The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Public Building Authority

Reference Number: MTAS-561
Tennessee Code Annotated
Reviewed Date: March 24, 2014

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Any city and/or county may establish a public building authority (PBA). The authority is a public, non-profit corporation that can build and operate buildings used by one government, several governments, government organizations, and private businesses that lease space in such buildings. The authority’s powers include any undertaking that can be financed by bonds, other municipal obligations, the state, or any agency that enters into an agreement with the authority. T.C.A. §§ 12-10-101, et seq.

The authority may issue revenue bonds to raise money to construct a building. Revenue from long-term leases of the space may pay the bonds. If the bonds or notes are issued in registered form, they must meet requirements established by the Tennessee Public Obligations Registration Act. T.C.A. §§ 9-19-101, et seq.

Any municipality may, by resolution, enter into leases, loan agreements, sales contracts, or operating agreements or contracts for financing certain projects. Such leases, loan agreements, sales contracts, or operating contracts with an authority are payable only from revenues from one or more city projects. After a city makes a commitment to lease space in an authority’s building, it must make the necessary tax levies to meet the lease’s payment terms, including the project’s operating and maintenance expenses. Such a tax must be by resolution and is in addition to other taxes authorized by charter. Cities with taxing power that enter into any lease, loan agreement, or sales contract with a public building authority must comply with the same resolution, notice, and election provisions the municipality must comply with in issuing general obligation bonds unless the lease, loan agreement, or sales contract retires or refunds existing debt. T.C.A. §§ 12-10-101, et seq.

T.C.A. § 12-10-124(c) requires PBAs to advertise publicly and receive competitive bids for the construction of buildings or improvements costing more than $10,000 but less than $1 million. For buildings or improvements costing $1 million or more, the authority must use public advertisement or competitive sealed bids, a request for proposals with minimum required qualifications, or a request for qualifications, including minimum qualification requirements, in which multiple proposers are selected and prequalified to submit bids.

Municipalities, counties, and metropolitan governments may invest loan proceeds from public building authorities in guaranteed investment contracts chosen or established by the authority under restrictions set out in T.C.A. § 12-10-111.

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