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Process for Issuing Debt

Reference Number: MTAS-558
Reviewed Date: 12/12/2022

General Filing Requirements
Within 45 days following the issuance or execution of a financing transaction, the city must submit a report (CT-0253) to the municipal governing body and to the Comptroller’s Office, Division of Local Government Finance. This report must include:

  • a brief description of the transaction;
  • the issuance and continuing costs of the transaction;
  • a copy of the IRS information return, if applicable;
  • a description of any continuing disclosure obligations
  • a copy of the offering document, if any; and
  • other information required by the funding board.

When a municipality discovers a failure to file as required above or an error in a filing, it may seek permission from the Office of the Comptroller to do a late filing. The director may order a late filing upon discovery of non-compliance. The municipality must file the required information within 15 days.

The funding board may exempt from these disclosure requirements de minimum transactions, transactions in which the municipality is required to participate in a financing program, a transaction that is a conduit for a non-governmental entity, and transactions in which cost disclosure is inconsistent with the intent of this law. T.C.A. § 9-21-151.

Note Requirements
Bond anticipation notes may be issued for no more than two years from the date of issue. The Office of the Comptroller must approve the issue and may approve two extensions of two years each for a six-year total. During such an extension period, the city has to begin retiring the debt. T.C.A. §§ 9-21-501, et seq.

Capital outlay notes also must be approved by the Office of the Comptroller. Several time frame options are available, including three-year notes with two three-year renewal periods, 10-year notes for purchasing land, and 12-year notes. Twelve-year capital outlay notes totaling less than $2 million must be sold at a competitive public sale or by an informal bid process. Twelve-year capital outlay notes totaling more than $2 million must be sold at a competitive sale. T.C.A. §§ 9-21-601, et seq.

Grant anticipation notes may be issued for various public works projects. They are secured only by the pledge of grant funds under contract between the federal or state government and the city. However, the interest on such grant anticipation notes may be a general obligation of the city. Grant anticipation notes may be issued for three years or for seven years with the approval of the Office of the Comptroller. Under certain conditions, they may be extended to 10 years. T.C.A. §§ 9-21-705, et seq.

Tax anticipation notes for up to 60 percent of a city’s total appropriations for a current fiscal year are authorized subject to prior approval by the Office of the Comptroller. These must be paid by the end of the fiscal year. If this is not possible, application for permission to issue funding bonds must be made to the Office of the Comptroller "within 10 days prior to the close of the fiscal year". T.C.A. §§ 9-21-801, et seq.

"Any note or promise to repay money issued ... contrary to the requirements of Chapter 21 ... shall be considered non-conforming and shall be subject to the restrictions and penalties of T.C.A. § 9-21-406." Upon identification of a non-conforming obligation, the Comptroller must notify the offending parties, including the local government. Notice must contain actions necessary to bring obligation into compliance and a time frame for doing so. Local government must issue a response within 10 business days containing a plan for compliance or a dispute of charges. State Funding Board charged with promulgating rules for identifying classifications of non-conformance and reasonable penalties for non-conformance. T.C.A. § 9-21-406.

To assure that no Tennessee local government slips into the habit of borrowing funds to pay annual operating expenses, any city issuing any debt under this chapter is required to send a balanced annual budget to the Office of the Comptroller for approval. If the director finds that the city is using unrealistic projections in its budget, he or she may require the governing body to adjust its estimates or increase its tax levy. T.C.A. § 9-21-403.

Before notes may be issued to finance industrial parks, a city must obtain a certificate of public purpose and necessity from the Building Finance Committee in the Industrial Development Division of the Department of Economic and Community Development. T.C.A. § 9-21-402, T.C.A. § 13-16-207.

The Comptroller's Division of Local Government Finance has prepared a comprehensive Debt Manual. This document should be read and followed upon the issue of any debt by a local government in Tennessee.

Refunding Bond Requirements
Before issuing refunding bonds for either outstanding general obligation bonds or outstanding revenue bonds, the city’s refunding plan must be submitted to the Office of the Comptroller. T.C.A. §§ 9-21-901, et seq., T.C.A. §§ 9-21-1001, et seq.