Can Hamilton County, Tennessee allow distilleries by county commission resolution, or does it need a referendum?

Subject

Opinion No. 12-93, Manufacture of Intoxicating Liquors in Hamilton County, October 3, 2012

Plain-English summary

Senator Bo Watson asked whether the Hamilton County Board of Commissioners could authorize distillery operations within the county by resolution, instead of running a county-wide referendum. The AG said no.

Tennessee's general rule (Tenn. Code Ann. § 57-2-103(a)-(c)) is that a county may permit the manufacture of intoxicating liquors only after a successful referendum. The procedure: 10% of qualified voters sign a petition, the county commission calls an election, and if a majority votes yes, distilling is allowed.

In 2009, the General Assembly added subsection (d) to § 57-2-103 via Public Chapter 524, creating a shortcut for certain counties: they can authorize manufacturing by county commission resolution (no referendum needed) if they meet two conditions:

1. Either both retail package sales and liquor-by-the-drink are already approved by referendum, or the county is included in the Tennessee River resort district (defined in Tenn. Code Ann. § 57-4-102(35) / § 67-6-103(a)(3)(F)); AND
2. The county falls within one of the very narrow population brackets in § 57-2-103(d)(1)(B). The brackets are highly specific (e.g., 7,600-7,700; 14,300-14,400; 27,100-27,200) and effectively name individual counties by population.

The AG ran the math on Hamilton County: 307,896 in the 2000 census and 336,463 in the 2010 census. Neither figure fits any of the brackets. Hamilton County also does not qualify as a Tennessee River resort district because it is not in the first quartile of economically distressed counties for fiscal year 2006 and does not meet the alternate population parameters.

So Hamilton County is back to the standard referendum route under § 57-2-103(a)-(c).

The opinion also clarifies that the local-option provisions in Chapter 3 of Title 57 (Tenn. Code Ann. § 57-3-106), which govern sales, storage, transportation, and distribution of liquor, do not affect the manufacturing rules in Chapter 2 by virtue of Tenn. Code Ann. § 57-3-103(a)(1).

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.

Background and statutory framework

The referendum default

Tenn. Code Ann. § 57-2-103(a)-(c) sets up the standard process for a county to authorize liquor manufacturing:

• 10% of the qualified voters in the county sign a petition asking whether liquor manufacturing should be allowed (subsection (a)).
• The county commission calls an election (subsection (b)).
• If a majority votes yes, liquor manufacturing is permitted (subsection (c)).

The Tennessee Supreme Court's 1938 State ex rel. Motlow v. State case established this referendum framework as the principal way counties exercise their local option on liquor manufacturing.

The 2009 shortcut for certain counties

2009 Tenn. Pub. Acts ch. 524 added subsection (d) to § 57-2-103. Subsection (d)(1)(A) lets the county commission authorize manufacturing by resolution if (a) the county has approved both retail package sales and liquor-by-the-drink (or qualifies as a Tennessee River resort district with retail package sales approved) and (b) the county's population falls within one of a list of specific brackets in subsection (d)(1)(B).

The bracket list is essentially a population-bracket way of naming specific counties without naming them directly. Each bracket has a narrow range (often 100 people wide) calibrated to capture exactly one or a handful of counties as of the 2000 federal census. The list also catches any county over 500,000 in population.

Why Hamilton County falls outside

Hamilton County's 2000 population (307,896) and 2010 population (336,463) don't match any bracket. The highest narrow bracket maxes at 382,100. The over-500,000 catch is the only one above that, and Hamilton County does not reach it.

The Tennessee River resort district alternative

§ 57-4-102(35) and § 67-6-103(a)(3)(F) define the "Tennessee River resort district" for various tax and licensing purposes. To qualify, a county must (a) rank in the first quartile of county economic distress for fiscal year 2006, (b) border or be crossed by the Tennessee River, and (c) elect into the district status under § 67-6-103(a)(3)(F). Hamilton County, while bordered by the Tennessee River, is not economically distressed and has never elected into the district. The opinion footnoted that the Department of Economic and Community Development map identifies which counties qualify.

