Can Tennessee pass a law letting (or requiring) water and sewer utilities to give senior citizens a discount on their bills?

Subject

Opinion No. 12-26, Discount Utility Rates for Senior Citizens, February 29, 2012

Plain-English summary

Comptroller Wilson asked whether the Tennessee General Assembly could authorize or require local water and sewer utilities to offer discount rates to senior citizens. The AG said yes, but the path through the analysis is interesting because it threads several Tennessee constitutional and common-law restrictions on utility-rate discrimination.

The starting point: prior AG opinions on charity discounts. This Office had previously concluded that a metropolitan government could not give charitable organizations discount water rates. Op. Tenn. Att'y Gen. 99-026 (1999); 97-127 (1997). Those opinions rested on (a) statutory requirements that the system charge "reasonable rates" and (b) the common-law rule against "unjustly discriminatory" municipal utility rates. City of Parsons v. Perryville Utility District (Tenn. Ct. App. 1979). But those opinions assumed there was no statute authorizing the discount. If the Legislature steps in and expressly authorizes a category of discount, the statutory and common-law reasonable-rate analysis changes; the question becomes whether the statute itself is constitutional.

Tenn. Const. art. II, § 28's "equal and uniform" clause does not apply. That clause requires equal and uniform property assessment "in each class or subclass." It speaks to taxes. The AG had previously held that local property-tax relief for elderly citizens was not permissible unless Article II, Section 28 authorized it. Op. Tenn. Att'y Gen. 98-034 (1998). But Article II, Section 28 is about taxes, not utility fees. A tax raises general revenue; a fee defrays the cost of a specific service. City of Tullahoma v. Bedford County (Tenn. 1997). Utility rates are fees, not taxes. So Article II, Section 28 imposes no constraint here.

Equal protection (Tenn. Const. art. XI, § 8 and the Fourteenth Amendment) does apply, but rational basis controls. A senior-citizen discount creates a classification based on age. Age is not a suspect class, and access to discounted utility rates is not a fundamental right. State v. Tester (Tenn. 1994). So the rational-basis test governs. Under that test, a challenger must show the classification is unreasonable and arbitrary, and the classification is upheld if any state of facts can reasonably be conceived to justify it. Harrison v. Schrader (Tenn. 1978); Tennessee Small School Systems v. McWherter (Tenn. 1993); F.S. Royster Guano (1920).

A rational basis is easy to identify. Older citizens generally have less disposable income than other age groups. Other jurisdictions have upheld senior-citizen discounts on equal-protection grounds for tennis-court fees (Kahn v. Thompson (Ariz. Ct. App. 1995)) and movie-theater tickets (Starkman v. Mann Theatres (Cal. Ct. App. 1991)). The same logic supports senior-citizen utility discounts.

Bottom line. The General Assembly may authorize or require water and sewer discounts for senior citizens. The discount must come from the Legislature, not from the utility's own rate-setting discretion (which is constrained by the reasonable-rate statutes and the common-law non-discrimination rule). And the legislative authorization needs a rational basis, which the income-disparity rationale supplies.

Currency note

This opinion was issued in 2012. 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.

The Tennessee constitutional framework for utility rates is stable, but specific authorizing statutes for senior discounts (and any privately-owned-utility regulatory regime) may have shifted. Pull current law before relying on any specific rate program.

Background and statutory framework

Tax versus fee. A tax is a revenue-raising measure for general government debts. A fee defrays the cost of a regulated activity or a service provided to the fee payer. City of Tullahoma (Tenn. 1997). Utility rates are classic fees.

Equal-and-uniform clause. Tenn. Const. art. II, § 28: "[t]he ratio of assessment to value of property in each class or subclass shall be equal and uniform through the State." This applies to property taxation, and it forbids the Legislature from giving property-tax relief to a category like elderly homeowners unless the clause itself authorizes the relief. The clause does not reach utility fees.

