The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Distribution of Funds

Reference Number: MTAS-47
Tennessee Code Annotated
Reviewed Date: August 14, 2017
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Generally, a city school system is entitled to a pro rata share of funds from the issue of county school bonds (including capital outlay notes) financed by a countywide tax levy, based on average daily attendance in county and city schools. That is true whether the bonds are issued under T.C.A. §§ 49-3-1201, et seq., or T.C.A. §§ 9-21-101, et seq. Cities are authorized to waive their right to a share of these funds. T.C.A. § 49-3-1003, T.C.A. § 9-21-129. However, if the county school project is financed by the county through a loan from the Tennessee State School Bond Authority for "qualified zone academy projects" under T.C.A. §§ 49-3-1201, et seq., the county is not required to share the proceeds of the loan with the city school system. A "qualified zone academy project" means "buildings, structures, improvements and equipment for schools of any local government." T.C.A. § 49-3-1206(d)(2).

T.C.A. § 12-10-115(c) requires counties receiving proceeds from a lease, loan agreement, sales contract, or operating contract with a public building authority for school capital outlay purposes to share those proceeds with city school systems in the county just as capital outlay note proceeds are shared. Proceeds need not be shared by the county until they are received. The requirements of T.C.A. § 12-10-115(c) do not apply in Shelby County.

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