Title 57 Chapter 3 doesn't override Chapter 2

Some statutes in Chapter 3 of Title 57 (Tenn. Code Ann. § 57-3-106) discuss local options for sales-related activities (manufacture, sale, storage, transportation, distribution, possession). The opinion notes that § 57-3-103(a)(1) explicitly preserves Chapter 2's exclusive control over when a county can authorize manufacturing. So § 57-3-106 cannot be used as a back door to permit distillery operations without complying with § 57-2-103.

Common questions

What's the practical path for Hamilton County to allow distilleries?
Run a referendum under § 57-2-103(a)-(c). A petition signed by 10% of qualified voters triggers an election; majority approval makes manufacturing legal.

Why are the population brackets so narrow?
They function as a workaround to Tennessee's constitutional limits on private/local legislation by population bracket. By drawing brackets tightly enough to capture specific counties without naming them, the General Assembly extended distillery-friendly rules to particular jurisdictions while making the law facially "general."

Could Hamilton County elect into the Tennessee River resort district?
Not as the rules stood in 2012; the county would have to be in the first quartile of economic distress for fiscal year 2006. That's a backward-looking criterion based on past economic data the county cannot change.

Does this affect retail sales of liquor in Hamilton County?
No. The opinion is about manufacturing, not retail sales. Retail package sales and liquor-by-the-drink are governed by separate provisions and may or may not be permitted in Hamilton County depending on local referendum history.

Citations

Statutes:

• Tenn. Code Ann. § 57-2-103 (county-by-county authorization of liquor manufacturing)
• Tenn. Code Ann. § 57-2-103(a)-(c) (referendum process)
• Tenn. Code Ann. § 57-2-103(d) (resolution shortcut for certain counties)
• Tenn. Code Ann. § 57-3-103(a)(1) (Chapter 3 doesn't override Chapter 2)
• Tenn. Code Ann. § 57-3-106 (local option for sales-related activities)
• Tenn. Code Ann. § 57-4-102(35) (Tennessee River resort district definition)
• Tenn. Code Ann. § 67-6-103(a)(3)(F) (Tennessee River resort district election)
• 2009 Tenn. Pub. Acts, ch. 524 (adding subsection (d) to § 57-2-103)

Cases:

• State ex rel. Motlow v. State, 173 Tenn. 81, 114 S.W.2d 800 (1938)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2012/op12-093.pdf

Original opinion text

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

October 3, 2012

Opinion No. 12-93

Manufacture of Intoxicating Liquors in Hamilton County

QUESTION

May Hamilton County permit the manufacture of intoxicating liquors or intoxicating drinks within its boundaries by means of a resolution adopted by its Board of Commissioners pursuant to Tenn. Code Ann. § 57-2-103(d) in lieu of seeking to obtain such authorization by means of a referendum as set forth in Tenn. Code Ann. §§ 57-2-103(a)-(c)?

OPINION

No. Tenn. Code Ann. § 57-2-103(d) authorizes county legislative bodies to adopt resolutions authorizing the manufacture of intoxicating liquors and intoxicating drinks in counties that (1) have approved both retail package sales and liquor by the drink or are included in the Tennessee River resort district as defined by Tenn. Code Ann. § 57-4-102 and (2) meet the population requirements set forth in Tenn. Code Ann. § 57-2-103(d)(1)(B). Hamilton County does not come within these statutory requirements and, therefore, the county must follow the petition and referendum procedure set forth in Tenn. Code Ann. § 57-2-103(a)-(c) before the manufacture of intoxicating liquors and intoxicating drinks may be permitted in the county.

ANALYSIS

Tenn. Code Ann. § 57-2-103 generally governs the manufacture of intoxicating liquors in Tennessee. Under that statute, such manufacture is permitted in any county where the majority of voters have, by referendum, approved a resolution permitting it within the county. See State ex rel. Motlow v. State, 173 Tenn. 81, 89-90, 114 S.W.2d 800, 803-04 (1938). Tenn. Code Ann. § 57-2-103(a)-(c) sets forth the procedure that is followed to determine whether such a referendum may be presented to the voters. If 10% of the qualified voters in a county sign a petition to present the question whether the manufacture of liquor will be permitted within a county, the county commission must call an election on the question. Tenn. Code Ann. § 57-2-103(a)-(b). If a majority of the votes are cast in favor of the question, then the manufacture of liquor is permitted within that county. Tenn. Code Ann. § 57-2-103(c).