Reasonable-rate and non-discrimination rules. Tennessee statutes require municipal water utilities to charge "reasonable rates" that keep the system self-supporting. The common law adds a rule against "unjustly discriminatory" rates. City of Parsons (Tenn. Ct. App. 1979). These rules constrain a utility's own discretion, but they do not bind the Legislature, which can override them by express statutory authority.

Equal protection. Tenn. Const. art. XI, § 8 (Tennessee's parallel) and U.S. Const. amend. XIV apply the same rules. City of Memphis v. State ex rel. Ryals (Tenn. 1915). Classifications that do not affect a suspect class or a fundamental right are reviewed under rational basis. State v. Tester (Tenn. 1994). Age classifications get rational-basis review; income-disparity rationales easily satisfy that test.

Comparable senior-discount cases. Kahn v. Thompson (Ariz. Ct. App. 1995) (tennis-court fee discount). Starkman v. Mann Theatres Corp. (Cal. Ct. App. 1991) (movie-theater discount).

Common questions

Q: I am over 65 and live in Tennessee. Do I get a discount on my water bill today?
A: This opinion addresses the General Assembly's power to authorize such a discount. Whether a discount exists in your utility's actual rate schedule depends on (a) whether the Legislature has enacted authorizing legislation, and (b) whether your utility (or the local government over it) has implemented a senior-discount program. Check with your utility provider and current Tennessee statutes.

Q: Could a utility decide on its own to offer senior discounts without legislative authorization?
A: Per the AG's prior charity-discount opinions, probably not. Tennessee statutes require utilities to charge "reasonable rates" and the common law forbids "unjustly discriminatory" rates. A utility-created senior discount without legislative authorization could be challenged as discrimination among ratepayer classes. Authorized discounts are different.

Q: Why does Article II, Section 28 not block this when it blocked property-tax relief for the elderly?
A: Because Article II, Section 28 applies to property tax assessment, not to utility fees. Senior discounts on water and sewer bills are not subject to the equal-and-uniform clause.

Q: Could the Legislature also authorize utility discounts for the disabled or low-income customers?
A: Probably yes, under the same rational-basis logic. The opinion did not address these categories specifically, but they have at least as strong a rational basis as age.

Q: Could private water companies (regulated by the TPUC) offer senior discounts under the same rule?
A: The opinion contemplates that legislation could apply to both publicly- and privately-owned utilities. Private utility rates are subject to additional regulatory review by the Tennessee Public Utility Commission; check current TPUC rules.

Citations and references

Constitutional provisions:

• Tenn. Const. art. II, § 28
• Tenn. Const. art. XI, § 8
• U.S. Const. amend. XIV

Cases:

• City of Tullahoma v. Bedford County, 938 S.W.2d 408 (Tenn. 1997)
• City of Parsons v. Perryville Utility District, 594 S.W.2d 401 (Tenn. Ct. App. 1979)
• State v. Tester, 879 S.W.2d 823 (Tenn. 1994)
• Harrison v. Schrader, 569 S.W.2d 822 (Tenn. 1978)
• Tennessee Small School Systems v. McWherter, 851 S.W.2d 139 (Tenn. 1993)
• F.S. Royster Guano Co. v. Virginia, 253 U.S. 412 (1920)
• Kahn v. Thompson, 916 P.2d 1124 (Ariz. Ct. App. 1995)
• Starkman v. Mann Theatres Corporation, 278 Cal. Rptr. 543 (Cal. Ct. App. 1991)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2012/op12-026.pdf

