Tenn. Code § 9-21-704
The principal of grant anticipation notes shall not be direct general obligations of the local government, and the local government shall have no authority to levy ad valorem taxes for the payment of the principal of such notes; provided, that interest on grant anticipation notes may be a general obligation of a local government, and the local government shall have the authority to levy ad valorem taxes for the payment of interest on such notes. When the grant anticipation notes are issued and sold, they shall be secured solely by a pledge of moneys, which pledge shall not be less than the principal amount of such notes, to be received pursuant to a contract or agreement between a state or federal agency and the local government. Nothing herein shall preclude a local government from issuing capital outlay notes or bond anticipation notes in conjunction with grant anticipation notes issued under this section; provided, that the proceeds from the sale of any such capital outlay notes or bond anticipation notes shall not be applied to the payment of such grant anticipation notes.
T.C.A. § 9-21-704