Prior to 2009, a county that chose to exercise its local option to permit or prohibit the manufacture of intoxicating liquors within its borders could do so only by referendum under Tenn. Code Ann. § 57-2-103. In 2009, the General Assembly enacted Public Chapter 524, which added subsection (d) to Tenn. Code Ann. § 57-2-103. Subsection (d) provides in relevant part:

(d)(1)(A) Notwithstanding subsections (a)-(c), it shall be lawful to manufacture intoxicating liquors or intoxicating drinks, or both, within the boundaries of those counties included in subdivision (d)(1)(B), if both retail package sales and liquor-by-the-drink have been approved through voter referendum within the county or if the county is included in the Tennessee River resort district as defined in § 57-4-102 and retail package sales have been approved through voter referendum within the county.

(B) This subsection (d) shall apply in any county having a population, according to the 2000 federal census or any subsequent federal census, of:

[Population bracket list omitted for brevity; see original PDF for full table]

and in any county having a population of more than five hundred thousand (500,000) according to the 2000 federal census or any subsequent federal census.

Tenn. Code Ann. § 57-2-103(d)(1).

In order for subsection (d)(1)(A) to apply to a particular county, the county population must fall within one of the population classifications contained in subsection (d)(1)(B). Hamilton County's total population, according to the 2000 Federal Census was 307,896 and the population according to the 2010 Federal Census was 336,463, neither of which falls within the population groups that are set forth in that subsection. Therefore, Tenn. Code Ann. § 57-2-103(d) does not apply to Hamilton County, and the county is limited to the referendum process set forth in Tenn. Code Ann. §§ 57-2-103(a)-(c) in order to exercise its local option to permit the manufacture of intoxicating liquors within its borders.

"Tennessee River resort district" is defined by Tenn. Code Ann. § 57-4-102(35) by reference to a club, hotel, motel, restaurant or limited service restaurant located within a jurisdiction that has elected Tennessee River resort district status pursuant to the provisions of § 67-6-103(a)(3)(F); provided, that for the purposes of this chapter, such district shall only extend inland for three (3) miles from the nearest bank of the Tennessee River.

Tenn. Code Ann. § 67-6-103(a)(3)(F) provides:

(F)(i) A county ranking in the first quartile of county economic distress in the United States for fiscal year 2006, as determined pursuant to subdivision (a)(3)(F)(v) and bordering on, or crossed by, the Tennessee River, may elect to be a "Tennessee River resort district" for purposes of this chapter. A municipality within such county and located within three (3) miles of the nearest bank of the Tennessee River, may also elect to be a "Tennessee River resort district" for purposes of this chapter. . . . This subdivision (a)(3)(F)(i) shall also apply in any county that has a population of less than ten thousand (10,000), according to the 2000 federal census or any subsequent federal census, and borders the Tennessee River and a county included within the Tennessee River resort district. This subdivision (a)(3)(F)(i) shall also apply in any county having a population of not less than twelve thousand three hundred sixty-nine (12,369) nor more than twelve thousand four hundred fifty (12,450) and in any county having a population of not less than seventeen thousand nine hundred (17,900) nor more than eighteen thousand (18,000), all according to the 2000 federal census or any subsequent federal census, and that border the Tennessee River;

According to the map published by the Department of Economic and Community Development, Hamilton County does not qualify as an economically distressed county, nor does it meet the population parameters in subsection (F)(i), therefore Hamilton County does not qualify as a Tennessee River resort district. Furthermore, Hamilton County has never qualified for or elected into Tennessee River resort district status according to information this Office obtained from the Department of Revenue.

Chapter 3 of Title 57, specifically Tenn. Code Ann. § 57-3-106, also contains provisions related to local option elections in counties and municipalities to permit or forbid the manufacture, receipt, sale, storage, transportation, distribution and possession of intoxicating liquors. However, pursuant to Tenn. Code Ann. § 57-3-103(a)(1), those provisions do not affect Title 57, Chapter 2 which exclusively governs when a county may authorize the manufacture of intoxicating liquors or drinks.

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

LYNDSAY F. SANDERS
Senior Counsel

Requested by:
The Honorable Bo Watson
State Senator
301 6th Avenue North
Suite 13 Legislative Plaza
Nashville, TN 37243-0231