repayment of long-term liabilities comprises a large percentage of the
budget, consistent management of the government’s obligations is essential.
Multi-Year Financial Planning
Having a plan that considers the long-term affordability of programs or projects before they become
an item in the annual budget is crucial. Assets will need to be replaced, maintenance performed, and
programs expanded; advanced planning of these items will help ensure the funding is available in the
future.
b. Financial Health Metrics
Financially healthy local governments tend to have a few traits in common—they operate with
balanced budgets, do not spend nonrecurring funds on recuring expenses, maintain adequate cash
reserves, have a manageable debt burden, and keep liabilities in check. Local governments that do not
manage these items tend to experience financial issues that show up in the following metrics that the
Comptroller’s Office calculates annually:
53
c. Technical Assistance Services
The Municipal Technical Advisory Service (MTAS) assists Tennessee cities and towns with finance and
accounting, human resources, legal services, municipal management, public safety, public utilities, and
public works. https://www.mtas.tennessee.edu/
The County Technical Assistance Service (CTAS) assists Tennessee counties with financial services,
legal services, information technology, highway services, public safety, environmental services, training
services, and research and analysis. http://www.ctas.tennessee.edu/
The Tennessee Association of Utility Districts (TAUD) provides Tennessee utilities with training,
industry information and publications, and legislative updates. https://taud.org/
d. Debt Coverage
The State of Tennessee does not limit the amount of debt a local government can issue; however, all
local governments should know what amount of debt they can afford.
The Government Finance Officers Association (GFOA) states in its Debt Management Policy Best
Practices that local governments’ debt management policy should consider setting specific limits or
acceptable ranges for each type of debt. Limits generally are set for legal, public policy, and financial
restrictions and planning considerations. Debt limits often are expressed as ratios. Different limits
are used for different types of debt. Examples include:
i. General Government Debt:
• Debt per capita,
• Debt to personal income,
• Debt to taxable property value, and
• Debt service payments as a percentage of general fund revenues or
expenditures.
ii. Revenue Debt
Revenue debt levels often are limited by debt service coverage ratios, additional
bond provisions contained in bond covenants, and potential credit rating
impacts.
For more information, see the GFOA website at: https://www.gfoa.org/
For local governments with rated debt, or those seeking a rating, rating agencies set
outer limits on the amount of debt and/or debt service allowed for their various rating
categories (see Section 9e and rating agency websites and other resources for more
information on specific rating methodologies).
The Division of Local Government Finance recommends that all local governments
that have outstanding debt, or plan to issue debt, review their debt management
policy and discuss the merits of setting a debt limit for each debt security (general
54
obligation/revenue) the local government maintains. The local government should also
review the Financial Health Metrics section of this Manual for guidance on debt metrics.
e. Rating Agencies
Rating agencies provide, for a fee, opinions on the credit quality of an entity that issues bonds, or a
specific bond issue—in other words, how likely the issuer is to pay principal and interest on time. In
determining a rating, the rating agency reviews, among other factors, the issuer’s financial reports, tax
structure and related laws, demographic data, and economic statistics.
The three major rating agencies are Moody’s Investors Service, Standard and Poor’s (S&P), and Fitch
Ratings.
Depending on the rating agency, modifiers of 1, 2, and 3, or +/- are added to each rating classification
—e.g., Aa1 or BB+ – to indicate whether the security falls into the low or high end of the range.
Definitions adapted from Moody’s Investors Service.
55
Appendix
1. Bond Anticipation Note Resolution
2. Capital Outlay Note Resolution
3. Grant Anticipation Note Resolution
4. Tax Anticipation Note Resolution
5. Informal Bid Form
6. Balloon Debt Law Flowchart
56
Appendix 1
Bond Anticipation Note Resolution
Resolution No. ______________
RESOLUTION OF THE GOVERNING BODY OF
__________________________, TENNESSEE,
AUTHORIZING THE ISSUANCE, SALE, AND PAYMENT OF
___________________________________________BOND ANTICIPATION NOTES
NOT TO EXCEED $___________________________
WHEREAS, the Governing Body of ____________________________, Tennessee (the Local
Government) has determined that it is necessary and desirable to provide funds for the following public works
project (the “Project”):
(If multiple projects are involved, attach separate sheet identifying each project, its estimated economic life, and
the portion of the Notes to be applied to the cost of such project ;) and
WHEREAS, the Governing Body has determined that the Project will promote or provide a traditional
governmental activity or otherwise fulfill a public purpose; and
WHEREAS, the Local Government intends to issue and sell general obligation bonds (the “Bonds”)
pursuant to the provisions of Title ______, Tennessee Code Annotated, to finance the cost of the Project; and,
if required by law, has duly adopted an initial resolution authorizing the issuance of the Bonds; and
WHEREAS, under the provisions of Parts I, IV, and VI of Title 9, Chapter 21, Tennessee Code
Annotated (the “Act”), local governments in Tennessee are authorized to issue and sell interest bearing bond
anticipation notes for the purpose of providing funds in anticipation of the issuance of bonds upon the approval
of the Comptroller of the Treasury or the Comptroller's designee; and
WHEREAS, the Governing Body finds that it is advantageous to the Local Government to authorize
the issuance of bond anticipation notes at this time:
NOW THEREFORE, BE IT RESOLVED by the Governing Body of
___________________________, Tennessee, as follows:
Section 1. For the purpose of providing funds in anticipation of the issuance of the Bonds, the chief
executive officer of the Local Government is hereby authorized in accordance with the terms of this resolution,
and upon approval of the Comptroller of the Treasury or Comptroller’s designee for the sale of the Notes, to
issue and sell interest-bearing bond anticipation notes in a principal amount not to exceed
57
_________________________ Dollars ($_____________) (the “Notes”) at either a competitive public sale
or at a private negotiated sale pursuant to the terms, provisions, and conditions permitted by law. The Notes
shall be designated “__________________________________Bond Anticipation Notes, Series 20__”, shall
be numbered serially from 1 upwards; shall be dated as of the date of issuance; shall be in denomination(s) as
agreed upon with the purchaser; shall be sold at not less than 99% of par value and accrued interest; and shall
bear interest at a rate or rates not to exceed ________ percent (________%) per annum, and in no event shall
the rate exceed the legal limit provided by law.
