Source: http://www.mtas.tennessee.edu/print/book/export/html/143211
Timestamp: 2019-04-22 12:26:30+00:00

Document:
[The Drug Fund is a] special revenue account authorized by T.C.A. § 39-17-420: “All fines and forfeitures of appearance bonds … and the proceeds of goods seized and forfeited … and disposed of according to law, shall be accounted for in a special revenue fund of the jurisdiction that initiated the arrest. All financial activities related to funds received under this part shall be accounted for in this fund.” Fines are further controlled by T.C.A. § 39-17-428 as specified below. Listed below are some guidelines that cities should use (and are required to by law) in accounting for these funds.
The account is under the control of the city recorder. The police chief and the mayor or chief executive officer will recommend a budget for the special revenue fund to be approved by the governing body. It is best to budget for all the money in the account. You do not have to spend the money, but you cannot spend money that has not been appropriated. Any money left over at the end of the year will carry over to the next year’s fund balance. You need to ensure that you keep an amount in the account equal to at least 20 percent of the revenues coming in. You can spend only as much money as you have budgeted, and you can spend only as much money as is in the account. In other words, you can’t spend money that you anticipate receiving until you have actually received it.
REVENUES – Allowable deposits of funds into the Drug Fund Account.
A. Fines for drug offenses. The Sessions or Criminal Court returns fines for all drug offenses to the city. The city deposits 50 percent of fine revenue into the drug fund and 50 percent into the city’s general fund. Note: the 50/50 split applies ONLY to drug offense fine revenue. T.C.A. § 39-17-428 specifies certain minimum fines for different classifications of most drug charges.
B. Forfeited cash. Any cash seized pursuant to the drug control laws that is ultimately awarded to the city goes into the drug fund pursuant to T.C.A. § 53-11-451.
C. Proceeds from the sale of items seized pursuant to the drug laws that are ultimately forfeited to the city. All proceeds from the sale of these items go into the drug fund pursuant to T.C.A. 53-11-451. The items themselves, usually vehicles, may be used for drug enforcement activities. They cannot be used for other city activities, such as using a forfeited pick-up truck at the wastewater treatment plant.
D. Contributions. As part of a plea bargain, there may be some amount of money contributed to the city’s drug fund. Civic organizations also may contribute funds.
E. Budget allocations. The governing body may allocate general fund money to the drug fund.
EXPENDITURES – Allowable uses for funds in the Drug Fund Account.
A. Local drug treatment programs. Drug fund money can be used to fund local drug treatment programs. Expenditures must be made in accordance with local purchasing guidelines.
B. Drug education. The drug fund can be used to fund drug education programs. Typical examples are the D.A.R.E. program, anti-drug magazines or literature, and anti-drug billboards.
C. Drug enforcement. The drug fund can be used for any legitimate drug enforcement activity, operational or capital. Although we strongly recommend against it, drug enforcement salaries may be paid from the drug fund.
There are two types of drug enforcement expenditures: regular and confidential. Regular drug enforcement expenditures include the purchase of surveillance equipment and drug identification kits, maintenance on a narcotics officer’s vehicle, and drug enforcement officers’ monthly cell phone bills, etc. Confidential expenditures include money paid to informants; gasoline for informants’ vehicles; and money spent purchasing drugs, etc.
D. Non-recurring general law enforcement expenditures. Generally, but not always, these are fixed asset purchases. These expenditures do not have to be related to drug enforcement, but they cannot be operational expenditures. Legitimate examples include vehicles, standard equipment for the vehicles, body armor, weapons, and computers.
Examples of items that cannot be purchased as non-recurring general law enforcement purposes are uniforms, ammunition, general law enforcement officer’s cell phone bill or salary, and jackets for the police department.
A. Special Revenue Account. ALL revenues destined for the drug fund MUST go into a special revenue account under the control of the city recorder.
The special revenue account should be handled in the same way as other special revenue accounts such as those for state street aid.
With the exception of confidential expenditures, all expenditures MUST follow the city’s purchasing guidelines.
B. Confidential expenditures. Confidential money must be accounted for according to Procedures for Handling Cash Transactions Related to Undercover Investigative Operation of County and Municipal Drug Enforcement Programs prepared by the comptroller’s office.
Generally, for confidential expenditures the police chief requests that the city recorder write him/her a check from the Drug Fund Account. The chief then deposits the check into a separate bank account over which the chief has control. Next, the chief writes a check to an undercover agent/officer who cashes the check. The police department should limit the funds kept in the checking account to no more than an estimated 45-day supply. Unused funds should be returned to the recorder. The police department will generally keep SOME funds in the account or may keep cash for immediate needs.
WHEREAS, the governing body has published the annual operating budget and budgetary comparisons of the proposed budget with the prior year (actual) and the current year (estimated) in a newspaper of general circulation not less than ten (10) days prior to the meeting where the governing body will consider final passage of the budget.
SECTION 6: No appropriation listed above may be exceeded without an amendment of the budget ordinance as required by the Municipal Budget Law of 1982 T.C.A. Section 6-56-208. In addition, no appropriation may be made in excess of available funds except to provide for an actual emergency threatening the health, property or lives of the inhabitants of the municipality and declared by a two-thirds (2/3) vote of at least a quorum of the governing body in accord with Section 6-56-205 of the Tennessee Code Annotated.
SECTION 7: Money may be transferred from one appropriation to another in the same fund only by appropriate ordinance by the governing body, subject to such limitations and procedures as it may describe as allowed by Section 6-56-209 of the Tennessee Code Annotated. Any resulting transfers shall be reported to the governing body at its next regular meeting and entered into the minutes.
SECTION 8: A detailed financial plan will be attached to this budget and become part of this budget ordinance. In addition, the published operating budget and budgetary comparisons shown by fund with beginning and ending fund balances and the number of full time equivalent employees required by Section 6-56-206, Tennessee Code Annotated will be attached.
SECTION 9: If for any reason a budget ordinance is not adopted prior to the beginning of the next fiscal year, the appropriations in this budget ordinance shall become the appropriations for the next fiscal year until the adoption of the new budget ordinance in accordance with Section 6-56-210, Tennessee Code Annotated provided sufficient revenues are being collected to support the continuing appropriations. Approval of the Director of the Office of State and Local Finance in the Comptroller of the Treasury for a continuation budget will be requested if any indebtedness is outstanding.
SECTION 10: There is hereby levied a property tax of $ ______ per $100 of assessed value on all real and personal property.
SECTION 11: All unencumbered balances of appropriations remaining at the end of the fiscal year shall lapse and revert to the respective fund balances.
SECTION 12: This ordinance shall take effect July 1, 20XY, the public welfare requiring it.
The following are a list of municipal revenues. Click on each for more detailed information.
Description: Ad valorem taxes levied within the municipality based on property appraisals.
Authorization: Article II, Section 28 of the Tennessee Constitution; T.C.A. § 67-1-701 et seq.; T.C.A. § 67-5-101 et seq.; T.C.A. § 67-5-801 et seq.
Requirements or Restrictions: Reference T.C.A.
Residential and farm real property, 25 percent.
Frequency of Payment: Annually, between the first Monday in October and before the following March 1, unless the municipality is authorized to establish other due dates.
Late Pay Penalty: See Interest and Penalties – Property Tax, Account #31300.
Exemptions: All government, religious, charitable, scientific, literary and educational properties are exempt (Article II, Section 28 of the Tennessee Constitution and T.C.A. § 67-5-201 et seq.). Tax relief is offered to certain disabled and elderly home owners (Article II, Section 28 of the Tennessee Constitution and T.C.A. § 67-5-701 et seq.) and cities may provide by ordinance a tax freeze for qualified taxpayers over 65 years of age on their principal place of residence.
