Can the Carroll County Watershed Authority issue refunding bonds to refinance its lake-project debt, and how much new debt can it issue?

Subject

Opinion No. 13-47, Authority of Carroll County Watershed to Issue Bonds, June 28, 2013

Plain-English summary

The Carroll County Watershed Authority (CCWA) is one of nine active river basin development authorities created by Title 64, Chapter 1 of the Tennessee Code. Sen. John Stevens asked the AG to identify the scope of CCWA's bond-issuance authority.

The AG concluded:

• CCWA can issue bonds for resource-development capital projects. Tenn. Code Ann. § 64-1-804(a)(7) authorizes the CCWA to issue bonds "from time to time in a total amount not to exceed twelve million dollars ($12,000,000)" for acquiring land and developing Carroll County resources. CCWA may issue multiple series so long as the total stays under the $12 million cap.
• CCWA cannot issue refunding bonds. Refunding (refinancing existing bonds) is not in the CCWA's enumerated powers. Four of the nine river basin development authorities in Title 64 do have express refunding authority (the Duck River Development Agency in § 64-1-604(c), the West Fork Drakes Creek Authority in §§ 64-1-905(c)-(i), and two others). Reading Chapter 1 in pari materia, the AG concluded that when the General Assembly intends to grant refunding authority, it does so expressly. Silence in CCWA's enabling chapter means no refunding power.
• The 2013 appropriations bill line item does not change this. The FY 2013-14 appropriations bill (2013 Tenn. Pub. Acts, ch. 453, § 68, Item I) contained $5 million for CCWA "for the purpose of the authority's refinancing its existing outstanding debt." But the Tennessee Constitution's single-subject rule (Tenn. Const. art. II, § 17) and Tenn. Code Ann. § 9-4-5108(c) bar appropriations bills from containing "provisions of general legislation." The line item is a grant of state funds, not an expansion of CCWA's enabling statute, so it can't be read to authorize refunding bonds that the general law does not authorize.

The opinion did not reach whether the $5 million grant could be used to pay down existing debt directly (rather than refinance through new bonds), but the practical implication is that CCWA can use appropriated funds as paid into its accounts; it just can't issue its own refunding bonds to take advantage of lower interest rates.

Currency note

This opinion was issued in 2013. 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 Title 64 river basin authority statutes have been amended periodically. Before any current bond issuance by CCWA or a similar authority, check the current enabling chapter for any added refunding authority or change in the bond cap.

Background and statutory framework

CCWA enabling power. Tenn. Code Ann. § 64-1-804(a) grants the CCWA broad authority to "do any and all things necessary or desirable in forming and executing a plan for the comprehensive development of the resources of Carroll County." The statute identifies plan elements including agriculture, drainage and flood control, land reclamation, electric power, irrigation, water supply, recreation, public health, education, and manufacturing.

Specific bond power. § 64-1-804(a)(7) provides:

[M]ay issue its bonds from time to time in a total amount not to exceed twelve million dollars ($12,000,000) for the purpose of paying in whole or in part the cost of the acquisition of necessary land or interests therein and the development of the resources of Carroll County, and expenses incidental thereto; may secure such bonds by a pledge of all or any part of the revenues that may now or hereafter come to the authority from any source, by a mortgage or deed of trust of the authority's land or any part thereof, or by a combination of the two (2); and may make such contracts or covenants in the issuance of such bonds as may be necessary to ensure the marketability thereof.

Chapter 1's nine active parts. Chapter 1 of Title 64 was originally structured with twelve separate parts, each creating a river basin development authority. Three parts (Parts 3, 4, and 10) have been repealed or transferred, leaving nine active authorities. Four of the nine include express refunding authority (e.g., Duck River Development Agency at § 64-1-604(c); West Fork Drakes Creek Authority at §§ 64-1-905(c)-(i)). The other five, including CCWA, do not.

Express refunding statutes elsewhere. Tenn. Code Ann. §§ 9-21-901 to -1017 grant general refunding authority to local governments with extensive statutory restrictions. § 64-1-604(c) restricts refunding-bond proceeds to specific categories: principal of obligations being refinanced, redemption premiums, accrued interest, certain trust deposits, reasonable reserve, construction interest if the project isn't complete, and reasonable expenses. The structure of those statutes shows that when the legislature grants refunding power, it pairs it with substantive limits.

