Authorized Investments

Counties

TENN. CODE ANN. 5-8-301. Authorized investments.

(a) ) It is the policy of the state of Tennessee and the several counties that all idle county funds shall be invested to the maximum extent practical according to the following:

(1) Idle county funds derived from bond proceeds shall be invested in accordance with subsection (b);

(2) Idle county funds derived from sales of assets, settlements, or other infrequent and unusual occurrences shall be invested in accordance with subsection (b) and subdivisions (c)(2) and (3); and

(3) All other idle county funds shall be invested in accordance with subsections (b) and (c).

(b) In order to provide a safe temporary medium for investment of idle funds, counties are authorized to invest in the investment instruments noted in this section or as otherwise provided in the charter of those counties that have adopted a charter form of government pursuant to chapter 1, part 2 of this title. Any investments made pursuant to subdivisions (b)(3), (5) and (6) shall either be approved by the county legislative body, be in compliance with an investment policy adopted by the county legislative body, or approved by an investment committee established pursuant to 5-8-302. Counties are authorized to invest idle funds in any of the following:

(1) Bonds, notes or treasury bills of the United States or other obligations guaranteed as to principal and interest by the United States or any of its agencies;

(2) Certificates of deposit and other evidence of deposit at Tennessee state chartered banks and savings and loan associations and federally chartered banks and savings and loan associations. Prior to making these investments, the county official shall obtain and document at least two (2) proposals from banks or other financial institutions to assure the county receives the highest and best rate of return. The documentation shall be retained in the official's office for a period of not less than three (3) years. Notwithstanding any other public or private act to the contrary, all investments made pursuant to this subdivision (b)(2) shall be secured by collateral in the same manner and under the same conditions as state deposits under title 9, chapter 4, parts 1 and 4, or as provided in a collateral pool created under title 9, chapter 4, part 5;

(3) Obligations of the United States or its agencies under a repurchase agreement for a shorter time than the maturity date of the security itself if the market value of the security itself is more than the amount of funds invested. Counties may invest in repurchase agreements only if the comptroller of the treasury or the comptroller's designee approves repurchase agreements as an authorized investment and if such investments are made in accordance with procedures established by the state funding board;

(4) The pooled investment fund established by title 9, chapter 4, part 7;

(5) (A) (i) Bonds of this state, including any revenue bond issued by any agency of the state of Tennessee, specifically including institutions under the control of the state board of education, the board of trustees for the University of Tennessee and bonds issued in the name of the state school bond authority;

(ii) Bonds of any county or municipal corporation of this state, including bonds payable from revenues, but expressly excluding bonds of any road, levee or drainage district; and

(iii) Bonds of any other state or political subdivision thereof;

(B) Any funds invested pursuant to this subdivision (b)(5) shall be invested only in bonds rated A or higher by any nationally recognized rating service;

(6) Nonconvertible debt securities of the following federal government sponsored enterprises that are chartered by the United States congress; provided, that the securities are rated in the highest category by at least two (2) nationally recognized rating services:

(A) The federal home loan bank;

(B) The federal national mortgage association;

(C) The federal farm credit bank;

(D) The federal home loan mortgage corporation; and

(E) Any other obligations that are guaranteed as to principal and interest by the United States or any of its agencies; and

(7) The county's own bonds or notes issued in accordance with title 9, chapter 21.

(c) (1) Not more than twenty percent (20%) of the lowest idle fund balance in the last five (5) years or twenty percent (20%) of the idle funds available at the time of investment, whichever is less, may be invested in maturities of greater than two (2) years but not greater than five (5) years from the date of investment.

(2) No idle funds are to be invested for a maturity of greater than two (2) years, unless first the county legislative body shall appoint an investment committee as authorized by 5-8-302 or 5-21-105, and such investment committee shall give its prior approval. Such investment committee may approve investments in maturities of up to five (5) years.