Collection: Property taxes are usually paid directly to the municipality. Some counties collect taxes for their municipalities, as in T.C.A. § 67-1-702 and § 67-5-1801(a). Taxes cannot be collected after ten years from April 1 of the year following the year they become delinquent. T.C.A. § 67-5-1806.
Description: Ad valorem taxes levied on personal property used for business purposes within incorporated municipal limits.
Authorization: Article II, Section 28 of the Tennessee Constitution; T.C.A. § 67-1-701 et seq.; T.C.A. § 67-5-101; T.C.A. § 67-5-901.
Other tangible personal property, 5 percent.
Frequency of Payment: Annually, between the first Monday in October and on or before the following March 1, unless the municipality is authorized to establish other due dates.
Late Pay Penalty: Interest of one and one half percent (1.5%) shall be added on March 1,(unless the municipality is authorized to establish other due dates) following the tax due date and on the first day of each succeeding month, except as otherwise provided in regard to municipal taxes under T.C.A. § 67-5-2010.
Exemptions: Inventories of merchandise held by merchants and businesses for sale and exchange by persons taxable under T.C.A. § 67-5-901(a).
Collection: Personal property schedules mailed out no later than February 1st by the assessor; completed and returned by March 1; collection same as real property tax. Taxes cannot be collected after 10 years from April 1 of the year following the year they become delinquent. T.C.A. § 67-5-1806.
Description: Taxes levied by the municipality on those corporations that provide public utilities (i.e., telephone, railroads, gas, airlines, etc.) and that are subject to government regulation.
Authorization: Article II, Section 28 of the Tennessee Constitution; T.C.A. § 67-5-101; T.C.A. § 67-5-801 et seq.; T.C.A. § 67-5-901 et seq.; T.C.A. § 67-5-1301 et seq.
Current Rate: Assessment rate is 55 percent of the appraised value for public utility real property and tangible personal property; T.C.A. § 67-5-1302.
Late Pay Penalty: The same interest and penalties listed in Property Tax, Account #31300, are applicable, but are assessed by the comptroller.
Exemptions: Does not apply to corporations organized under the laws of Tennessee whose principal business is the manufacture of products of the soil of Tennessee and who for the transportation alone of such products furnish their own cars.
Collection: The public utilities tax roll is established and maintained by the state. Complete tax roll and tax bills are mailed to the municipality each year, which in turn re-mails the tax bill to individual taxpayers.
Description: Some people do not pay their property taxes by the due date. This represents property tax payments from previous years that are received by the municipalities.
Authorization: Article II, Section 28 of the Tennessee Constitution; T.C.A. § 67-1-701 et seq.; T.C.A. § 67-1-801 et seq.; T.C.A. § 67-5-801 et seq.; T.C.A. § 67-5-901 et seq.; T.C.A. § 67-5-2001 et seq.
Other tangible personal property – 5 percent.
Collection: There are several options for collecting delinquent property taxes, including publishing a list of delinquent taxpayers in a local newspaper, turning the delinquent list over to a tax attorney, distraint, garnishment and a tax sale. See T.C.A. § 67-5-2001 et seq. for a complete list and procedures.
Description: Revenue received from interest on delinquent property tax payments.
Authorization: T.C.A. § 67-1-701 et seq.; T.C.A. § 67-1-801 et seq.; T.C.A. § 67-5-2010.
Current Rate: Interest of 1.5 percent imposed on March 1 and on the first day of each additional month, except as otherwise provided in reference to municipal taxes.
Exemptions: For cities in any county having a population of not less than 24,600 nor more than 24,700 according to the federal census, upon approval by two-thirds of the governing body, the rate of interest may be reduced to an amount not less than 12 percent per year in the aggregate. In addition, members serving in the armed services in an active hostility outside the U.S. have additional time before interest accrues. T.C.A. § 67-5-2011.
Collection: Interest is collected, along with delinquent property taxes. T.C.A. § 67-5-2001 et seq.
Description: Revenue received as payment in lieu of tax on electric system property and operations that represents the public utility’s fair share of the cost of local government. Payments are based upon the plant value of the electrical system and electric system operations. It applies only to municipalities that own an electrical distribution system and who buy power from TVA.
Authorization: T.C.A. § 7-52-301 et seq. (Municipal Electric System Tax Equivalent Law of 1987).
Requirements or Restrictions: Payments cannot be made to the municipality unless the following expenses are paid or provided for: operating expenses, debt payments, reasonable reserves or contingencies, and cash working capital adequate to cover operating expenses for a reasonable number of weeks. Cities that have private act or home rule charters that differ from these requirements should continue with their formulas for calculations until the tax equivalent payments exceed the tax equivalent amount paid in the fiscal year ending June 30, 1987. At that point the charter provisions are repealed and become subject to the T.C.A. requirements.
Current Rate: In lieu of tax payments are computed under T.C.A. § 7-52-304.
Frequency of Payment: Varies (in accordance with the resolution passed by the governing body – T.C.A. § 7-52-304(4)).
Exemptions: All underground equipment and all substation transmission lines are exempt.
Collection: Payments are transferred from the electric fund in accordance with a resolution passed by the governing body. T.C.A. § 7-52-307.
Use Restrictions: Twenty-two and one-half percent of the total tax equivalent payment is distributed to the county or counties that the system serves. Likewise, other cities that the system serves receive an amount equal to the equalized property tax rate of the other cities’ taxing jurisdictions, multiplied by the net plant value of the electric plant plus the book value of materials and supplies located within the other cities’ boundaries, multiplied by the assessment ratio, minus reductions required by T.C.A. § 7-52-304(3) and (4).
Requirements or Restrictions: Must be authorized by resolution.
Current Rate: Varies by municipality, based on 1) the equalized tax rate, 2) net book value of net fixed assets, and 3) book value of inventory.
Frequency of Payment: Established in the authorizing resolution.
Late Pay Penalty: Not specified.
Collection: Payment is made by water utility to municipality pursuant to authorizing resolution.
Current Rate: Varies by municipality, based on 1) equalized tax rate, 2) net book value of net fixed assets, and 3) book value of inventory.
Frequency of Payment: Established in authorizing resolution.
Collection: Payment is made by sewer utility to municipality pursuant to authorizing resolution.
Description: Revenue received as payment in lieu of tax on the gas system property and operations that represents the public utility’s fair share of the cost of local government. Payments are based on the value of the gas system and gas operations. It applies only to municipalities that own and operate a gas system. A worksheet can be found under MTAS Municipal Resources: In-lieu-of tax calculator on the http://www.mtas.tennessee.edu/finance-and-accounting .
Authorization: T.C.A. § 7-39-401 et seq. (Municipal Gas System Tax Equivalent Law).
Requirements or Restrictions: Payments cannot be made to the municipality unless the following expenses are paid or provided for: operating expenses, debt payments, reasonable reserves, and cash working capital adequate to cover operating expenses for a reasonable number of weeks. A resolution is required that sets forth the tax equivalent provisions.
Current Rate: In lieu of tax payments are computed under T.C.A. § 7-39-404 (1).
Frequency of Late Pay Penalty: None.
Exemptions: Retail sales or use taxes on gas energy at the same rates applicable generally to sales or use of personal property or services are not included in the calculations. T.C.A. § 7-39-404(6).
Collection: Payments are transferred from the gas fund in accordance with resolution passed by the governing body. T.C.A. § 7-39-405.