Original opinion text

May the General Assembly adopt legislation allowing or requiring local utility providers
Yes, the General Assembly may adopt legislation allowing or requiring local utility
providers to discount water and/or sewer rates to senior citizens. The "equal and uniform" clause
of Article II, Section 28, of the Tennessee Constitution applies to taxes, not to utility rates, and
thus is not applicable to the question presented. Nor does this proposed legislation violate
federal or Tennessee equal protection constitutional provisions, since there is a rational basis for
This opinion concerns the authority of the General Assembly to adopt legislation either
allowing or requiring local utility providers to discount water and/or sewer rates to senior
citizens. This opinion will assume that the term "local utility providers" includes privately-
owned utility companies as well as utility companies owned by Tennessee political subdivisions.
As the request notes, this Office has addressed discount utility rates to charitable
organizations in two different opinions. See Op. Tenn. Att'y Gen. 99-026 (February 16, 1999);
Op. Tenn. Att'y Gen. 97 127 (September 8, 1997). Both those opinions conclude that a
metropolitan government is not authorized to charge discount water rates to charitable
institutions. These opinions are based on the statutory requirement that the system charge
"reasonable rates" and on the common law principle that municipal utilities may not charge rates
that are "unjustly discriminatory." Op. Att'y Gen. 99-026, at 1-2; Op. Tenn. Att'y Gen. 97-127,
at 2-4. See also City of Parsons v. Perryville Utility District, 594 S.W.2d 401, 406-407 (Tenn.
Ct. App. 1979). When those opinions were written, however, no statute authorized or required
the discount rates in question. Thus, should the General Assembly enact a statute that expressly
authorizes or requires discount utility rates to senior citizens, the reasoning of those opinions
S T A T E O F T E N N E S S E E
OFFICE OF THE
ATTORNEY GENERAL
PO BOX 20207
NASHVILLE, TENNESSEE 37202
February 29, 2012
Opinion No. 12-26
Discount Utility Rates for Senior Citizens
QUESTION
May the General Assembly adopt legislation allowing or requiring local utility providers
to discount water and/or sewer rates to senior citizens?
OPINION
Yes, the General Assembly may adopt legislation allowing or requiring local utility
providers to discount water and/or sewer rates to senior citizens. The “equal and uniform” clause
of Article II, Section 28, of the Tennessee Constitution applies to taxes, not to utility rates, and
thus is not applicable to the question presented. Nor does this proposed legislation violate
federal or Tennessee equal protection constitutional provisions, since there is a rational basis for
charging lower rates to senior citizens.
ANALYSIS
This opinion concerns the authority of the General Assembly to adopt legislation either
allowing or requiring local utility providers to discount water and/or sewer rates to senior
citizens. This opinion will assume that the term “local utility providers” includes privately-
owned utility companies as well as utility companies owned by Tennessee political subdivisions.
As the request notes, this Office has addressed discount utility rates to charitable
organizations in two different opinions. See Op. Tenn. Att’y Gen. 99-026 (February 16, 1999);
Op. Tenn. Att’y Gen. 97 127 (September 8, 1997). Both those opinions conclude that a
metropolitan government is not authorized to charge discount water rates to charitable
institutions. These opinions are based on the statutory requirement that the system charge
“reasonable rates” and on the common law principle that municipal utilities may not charge rates
that are “unjustly discriminatory.” Op. Att’y Gen. 99-026, at 1-2; Op. Tenn. Att’y Gen. 97-127,
at 2-4. See also City of Parsons v. Perryville Utility District, 594 S.W.2d 401, 406-407 (Tenn.
Ct. App. 1979). When those opinions were written, however, no statute authorized or required
the discount rates in question. Thus, should the General Assembly enact a statute that expressly
authorizes or requires discount utility rates to senior citizens, the reasoning of those opinions
would not apply to discounts approved by legislation.
The question then becomes whether such a statute would violate any provision of the
Tennessee or the United States Constitution. A definite answer to this question would depend on
the language of the statute. No constitutional provision directly addresses utility rates. With
respect to taxes, Article II, Section 28, of the Tennessee Constitution, provides that "[t]he ratio of