(3) Under subdivision (a)(2), the investment committee may approve investment in maturities of greater than five (5) years. Any such investments shall also be approved by the comptroller of the treasury or the comptroller's designee. The individual designated to invest the funds shall submit to the director in writing the infrequent and unusual occurrence that generated idle funds under subdivision (a)(2), the medium of investment and the maturity approved by the investment committee.

(d) (1) In addition to the investments authorized in subsection (a), those counties having a population in excess of one hundred fifty thousand (150,000), according to the 1980 federal census or any subsequent federal census, may also permit investment of idle funds in the investment instruments in subdivisions (d)(1)(A) and (B) in accordance with the provisions of subdivision (d)(3);

(A) Prime banker's acceptances that are eligible for purchase by the federal reserve system; and

(B) Prime commercial paper that is rated at least A1 or equivalent by at least two (2) nationally recognized rating services.

(2) In addition to the investments authorized in subsection (a), those counties having a population of not less than twenty thousand (20,000) nor more than one hundred fifty thousand (150,000), according to the 1990 federal census or any subsequent federal census, may also permit investment of idle funds in prime commercial paper in accordance with the following:

(A) Such paper shall be rated in the highest category by at least two (2) commercial paper rating services; and

(B) The paper shall have a remaining maturity of ninety (90) days or less.

(3) Investment in the instruments set forth in subdivisions (d)(1) and (2) shall first be authorized by the county legislative body, acting by resolution duly adopted or otherwise provided in the charter of those counties that have adopted a charter form of government, pursuant to the provisions of chapter 1, part 2 of this title. In addition, investment in the instruments set forth in subdivisions (d)(1) and (2) shall be prohibited until the investment committee has adopted written policies to govern the use of such instruments, with such policies being no less restrictive than those established by the state funding board to govern state investment in the instruments set forth in subdivisions (d)(1) and (2).

TENN. CODE ANN. 5-8-302. Committee on investment.

(a) For the purpose of carrying out the provisions of 5-8-301, the county legislative body of the several counties may appoint a committee with authority to designate the types of investments, the amounts of those investments and the maturity of those investments.

(b) No liability shall attach to any member of a committee selected for the purpose mentioned in subsection (a), except for misfeasance or malfeasance in the performance of the duties imposed on the committee.


Cross References:
Investment in TVA bonds, TENN. CODE ANN. 35-3-119.
Political subdivisions investing in obligations of public housing authority authorized, TENN. CODE ANN. 35-3-115

Municipalities

TENN. CODE ANN. 6-56-106. Authorized investments.

(a) In order to provide a safe temporary medium for investment of idle funds, municipalities are authorized to invest in the following:

(1) Bonds, notes or treasury bills of the United States;

(2) Nonconvertible debt securities of the following federal government sponsored enterprises that are chartered by the United States congress; provided, that such securities are rated in the highest category by at least two (2) nationally recognized rating services:

(A) The federal home loan bank;

(B) The federal national mortgage association;

(C) The federal farm credit bank; and

(D) The federal home loan mortgage corporation;

(3) Any other obligations not listed in subdivisions (a)(1) and (2) that are guaranteed as to principal and interest by the United States or any of its agencies;

(4) Certificates of deposit and other evidences of deposit at state and federally chartered banks, and savings and loan associations. Notwithstanding any other public or private act to the contrary, all investments made pursuant to this subdivision (a)(4) shall be secured by collateral in the same manner and under the same conditions as state deposits under title 9, chapter 4, parts 1 and 4, or as provided in a collateral pool created under title 9, chapter 4, part 5;

(5) Obligations of the United States or its agencies under a repurchase agreement for a shorter time than the maturity date of the security itself if the market value of the security itself is more than the amount of funds invested; provided, that municipalities may invest in repurchase agreements only if the comptroller of the treasury or the comptroller's designee approves repurchase agreements as an authorized investment, and if such investments are made in accordance with procedures established by the state funding board;

(6) The local government investment pool created by title 9, chapter 4, part 7;