Description: Property in this category is not subject to ad valorem taxes as the industrial development corporation is declared to be performing a public function on the behalf of the municipality. The corporation has the authority to negotiate and accept from its’ lessees payments in lieu of ad valorem taxes to the municipality, provided that these payments do not exceed ad valorem taxes otherwise due where the leased property is owned by an entity subject to taxation.
Requirements or Restrictions: Cannot permit payment in-lieu-of taxes to be waived or otherwise not assessed for a period of more than 20 years from the date of agreement (plus a reasonable construction or installation period not to exceed three (3) years) or contract unless both the commissioner of economic and community development and the comptroller of the treasury have made a written determination that it is in the best interest of the state to do so. T.C.A. § 7-53-305(b)(1).
Late Pay Penalty: Ten percent per annum interest from the due date plus reasonable attorneys’ fees. Other late penalties apply, but municipalities are not recipients of those penalties.
Exemptions: Minimum payments are not applicable to an eligible headquarters facility. Other exceptions apply to Memphis.
Collection: Corporation lessees submit on or before October 1 an annual report to the state board of equalization. A copy must be sent to the assessor on or before October 15.
Description: Receipts from countywide local option sales tax that is levied within the municipality.
Requirements or Restrictions: Tax can be increased only by ordinance after voters approve by referendum. T.C.A. § 67-6-706. Tax is applicable only to the first $1,600 on the sale or use of any single article of personal property. T.C.A. § 67-6-702. “Single article” applies only to motor vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile homes. After July 1, 2017, the tax levied on the sale, purchase, use, consumption of electricity, piped natural or artificial gasses, or other heating fuels delivered by the seller will be 0.5 percent. Also after July 1, 2019, there will be no local option sales tax exemption for cable or wireless cable television services.
Current Rate: Varies according to county and municipality; maximum rate is 2.75 percent.
Exemptions: Same as statewide sales tax, plus electricity and fuels through June 30, 2019 (see T.C.A. § 67-6-704) and the above listed restrictions. Until June 30, 2019, cable or wireless cable television services are exempted up to $27.50 per month. T.C.A. § 67-6-714.
Collection: State collects (and keeps 1.125 percent for administrative expenses), forwards the remainder to the county, and the county distributes 50 percent for school purposes and 50 percent to the jurisdiction where collected or as contracted between jurisdictions (less a 1% administrative fee retained by the county trustee). Local sales tax revenues that the Department of Revenue cannot identify to a particular situs are distributed 50 percent to municipalities based on population and 50 percent to counties based on population. For out-of-state internet sales collections that are voluntarily remitted (usually dealers with more than $100,000 in annual revenue), taxes that can be attributed to specific SITUS codes are distributed to those local governments. Taxes that are not attributable to specific SITUS codes are distributed baased on a Department of Revenue formula that weights the taxes based on known SITUS-specific collections.
Use Restrictions: None for the 50 percent returned to municipality, unless contracted differently.
Description: State authorized tax on wholesale sales of beer. Wholesale beer deliveries to retail outlets in a city or county are taxed at flat rate of $35.60 per barrel sold. The tax is paid by each beer wholesaler directly to the city or county, and monthly reports on such sales are made to the state Department of Revenue and to each city and county. Of this tax, a wholesaler must remit $.17 to the state for administration and retain $.92 to defray the cost of collecting and remitting the tax. A city should check that tax payments are being received from beer wholesalers serving the area based on deliveries to all retail beer outlets in the city. If there is doubt about administration of the tax, an investigation by the Department of Revenue may be requested.
Current Rate: $35.60 per barrel sold (31 gallons).
Frequency of Payment: Monthly by the 20th.
Late Pay Penalty: City may institute legal action for collection. T.C.A. § 57-6-107(b).
Exemptions: Wholesalers may deduct this amount from their gross receipts tax liability. T.C.A. § 67-4-711 (b)(5). Wholesale sales are tax-free if sold to U.S. armed forces. T.C.A. § 57-6-111.
Collection: Beer wholesalers remit monthly, directly to the municipality on state-prescribed forms.
Description: State authorized tax on wholesale sales of liquor. City must pass an ordinance to impose an inspection fee upon licensed retailers of alcoholic beverages or upon retail food store wine licensees located within such municipality.
Authorization: T.C.A. § 57-3-501 et seq.
Requirements or Restrictions: As delineated in T.C.A.
Current Rate: Depending upon the size of municipality’s county, the municipality levies by ordinance a 5 percent or 8 percent inspection fee that is collected by the wholesalers from the retailer during distribution. The wholesalers then retain 5 percent of the fee for performing the collection. The fee cannot exceed 8 percent of the wholesale price of alcoholic beverages sold in municipalities located in counties having a population of less than 60,000; and cannot exceed 5 percent for municipalities located in counties having a population more than 60,000.
Late Pay Penalty: A penalty of 10 percent is assessed after the 20th of each month. T.C.A. § 57-3-503(b).
Collection: The inspection fee is collected by the wholesaler from the retailer and remitted by wholesalers to the municipality monthly on municipal-prescribed form.
Description: Tax on the sale of alcoholic beverages for consumption on the premises.
Current Rate: Fifteen percent of the sales price of all alcoholic beverages sold for consumption on the premises.
Exemptions: Not applicable to charitable, nonprofit, or political organizations selling alcohol under a special occasion license. T.C.A. § 57-4-301(e). Also exempted from this tax are commercial airlines (but not airline travel clubs), paddlewheel steamboat companies, and passenger trains. T.C.A. § 57-4-301(d).
Collection: State retains the first 50 percent for its general fund and it is earmarked for education; the remaining 50 percent is distributed to the municipality, if collected in an incorporated municipality, or to the county if collected in an unincorporated area. Recent legislation found at T.C.A. § 57-4-306 (b) provides detailed instructions on further distribution and should be reviewed carefully. Determining factors include whether or not municipalities have their own school system (LEA) or special school district (SSA). Also included are interim requirements through June 30, 2019, as well as compliance, notice and exemption provisions.
Use Restrictions: For premier tourist resorts, the municipality’s percentage must be spent on schools in the municipality. T.C.A. § 57-4-306 (d).
Description: The business tax is levied in addition to all other privilege taxes and is intended by the legislature to be in-lieu-of any other ad valorem tax on “inventories of merchandise held for sale or exchange.” T.C.A. § 67-4-701 (b).
Requirements or Restrictions: Businesses are required to file tax returns with the state on state subscribed forms.
Transient vendors must pay a minimum tax of $50 for each 14-day period of business in a municipality, but they are not subject to the percent of the gross receipts portion of the tax. T.C.A. § 67-4-710 (a)(2).
Frequency of Payment: Monthly. Due dates for different business classifications are listed under T.C.A. § 67-4-715.
Exemptions: Exemptions are listed under T.C.A. § 67-4-712. Businesses may deduct certain items from their gross receipts liability (listed under T.C.A. § 67-4-711). Certain credits are also allowed as listed in T.C.A. § 67-4-713.
Collection: State forwards municipality’s share monthly.
Description: A tax levied at the same rate for tangible personal property on the sales price of each sale at retail of dues or fees for membership to recreational clubs, admission ticket sales, entrance fees, and charges made for the privilege of using tangible personal property for amusement, sports, entertainment or recreational activities.
Requirements or Restrictions: Free or complimentary tickets or admissions are to be computed at equivalent values and included as sales, unless they are provided to people attending a public school, college, or university.
Current Rate: Municipalities receive 99 percent of 4.603 percent of six percent of the statewide seven percent sales tax. This allocation is different for premiere type tourist resorts and Tennessee River resort districts. All increased revenues from the 2002 state sales tax rate increase from six percent to seven percent go to the state general fund (Public Acts, 2002 Chapter 856, Section 4).