Section 2. The Notes shall mature not later than two (2) years after the date of issuance. If any of the
Notes shall remain unpaid at the end of two (2) years from the original issue date, then the unpaid Notes shall
be renewed or extended as permitted by law or retired from the funds of the Local Government or be converted
into bonds pursuant to state law or be otherwise liquidated as approved by the Comptroller of the Treasury or
Comptroller’s designee.
Section 3. The Notes shall be subject to redemption at the option of the Local Government, in whole
or in part, at any time, at the principal amount an accrued interest to the date of redemption, without a premium,
or, if sold at par, with or without a premium of not exceeding one percent (1%) of the principal amount.
Section 4. The Notes shall be direct general obligations of the Local Government and, for the purpose
of providing funds for the payment of principal of and interest on the Notes, the Local Government hereby
pledges its taxing power as to all taxable property in the Local Government for the purpose of providing funds
for the payment of principal of and interest on the Notes. The Governing Body of the Local Government
hereby authorizes the levy and collection of a special tax on all taxable property of the Local government over
and above all other taxes authorized by the Local government to create a sinking fund to retire the Notes with
interest as they mature in an amount necessary for that purpose.
If applicable, the Notes shall be further secured by
_____________________________________________________________________________________
_____________________________________________________________________________________
(If the revenues generated by the Project are to be applied as additional security for the Notes, describe such
revenues here.)
Section 5. The Notes shall be executed in the name of the Local Government and bear the signature
of the chief executive officer of the Local Government and the signature of the
___________________________ with the Local Government seal affixed thereon; and shall be payable as to
principal and interest at the office of the ____________________________________________ of the Local
Government or the paying agent duly appointed by the Local Government. Proceeds of the Notes shall be
deposited with the ___________________________________ of the Local Government and shall be paid
out for the purpose of providing funds in anticipation of the issuance of the Bonds pursuant to this Resolution
and as required by law.
Section 6. The Notes will be issued in fully registered form and that at all times during which any
Notes remains outstanding and unpaid, the Local Government or its agent shall keep or cause to be kept at its
office a note register, if held by an agent of the Local Government, shall at all times be open for inspection by
the Local Government or any duly authorized officer of the Local Government. Each Note shall have the
qualities and incidents of a negotiable instrument and shall be transferable only upon the note register kept by
the Local Government or its agent, by the registered owner of the Note in person or by the registered owner’s
attorney duly authorized in writing, upon presentation and surrender to the Local Government or its agent
together with a written instrument of transfer satisfactory to the Local Government duly executed by the
58
registered owner of the registered owner’s duly authorized attorney. Upon the transfer of any such Note, the
Local Government shall issue in the name of the transferee a new registered note or notes of the same aggregate
principal amount and maturity as the surrendered Notes. The Local Government shall not be obligated to
make any such Note transfer during the fifteen (15) days next preceding an interest payment date of the Notes
or, in the case of any redemption of the Notes, during the forty-five (45) days next preceding the date of
redemption.
Section 7. The Notes shall be in substantially the form attached as Attachment 1 with only changes
as are necessary or appropriate to comply with the requirements of the purchaser thereof.
Section 8. The Bonds will be issued under the authority of Title _________ of Tennessee Code
Annotated.
Section 9. This Resolution shall not be effective until the initial resolution authorizing the issuance of
the Bonds, if required by law, shall have been adopted and published, and no petition protesting the issuance
of the Bonds shall have been filed as permitted by law.
Section 10. The Notes may be renewed or extended as permitted by law.
Section 11. The Notes shall not be sold until receipt of written approval for the sale of the Notes
from the Comptroller of the Treasury or the Comptroller's designee.
Section 12. After the sale of the Notes, and for each year that any of the Notes are outstanding, the
Local Government shall prepare an annual budget and budget ordinance in a form consistent with accepted
governmental standards and as approved by the Comptroller of the Treasury or Comptroller’s designee. The
budget shall be kept balanced during the life of the Notes and shall appropriate sufficient monies to pay all
annual debt service. The annual budget and ordinance shall be submitted to the Comptroller of the Treasury
or Comptroller’s designee immediately upon its adoption; however, it shall not become the official budget for
the fiscal year until such budget is approved by the Comptroller of the Treasury or Comptroller’s Designee in
accordance with Title 9, Chapter 21, Tennessee Code Annotated (the “Statutes”). If the Comptroller of the
Treasury or Comptroller’s Designee determines that the budget does not comply with the Statutes, the
Governing Body shall adjust its estimates or make additional tax levies sufficient to comply with the Statutes,
or as directed by the Comptroller of the Treasury or Comptroller’s designee.
Section 13. That, all orders or resolutions in conflict with this Resolution are hereby repealed insofar
as such conflict exists and this Resolution shall become effective immediately upon its passage and the
satisfaction of all conditions referenced in this Resolution.
Duly passed and approved this _______________ day of __________________, 20__.
________________________________
(Local Government Chief Executive)
ATTESTED:
(Recording Officer)
59
Attachment 1
BOND ANTICIPATION NOTE FORM
Registered Note No.
Registered $
(Name of Local Government)
of the State of Tennessee
Bond Anticipation Notes, Series 20__
Bond Anticipation Notes, Extension Note Series 20__
DATED:
INTEREST RATE:
MATURITY DATE:
Registered Owner:
Principal Sum:
T
he _________________________ (Governing Body) of Tennessee (the
Local Government) hereby acknowledges itself indebted, and for value received hereby promises to pay to the
Registered Owner hereof (named above), or registered assigns, the Principal Sum (specified above) on the
Maturity Date (specified above) (unless this note shall have been duly called for prior redemption and payment
of the redemption price shall have been duly made or provided for), upon presentation and surrender to the
Local Government or its agent, and to pay interest on the Principal Sum on
________________________________ and thereafter on _______________________________ of each
year at the Interest Rate per annum (specified above), by check, draft, or warrant mailed to the Registered
Owner at the address of the Registered Owner as it appears on the fifteenth (15th) calendar day of the month
next preceding the applicable payment date in the note register maintained by or on behalf of the Local
Government. Both principal of and interest on this note are payable at the office of the
_________________________________of the Local Government or a paying agent duly appointed by the
Local Government in lawful money of the United States of America.
