In the First Session of the 114th General Assembly, Tennessee legislators passed laws promoting economic development across the state and modernizing regulatory oversight of local governments engaging in different types of long-term financings of public projects. Below we have summarized six of these recently enacted public chapters that will be important for local governments to understand.
Economic Development
Tax Increment Financing
Public Chapter No. 353, which went into effect on May 2, 2025, most notably expands the list of projects eligible for tax increment financing (TIF). As a reminder, tax increment financing utilizes revenues associated with the growth in value of a developed area to pay for infrastructure costs in that area. The expanded list of TIF-eligible projects now includes single family residential developments, with an emphasis on affordable and workforce housing, and public infrastructure improvements. Jurisdictions experiencing rapid growth and looking for alternative ways to partner with the private sector to finance housing and infrastructure improvements should explore whether this new ability to utilize TIF for these types of improvements might aid their communities.
Infrastructure Development Districts
Public Chapter No. 357, which went into effect on May 5, 2025, broadens the Residential Infrastructure Development Act (RIDA) from last year by eliminating the size, capital investment and use requirements. Under RIDA, the district had to be at least five acres in size or have a capital investment of at least $5 million, and at least half of the area must be used for residential housing. The new law allows special assessments to be levied within the boundaries of an infrastructure development district encompassing commercial, residential or mixed-use developments, and the revenues from the special assessments may be used to reimburse the developer for required infrastructure costs or pledged to the payment of bonds to finance those infrastructure costs and issued by either the municipality or a designated industrial development or public building authority. Under both RIDA and the new law, it is important to note that special assessment revenues in infrastructure development districts cannot be used to pay for ongoing maintenance needs.
Limitation on State Incentives
Public Chapter No. 151, which went into effect on July 1, 2025, prohibits business entities pursuing state economic development incentives from entering into contracts with other nongovernmental entities that impose requirements regarding the business entity's employment practices— these types of contracts are commonly known as community benefits agreements. For example, a business entity pursuing state incentives is prohibited from entering into a contract with a third-party requiring it to utilize a unionized workforce because such a requirement is not directly related to its duties under the state economic development incentives. Please note this new law will limit locally initiated community benefits agreements if state incentives are pursued for the same project.
New Regulatory Oversight
Heightened Risk Debt
Public Chapter No. 218, which went into effect on July 1, 2025, creates a new regulatory framework for "heightened risk debt," which includes variable rate debt, debt with interest rate reset provisions, and debt with put options. Heightened risk debt must be submitted to the Comptroller's Office for review—these requests will only be approved if the debt terms are determined by the Comptroller's Office to be in the public's interest. This new law applies to cities, metropolitan governments, counties, utility districts, energy authorities and other water and wastewater authorities issuing heightened risk debt. Please note that bond anticipation notes issued as part of a federal loan program are not considered heightened risk debt under this new law.
New Disclosure Requirements
Public Chapter No. 17, which went into effect on March 12, 2025, amends the local government debt disclosure statute to require local governments to report "covenant violations" and "credit rating downgrades" to the Comptroller's Office within 10 business days of the event occurrence. These additional debt disclosure requirements apply to debt obligations issued by cities, counties and towns as well as their instrumentalities – such as sports authorities and industrial development boards. While general obligation debt obligations are typically accompanied by relatively few covenants, revenue debt obligations – such as utility revenue bonds and project finance bonds issued by boards and authorities – typically include more covenants. For example, a utility revenue bond resolution will typically obligate a local government to ensure that utility operating income is sufficient to provide a specified level of debt service coverage (sometimes called a "rate covenant"). If a local government fails to comply with its rate covenant, that failure would need to be reported to the Comptroller's Office using one of the forms located at this link.
Public Meetings Requirements
Agenda Requirements
Public Chapter No. 360, which went into effect on May 5, 2025, broadens the application of the recently enacted law (2023 and 2024) requiring legislative bodies of cities, metropolitan governments and counties to post meeting agendas that reasonably describe matters that will be acted upon at least 48 hours prior to the public meeting. The agenda must be posted on websites or other places accessible to the public. The new 2025 law broadens the prior law to apply to all "local governmental bodies" which is statutorily defined to include the following entities:
- Legislative bodies of incorporated cities or towns, metropolitan governments, or counties
- Regional or municipal planning commissions
- Boards of zoning appeals
- Public utility boards, including municipal utility boards, utility districts, energy authorities, and other utility authorities
- Industrial development corporation boards of directors
- Housing authorities
- Regional or municipal airport authorities
- County election commissions
- Budget committees of legislative bodies of incorporated cities or towns, metropolitan governments, or counties
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