Exemptions: There are several other exemptions listed in T.C.A. § 67-6-330 that include admissions to K-12 school activities, fairs, dues to 501(c) organizations, and admissions to various nonprofit organizations’ events.
Collection: The state collects the tax and distributes to municipalities.
Description: Municipalities can impose a franchise fee and other conditions upon the operation of a gas company within their corporate limits.
Requirements or Restrictions: The franchise agreement is subject to the approval of the Tennessee Regulatory Authority. T.C.A. § 65-4-107. The franchise agreement is passed by municipal ordinance.
Current Rate: Varies; there is no maximum franchise fee.
Description: Occupancy tax on hotel or motel room rentals, imposed by private act. Rates vary from 1.25 percent to 5 percent.
Requirements or Restrictions: Tax must be approved by ordinance by two-thirds vote of the governing body at two consecutive regularly scheduled meetings; or be approved by referendum, and tax cannot exceed five percent. T.C.A. § 67-4-1402. City cannot assess the tax if the county has already levied an occupancy tax. T.C.A. § 67-4-1425 (a)(2). Additional limitations are found in T.C.A. § 67-4-1425.
Current Rate: Cannot exceed 5 percent. Hotel operator is allowed to retain 2 percent of the amount of the tax due for collecting the tax. T.C.A. § 67-4-1405 (b).
Late Pay Penalty: Interest is charged at 12 percent per annum plus a penalty of 1 percent for each month taxes are delinquent. T.C.A. § 67-4-1408.
Collection: Monthly. The municipality has the authority to collect delinquent taxes by any means available by law including issuing distress warrants and the seizure of assets. T.C.A. § 67-4-1408(d).
Use Restrictions: None unless the governing body specifies such in the authorizing ordinance. T.C.A. § 67-4-1403.
Description: Municipalities have the power to design and execute construction and improvement or reconstruction and re-improvement of any street, avenue, alley, highway or public place including improvements or alterations for flood control, water management, soil erosion, and disaster relief and assess not less than two-thirds of the cost or expense of the work against the property abutting or adjacent to the street, avenue, alley, or any other public place that is improved. If 75 percent of the property owners whose lots about the proposed improvement petition for the work to be done, 100 percent of the cost of the project can be assessed to the property owners. T.C.A. § 7-32-118.
Authorization: T.C.A. § 7-32-101 et seq.
Requirements or Restrictions: The municipality needs to adopt an ordinance and hold a public hearing prior to making the improvements. The ordinance should describe in detail the nature of the intended work. After apportionments are made, the municipality must hold another hearing on objections to the assessments. T.C.A. § 7-32-121. Appeals to the assessment may be made to the circuit court. T.C.A. § 7-32-126. If any objections to an assessment to pay costs are made, the confirmation of the assessment shall require the unanimous approval of the members of the governing body present at the meeting at which the objection is considered. T.C.A. § 7-32-123.
Current Rate: Depends upon the cost of the project and the number and sizes of properties involved.
Frequency of Payment: Payments are due 30 days after the assessment is made final. At the request of the property owner, the assessment may be paid in five annual installments, and shall bear interest at the rate of 6 percent per annum, interest payable semiannually. T.C.A. § 7-32-133. An assessment levied in connection with a public facility may be paid back over thirty years. T.C.A. § 7-32-133.
Late Pay Penalty: If any property owner makes default in the payment schedule, all of the installments with interest and an additional sum equal to one-half the annual interest, shall become immediately due and payable T.C.A. § 7-32-137. After 60 days delinquency, the city recorder turns the collection over to the city attorney who may then attach a lien on the property. T.C.A. § 7-32-138.
Exemptions: The total assessment made against any lot or parcel of land shall not exceed one-half of the cash value (fair sale price of the lot and improvements on the lot if sold at a voluntary sale) of the lot and improvements. T.C.A. § 7-32-116.
Collection: Collected by the municipal tax collector following the assessment. The assessment is a lien on the property. T.C.A. § 7-32-131.
Description: Municipalities may require by ordinance an automobile regulatory fee or inspection fee for all vehicles owned or operated by residents who live within its corporate boundaries.
Authorization: T.C.A. § 6-55-501 et seq.; T.C.A. § 7-51-701 et seq.
Requirements or Restrictions: Non-residents cannot be required to pay such fees (T.C.A § 6-55-502(c) and T.C.A. § 7-51-702).
Frequency of Payment: Usually annually.
Collection: Varies. The municipality may enter into an agreement with the county authorizing the county clerk to collect the motor vehicle regulatory fee at the same time the clerk sells a state license.
Use Restrictions: Some municipalities dedicate revenue to streets and highways, but this is not required by T.C.A.
Description: Under the Tennessee Passenger Transportation Services Act, municipalities have the authority to license, control and regulate by ordinance or resolution passenger-for-hire vehicles providing transportation services within its jurisdiction. Municipalities in counties with populations greater than 500,000 also have the authority to regulate entry into the business of providing passenger transportation services.
Any other regulation that ensures safe and reliable passenger transportation service.
Frequency of Payment: Not specified by T.C.A.
Late Pay Penalty: Not specified by T.C.A.
Exemptions: Does not apply to cities in counties with a population of between 287,700 and 287,800 (T.C.A. § 7-51-1006) and does not supercede authority of the department of safety (T.C.A. § 7-51-1005).
Collection: Not specified by T.C.A.
Description: Revenue received from beer permits sold to individuals who sell beer at retail establishments.
Requirements or Restrictions: Business must operate within and comply with municipal and/or county ordinances.
Frequency of Payment: $250 fee is imposed upon application and the annual renewal fee of $100 is due on January 1.
Late Pay Penalty: Permit may be revoked for nonpayment. If a permit holder does not pay the tax by January 31 or within 30 days after written notice of the tax was mailed, whichever is later, then the city shall notify the permit holder by certified mail that the tax payment is past due. If a permit holder does not pay the tax within 10 days after receiving notice of its delinquency by certified mail, then the city may suspend or revoke the permit or impose a civil penalty pursuant to T.C.A. § 57-5-108. T.C.A. § 57-5-104 (b)(3).
Collection: By the municipality from applicants and permit holders.
Description: This is a privilege tax on those who engage in the business of selling retail alcoholic beverages for consumption on the premises. The tax varies by the type of establishment that sells the liquor by the drink.
Authorization: T.C.A. § 57-4-301 et seq.
Requirements or Restrictions: These same privilege taxes are paid twice by the businesses; once to the county and once to the municipality. Privilege tax increases imposed after fiscal year 2004 do not go to cities, but rather to the Alcoholic Beverage Commissioner to administer the law.
Exemptions: No tax authorized or imposed by this section shall be levied or assessed from any charitable, nonprofit or political organization selling alcoholic beverages at retail pursuant to a special occasion license. T.C.A. § 57-4-301 (e).
Collection: The state notifies the municipality when renewal is due, then the municipality sends a letter to the establishment, which sends the revenue to the municipality.
Description: Revenue received from the sale of building permits and builder and contractor licenses. Municipalities are authorized and empowered to enact laws or ordinances to safeguard and protect the home owner or prospective home owner, commercial property owner or assembly building property owner by requiring the licensing of the residential, commercial or assembly builders and residential, commercial and assembly maintenance and alteration contractors.
Authorization: T.C.A. § 6-54-501 et seq.; T.C.A. § 7-62-101 et seq.; T.C.A. § 7-62-201 et seq.
