The Tennessee Local Development Authority (T.C.A. § 4-31-101 et seq.) – made up of the governor, secretary of state, state treasurer, comptroller of the treasury, and commissioner of finance and administration – has statutory authority to borrow money in the name of the state and on the credit of the state, allowing it to lend funds to local governments for the following purposes:

1. Correctional facilities.  T.C.A. §§ 4-31-102(5), 4-31-401 through 4-31-415.
2. Construction of sewage treatment works.  T.C.A. §§ 4-31-102(5), 4-31- 401 through 4-31-415.
3. Waterworks.  T.C.A. §§ 4-31-102(5), 4-31-401 through 4-31-415.
4. Energy recovery facilities.  T.C.A. §§ 4-31-102(5), 4-31-401 through 4-31- 415.
5. Solid waste resource recovery facilities.  T.C.A. §§ 4-31-102(5), 4-31-401 through 4-31-415.
6. Agriculture development.  T.C.A. §§ 4-31-201 through 4-31-206.
7. Industrial development.  T.C.A. §§ 4-31-301 through 4-31-308.
8. Rural fire protection equipment.  T.C.A. §§ 4-31-501 through 4-31-516.
9. Airports. T.C.A. §§ 4-31-601 through 4-31-615.
10. Health facilities. T.C.A. §§ 4-31-201(5), 4-31-401 through 4-31-415, 4-31- 701 through 4-31-711.

In order to borrow from the state, a local government is required to pledge its allocation of state-shared taxes to the state for the annual interest and principal payments in case the county defaults on its obligation to pay.

The Tennessee Local Development Authority, in conjunction with the Tennessee Department of Education, is authorized to develop an enhancement program whereby the authority lends funds to eligible local governments for education capital outlay purposes. Each local government issuing debt under this program, as well as any local education agency for which such debt is issued, is empowered to assign or pledge to the authority for the repayment of the loan available local capital outlay funds, including the state share of the capital outlay portion of the nonclassroom component of BEP funding.

Users of capital projects financed by the Tennessee Local Development Authority, such as counties, are prohibited from making any changes to a project or program that would affect the tax-exempt status of the bonds or notes unless the change is approved by the office of state and local finance in the office of the comptroller and the Authority.  Failure to get prior approval renders the change void.  T.C.A.  § 4-31-120.