This note is a direct obligation of the Local Government for the payment of which as to both principal
and interest the full faith and credit of the Local Government is pledged.
This note is subject to redemption prior to its stated maturity in whole or in part at any time at the
option of the Local Government upon payment of the principal amount of the note together with the interest
accrued thereon to the date of redemption with a premium of ______________ % of par value.
60
This note is issued under the authority of Parts I, IV, and V of Title 9, Chapter 21, Tennessee Code
Annotated, and a Resolution duly adopted by the Governing Body of the Local Government meeting in session
on the __________ day of _______________, 20____ (the "Resolution") to provide funds in anticipation of
the issuance of the bonds referenced in the Resolution.
This note shall have the qualities and incidents of a negotiable instrument and shall be transferable
only upon the note register kept by the Local Government or its agent, by the Registered Owner of the note in
person or by the Registered Owner's attorney duly authorized in writing, upon presentation and surrender to
the Local Government or its agent of the note together with a written instrument of transfer satisfactory to the
Local Government duly executed by the Registered Owner or the Registered Owner's duly authorized attorney
but only in the manner as provided in the Resolution of the Local Government authorizing the issuance of this
note and upon surrender hereof for cancellation. Upon the transfer of any such note, the Local Government
or its agent shall issue in the name of the transferee a new registered note or notes of the same aggregate
principal amount and maturity as the surrendered note. The Local Government shall not be obligated to make
any such Note transfer during the fifteen (15) days next preceding an interest payment date on the Notes or, in
the case of any redemption of the Notes, during the forty-five (45) days next preceding the date of redemption.
Title 9, Chapter 21, Section 117, Tennessee Code Annotated provides that this note and interest
thereon are exempt from taxation by the State of Tennessee or by any county, municipality, or taxing district
of the State, except for inheritance, transfer, and estate taxes and except as otherwise provided under the laws
of the State of Tennessee.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things
required to exist, happen and be performed precedent to and in the issuance of this note exist, have happened
and have been performed in due time, form and manner as required by the Constitution and laws of the State
of Tennessee, and that the amount of this note, together with all other indebtedness of the Local Government,
does not exceed any constitutional or statutory limitation thereon, and that this note is within every
constitutional and statutory limitation.
IN WITNESS WHEREOF, the Governing Body of the Local Government has caused this note to be
executed in the name of the Local Government by the signature of the _________________________, and
attested by the signature of the _______________________________ with the Seal of the Local Government
affixed hereto or imprinted hereon, and this note to be dated as of the ____________ day of 20____.
(Local Government Chief Executive)
ATTESTED:
(Recording Officer)
61
ASSIGNMENT
Note No.
Amount: $
For value received, the undersigned hereby sells, assigns, and transfers unto
(Name and Address of assignee)
(Please indicate social security or other tax identifying number of assignee)
The within-mentioned note and hereby irrevocably constitutes and appoints
attorney-in-fact, to transfer the same on the note register in the office of the
or the agent of the Local Government with full power of substitution in the premises.
Date: ____________________
Assignor:
Address:
62
Appendix 2
Capital Outlay Note Resolution
Resolution No. ______________
RESOLUTION OF THE GOVERNING BODY OF
__________________________, TENNESSEE,
AUTHORIZING THE ISSUANCE, SALE, AND PAYMENT OF
___________________________________________ CAPITAL OUTLAY NOTES
NOT TO EXCEED $___________________________
WHEREAS, the Governing Body of the
Tennessee, (the "Local Government") has determined that it is necessary and desirable to issue capital outlay
notes in order to provide funds for the following public works project:
(the “Project”); and
WHEREAS, the Governing Body has determined that the Project is a public works project within the
meaning of the Act (as defined below); and
WHEREAS, under the provisions of Parts I, IV and VI of Title 9, Chapter 21, Tennessee Code
Annotated (the "Act"), local governments in Tennessee are authorized to finance the cost of this Project
through the issuance and sale of interest-bearing capital outlay notes upon the approval of the Comptroller of
the Treasury or Comptroller’s designee; and
WHEREAS, the Governing Body finds that it is advantageous to the Local Government to authorize
the issuance of capital outlay notes to finance the cost of the Project;
NOW THEREFORE, BE IT RESOLVED by the Governing Body of
Tennessee, as follows:
Section 1. For the purpose of providing funds to finance the cost of the Project, the chief executive
officer of the Local Government is hereby authorized in accordance with the terms of this resolution, and upon
approval of the Comptroller of the Treasury or Comptroller’s designee, to issue and sell interest-bearing capital
outlay notes in a principal amount not to exceed Dollars ($ ) (the "Notes").
The Notes shall be designated “ Capital Outlay Notes, Series 20__”; shall be
numbered serially from 1 upwards; shall be dated as of the date of issuance; shall be in denomination(s) as
agreed upon with the purchaser; shall be sold at not less than 99% of par value plus accrued interest if any; and
shall bear interest at a rate or rates not to exceed per cent ( %) per annum, and in no event
shall the rate exceed the legal limit provided by law.
63
Section 2. The Notes shall mature ( ) fiscal years after the fiscal year of
issuance and, unless otherwise approved by the Comptroller of the Treasury or Comptroller’s designee, the
Notes shall be amortized through mandatory redemption in amounts reflecting level debt service on the Notes
or an equal amount of principal paid in each fiscal year as is agreed upon by the chief executive officer and he
Purchaser. The principal amount paid in each fiscal year shall be set forth in the form of the Note. The weighted
average maturity of the Notes shall not exceed the reasonably expected weighted average life of the Project
which is hereby estimated to be years.