Requirements or Restrictions: City cannot issue more than 10 active building permits at one time to an unlicensed contractor. T.C.A. § 7-62-202 (b). Unlicensed contractors are required to post a cash bond with the city for a period of at least two years. T.C.A. § 7-62-203.
Frequency of Payment: Upon issuance of permit.
Description: Revenue received from permits for electrical work.
Authorization: T.C.A. § 6-54-104; T.C.A. § 6-54-501 et seq.
Requirements or Restrictions: Permits issued only to contractors or appliance electricians licensed according to municipal ordinance or to a homeowner doing personal work within his/her residence.
Description: Revenue received from permits for plumbing work.
Authorization: T.C.A. § 6-54-501 et seq.; T.C.A. § 62-6-401 et seq.
Requirements or Restrictions: Permits issued only to licensed plumbing contractors or to a homeowner doing personal work in his or her residence.
Description: Fees for zoning permits and, in some municipalities, subdivision plats and other plans.
Authorization: Various general law charters T.C.A. § 6-2-201; T.C.A. § 6-19-101 and 102; T.C.A. § 6-33-101; T.C.A. § 13-7-201 et seq.
Requirements or Restrictions: Changes to the zoning ordinance must be made by an amending ordinance and include a public hearing.
Authorization: T.C.A. § 6-54-124 and 42 USC 5301 et seq.
Requirements or Restrictions: T.C.A. § 6-54-124 requires municipalities that receive community development block grants and municipalities or industrial development corporations that are a party to an in-lieu-of property tax agreement to make a report addressing the expenditures of such funds. In addition, the municipality must place a copy of such report in the main branch of the municipality’s public library or place the report on the Internet.
Description: Payments in lieu of taxes from local housing authority, based on gross rent receipts. Housing authorities “shall agree” to pay in-lieu-of taxes or special assessments not to exceed the cost of services, improvements, or facilities provided. A similar requirement provides that nonprofit housing corporations providing low-cost housing for elderly or handicapped people must agree to make in-lieu-of-tax payments for any project exceeding 12 units occupied after January 1, 1990. Bonds and notes of a housing authority are issued for a public purpose and together with the interest shall be exempt from taxation.
Requirements or Restrictions: Subject to federal housing law and regulations. There also are several qualifications for nonprofit housing corporations that must be met to be eligible for the payment in-lieu-of taxes listed under T.C.A. § 67-5-207.
Description: The Retailers’ Sales Tax is applied to the sale, use, consumption, distribution, lease, or rental of tangible personal property and selected services, of which cities receive a population-based share of a portion of the total statewide collections. Additional money is available to cities that have sports authorities that have secured professional major league baseball, football, basketball or hockey franchises. Premier type tourist resorts that meet specified requirements (i.e., golf courses, ski slopes, theme parks, etc.) are entitled to additional distributions per T.C.A. § 67-6-103 (a)(3)(B).
Authorization: T.C.A. § 67-6-101 et seq.
Requirements or Restrictions: Municipalities may conduct only four special censuses after the decennial census to increase their population-based share. T.C.A. § 67-6-103(a)(3)(C) and (D). Special options exist for “premiere type tourist resort” cities, cities that have a major league sports team, and others as noted in T.C.A.
Current Rate: 99 percent of 4.6030 percent of 6 percent of the statewide 7 percent sales tax (which equates to 4.55697%). The 1 percent (which equates to 0.04603%) is retained by the state and sent to the University of Tennessee to partially fund the Municipal Technical Advisory Service (MTAS). For example, if the state collected $1 million in sales tax, MTAS would receive $418.46, and cities would split $45,569.70 based on population.
Exemptions: Revenues from fuel sales used for aviation, railways or water carriers are placed in the transportation equity fund.
Collection: Revenue is distributed monthly by the state.
Description: State taxes levied on the earnings of stock dividends and interest on bonds earned by individuals, partnerships, associations, trusts and corporations. The municipality’s share depends upon the residence of taxpayers; i.e., if he/she resides within the corporate limits of the municipality.
Authorization: T.C.A. § 67-2-101 et seq.
Frequency of Payment: Annually on or on or before the fifteenth day of the fourth month commencing after the end of the taxpayer's tax year. Armed forces personnel have 180 days in which to file in certain circumstances.
Exemptions: Exemptions are listed in T.C.A. § 67-2-104. The most common exemptions include the first $1,250 of an individual’s return and the first $2,500 of income for a joint return; people 65 or older whose income is not more than $37,000 ($68,000/couple); blind people; pension trusts; profit-sharing trusts; and all income derived from government bonds and securities.
Collection: State forwards municipalities’ share annually.
Description: State tax on the manufacture, sale, and transportation of beer, of which the municipalities receive a share of 10.05 percent of the total taxes, distributed based on population.
Authorization: T.C.A. § 57-5-201 et seq.
Late Pay Penalty: 10 percent interest and penalty is collected by the state. T.C.A. § 57-5-204.
Exemptions: Beer and ale sold for consumption at U.S. military installations.
Collection: State forwards municipality’s share semi-annually.
Description: Any seized intoxicating liquors or vehicles associated with the production or transport of illegal intoxicating liquors are turned over to the Alcoholic Beverage Commission for public sale as contraband by the Commissioner of General Services. A portion of the revenue from sales of these contraband items goes to the municipality where the officer who made the seizure works.
Current Rate: Ninety percent of proceeds from the sale of seized liquor and 50 percent of proceeds from the sale of seized vehicles, aircraft and boats.
Frequency of Payment: Periodic. Depends on the frequency of seizures by cities and sales by the state.
Collection: The Commissioner of General Services collects the money at the time of the sale then forwards it to municipalities.
Description: Local share of state gasoline and other motor fuel taxes comprising the Gasoline Tax, the Diesel Tax, the Liquified Gas Tax on vehicles, the Compressed Natural Gas Tax, and the Prepaid User Diesel Tax. Distribution to municipalities is based upon population.
Authorization: T.C.A. § 67-3-201; T.C.A. § 67-3-202; T.C.A. § 67-3-901; T.C.A. § 67-3-905; T.C.A. § 67-3-908; T.C.A. § 67-3-1102; T.C.A. § 67-3-1113; T.C.A. § 67-3-1309.
Requirements or Restrictions: Special census counts are limited to four in addition to the decennial census.
Diesel Tax – The IMPROVE Act increases the tax to 21 cents in fiscal year 2017-18; an additional 3 cents in 2018-19,and an additional 3 cents in fiscal year 2019-20. Beginning with fiscal year 2020-21 the tax will be 27 cents. Of the original 17 cents tax per gallon, municipalities receive 12.38 percent of 12 cents.
Liquified Gas – Of the 14 cents tax per gallon, municipalities receive 14.14 percent of the first 11 cents and 99 percent of 33.33 percent of an additional one-cent increase in 1986.
Liquified Gas Tax on Vehicles – Municipalities receive 14.14 percent of a flat rate that varies depending on the classification of the vehicle (by gross vehicle weight). The rate varies from $70 to $114.
Compressed Natural Gas – Of the 13 cents tax per gallon, municipalities receive 12.38 percent.
Prepaid User Diesel Tax – Municipalities receive 12.38 percent of a flat rate ($56 – $159) for farmers whose use of diesel fuel is mostly for agricultural purposes yet who own diesel powered passenger cars or trucks.
Exemptions: As noted in T.C.A.
Use Restrictions: Outlined in T.C.A. § 54-4-204. Funds can be spent on street improvements; principal and interest payments for street improvement project loans; the costs of acquiring rights-of-way for approaches to bridges and tunnels; the city’s share of grade eliminations; one-third of the total costs of rights-of-way for state or federal highways; paying another municipality, county or TDOT for doing road improvements; and up to 22.22 percent can be spent on funding mass transit.