assessment to value of property in each class or subclass shall be equal and uniform through the
State." (Emphasis added). Accordingly, this Office concluded that local governments could not
constitutionally provide for property tax relief for elderly citizens unless Article II, Section 28,
specifically authorized it. Op. Tenn. Att'y Gen. 98-034 (February 9, 1998). But Article II,
Section 28, addresses taxes, not utility fees. A tax is a revenue raising measure levied for the
purpose of paying the government's general debts and liabilities. City of Tullahoma v. Bedford
County, 938 S.W.2d 408, 412 (Tenn. 1997). A fee, on the other hand, is imposed for the purpose
of regulating a specific activity or defraying the cost of providing a service or benefit to the party
paying the fee. Id. Thus, the "equal and uniform" requirement in Article II, Section 28, of the
Tennessee Constitution would not prevent the General Assembly from statutorily authorizing or
requiring public utilities to provide discount utility rates, which are fees not taxes, for senior
The only other constitutional provisions relevant to legislation authorizing or requiring
discount utility rates to senior citizens by both public and private utilities would be the equal
protection provisions of the Tennessee and United States Constitutions. The Tennessee
Constitution's provisions concerning equal protection provide in relevant part:
The Legislature shall have no power to suspend any general law for the benefit of
any particular individual, nor to pass any law for the benefit of individuals
inconsistent with the general laws of the land; nor to pass any law granting to any
individual or individuals, rights, privileges, immunitie, [immunities] or
exemptions other than such as may be, by the same law extended to any member
of the community, who may be able to bring himself within the provisions of such
Tenn. Const. art XI, § 8. Similarly the Fourteenth Amendment of the United States Constitution
All persons born or naturalized in the United States, and subject to the
jurisdiction thereof, are citizens of the United States and of the state wherein they
reside. No state shall make or enforce any law which shall abridge the privileges
or immunities of citizens of the United States; nor shall any state deprive any
person of life, liberty, or property without due process of law; nor deny to any
The same rules apply to the validity of classifications made in legislative enactments
under the 14th Amendment to the United States Constitution and Article XI, Section 8, of the
(1915). These provisions guarantee that "all persons similarly circumstanced shall be treated
Page 2
The question then becomes whether such a statute would violate any provision of the
Tennessee or the United States Constitution. A definite answer to this question would depend on
the language of the statute. No constitutional provision directly addresses utility rates. With
respect to taxes, Article II, Section 28, of the Tennessee Constitution, provides that “[t]he ratio of
assessment to value of property in each class or subclass shall be equal and uniform through the
State.” (Emphasis added). Accordingly, this Office concluded that local governments could not
constitutionally provide for property tax relief for elderly citizens unless Article II, Section 28,
specifically authorized it. Op. Tenn. Att’y Gen. 98-034 (February 9, 1998). But Article II,
Section 28, addresses taxes, not utility fees. A tax is a revenue raising measure levied for the
purpose of paying the government’s general debts and liabilities. City of Tullahoma v. Bedford
County, 938 S.W.2d 408, 412 (Tenn. 1997). A fee, on the other hand, is imposed for the purpose
of regulating a specific activity or defraying the cost of providing a service or benefit to the party
paying the fee. Id. Thus, the “equal and uniform” requirement in Article II, Section 28, of the
Tennessee Constitution would not prevent the General Assembly from statutorily authorizing or
requiring public utilities to provide discount utility rates, which are fees not taxes, for senior
citizens.
The only other constitutional provisions relevant to legislation authorizing or requiring
discount utility rates to senior citizens by both public and private utilities would be the equal
protection provisions of the Tennessee and United States Constitutions. The Tennessee
Constitution’s provisions concerning equal protection provide in relevant part:
The Legislature shall have no power to suspend any general law for the benefit of