Section 3. [The Notes shall be subject to redemption at the option of the Local Government, in whole
or in part, at any time, at the principal amount and accrued interest to the date of redemption, without a
premium, or, if sold at par, with or without a premium of not exceeding one percent (1%) of the principal
amount as determined with the purchaser.] [The Notes shall not be subject to redemption prior to maturity.]
[Select one option]
Section 4. The Notes shall be direct general obligations of the Local Government, for which the
punctual payment of the principal and interest on the Notes, the full faith and credit of the Local Government
is irrevocably pledged, and the Local Government hereby pledges its taxing power as to all taxable property in
the Local Government for the purpose of providing funds for the payment of principal of and interest on the
Notes. The Governing Body of the Local Government hereby authorizes the levy and collection of a special
tax on all taxable property of the Local Government over and above all other taxes authorized by the Local
Government to create a sinking fund to retire the Notes with interest as they mature in an amount necessary
for that purpose.
Section 5. The Notes shall be executed in the name of the Local Government; shall bear the signature
of the chief executive officer of the Local Government and the signature of the recording officer of the Local
Government and shall be payable as to principal and interest at the office of recording officer of the Local
Government or at the office of the paying agent duly appointed by the Local Government. Proceeds of the
Notes shall be deposited with the official designated by law as custodian of the funds of the Local Government.
All proceeds shall be paid out for financing the Project pursuant to this Resolution and as required by law.
Section 6. The Notes will be issued in fully registered form and that at all times during which any
Note remains outstanding and unpaid, the Local Government or its agent shall keep or cause to be kept at its
office a note register for the registration, exchange or transfer of the Notes. The note register, if held by an
agent of the Local Government, shall at all times be open for inspection by the Local Government or any duly
authorized officer of the Local Government. Each Note shall have the qualities and incidents of a negotiable
instrument and shall be transferable only upon the note register kept by the Local Government or its agent, by
the registered owner of the Note in person or by the registered owner's attorney duly authorized in writing,
upon presentation and surrender to the Local Government or its agent together with a written instrument or
transfer satisfactory to the Local Government duly executed by the registered owner or the registered owner's
duly authorized attorney. Upon the transfer of any such Note, the Local Government shall issue in the name
of the transferee a new registered note or notes of the same aggregate principal amount and maturity as the
surrendered Notes. The Local Government shall not be obligated to make any such Note transfer during the
fifteen (15) days next preceding an interest payment date on the Notes or, in the case of any redemption of the
Notes, during the forty-five (45) days next preceding the date of redemption.
64
Section 7. The Notes shall be in substantially the form attached as Attachment 1 with only changes
as are necessary or appropriate to comply with the requirements of the purchaser thereof as determined by the
chief executive officer.
Section 8. [The Notes shall be sold at competitive sale in accordance with the Act.] or [The Notes
shall be sold by negotiated sale in accordance with the Act.] or [The Notes shall be sold through the informal
bid process provided in Tenn. Code Ann. Section 9-21-609.]
Section 9. The Notes shall not be sold until receipt of the Comptroller of the Treasury or
Comptroller’s Designee’s written approval for the sale of the Notes.
Section 10. The chief executive officer is authorized to designate the Notes as qualified tax-exempt
obligations for the purpose of Section 265(b) (3) of the Internal Revenue Code of 1986 if so eligible to be
designated.
Section 11. After the sale of the Notes, and for each year that any of the Notes are outstanding, the
Local Government shall prepare an annual budget and budget ordinance in a form consistent with accepted
governmental standards and as approved by the Comptroller of the Treasury or Comptroller’s designee. The
budget shall be kept balanced during the life of the Notes and shall appropriate sufficient monies to pay all
annual debt service. The annual budget and ordinance shall be submitted to the Comptroller of the Treasury
or Comptroller’s designee immediately upon its adoption; however, it shall not become the official budget for
the fiscal year until such budget is approved by the Comptroller of the Treasury or Comptroller’s Designee in
accordance with Title 9, Chapter 21, Tennessee Code Annotated (the “Statutes”). If the Comptroller of the
Treasury or Comptroller’s designee determines that the budget does not comply with the Statutes, the
Governing Body shall adjust its estimates or make additional tax levies sufficient to comply with the Statutes,
or as directed by the Comptroller of the Treasury or Comptroller’s designee.
Section 12. All orders or resolutions in conflict with this Resolution are hereby repealed insofar as
such conflict exists and this Resolution shall become effective immediately upon its passage.
Duly passed and approved this day of , 20 .
(Local Government Chief Executive)
ATTESTED:
(Recording Officer)
65
Attachment 1
CAPITAL OUTLAY NOTE FORM
Registered Note No.
Registered $
(Name of Local Government)
of the State of Tennessee
Capital Outlay Notes, Series 20__
DATED:
INTEREST RATE:
MATURITY DATE:
Registered Owner:
Principal Sum:
,
Tennessee (the Local Government) hereby
acknowledges itself indebted, and for value received hereby promises to pay to the Registered Owner hereof
(named above), or registered assigns, the Principal Sum specified above on the Maturity Date specified above
or according to an amortization schedule attached hereto (unless this note shall have been duly called for prior
redemption and payment of the redemption price shall have been duly made or provided for), upon
presentation and surrender to the Local Government or its agent, and to pay interest on the Principal Sum on
and thereafter on of each year at
the Interest Rate per annum specified above or according to an amortization schedule attached hereto, by
check, draft, or warrant mailed to the Registered Owner at the address of the Registered Owner as it appears
on the fifteenth (15th) calendar day of the month next preceding the applicable payment date in the note register
maintained by or on behalf of the
Local Government. Both principal of and interest on this note are payable at the office of the Of the Local
Government or a paying agent duly appointed by the Local Government in lawful money of the United States
of America.
This note is a direct obligation of the Local Government for the payment of which as to both
principal and interest the full faith and credit of the Local Government is pledged.