Description: This represents what is referred to as the Special Privilege Tax or the Petroleum Special Products Tax/Gas Inspection Fee and the Export Tax. The Special Privilege Tax establishes a local government fund created by a tax of one cent per gallon on all petroleum products. The export tax is a tax of 1/20th of one cent per gallon of petroleum product that is stored in Tennessee or stored in Tennessee and then exported. If the special privilege tax has already been paid, then 19/20th of the Special Privilege Tax can be credited on the Export Tax return. The local share is distributed to municipalities based on population.
Requirements or Restrictions: As noted in T.C.A.
Current Rate: The state distributes $619,833 per month to cities on a population basis. Before the money is distributed to cities, the state retains $10,000 per month and allocates it to The University of Tennessee Center for Government Training.
Exemptions: As noted in T.C.A. § 67-3-401 et seq. Some of the exemptions include government agencies, products used for agricultural purposes, exported products, kerosene, and aviation fuels.
Use Restrictions: Although this money is general fund revenue, it is limited in the same manner as the state gasoline and motor fuel tax (to fund city street projects).
Description: TVA pays five percent of gross power sales proceeds to the state in lieu of taxes. 48.5 percent of the increase in TVA payments made to the State of Tennessee above the amount received in the base year (1977-1978) is distributed to county and municipal governments.
Requirements or Restrictions: Before making the 30 percent of the 48.5 percent distribution to cities and counties, the state deducts $4,462 monthly and appropriates it to the Tennessee Advisory Commission on Intergovernmental Relations (TACIR).
Current Rate: Thirty percent of 48.5 percent (minus $4,462) collected above the base rate set in 1978 to cities based upon population.
Collection: State remits municipality’s share quarterly.
Description: Three percent of the increase in gross power sales paid by TVA as payments in-lieu-of property taxes since June 30, 1978, is paid to municipalities where TVA is performing construction activity on facilities to produce electric power.
Requirements or Restrictions: TVA designates the construction activity areas. Payments are made during the time of construction and for one year after the construction activity is completed. For the next three fiscal years, payments are made in decreasing amounts based on the last year of the entitlement. The first year yields 75 percent of the payment based on the last year of the entitlement, the second year yields 50 percent, and the third year yields 25 percent. T.C.A. § 67-9-102 (b)(2).
This impact allocation for one county and its cities cannot exceed 10 percent of funds received under the normal distribution of the TVA gross receipts tax. T.C.A. § 67-9-102 (b)(1).
Current Rate: Three percent of the increase in gross receipts taxes from the fiscal year ended June 30, 1978 is distributed to TVA-impacted cities and counties.
Exemptions: If in any fiscal year funds remain or there are no areas impacted by TVA construction activity, then no more than 30 percent of the impact funds are allocated to The University of Tennessee for the County Technical Assistance Service (CTAS). If there are still funds remaining, then no more than 20 percent of the impact funds are allocated to TACIR in two separate 20 percent increments. If there are still funds remaining, then they go to regional development authorities that have acquired a former nuclear site from TVA. Any money remaining after these allocations follows the normal distribution of TVA gross receipts tax.
Description: The state corporate excise tax collected from banks is shared with municipalities and counties.
Local tax rates determine the payment allocation between the county and the city, so a city must levy a property tax to receive any funds. Another formula is prescribed for allocating such revenue if a bank has branches in more than one city and/or in more than one county. T.C.A. § 67-4-2017 (a)(1)(B).
Current Rate: The tax is 3 percent of net earnings (excluding interest from state bonds), less 7 percent of ad valorem taxes, divided between counties and municipalities based on property tax rates.
Frequency of Payment: Annually in the third quarter.
Collection: State forwards revenue to municipalities in third quarter of each year.
Is the City of Millington authorized to make a commitment to appropriate funds to a nonprofit organization for 15 years without a public referendum?
The City of Millington is not authorized, either under its charter or [under] any provision of general law, to make a binding commitment to appropriate funds to a nonprofit organization for 15 years.
This opinion concerns the authority of the City of Millington to make a commitment to appropriate funds to a nonprofit organization for 15 years. Our opinion is confined to this question and does not address any other legal issues that the proposed transaction might present.
Our opinion is based on the following facts as presented in the opinion request: The YMCA is planning to build a new center in the City of Millington. It has been proposed that the City of Millington would donate 10 acres of land, presumably owned by the city, to the YMCA for the project. The city would “pledge” $150,000 to the YMCA each year for the next 15 years, beginning in 1999, for the construction of the Millington YMCA. The city would sign a “letter of commitment” addressed to the YMCA stating that the city is committed to the YMCA and desires that construction begin as soon as financing can be finalized. The city would waive all costs associated with fees and permits generally required by the City of Millington for the construction project. The board of directors of the YMCA would sign an agreement stating that, in the event the Millington YMCA decides to close in the future, the building and property will revert to the City of Millington. The lender providing the funds for construction would accept these conditions.
The request does not specify the form of the city’s commitment to appropriate funds or the purpose the commitment is intended to serve. Based on the request, it appears that the city’s “pledge” to appropriate funds is intended to provide some incentive for the YMCA to obtain a loan to finance construction of the new facility. We therefore address whether the city may enter into a commitment to appropriate funds for this purpose, either from current or from future city revenues, that could be enforced by a proposed recipient or a third party such as a lender. Generally, municipalities may exercise those express or necessarily implied powers delegated to them by the legislature in their charters or under statutes. City of Lebanon vs. Baird, 756 S.W.2d 236, 241 (Tenn. 1988); Professional Home Health & Hospice, Inc. vs. Jackson-Madison County General Hospital District, 759 S.W.2d 416, 419 (Tenn.Ct.App. 1988), p.t.a. denied (1988), reh’g denied (1988); City of Chattanooga vs. Tennessee Electric Power Co., 172 Tenn. 524, 533, 112 S.W.2d 385, 388 (1938) (a municipal corporation may exercise only such powers “as are expressly granted in its charter or arise by necessary implication in order to carry out the declared objects and governmental purposes for which the corporation was created”). Neither the Millington City Charter, nor any general law, expressly authorizes such a commitment.
Under T.C.A. § 12-2-301 et seq., a city may lease property to or from a not-for-profit corporation. Based on the facts included in the request, however, the proposed transaction does not appear to fall within this statutory scheme. Cities are generally authorized to appropriate city funds for the financial aid of civic and charitable organizations under the limitations set forth in T.C.A. § 6-54-111. Depending on the facts and circumstances, the beneficiary of an appropriation made in compliance with this statute may have the right to enforce its disbursement in accordance with its terms. But that statute does not authorize a city to make a binding commitment or pledge to appropriate funds either from current or from future revenues, nor is such a transaction “necessarily implied” by any of the powers granted in the Millington City Charter or general law.
Therefore the City of Millington is not authorized, either under its charter or any provision of general law, to make a binding commitment to appropriate funds to a non-profit organization for fifteen years.
Can municipally owned electrical systems and electric cooperatives legally put money into economic and community organizations?
It is the opinion of this office that municipally owned electrical systems may be barred, and electric cooperatives are barred, by the statutes which govern their operations from using their revenues to fund economic and community organizations; further, each may be barred from such use of revenues by documents executed in connection with the issuance of any bonds to finance or refinance the system notwithstanding the lack of any specific bar to such action in the governing statutory scheme.