any particular individual, nor to pass any law for the benefit of individuals
inconsistent with the general laws of the land; nor to pass any law granting to any
individual or individuals, rights, privileges, immunitie, [immunities] or
exemptions other than such as may be, by the same law extended to any member
of the community, who may be able to bring himself within the provisions of such
law.
Tenn. Const. art XI, § 8. Similarly the Fourteenth Amendment of the United States Constitution
states:
All persons born or naturalized in the United States, and subject to the
jurisdiction thereof, are citizens of the United States and of the state wherein they
reside. No state shall make or enforce any law which shall abridge the privileges
or immunities of citizens of the United States; nor shall any state deprive any
person of life, liberty, or property without due process of law; nor deny to any
person within its jurisdiction the equal protection of the laws.
The same rules apply to the validity of classifications made in legislative enactments
under the 14th
Amendment to the United States Constitution and Article XI, Section 8, of the
Tennessee Constitution. City of Memphis v. State ex rel. Ryals, 133 Tenn. 83, 88, 179 S.W. 631
(1915). These provisions guarantee that “all persons similarly circumstanced shall be treated
alike.” State v. Robinson, 29 S.W.3d 476, 480 (Tenn. 2000); Tennessee Small School Systems v.
A law authorizing or requiring discount utility rates to senior citizens would create
different classes of customers based on age. All classifications that do not affect a fundamental
The burden of showing that a classification is unreasonable and arbitrary is placed upon the
individual challenging the statute. If any state of facts can reasonably be conceived to justify the
classification or if the reasonableness of the class is fairly debatable, the statute must be upheld.
Id. Thus, a classification will be upheld "if any state of facts may reasonably be conceived to
upheld senior citizen discounts against equal protection challenges. See, e.g., Kahn v. Thompson,
185 Ariz. 408, 916 P.2d 1124 (Ariz.Ct.App. 1995), (city tennis court fee discount); Starkman v.
Mann Theatres Corporation, 227 Cal.App.3d 1491, 278 Cal.Rptr. 543 (Ca.Ct.App. 1991) (movie
theater discount for senior citizens and children was not arbitrary discrimination prohibited by
state statute). In these cases, the courts found different treatment amply justified by the fact that
older citizens generally had less disposable income than other age groups. A similar rationale
The Honorable Justin P. Wilson
Nashville, Tennessee 37243-9034
Page 3
McWherter, 851 S.W.2d 139, 153 (Tenn. 1993) (both quoting F.S. Royster Guano Co. v.
Virginia, 253 U.S. 412, 415, 40 S.Ct. 560, 562, 64 L.Ed.2d 989 (1920).
A law authorizing or requiring discount utility rates to senior citizens would create
different classes of customers based on age. All classifications that do not affect a fundamental
right or discriminate as to a suspect class are generally subject to the rational basis test. State v.
Tester, 879 S.W.2d 823, 828 (Tenn. 1994). In this case, the rational basis standard would apply.
The burden of showing that a classification is unreasonable and arbitrary is placed upon the
individual challenging the statute. If any state of facts can reasonably be conceived to justify the
classification or if the reasonableness of the class is fairly debatable, the statute must be upheld.
Id. Thus, a classification will be upheld “if any state of facts may reasonably be conceived to
justify it.” Id., (quoting Tennessee Small School Systems v. McWherter, 851 S.W.2d at 152); see
also Harrison v. Schrader, 569 S.W.2d 822, 825 (Tenn. 1978). Courts in other jurisdictions have
upheld senior citizen discounts against equal protection challenges. See, e.g., Kahn v. Thompson,
185 Ariz. 408, 916 P.2d 1124 (Ariz.Ct.App. 1995), (city tennis court fee discount); Starkman v.
Mann Theatres Corporation, 227 Cal.App.3d 1491, 278 Cal.Rptr. 543 (Ca.Ct.App. 1991) (movie
theater discount for senior citizens and children was not arbitrary discrimination prohibited by
state statute). In these cases, the courts found different treatment amply justified by the fact that
older citizens generally had less disposable income than other age groups. A similar rationale
would support discount utility rates for senior citizens.
ROBERT E. COOPER, JR.
Attorney General and Reporter
WILLIAM E. YOUNG
Solicitor General
ANN LOUISE VIX
Senior Counsel
Requested by:
The Honorable Justin P. Wilson
Comptroller of the Treasury
State Capitol
Nashville, Tennessee 37243-9034