Constitutional limit on appropriations bills. Tenn. Const. art. II, § 17 ("[n]o bill shall become a law which embraces more than one subject, that subject to be expressed in the title") together with Tenn. Code Ann. § 9-4-5108(c) ("[t]he appropriation bill shall not contain any provisions of general legislation") prevent appropriations bills from amending the substance of general law. The AG had said the same thing before in Op. 05-164 (Oct. 24, 2005).

Pari materia. Under Wilson v. Johnson County, 879 S.W.2d 807, 809 (Tenn. 1994), statutes relating to the same subject or having a common purpose are construed together. Comparing the nine river basin authority parts shows the General Assembly grants refunding authority expressly where it intends to grant it, so silence means absence.

Common questions

What can CCWA actually finance with its $12 million bond authority?

Capital projects for the comprehensive development of Carroll County's resources, including land acquisition. The list in § 64-1-804(a) is illustrative and broad (flood control, electric power, recreation, public health, etc.), so a wide range of capital projects can fit, but everything has to tie back to that development purpose. The $12 million is a total cumulative cap, not a per-issuance cap.

Why does it matter that the General Assembly gave refunding authority to some river basin authorities but not CCWA?

It is the strongest evidence of legislative intent. If the legislature wanted CCWA to refinance its lake-project debt, the AG concluded, it would have included refunding power in § 64-1-804 the same way it included it in § 64-1-604(c) for the Duck River authority. Silence in a statute with this kind of comparative structure isn't an oversight; it's a choice.

The 2013 budget included $5 million for CCWA debt refinancing. Doesn't that override the general law?

No. The single-subject rule (Tenn. Const. art. II, § 17) and § 9-4-5108(c) both prohibit appropriations bills from amending substantive law. The line item can deliver money to CCWA, but it cannot enlarge CCWA's general-law powers. The AG's view: CCWA can take the $5 million as a grant, but the grant has to be used in ways consistent with the powers CCWA already has under § 64-1-804.

Could CCWA just use the $5 million to pay off its existing debt directly?

The opinion didn't reach that question. The structural difference between paying off existing bondholders with appropriated cash (which is just spending money) versus issuing new bonds to retire old ones (which is refunding) is significant. The opinion forecloses the second; the first is a separate question that would turn on the terms of the existing bond contracts and the appropriation language.

Does the legislature need to amend the statute for CCWA to refinance?

Yes, if CCWA wants to issue refunding bonds. The General Assembly would need to add refunding language to CCWA's enabling part of Title 64, Chapter 1, the same way it has done for other authorities. That kind of amendment requires its own substantive bill, not a line item in an appropriations act.

What's the practical lesson for other river basin authorities?

Check the part of Title 64, Chapter 1 that governs the specific authority. Refunding power exists for four authorities and not for the others. The presence of refunding power isn't implied from the general authority to issue bonds; it has to be express.

Citations

Tenn. Code Ann. § 64-1-804(a), (a)(7) (CCWA enabling statute and bond authority). Tenn. Code Ann. §§ 64-1-101 to -1219 (river basin development authorities). Tenn. Code Ann. § 64-1-604(c) (Duck River refunding authority). Tenn. Code Ann. §§ 64-1-905(c)-(i) (West Fork Drakes Creek refunding authority). Tenn. Code Ann. §§ 9-21-901 to -1017 (general local-government refunding statutes). Tenn. Code Ann. § 9-4-5108(c) (appropriations bill single-subject limit). Tenn. Const. art. II, § 17. 2013 Tenn. Pub. Acts, ch. 453, § 68, Item I. Cases: Estate of French v. Stratford House, 333 S.W.3d 546 (Tenn. 2011); Wilson v. Johnson County, 879 S.W.2d 807 (Tenn. 1994). Prior AG opinions: Op. 05-164 (Oct. 24, 2005); Ops. 99-198 (Sept. 28, 1999); 85-249 (Sept. 26, 1985).