(7) (A) Municipalities having a population in excess of one hundred fifty thousand (150,000), according to the 1990 federal census or any subsequent federal census, may also permit investment of idle funds in the following investment instruments:

(i) Prime banker's acceptances that are eligible for purchase by the federal reserve system; and

(ii) Prime commercial paper that is rated at least A1 or equivalent by at least two (2) nationally recognized rating services;

(B) Municipalities having a population of not less than twenty thousand (20,000) nor more than one hundred fifty thousand (150,000), according to the 1990 federal census or any subsequent federal census, may also permit investment of idle funds in prime commercial paper in accordance with the following:

(i) Such paper shall be rated in the highest category by at least two (2) commercial paper rating services; and

(ii) The paper shall have a remaining maturity of ninety (90) days or less;

(C) Investment in the instruments set forth in this subdivision (a)(8) shall first be authorized by the municipality's legislative body, acting by resolution or ordinance. In addition, investment in such instruments shall be prohibited until the legislative body has adopted written policies to govern the use of such instruments, with such policies being no less restrictive than those established by the state funding board to govern state investments in such instruments;

(8) The municipality's own bonds or notes issued in accordance with title 9, chapter 21; and

(9) (A) Investment in the instruments set forth in subdivision (a)(2), (a)(5), (a)(6), or any type of investment authorized pursuant to a municipality's charter that is of a type that is not included in this part shall require the following:

(i) The municipality's legislative body must authorize the investment by ordinance; and

(ii) The legislative body must adopt a written enforceable investment policy by ordinance to govern the use of investments, with the policies being no less restrictive than those established by the state funding board to govern state investments in these types of instruments.

(B) Investment in instruments covered by this subdivision (a)(9) shall be prohibited until the legislative body has adopted written policies to govern the use of the investments or an ordinance has been passed to authorize the investment.

(b) The investments listed in subdivisions (a)(1)-(4) may have a maturity of not greater than four (4) years from the date of investment; however, such investments may have a maturity of greater than four (4) years from the date of investment if such maturity is approved by the comptroller of the treasury or the comptroller's designee.

(c) (1) Proceeds of bonds, notes and other obligations issued by municipalities, reserves held in connection therewith and the investment income therefrom, may be invested in obligations that:

(A) Are rated in either of the two (2) highest rated categories by a nationally recognized rating agency of such obligation;

(B) Are direct general obligations of a state of the United States, or a political subdivision or instrumentality thereof, having general taxing powers; and

(C) Have a final maturity on the date of investment of not to exceed forty-eight (48) months or that may be tendered by the holder to the issuer thereof, or an agent of the issuer, at not less than forty-eight-month intervals.

(2) Such proceeds and the investment income thereon may also be invested as otherwise set forth in this section.

(d) The investments authorized by this section are in addition to those authorized in any other general law or in any municipality's charter.

TENN. CODE ANN. 6-56-107. Selection of bonds for investment.

(a) For the purpose of carrying out the provisions of 6-56-106, the governing body of the municipality may appoint a committee with authority to act in the premises and, unless the governing body shall designate the specific series of bonds in which such funds shall be invested, the selection of the series for investment of such funds as will be best suited to the requirements of the municipality shall be made by the committee.

(b) No liability shall attach to any member of a committee selected for the aforementioned purpose, except for misfeasance or malfeasance in the performance of the duties imposed on the committee.

Cross References:
Investments in TVA bonds, TENN. CODE ANN. 35-3-119
Investing in obligations of Public Housing Authority authorized, TENN. CODE ANN. 13-20-61 & 35-3-115

Utility Districts

TENN. CODE ANN. 7-82-108. Authorized investments.