[This note is subject to redemption prior to its stated maturity in whole or in part at any time
at the option of the Local Government upon payment of the principal amount of the note together with the
66
interest accrued thereon to the date of redemption with a premium of % of par
value.][This note is not subject to redemption prior to maturity.] [Select one option.]
This note is issued under the authority of Parts I, IV, and VI of Title 9, Chapter 21, Tennessee
Code Annotated, and a Resolution duly adopted by the Governing Body of the Local Government meeting on
the day of , 20 (the "Resolution") to provide funds to finance the
cost of public works projects referenced in the Resolution.
This note shall have the qualities and incidents of a negotiable instrument and shall be
transferable only upon the note register kept by the Local Government or its agent, by the Registered Owner
of the note in person or by the Registered Owner's attorney duly authorized in writing, upon presentation and
surrender to the Local Government or its agent of the note together with a written instrument of transfer
satisfactory to the Local Government duly executed by the Registered Owner or the Registered Owner's duly
authorized attorney but only in the manner as provided in the Resolution of the Local Government authorizing
the issuance of this note and upon surrender hereof for cancellation. Upon the transfer of any such note, the
Local Government or its agent shall issue in the name of the transferee a new registered note or notes of the
same aggregate principal amount and maturity as the surrendered note. The Local Government shall not be
obligated to make any such Note transfer during the fifteen (15) days next preceding an interest payment date
on the Notes or, in the case of any redemption of the Notes, during the forty-five (45) days next preceding the
date of redemption.
Pursuant to Tenn. Code Ann. Section 9-21-117, this note and interest thereon are exempt
from all state, county, and municipal taxation except for inheritance, transfer and estate taxes and except as
otherwise provided under the laws of the State of Tennessee.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and
things required to exist, happen and be performed precedent to and in the issuance of this note exist, have
happened and have been performed in due time, form and manner as required by the Constitution and laws
of the State of Tennessee, and that the amount of this note, together with all other indebtedness of the Local
Government, does not exceed any constitutional or statutory limitation thereon, and that this note is within
every constitutional and statutory limitation.
IN WITNESS WHEREOF, the Governing Body of the Local Government has caused this
note to be executed in the name of the Local Government by the signature of the
and attested by the signature of the with the Seal of the Local
Government affixed hereto or imprinted hereon, and this note to be dated as of the ____________ day of
20____.
(Local Government Chief Executive)
ATTESTED:
(Recording Officer)
67
ASSIGNMENT
Note No.
Amount: $
For value received, the undersigned hereby sells, assigns, and transfers unto
(Name and Address of assignee)
(Please indicate social security or other tax identifying number of assignee)
The within-mentioned note and hereby irrevocably constitutes and appoints
attorney-in-fact, to transfer the same on the note register in the office of the
or the agent of the Local Government with full power of substitution in the premises.
Date:
Assignor:
Address:
68
Appendix 3
Grant Anticipation Note Resolution
Resolution No.
RESOLUTION OF THE GOVERNING BODY OF
, TENNESSEE,
AUTHORIZING THE ISSUANCE, SALE, AND PAYMENT OF
GRANT ANTICIPATION NOTES
NOT TO EXCEED $
WHEREAS, the Governing Body of , Tennessee, (the “Local
Government” has determined that it is necessary and desirable to provide funds for the following public works
project (the “Project”):
(If multiple projects are involved, attach separate sheet identifying each project, its estimated economic life, and
the portion of the Notes to be applied to the cost of such project ;) and
WHEREAS, the Governing Body has determined that the Project will promote or provide a traditional
governmental activity or otherwise fulfill a public purpose; and
WHEREAS, there is on file in the offices of the Local Government a fully executed contract or
agreement between (designate the state or federal agency) (the “Agency”) and
the Local Government, dated , 20 , whereby the Agency agrees to pay the Local Government
a principal amount of Dollars ($ ) (the “Agency Grant”) to finance the cost of the
Project; and
WHEREAS, under the provisions of Parts I, IV, and VI of Title 9, Chapter 21, Tennessee Code
Annotated (the “Act”), local governments in Tennessee are authorized to issue and sell interest-bearing grant
anticipation notes upon the approval of the Comptroller of the Treasury or the Comptroller's designee; and
WHEREAS, the Governing Body finds that it is advantageous to the Local Government to authorize
the issuance and sale of grant anticipation notes to provide funds in anticipation of the Agency Grant;
NOW, THEREFORE, BE IT RESOLVED, by the Governing Body of
, Tennessee as follows:
Section 1. For the purpose of providing funds in anticipation of the Agency Grant, the Local
Government is hereby authorized to issue and sell interest-bearing grant anticipation notes in a principal
amount not to exceed Dollars ($ ) (the “Notes”) at either a
competitive public sale or at a private negotiated sale upon approval of Comptroller of the Treasury or the
Comptroller's designee pursuant to the term, provisions, and conditions of the Act. The Notes shall be
69
designated Grant Anticipation Note, Series 20 ; shall be numbered serially from
1 upwards; shall be dated as of the date of issuance; shall be sold at not less than par value and accrued interest;
and shall bear interest at a rate or rates not to exceed per cent ( %) per annum, and in no event
shall the rate exceed the legal limit provided by law.
S
ection 2. The Notes shall mature not later than (designate either three/3
or seven/7 years) after the date of issuance.
Section 3. The Notes shall be subject to redemption at the option of the Local Government, in whole
or in part, at any time that the funds of the Agency Grant become available to the Local Government, at the
principal amount and accrued interest to the date of redemption without a premium.
Section 4. The principal amount of the Notes shall be secured solely by the pledge of funds to be
received pursuant to the Agency Grant, and the Local Government hereby pledges a portion or all of the
Agency Grant in an amount at least equal to the principal amount of the Notes, being Dollars
($______), to the payment of the principal amount of the Notes. The Local Government shall have no
authority to levy ad valorem taxes for the payment of the principal of the Notes.
Section 5. The interest on the Notes shall be direct general obligations of the Local Government and
the Local Government hereby pledges its taxing power as to all taxable property in the Local Government for
the purpose of providing funds for the payment of interest on the Notes. Provided, however, that the proceeds
of any capital outlay notes, or bond anticipation notes shall not be applied to any payment of the Notes.
