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Municipal Technical Advisory Service (MTAS)

Revenue Bonds

Reference Number: MTAS-1746
Reviewed Date: 12/12/2022

Issuing revenue bonds is similar to issuing general obligation bonds, but there are no general law provisions for petitioners to force a referendum on revenue bonds. They may be sold by competitive bid or negotiation for at least 97 percent of par value. T.C.A. §§ 9-21-302–303.

Lenders providing money through revenue bonds must look for repayment to the revenue produced by the public works being financed. Therefore, revenue bond covenants frequently include detailed promises about how the city will operate its revenue-generating investment and handle its finances. Cities have the authority to make covenants about insuring and maintaining a public works project, keeping city books, performing audits, and many other operational details. There may be interest rate swap or exchange agreements, agreements establishing interest rate floors or ceilings, and other interest rate hedging agreements relative to revenue bonds. T.C.A. § 9-21-306.