Memphis Moved $37 Million Into Its Sewer Fund by Borrowing From Two Other City Funds. The Council Asked No Questions.

One note is for $9 million at no interest. The other is $28 million at 3.761 percent, a rate the city does not choose because state law sets it. Both were reported to the budget committee on August 4. The chairman asked twice for questions and got none.

MEMPHIS, August 4, 2026 - The City of Memphis has borrowed $37 million into its sewer treatment and collection fund from two other city funds, and the two reports disclosing that to the Memphis City Council drew no questions from any member.

The reports came before the Budget Committee on August 4. Both were listed as reports rather than as items requiring a vote, and the committee chairman noted from the dais that such reports are typically required in connection with the issuances.

The $9 million note

The city's chief financial officer told the committee the first transaction is an interfund capital outlay note, Series 2026B, in the amount of $9 million. It closed on June 29.

The borrowing fund is the sewer treatment and collection fund. The lending fund is the debt service fund. The note matures in 2028.

Because the loan was funded from the debt service fund, he said, there is no interest on it.

The $28 million note

The second transaction is Series 2026A, in the amount of $28 million. The borrowing fund is again the sewer treatment and collection fund. The lending fund is the storm water fund.

That one carries interest, and the city did not set the rate.

The chief financial officer told the committee that Tennessee law requires interest when restricted enterprise funds are loaned to another fund through interfund borrowing, and that state law provides the interest rate must equal the highest rate earned by the lending fund on its investments as of the closing date. Applying that requirement produced a rate of 3.761 percent.

Interest and debt payments are scheduled for June 30 in 2027, 2028, 2029 and 2030.

No questions

After the first report, the chief financial officer asked whether there were any questions before he moved to the second. There were none.

After the second report, he asked again. The chairman repeated the question to the committee and used the pause to note for the record that Chairwoman Rhonda Logan had joined the meeting. No member asked anything about either note.

The committee moved on to the item that did require a vote, the resolution authorizing up to $350 million in general improvement refunding bonds, which drew several minutes of questions from Councilwoman Janika White and from Vice Chair Chase Carlisle, the committee chairman.

What the two interfund notes mean in practice is that the sewer treatment and collection fund needed $37 million it did not have on hand, and that the city supplied it internally rather than going to the bond market. On $28 million of it, the sewer fund will pay the storm water fund 3.761 percent, an arrangement the city cannot price down because the state sets the floor.

What happens next

Neither report required a vote and neither received one. Payments on the $28 million note are scheduled for June 30 in each of 2027, 2028, 2029 and 2030. The $9 million note matures in 2028.

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