When a Tennessee special school district wants its property tax rate changed, what does its board of education have to do procedurally, and can the General Assembly raise the rate above the certified rate after a county reappraisal?

Plain-English summary

A special school district in Tennessee gets its property tax rate set by an act of the General Assembly, not by a county commission or by the school board itself. Representative Halford asked five questions about how that process works and what the board of education has to do to request a change.

The AG's main holdings:

• No Tennessee statute sets out a procedure the board has to follow to request a new tax rate. The board can use whatever internal procedures it normally follows; the practical step is to send a communication reflecting the board's position to the district's House and Senate members.
• Because no resolution is required, a follow-up question about unapproved minutes was pretermitted.
• The General Assembly is not limited to the certified rate or the prior rate after a general reappraisal. Tenn. Code Ann. § 67-5-1704(c) authorizes the legislature to set the rate at whatever level is necessary to generate the ad valorem revenue the district needs.
• The Home Rule Amendment in Tenn. Const. art. XI, § 9 does not require the board to approve the act before it takes effect. The Tennessee Supreme Court held in Gibson County Special School District v. Palmer and Perritt v. Carter that special school districts are not "municipalities" within the Home Rule Amendment, so the two-thirds local approval requirement does not apply.

Currency note

This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Who has the constitutional power to tax for special school districts in Tennessee?
The General Assembly. Under Article II, Section 29, the legislature may delegate taxing power to counties and towns, but the Tennessee Supreme Court held in Gibson Co. Special School District v. Palmer, 691 S.W.2d 544, 549 (Tenn. 1985), that this delegation does not extend to special school districts. The legislature itself fixes the rate by general law or private act.

Is there a statute telling a special school district board how to ask for a rate change?
No. Tenn. Code Ann. § 49-3-1007 lets a special district with bonds outstanding certify a lower rate by resolution under certain debt-service conditions, but neither it nor any other statute lays out a procedure for asking the General Assembly to set a higher rate. The board follows its own internal procedures.

Does the request have to be a board resolution?
No. Because no statute requires a resolution, the board can communicate its position in any reasonable way. The AG suggested a written request, possibly attaching a resolution if the board passed one, was a practical way to preserve a record.

Can the General Assembly raise the rate above the certified rate after a reappraisal?
Yes. The certified tax rate that follows a general reappraisal under Tenn. Code Ann. § 67-5-1704 is designed to be revenue-neutral. But subsection (c) expressly authorizes the General Assembly, by general law or private act, to set the special school district's rate at a level to generate "the ad valorem revenue necessary for such special school district." That means the legislature may set a rate above the certified or previous rate.

Does the school board have to approve the act before it takes effect?
No. The Home Rule Amendment requires local approval only for acts applying to a "municipality or county." The Tennessee Supreme Court has twice held that a special school district is not a municipality for this purpose (Gibson Co. Special School District v. Palmer; Perritt v. Carter, 204 Tenn. 611, 325 S.W.2d 233 (Tenn. 1959)). A rate-setting act for a special school district therefore takes effect without local approval.

Background and statutory framework

Tennessee has a relatively unusual category of school district called a "special school district," typically created by private act and not coterminous with a county. Because special districts are creatures of the legislature, their funding and tax authority sit in the legislature's hands rather than in local governance structures. The certified tax rate mechanism in Tenn. Code Ann. § 67-5-1704 prevents windfall property tax revenue increases when reassessment raises assessed values, but subsection (c) carves out special school districts: if more revenue is needed, the General Assembly itself sets the rate.

The Home Rule Amendment was added in 1953 and protects counties and municipalities from purely local legislation that has not been approved locally. The Tennessee Supreme Court's narrow definition of "municipality" excludes special school districts, which makes sense because the General Assembly created them and remains the only body with constitutional authority to tax for them.

Citations

• Tenn. Code Ann. § 49-3-1007 (special school district tax rate adjustment for bonded debt service)
• Tenn. Code Ann. § 67-5-1704(c) (post-reappraisal rate setting for special school districts)
• Tenn. Const. art. II, § 29 (delegation of taxing power to counties and towns)
• Tenn. Const. art. XI, § 9 (Home Rule Amendment)
• Gibson Co. Special School District v. Palmer, 691 S.W.2d 544 (Tenn. 1985) (special school districts not within Home Rule)
• Perritt v. Carter, 204 Tenn. 611, 325 S.W.2d 233 (Tenn. 1959) (same)
• Williamson v. McClain, 249 S.W. 811 (Tenn. 1923) (limits on delegation of taxing power)
• B.O. Keesee v. Civil District Bd. of Educ., 46 Tenn. 128 (1868) (taxing power belongs to legislature)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2011/op11-027.pdf

Original opinion text

March 24, 2011
Opinion No. 11-27
Setting tax rates for special school districts

QUESTIONS

1. What procedures must the board of education of a special school district follow in requesting that the General Assembly set a tax rate for the school district?

2. If the board of education is required to request a change in its tax rate by means of a resolution, would the failure of the board to approve the minutes of the meeting at which the resolution was adopted before transmitting the resolution to the General Assembly have any effect on an act of the General Assembly that set a tax rate for the special school district?