Section 6. The Notes shall be executed in the name of the Local Government and bear the signature
of the chief executive office of the Local Government and the signature of the _________________________
(Recording Officer) and shall be payable as to principal and interest at the office of the
______________________ (Recording Officer) of the Local Government or the paying agent duly appointed
by the Local Government. Proceeds of the Notes shall be deposited with the ____________________
(Recording Officer) of the Local Government and shall be paid out for the purpose of providing funds in
anticipation of the Agency Grant pursuant to this Resolution and as required by law.
Section 7. The Notes will be issued in fully registered form and that at all times during which any
Note remains outstanding and unpaid, the Local Government or its agent shall keep or cause to be kept at its
office a note register for the registration, exchange or transfer of the Notes. The notes register, if held by an
agent of the Local Government, shall at all times be open for inspection by the Local Government or any duly
authorized officer of the Local Government. Each Note shall have the qualities and incidents of a negotiable
instrument and shall be transferable only upon the note register kept by the Local Government or its agent, by
the registered owner of the Note in person or by the registered owner’s attorney duly authorized in writing,
upon presentation and surrender to the Local Government or its agent together with a written instrument of
transfer satisfactory to the Local Government duly executed by the registered owner or the registered owner’s
duly authorized attorney. Upon the transfer of any such Note, the Local Government shall issue in the name
of the transferee a new registered not or notes of the same aggregate principal amount and maturity as the
surrendered Note. The Local Government shall not be obligated to make any such note transfer during the
fifteen (15) days next preceding an interest payment date on the Notes or, in the case of any redemption of the
Notes, during the forty-five (45) days next preceding the date of redemption.
Section 8. That, the Notes may be extended or renewed as permitted by law.
Section 9. The Notes shall be in substantially the form attached as Attachment 1 with only changes
as are necessary or appropriate to comply with the requirements of the purchaser thereof.
70
Section 10. The Notes shall not be sold until receipt of written approval for the sale of the Notes
from the Comptroller of the Treasury or the Comptroller's designee.
Section 11. After the sale of the Notes, and for each year that any of the Notes are outstanding, the
Local Government shall prepare an annual budget and budget ordinance in a form consistent with accepted
governmental standards and as approved by the Comptroller of the Treasury or Comptroller’s designee. The
budget shall be kept balanced during the life of the Notes and shall appropriate sufficient monies to pay all
annual debt service. The annual budget and ordinance shall be submitted to the Comptroller of the Treasury
or Comptroller’s designee immediately upon its adoption; however, it shall not become the official budget for
the fiscal year until such budget is approved by the Comptroller of the Treasury or Comptroller’s Designee in
accordance with Title 9, Chapter 21, Tennessee Code Annotated (the “Statutes”) . If the Comptroller of the
Treasury or Comptroller’s Designee determines that the budget does not comply with the Statutes, the
Governing Body shall adjust its estimates or make additional tax levies sufficient to comply with the Statutes,
or as directed by the Comptroller of the Treasury or Comptroller’s designee.
Section 12. That, all orders or resolutions in conflict with this Resolution in conflict with this
Resolution are hereby repealed insofar as such conflict exists and this Resolution shall become effective
immediately upon its passage.
Duly passed and approved this day of , 20 .
(Local Government Chief Executive)
ATTESTED:
(Recording Officer)
71
Attachment 1
GRANT ANTICIPATION NOTE FORM
Registered Note No.
Registered $
(Name of Local Government)
of the State of Tennessee
Grant Anticipation Notes, Series 20
DATED:
INTEREST RATE:
MATURITY DATE:
Registered Owner:
Principal Sum:
The (Governing Body) of
Tennessee (the Local Government) hereby acknowledges itself indebted, and for value received hereby
promises to pay to the Registered Owner hereof (named above), or registered assigns, the Principal Sum
(specified above) on the Maturity Date (specified above) (unless this note shall have been duly called for prior
redemption and payment of the redemption price shall have been duly made or provided for), upon
presentation and surrender to the Local Government or its agent, and to pay interest on the Principal Sum on
________________________________ and thereafter on _______________________________ of each
year at the Interest Rate per annum (specified above), by check, draft, or warrant mailed to the Registered
Owner at the address of the Registered Owner as it appears on the fifteenth (15th) calendar day of the month
next preceding the applicable payment date in the note register maintained by or on behalf of the Local
Government. Both principal of and interest on this note are payable at the office of the
_________________________________of the Local Government or a paying agent duly appointed by the
Local Government in lawful money of the United States of America.
This note is a direct obligation of the Local Government for the payment of which as to both principal
and interest the full faith and credit of the Local Government is pledged.
This note is subject to redemption prior to its stated maturity in whole or in part at any time at the
option of the Local Government upon payment of the principal amount of the note together with the interest
accrued thereon to the date of redemption with a premium of ______________ % of par value.
72
This note is issued under the authority of Parts I, IV, and V of Title 9, Chapter 21, Tennessee Code
Annotated, and a Resolution duly adopted by the Governing Body of the Local Government meeting in session
on the __________ day of _______________, 20____ (the "Resolution") to provide funds in anticipation of
the issuance of the bonds referenced in the Resolution.
This note shall have the qualities and incidents of a negotiable instrument and shall be transferable
only upon the note register kept by the Local Government or its agent, by the Registered Owner of the note in
person or by the Registered Owner's attorney duly authorized in writing, upon presentation and surrender to
the Local Government or its agent of the note together with a written instrument of transfer satisfactory to the
Local Government duly executed by the Registered Owner or the Registered Owner's duly authorized attorney
but only in the manner as provided in the Resolution of the Local Government authorizing the issuance of this
note and upon surrender hereof for cancellation. Upon the transfer of any such note, the Local Government
or its agent shall issue in the name of the transferee a new registered note or notes of the same aggregate
principal amount and maturity as the surrendered note. The Local Government shall not be obligated to make
any such Note transfer during the fifteen (15) days next preceding an interest payment date on the Notes or, in
the case of any redemption of the Notes, during the forty-five (45) days next preceding the date of redemption.