(a) (1) In order to provide a safe temporary medium for investment of idle funds, utility districts are authorized to invest in the following:

(A) Bonds, notes, or treasury bills of the United States;

(B) Nonconvertible debt securities of the following federal government sponsored enterprises; provided, that the securities are rated in the highest category by at least two (2) nationally recognized rating services:

(i) The federal home loan bank;

(ii) The federal national mortgage association;

(iii) The federal farm credit bank; and

(iv) The federal home loan mortgage corporation;

(C) Any other obligations not listed in subdivisions (a)(1)(A) and (B) that are guaranteed as to principal and interest by the United States or any of its agencies;

(D) Certificates of deposit and other evidences of deposit at state and federal chartered banks and savings and loan associations. All investments made pursuant to this subdivision (a)(1)(D) shall be secured in the manner set forth in 9-1-107 or title 9, chapter 4, parts 1 and 4;

(E) Obligations of the United States or its agencies under a repurchase agreement for a shorter time than the maturity date of the security itself, if the market value of the security itself is more than the amount of funds invested; provided, that utility districts may invest in repurchase agreements only if the comptroller of the treasury or the comptroller's designee approves repurchase agreements as an authorized investment, and if such investments are made in accordance with procedures established by the state funding board; and

(F) The local government investment pool created by title 9, chapter 4, part 7.

(2) The investments listed in subdivisions (a)(1)(A)-(D) may have a maturity of not greater than four (4) years from the date of investment; however, such investments may have a maturity of greater than four (4) years from the date of investment, if the maturity is approved by the comptroller of the treasury or the comptroller's designee.

(3) (A) Investing in the instruments set forth in subdivision (a)(1)(B) or (a)(1)(E) shall require the following:

(i) The utility district's governing board must authorize the investment; and

(ii) The utility district's governing board shall adopt a written investment policy to govern the use of investments, with the policies being no less restrictive than those established by the state funding board to govern state investments in these types of instruments.

(B) Investment in instruments covered by subdivision (a)(3)(A) shall be prohibited until the utility district's governing board has adopted written policies to govern the use of the investments or has voted to authorize the investment.

(b) (1) Proceeds of bonds, notes and other obligations issued by utility districts, reserves held in connection with the bonds, notes or other obligations and the investment income from the bonds, notes or other obligations, may be invested in obligations that:

(A) (i) Are rated in either of the two (2) highest rated categories by a nationally recognized rating agency of such obligations;

(ii) Are direct general obligations of a state of the United States, or a political subdivision or instrumentality of a state, having general taxing powers; and

(iii) Have a final maturity on the date of investment of not to exceed forty-eight (48) months, or that may be tendered by the holder to the issuer of the bonds, notes or other obligations, or an agent of the issuer, at not less than forty-eight-month intervals; or

(B) (i) Are rated in the two (2) highest rating categories by a nationally recognized rating agency of such obligations;

(ii) Are obligations of a state of the United States, or a political subdivision or instrumentality of a state, secured solely by revenues received by or on behalf of the state or political subdivision or instrumentality of the state, which revenues are irrevocably pledged to the payment of the principal of and interest on such obligations; and

(iii) Have a final maturity on the date of investment of not to exceed forty-eight (48) months, or that may be tendered by the holder to the issuer of the bonds, notes and other obligations, or an agent of the issuer, at not less than forty-eight-month intervals.

(2) Such proceeds and the investment income on the proceeds may also be invested as otherwise set forth in this section.

(c) The investments authorized by this section are in addition to those authorized in any other general law.

Bank Deposits

Local governments with bank deposits that are in excess of the amount covered by FDIC insurance must either maintain the deposit with a bank that is a member of the bank collateral pool or collateralize the deposit in accordance with State statues.

Bank Collateral Pool (Tennessee Code Annotated Title 9 Chapter 4 Part 5)

Investment Programs

The Tennessee Department of Treasury administers a short-term and an intermediate term investment program for counties, municipalities, and utility districts. The following links to the Department of Treasury website provide information for the respective investment programs.

Short-Term Duration - Average Maturity of 90 Days
Local Government Investment Pool (Tennessee Code Annotated Title 9 Chapter 4 Part 7)

Intermediate-Term Duration - Average Maturity of 3 Years
Intermediate-Term Investment Fund (T.C.A. 9-4-608)