Both municipally owned electrical systems and electric cooperatives are creatures of statutes and it is to those statutes to which we must look, at least in part, for the answer to the question posed. Moreover, for purposes of this opinion, we assume that the phrase “economic and community organizations” means those organizations which are customarily thought of as tax-exempt or charitable organizations and that any appropriation by a municipality would be made in accordance with T.C.A. § 6-54-111, which provides guidelines for a municipality’s appropriating money for the financial aid of any nonprofit charitable organization or any nonprofit civic organization. In addition, we assume that the question posed is concerned with the use of surplus system revenues from operations and not with the use of bond proceeds.
The Tennessee judiciary has held that, in the absence of statutory prohibition, a municipality may divert its profits from the sale of a public works commodity to other municipal purposes. Killion vs. City of Paris, 192 Tenn. 466, 241 S.W.2d 524 (1951). In Killion, the city of Paris issued its general obligation debt to construct and acquire a water works system. Subsequently, the city passed an ordinance providing that a portion of the water works fees would be applied to retire debt service on all of the city’s bonded indebtedness. Water customer Killion sued to have the ordinance stricken.
The court noted that if the water works system were acquired under the authority of T.C.A. § 7-35-401 et seq., then surplus revenues would have to be applied exclusively to the improvements, extensions or additions to the water works system pursuant to T.C.A. § 7-35-417, 418. However, plaintiff in Killion did not allege application of the above cited statutes. Consequently, the Court held these statutes to be wholly inapplicable, and in the absence of any statutory prohibition, “a municipality may divert its profits from the sale of water to its customers to municipal purposes other than those of the water works enterprise.” 192 Tenn. at 453.
Also, we have opined previously that a municipality owning a gas system could apply surplus revenues from that system to other municipal purposes where the gas system was financed pursuant to the Municipal Recovery and Post War Aid Act of 1945, T.C.A. § 7-36-101 et seq. (repealed effective July 1, 1988, but not as to bonds issued before that date, 1988 Tenn. Public Acts Ch. 750, Sections 22 and 71). Op. Tenn. Atty. Gen. No. 87-03 (January 9, 1987); Op. Tenn. Atty. Gen. No. U87-47 (April 24, 1987).
In examining the statutory scheme governing the organization and operation of municipally owned electrical systems, we find that a municipally owned electrical system may be governed by one of a number of statutes. Some of these statutory schemes have been repealed and no longer govern municipally owned electrical systems, except in those cases where bonds were issued prior to the repeal of the statutes to finance or refinance the system.
Under current law, a municipality may organize a municipally owned electrical system pursuant to the Municipal Electric Plant Law of 1935, T.C.A. § 7-52-101 et seq., and issue its debt for the acquisition and improvement of the system pursuant to the Local Government Public Obligations Act of 1986, T.C.A. § 9-21-101 et seq. (“LGPOA”). Neither the Municipal Electric Plant Law of 1935 nor the LGPOA contains prohibitions against the municipality’s applying revenues from the municipally owned electrical system to economic and community organizations. Therefore, absent restrictive covenants in any bond documents executed in connection with financing or refinancing of the electrical system, the decision in Killion should permit a municipally to apply revenues from a municipally owned electrical system to economic and community organizations.
In addition, a municipality can organize and finance its municipally owned electrical system pursuant to the Revenue Bond Law, T.C.A. § 7-34-101 et seq. The Revenue Bond Law restricts the municipality in its use of surplus system revenues to fund economic and community organizations and provides that all surplus revenues can be used only to reduce rates. T.C.A. § 7-34-103(b) and § 7-34-115.
Under law prior to July 1, 1988, a municipality could both organize and finance a municipally owned electrical system under the Municipal Electric Plant Law of 1935. The portions of that law dealing with financing municipally owned electrical systems have now been repealed pursuant to 1988 Tenn. Pub. Acts, Ch. 750. However, prior to that repeal, T.C.A. § 7-52-130 (now repealed) states that the supervisory body of the municipally owned electric plant shall devote all moneys in the electric plant fund derived from any source other than the issuance of bonds to or for certain listed items of expenditure (not including funding economic and community organizations) and that any surplus thereafter remaining, after the establishment of proper reserves, if any, shall be devoted solely to the reduction of rates (the use of bond proceeds is governed by T.C.A. § 7-52-129 (now repealed), which also precludes the use of bond proceeds to fund economic and community organizations).
Tenn. Pub. Acts, Ch. 750, Section 71, states that nothing in the act affects the validity or enforceability of any bond, note or other obligation legally issued by a local government under any law existing prior to the effective date of the act. If bonds were issued pursuant to the Municipal Electric Plant Law of 1935 prior to its repeal, we interpret the repealing act to mean that the restrictions on the use of system revenues or bond proceeds could survive the repeal until the bonds were retired. If those restrictions affected the “enforceability” of the payment of the bonds, then we think they would survive the repeal. For example, if the system revenues were pledged for payment of the bonds, then we think the restrictions would survive since diversion of these revenues could affect the enforceability of the bonds by affecting the money available for payment of the bonds. However, we caution that each bond financing is unique and we cannot opine as to any one financing without reviewing it. If no such bonds are outstanding, then the use of system revenues would be governed by the Municipal Electric Plant Law of 1935 as now in effect (which as earlier noted does not contain restrictions precluding the use of system revenues to fund economic and community organizations).
In contrast to the multiple statutes which could govern a municipally owned electrical system, electric cooperatives are organized pursuant to and their operations governed by the Rural Electric and Community Cooperative Law, T.C.A. § 65-25-201 et seq. Revenues in excess of those necessary to pay certain listed items of expenditure are required by T.C.A. § 65-25-212 to be distributed by the cooperative to its patrons in the form of refunds or general reduction of rates. The permitted uses of revenues listed in the statute do not include payments to economic or community organizations and, therefore, such excess moneys must be distributed to the patrons in the form of refunds or general reduction of the rates. Although the statute permits a cooperative, prior to reducing rates or making refunds to patrons, to provide a “fund for education in cooperation and for the dissemination of information concerning the effective use and conservation of electric power and energy and concerning any other services made available by the cooperative,” we do not think that this provision would permit a payment to the organizations with which we are concerned. Thus, we conclude that an electric cooperative organized pursuant to this law cannot use its revenues to make payments to economic and community organizations.
In conclusion, for both municipally owned electrical systems and electric cooperatives, restrictions on funding economic and community organizations with surplus system revenues may be imposed by the statutes which govern their organization, financing and operation. Restrictions on such use of surplus system revenues may also be imposed by documents executed in connection with bonds issued to finance or refinance the construction of the electrical system. We cannot emphasize enough the importance of examining carefully those statutes and documents.
Whether T.C.A. § 6-54-111(c) may be satisfied by submission of an annual report in lieu of an audit.
It is the opinion of this Office that T.C.A. § 6-54-111(c) requires a nonprofit organization receiving financial assistance from a municipality to file an annual report of its business affairs, including a copy of its annual audit, with the city clerk. Thus, the statute cannot be satisfied by filing an annual report which does not include an annual audit. However, the statute does not require that such audit be prepared by an independent certified public accountant or an independent public licensed accountant. The type of audit that will satisfy the requirement may vary, depending on the size of the non-profit corporation and the complexity of its finances. The financial officers of the municipality, or other appropriate officials, might be consulted in this regard. Guidelines established by the municipal legislative body could also clarify the requirement.
Any nonprofit organization which desires financial assistance from a municipality shall file with the city clerk a copy of an annual report of its business affairs and transactions which includes, but is not limited to, a copy of an annual audit, its program which serves the residents of the municipality and their proposed use of the municipal assistance. Such report will be open for public inspection during regular business hours of the city clerk’s office.