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-047.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

June 28, 2013

Opinion No. 13-47

Authority of Carroll County Watershed to Issue Bonds

QUESTION

For what purposes may the Carroll County Watershed Authority ("CCWA") issue bonds?

OPINION

Pursuant to Tenn. Code Ann. § 64-1-804(a)(7), CCWA has the authority to issue bonds for capital projects related to the development of the resources of Carroll County. CCWA does not have the authority to issue refunding bonds to refinance any of CCWA's outstanding bonds.

ANALYSIS

CCWA is a statutorily created river basin development authority with the power "to do any and all things necessary or desirable in forming and executing a plan for the comprehensive development of the resources of Carroll County." Tenn. Code Ann. § 64-1-804(a). One of CCWA's enumerated powers is the ability to issue bonds to finance such development. Tenn. Code Ann. § 64-1-804(a)(7) specifically provides that the CCWA

[m]ay issue its bonds from time to time in a total amount not to exceed twelve million dollars ($12,000,000) for the purpose of paying in whole or in part the cost of the acquisition of necessary land or interests therein and the development of the resources of Carroll County, and expenses incidental thereto; may secure such bonds by a pledge of all or any part of the revenues that may now or hereafter come to the authority from any source, by a mortgage or deed of trust of the authority's land or any part thereof, or by a combination of the two (2); and may make such contracts or covenants in the issuance of such bonds as may be necessary to ensure the marketability thereof.

The CCWA thus has express authority to issue multiple series of bonds in a total amount not to exceed $12,000,000, for the costs associated with the development of the resources of Carroll County, including the acquisition of necessary land and interests therein and expenses incidental to such capital projects. Id. The CCWA's plan for development can include, but is not limited to, action in cooperation with appropriate "local, state and federal agencies in the fields of agriculture, forestry, drainage and flood control, land reclamation, electric power utilization, irrigation, water conservation and supply, recreation, public health, education, manufacturing and trade." Tenn. Code Ann. § 64-1-804(a). Thus, CCWA has broad authority to issue bonds so long as the bonds are related to the development of Carroll County resources. See Estate of French v. Stratford House, 333 S.W.3d 546, 554 (Tenn. 2011) (stating general rule of statutory construction that, when the terms of a statute are clear, courts will "apply the plain meaning [of the statute] without complicating the task").

CCWA however lacks authority to issue bonds to refinance bonds previously issued by CCWA. Chapter 1 of Title 64 of the Tennessee Code Annotated currently creates and empowers nine river basin development authorities, including CCWA. Tenn. Code Ann. §§ 64-1-101 to -1219. Only four of the nine authorities are expressly granted the authority to issue refunding bonds. See id. Reading these related statutory provisions in pari materia confirms that, when the General Assembly intends to grant a river basin development authority the power to issue refunding bonds, it does so expressly. See Wilson v. Johnson County, 879 S.W.2d 807, 809 (Tenn. 1994) (stating that "statutes 'in pari materia'—those relating to the same subject or having a common purpose—are to be construed together, and the construction of one such statute, if doubtful, may be aided by considering the words and legislative intent indicated by the language of another statute").

For example, under Tenn. Code Ann. § 64-1-604(c), the Tennessee Duck River Development Agency has express authority to issue refunding bonds so long as it complies with certain restrictions on the amounts that can be refunded. In granting refunding authority to the Tennessee Duck River Development Authority, Tenn. Code Ann. § 64-1-604(c) provides:

Subject to the approvals required in subsection (a), any bonds or notes of the agency at any time outstanding may at any time and from time to time be refunded by the authority by the issuance of its refunding bonds in such amount as the board of directors may deem necessary, but not exceeding the sum of the following:

(1) The principal amount of the obligations being refinanced;
(2) Applicable redemption premiums thereon;
(3) Unpaid interest on such obligations to the date of delivery or exchange of the refunding bonds;
(4) In the event the proceeds from the sale of the refunding bonds are to be deposited in trust as provided in this section, interest to accrue on such obligations from the date of delivery to the first or any subsequent available redemption date or dates selected, in its discretion, by the board or to the date or dates of maturity, whichever shall be determined by the board to be most advantageous or necessary to the agency;
(5) A reasonable reserve for the payment of principal of and interest on such bonds and/or a renewal and replacement reserve;
(6) If the project to be constructed from the proceeds of the obligations being refinanced has not been completed, an amount sufficient to meet the interest charges on the refunding bonds during the construction of such project and for two (2) years after the estimated date of completion, but only to the extent that interest charges have not been capitalized from the proceeds of the obligations being refinanced; and
(7) Expenses, premiums and commissions of the agency, including bonds discount, deemed by the board to be necessary for the issuance of the refunding bonds. A determination by the board that any refinancing is advantageous or necessary to the agency, or that any of the amounts provided in this subdivision (c)(7) should be included in such refinancing or that any of the obligations to be refinanced should be called for redemption on the first or any subsequent available redemption date permitted to remain outstanding until their respective dates of maturity shall be conclusive.

Similarly, the West Fork Drakes Creek Dam and Reservoir Interstate Authority has express authority to issue refunding bonds with restrictions on the amounts that can be refunded. Tenn. Code Ann. §§ 64-1-905(c)-(i). The West Fork Authority must comply with statutory requirements regarding the proper way to cause notice of intention to issue refunding bonds, and in the context of an advanced refunding, it must deposit bond proceeds in trust and limit the investment of such proceeds to certain types of obligations. Id.

This Office is aware that CCWA was provided a grant of State funds in the Fiscal Year 2013-2014 State budget in the appropriations bill "for the purpose of the authority's refinancing its existing outstanding debt associated with the lake project" and specifically to use such funds "to pay off $5,000,000.00 of the existing debt incurred in the construction and improvement of the Carroll County Lake project." 2013 Tenn. Pub. Acts, ch. 453, § 68, Item I. Tennessee law, however, specifically provides that the "appropriation bill shall not contain any provisions of general legislation." Tenn. Code Ann. § 9-4-5108(c). Moreover, the caption of the appropriations bill reinforces this statutory proscription by limiting its scope to making "appropriations for the purpose of defraying the expenses of the state government for the fiscal years beginning July 1, 2012, and July 1, 2013." 2013 Tenn. Pub. Acts, ch. 453 at 1. This Office has previously opined that under these circumstances an appropriations bill, limited in its caption and by statute to making appropriations, cannot amend provisions of the general law. Tenn. Att'y Gen. Op. 05-164 at 2 (Oct. 24, 2005). As this Office explained:

Article II, § 17, of the Tennessee Constitution states in pertinent part, "[n]o bill shall become a law which embraces more than one subject, that subject to be expressed in the title." Furthermore, Tenn. Code Ann. § 9-4-5108(c) provides that, "[t]he appropriation bill shall not contain any provisions of general legislation." Therefore, placing items of general legislation in the appropriations bill would violate both Article II, § 17, of the Tennessee Constitution and Tenn. Code Ann. § 9-4-5108(c) because the general legislation, not being germane to the subject of appropriations, constitutes the introduction of another subject in the appropriations bill. Ops. Tenn. Atty. Gen. 99-198 (September 28, 1999); 85-249 (September 26, 1985).

Id. Thus the language in the appropriations bill regarding a grant of State funds to CCWA cannot be read to have amended or expanded the general law describing CCWA's existing statutory authority.

Accordingly, reading the nine active parts of Chapter 1 of Title 64 of the Tennessee Code Annotated that pertain to river basin development authorities in pari materia, and noting that four of the nine include express refunding bond authority as well as certain public purpose safeguards, it is clear that when the General Assembly grants the power to issue refunding bonds, it does so expressly. See Tenn. Code Ann. §§ 9-21-901 to -1017. CCWA has not been expressly granted such authority by the General Assembly, and to imply such authority would broaden CCWA's authorizing statute beyond its intended scope.

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

ELIZABETH F. KNOTTS
Assistant Attorney General

Requested by:

The Honorable John Stevens
State Senator
3 Legislative Plaza
Nashville, TN 37243