3. Must the board of education of a special school district request in writing the specific tax rate that is to be set?

4. After a general reappraisal of property in the county in which a special school district is located, may the General Assembly, under Tenn. Code Ann. § 67-5-1704, set a tax rate for the special school district that is higher than either the certified tax rate or the previous tax rate?

5. Does Article XI, Section 9, of the Constitution of Tennessee require the board of education of a special school district to approve an act of the General Assembly setting a tax rate for the district before such act becomes effective?

OPINIONS

1. Tennessee statutes do not set forth any particular procedures for the board of education of a special school district to request that the General Assembly set a tax rate for the school district that exceeds the rate imposed by the existing legislative act.

2. In light of our response to Question 1 above, the board of education is not required to request a change in its tax rate by means of a resolution.

3. Tennessee statutes do not set forth how such request should be made.

4. Yes.

5. No.

ANALYSIS

1. Tenn. Code Ann. § 49-3-1007 provides:

49-3-1007. Special school districts; tax rate; adjustment

If any special school district has bonds outstanding payable from taxes levied by special act of the general assembly, and if at any time the amount on deposit in the special fund created solely for the purpose of paying principal of and interest on the bonds is equal to at least two hundred percent (200%) of the amount of the principal and interest coming due on the bonds in the next twelve (12) months next succeeding, excluding any portion of principal and interest budgeted at the beginning of each fiscal year to be paid from sales tax revenues, BEP funds, or a combination of sales tax revenues or BEP funds, hereinafter referred to as annual debt service requirements, the special district by resolution may, on or before September 1 of any year, certify to the county trustee the special school district tax rate, not to exceed the rate imposed by existing legislative act, necessary to raise the amount of taxes that must be collected in order to maintain the special fund during the succeeding year in an amount equal to at least two hundred percent (200%) of annual debt service requirements, and the county trustee shall collect only the taxes based on the rate so certified.

(Emphasis added).

Neither this nor any other Tennessee statute sets forth any particular procedures for the board of education of a special school district to request that the General Assembly set a tax rate for the school district that exceeds the rate imposed by the existing legislative act. Therefore, the board of education should follow its own internal policies and procedures in carrying out the business of the board. From a practical standpoint, some form of communication reflecting that it represents the board's position should be forwarded to the representatives for the special school district in both the House and Senate regarding a request for legislative action.

2. In light of our response to Question 1 above, the board of education is not required to request a change in its tax rate by means of a resolution. The remaining portion of this question is therefore pretermitted.

3. Neither Tenn. Code Ann. § 49-3-1007 nor any other Tennessee statute sets forth how such a request should be made. To preserve a record of the request, a written request could be made with a copy of the resolution attached. Other alternatives may also be acceptable, however.

4. The General Assembly may set a tax rate for the special school district that is higher than either the certified top rate or the previous tax rate after a general reappraisal of property under Tenn. Code Ann. § 67-5-1704(c):

(c) If additional revenue is required in a special school district following such general reappraisal and the adjustment to the tax rate under the provisions of this section, the General Assembly shall by general law or private act set the tax rate for such special school district at a level to generate the ad valorem revenue necessary for such special school district.

The power to tax belongs to the Tennessee legislature and cannot be delegated unless the Tennessee Constitution expressly allows such delegation. B.O. Keesee v. Civil District Bd. of Educ., 46 Tenn. 128 (1868). Article II, Section 29, of the Constitution allows the legislature to delegate its taxing powers to counties and towns. The Tennessee Supreme Court has held that this delegation of taxing power does not extend to special school districts. Gibson Co. Special School District v. Palmer, 691 S.W.2d 544, 549 (Tenn. 1985); Williamson v. McClain, 249 S.W. 811 (Tenn. 1923).

5. Article XI, Section 9, of the Tennessee Constitution does not require the board of education of a special school district to approve an act of the General Assembly setting a tax rate for the district before such act becomes effective.

Article XI, Section 9, of the Tennessee Constitution referred to as the "Home Rule Amendment," provides, in pertinent part:

The General Assembly shall have no power to pass a special, local or private act having the effect of removing the incumbent from any municipal or county office or abridging the term or altering the salary prior to the end of the term for which such public officer was selected, and any act of the General Assembly private or local in form or effect applicable to a particular county or municipality either in its governmental or its proprietary capacity shall be void and of no effect unless the act by its terms either requires the approval by a two-thirds vote of the local legislative body of the municipality or county, or requires approval in an election by a majority of those voting in said election in the municipality or county affected.

(Emphasis added). The Home Rule Amendment requires that laws local in effect and application shall be void unless the law is conditioned upon approval by a two-thirds vote of the electorate. In relation to special school districts, however, the Tennessee Supreme Court has specifically held that a special school district does not fall within the definition of a municipality as contemplated in the Home Rule Amendment. Gibson Co Special School District, 691 S.W.2d at 550; Perritt v. Carter, 204 Tenn. 611, 614, 325 S.W.2d 233, 234 (Tenn. 1959). Consequently, legislation setting a tax rate for a special school district does not prompt the need for a referendum because the Home Rule Amendment applies to municipalities and counties only. Id.

ROBERT E. COOPER, JR.
Attorney General and Reporter

BARRY TURNER
Deputy Attorney General

JANIE C. PORTER
Senior Counsel

Requested by:
The Honorable Curtis Halford
State Representative
108 War Memorial Building
Nashville, TN 37243-0125