T.C.A. § 6-54-111(c) (1985) (emphasis added).
Thus, the statute, by its terms, clearly requires such a non-profit corporation to file an annual report which includes a copy of its annual audit. A report which does not contain such an audit would clearly not satisfy this requirement. The statute contains no further definition of “annual audit.” Pursuant to T.C.A. § 6-54-111(b), each legislative body of a municipality appropriating funds under this statute must devise guidelines directing for what purpose such funds may be spent. Reference should be made to applicable municipal guidelines to determine whether they contain any more detailed description of the required documentation.
In addition, the comptroller is authorized to devise standard procedures to assist a municipality in the disposition of such funds. T.C.A. § 6-54-111 (b) (1985). The comptroller has promulgated regulations describing standard procedures for appropriating and disbursing municipal funds to non-profit charitable organizations, which appear at Tennessee Rules and Regs Ch. 0380-3-7 et seq. These regulations, however, contain no more detailed description of an “annual audit” to be filed under the statute.
The Tennessee Supreme Court has defined an “audit” as “... the methodical examination of records with intent to verify their accuracy.” National Health Corporation vs. Snodgrass, 555 S.W.2d 403, 405 (Tenn.1977). Black’s Law Dictionary defines “audit,” in part, as a “[s]ystematic inspection of accounting records involving analysis, tests, and confirmations.” Black’s Law Dictionary, 120 (5th Ed.1979). An audit may be independent or internal, depending on whether it is conducted by an outside firm, or by inside personnel. Id.
The statute nowhere specifies the appropriate auditor to conduct the audit, or the level of formality of the report to be submitted. The statute contains no requirement that such audit be prepared or certified by a certified public accountant or a licensed public accountant. Whether any particular report would contain sufficient financial information and be prepared with sufficient formality to satisfy the requirement of T.C.A. § 6-54-111(c) would appear to depend upon a variety of facts and circumstances surrounding the organization and the appropriation of municipal funds. Municipal guidelines could address this issue. In the absence of such guidelines, it is suggested that the municipality consult with its own financial officers or independent financial consultants for further guidance.
Does a nonprofit day care center or similar child care facility, which does not operate all 12 months of the year, meet T.C.A. § 6-54-11(a)(2)(A)’s requirement that a nonprofit charitable organization provide “year-round services” in order to qualify for appropriated funds from a municipality?
No. A nonprofit charitable organization, including a day care center or similar child care facility, must operate during the entire year in order to meet the “year-round” services requirement of T.C.A. § 6-54-111(a)(2)(A).
(a)(1) The legislative body of each municipality may appropriate funds for the financial aid of any nonprofit charitable organization or any nonprofit civic organization in accordance with the guidelines required by subsection (b).
(2)(A) For the purposes of this section, a nonprofit charitable organization is one in which no part of the net earnings inures or may lawfully inure to the benefit of any private shareholder or individual and which provides year-round services benefiting the general welfare of the residents of the municipalities.
T.C.A. § 6-54-111(a) (emphasis added).
“The rule of statutory construction to which all others yield is that the intention of the legislature must prevail.” City of Caryville vs. Campbell County, 660 S.W.2d 510, 512 (Tenn. App. 1983), perm. app. denied (1983). Legislative intent is “derived from a reading of the statute in its entirety and within its statutory context.” Crown Enterprises, Inc. vs. Woods, 557 S.W.2d 491, 493 (Tenn.1977).
Whenever possible, legislative intent and purpose are “ascertained primarily from the natural and ordinary meaning of the language used, when read in the context of the entire statute, without any forced or subtle construction to limit or extend the impact of the language.” Worrall vs. Kroger Co., 545 S.W.2d 736, 738 (Tenn. 1977). City of Caryville vs. Campbell County, 660 S.W.2d 510, 512 (Tenn. App.), perm. app. denied (1983). If legislative intent is without contradiction or ambiguity, “there is no room for interpretation or construction, and the judges are not at liberty, on consideration of policy or hardship, to depart from the words of the statute; ... they have no right to make exceptions or insert qualifications, however abstract justice or the justice of a particular case may require it.” Carson Creek Vacation Resorts, Inc. vs. Woods, 865 S.W.2d 1, 2 (Tenn. 1993) (citations omitted). The ordinary and common meaning of a word may be established by its definition in a recognized dictionary. Edelman vs. State, 62 Wis.2d 613, 620, 215 N.W.2d 386 (1974).
The term “year-round” is not defined in T.C.A. § 6-54-111. The term is not used or defined in the regulations promulgated by the Comptroller of the Treasury pursuant to T.C.A. § 6-54-111(b). (Tenn. Admin. Comp. 0380-3-7-.01 et seq., Rules of Comptroller of the Treasury.) Tennessee courts have not addressed the meaning of the term “year-round” in T.C.A. § 6-54-111(a).
Based on the common, unambiguous meaning of “year-round,” a day care or similar child care facility must operate continuously throughout the year, during all seasons, in order to qualify as a “a nonprofit charitable organization ... which provides year-round services benefiting the general welfare of the residents of the municipalities” within the meaning of Tenn. Code Ann. § 6-54-111(a)(2)(A).
 “Year” is “[t]he period in which the revolution of the earth round the sun, and the accompanying changes in the order of nature, are completed. Generally, when a statute speaks of a year, twelve calendar, and not lunar, months are intended.... When the period of a “year” is named, a calendar year is generally intended, but the subject-matter or context of statute or contract in which the term is found or to which it relates may alter its meaning.” Black’s Law Dictionary (6th ed. 1998).
Bland, R.L. and Rubin, I.S. 1997.
Budgeting: A Guide for Local Governments.
Washington, D.C.: International City/County Management Association.
Governmental Accounting, Auditing, and Financial Reporting.
Chicago, IL: Government Finance Officers Association.
Fiscal Administration: Analysis and Applications for the Public Sector.
3rd ed. Belmont, CA: Brooks/Cole Publishing Company.
Riley, S.L., and Colby P.W. 1991.
Practical Government Budgeting: A Workbook for Public Managers.
The Government Finance Officers Association webpage  provides over 40 best practices on the budgeting process. Click on 'Products and Services', then 'Best Practices", then 'Budgeting and Financial Planning'.
The ICMA website includes a number of articles and publications on budgeting.
The Tennessee Comptroller Office of State and Local Finance approves most local government budgets in Tennessee. The website includes the annual 'budget memorandum', sample budget ordinance, a checklist for items to be submitted to their office with the budget, and examples and blank copies in Excel format of the required worksheets to be submitted.

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 § 57
 § 67
 § 57
 § 57
 § 57
 § 57
 § 57
 § 57
 § 57
 § 67
 § 67
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 § 67
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 § 67
 § 65
 § 67
 § 67
 § 67
 § 67
 § 67
 § 67
 § 67
 § 7
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 § 6
 § 7
 § 6
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 § 7
 § 57
 § 57
 § 57
 § 57
 § 6
 § 7
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 § 6
 § 6
 § 6
 § 62
 § 6
 § 6
 § 6
 § 13
 § 6
 § 6
 § 67
 § 67
 § 67
 § 67
 § 67
 § 67
 § 57
 § 57
 § 67
 § 67
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 § 67
 § 54
 § 67
 § 67
 § 67
 § 67
 § 12
 § 6
 § 6
 § 7
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 § 7
 § 9
 § 7
 § 7
 § 7
 § 7
 § 7
 § 65
 § 65
 § 6
 § 6
 § 6
 § 6
 § 6
 § 6
 § 6
 § 6
 § 6
 § 6
 § 6
 § 6
 § 6