Title 9, Chapter 21, Section 117, Tennessee Code Annotated provides that this note and interest
thereon are exempt from taxation by the State of Tennessee or by any county, municipality, or taxing district
of the State, except for inheritance, transfer and estate taxes and except as otherwise provided under the laws
of the State of Tennessee.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things
required to exist, happen and be performed precedent to and in the issuance of this note exist, have happened
and have been performed in due time, form and manner as required by the Constitution and laws of the State
of Tennessee, and that the amount of this note, together with all other indebtedness of the Local Government,
does not exceed any constitutional or statutory limitation thereon, and that this note is within every
constitutional and statutory limitation.
IN WITNESS WHEREOF, the Governing Body of the Local Government has caused this note to be
executed in the name of the Local Government by the signature of the _________________________, and
attested by the signature of the _______________________________ with the Seal of the Local Government
affixed hereto or imprinted hereon, and this note to be dated as of the ____________ day of 20____.
(Local Government Chief Executive)
ATTESTED:
(Recording Officer)
73
ASSIGNMENT
Note No.
Amount: $
For value received, the undersigned hereby sells, assigns, and transfers unto
(Name and Address of assignee)
(Please indicate social security or other tax identifying number of assignee)
The within-mentioned note and hereby irrevocably constitutes and appoints
attorney-in-fact, to transfer the same on the note register in the office of the
or the agent of the Local Government with full power of substitution in the premises.
Date:
Assignor:
Address:
74
Appendix 4
Tax Anticipation Note Resolution
Resolution No. ______________
RESOLUTION OF THE GOVERNING BODY OF
__________________________, TENNESSEE,
AUTHORIZING THE ISSUANCE, SALE, AND PAYMENT OF
___________________________________________REVENUE/TAX ANTICIPATION NOTES
NOT TO EXCEED $___________________________
WHEREAS, the Governing Body of _______________________, Tennessee, (the “Local
Government”) has determined that it is necessary and desirable to borrow a limited amount of funds to meet
appropriations made for the ____________________________ Fund (the “Fund”) for the current fiscal year,
being July 1, 20___, through June 30, 20___, inclusive, (the “Fiscal Year”), in anticipation of the collection of
taxes and revenues for the Fund during the Fiscal Year; and
WHEREAS, under the provisions of Part I, IV, IV, and VIII of Title 9, Chapter 21, Tennessee Code
Annotated (the “Act”), local governments in Tennessee are authorized to issue and sell revenue/tax anticipation
notes in amounts not exceeding sixty percent (60%) of the Fund appropriation for the Fiscal Year upon the
approval of the Comptroller of the Treasury or Comptroller’s Designee; and
WHEREAS, the Governing Body finds that it is advantageous to the Local Government to authorize
the issuance and sale of revenue/tax anticipation notes;
NOW, THEREFORE, BE IT RESOLVED, by the Governing Body of the Local Government
_______________________, as follows:
Section 1. For the purpose of providing funds to meet certain appropriations for the Fiscal Year, the
chief executive officer of the Local Government is hereby authorized in accordance with the terms of this
Resolution to issue sell revenue/tax anticipation notes in a principal amount not to exceed
Dollars ($___________________) (the “Notes”) upon approval of the Comptroller
of the Treasury or Comptroller’s designee pursuant to the terms, provisions, and conditions permitted by law.
The Notes shall be designated “___________________ Revenue/Tax Anticipation Notes, Series 20___”; shall
be dated as of the date of issuance and shall bear interest at a rate or rates not to exceed percent
( %) per annum, and in no event shall the rate exceed the legal limit provided by law.
Section 2. That, the sum of the principal amount of the Notes, together with the principal amount or
amounts of any prior revenue/tax anticipation notes issued during the Fiscal Year, does not exceed sixty percent
(60%) of the Fund appropriation for the Fiscal Year.
Section 3. That, the Notes may be renewed from time to time and money may be borrowed from
time to time for the payment of any indebtedness evidenced by the Notes; provided, that the Notes and any
renewal notes shall mature and be paid in full without renewal on or before the end of the Fiscal Year. If the
Local Government overestimates the amount of taxes and revenue collected for the Fiscal Year and it becomes
75
impossible to retire the Notes and all renewal notes prior to the close of the Fiscal Year, then the Local
Government shall apply to the Comptroller of the Treasury or Comptroller’s designee within ten (10) days
prior to the close of the Fiscal year for permission to issue funding bonds to cover the unpaid Notes in the
manner provided by Title 9, Chapter 11 of Tennessee Code Annotated or as otherwise provided for in a manner
approved by the Comptroller of the Treasury or Comptroller’s designee.
Section 4. That, the Notes shall be secured solely by the receipt of taxes and revenues by the Fund
during the Fiscal Year.
Section 5. That, the Notes shall be subject to redemption at the option of the Local government, in
whole or in part, at any time, at the principal amount and accrued interest to the date of redemption without a
premium.
Section 6. The Notes shall be executed in the name of the Local Government; shall bear the signature
of the chief executive officer of the Local Government and the signature of the recording officer of the Local
Government and shall be payable as to principal and interest at the office of the recording officer of the Local
Government or at the office of the paying agent duly appointed by the Local Government. Proceeds of the
Notes shall be deposited with the official designated by law as custodian of the funds. All proceeds shall be
paid out for the purpose of meeting Fund appropriations made for the Fiscal Year in anticipation of the
collection of revenues and taxes pursuant to this Resolution and as required by law.
Section 7. The Notes shall be in substantially the form attached as Attachment 1 with only changes
as are necessary or appropriate to comply with the requirements of the purchaser thereof.
Section 8. The Notes shall be issued only after the receipt of the approval of the Comptroller of the
Treasury or Comptroller’s designee for the sale of the Notes.
Section 9. If any of the Notes shall remain unpaid at the end of the fiscal year of issue, then the unpaid
Notes shall be retired from the funds of the Local Government or be converted into bonds pursuant to Chapter
11 of Title 9 of the Tennessee Code Annotated, or any other law, or be otherwise liquidated as approved by
the Comptroller of the Treasury or Comptroller’s designee.
Section 10. All orders or resolutions in conflict with this Resolution are hereby repealed insofar as
such conflict exists and this Resolution shall become effective immediately upon its passage.
Duly passed and approved this ________day of __________________________, 20___.
(Local Government Chief Executive)
ATTESTED:
(Recording Officer)
76
Attachment 1
TAX/REVENUE ANTICIPATION NOTE FORM
Registered Note No.
Registered $
(Name of Local Government)
of the State of Tennessee
Tax/Revenue Anticipation Notes, Series 20__
DATED:
INTEREST RATE:
MATURITY DATE:
Registered Owner:
Principal Sum:
The (Governing Body) of
Tennessee (the Local Government) hereby acknowledges itself indebted, and for value received hereby
promises to pay to the Registered Owner hereof (named above), or registered assigns, the Principal Sum
(specified above) on the Maturity Date (specified above) (unless this note shall have been duly called for prior
redemption and payment of the redemption price shall have been duly made or provided for), upon
presentation and surrender to the Local Government or its agent, and to pay interest on the Principal Sum on
and thereafter on of each
year at the Interest Rate per annum (specified above), by check, draft, or warrant mailed to the Registered
Owner at the address of the Registered Owner as it appears on the fifteenth (15th) calendar day of the month
next preceding the applicable payment date in the note register maintained by or on behalf of the Local
Government. Both principal of and interest on this note are payable at the office of the
of the Local Government or a paying agent duly appointed by the Local Government in lawful
money of the United States of America.
This note is a direct obligation of the Local Government for the payment of which as to both principal
and interest the full faith and credit of the Local Government is pledged.
This note is subject to redemption prior to its stated maturity in whole or in part at any time at the
option of the Local Government upon payment of the principal amount of the note together with the interest
accrued thereon to the date of redemption with a premium of % of par value.
77
This note is issued under the authority of Parts I, IV, and V of Title 9, Chapter 21, Tennessee Code
Annotated, and a Resolution duly adopted by the Governing Body of the Local Government meeting in session
on the __________ day of _______________, 20____ (the "Resolution") to provide funds in anticipation of
the issuance of the bonds referenced in the Resolution.
This note shall have the qualities and incidents of a negotiable instrument and shall be transferable
only upon the note register kept by the Local Government or its agent, by the Registered Owner of the note in
person or by the Registered Owner's attorney duly authorized in writing, upon presentation and surrender to
the Local Government or its agent of the note together with a written instrument of transfer satisfactory to the
Local Government duly executed by the Registered Owner or the Registered Owner's duly authorized attorney
but only in the manner as provided in the Resolution of the Local Government authorizing the issuance of this
note and upon surrender hereof for cancellation. Upon the transfer of any such note, the Local Government
or its agent shall issue in the name of the transferee a new registered note or notes of the same aggregate
principal amount and maturity as the surrendered note. The Local Government shall not be obligated to make
any such Note transfer during the fifteen (15) days next preceding an interest payment date on the Notes or, in
the case of any redemption of the Notes, during the forty-five (45) days next preceding the date of redemption.
Title 9, Chapter 21, Section 117, Tennessee Code Annotated provides that this note and interest
thereon are exempt from taxation by the State of Tennessee or by any county, municipality, or taxing district
of the State, except for inheritance, transfer and estate taxes and except as otherwise provided under the laws
of the State of Tennessee.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things
required to exist, happen and be performed precedent to and in the issuance of this note exist, have happened
and have been performed in due time, form and manner as required by the Constitution and laws of the State
of Tennessee, and that the amount of this note, together with all other indebtedness of the Local Government,
does not exceed any constitutional or statutory limitation thereon, and that this note is within every
constitutional and statutory limitation.
IN WITNESS WHEREOF, the of the Local Government has caused this note to be executed in the
name of the Local Government by the signature of the _________________________, and attested by the
signature of the _______________________________ with the Seal of the Local Government affixed hereto
or imprinted hereon, and this note to be dated as of the ____________ day of 20____.
(Local Government Chief Executive)
ATTESTED:
(Recording Officer)
78
ASSIGNMENT
Note No.
Amount: $
For value received, the undersigned hereby sells, assigns, and transfers unto
(Name and Address of assignee)
(Please indicate social security or other tax identifying number of assignee)
The within-mentioned note and hereby irrevocably constitutes and appoints
attorney-in-fact, to transfer the same on the note register in the office of the
or the agent of the Local Government with full power of substitution in the premises.
Date:
Assignor:
Address:
79
Appendix 5
Informal Bid Form
[Enter Name of Local Government], TENNESSEE
NOT TO EXCEED [Amount Requested]
GENERAL OBLIGATION CAPITAL OUTLAY NOTE, SERIES 20__
As required by Title 9, Chapter 21, Part 609, Tenn. Code Ann., this information is being submitted
to the Comptroller’s Division of Local Government Finance to request approval to issue the above
notes by the informal bid process based upon the following:
1. The informal bid process is feasible.
2. The informal bid process is in the best interest of our local government.
3. Our local government will be able to amortize the notes together with all other outstanding
obligations.
4. Financial institutions were contacted by telephone or in writing and presented our local
government with the interest rates as detailed below (at least three should be contacted, if
possible):
Financial Institution/Lender Interest Rate Quoted
Issuance Costs
There are no issuance costs associated with these notes.
There are issuance costs, and they are itemized on the attached schedule:
Signed:
Name and Title (printed):
80
Attachment 1
Schedule of Informal Bid Issuance Costs
Fee Lender 1 Lender 2 Lender 3 Lender 4 Lender 5
Financial Advisor
Legal Counsel
Registration
Paying Agent
Rating Agency
Underwriter
Remarketing Agent
Advertising
Other
Total
81
Appendix 6
Balloon Debt Law Flowchart
