Can a Tennessee city buy water from, or join, a water commission organized in another state?

Subject

Opinion No. 14-65, City's Ability to Contract with Out-of-State Water Commission, June 25, 2014

Plain-English summary

Representative Joshua Evans asked two questions: whether a Tennessee city can contract for water services with a water commission created under another state's law, and whether a Tennessee city can be a member of such a commission. The AG said yes to both, with conditions.

The contract question (Question 1) is answered by the Tennessee Interlocal Cooperation Act (§§ 12-9-101 to -112). § 12-9-108 lets "one or more public agencies" contract with one or more "public agencies" to perform any governmental service each is authorized to perform, with consent of the governing body of each party. "Public agency" includes "any political subdivision of this state" and "any political subdivision of another state" (§ 12-9-103(3)(A), (E)). A water commission created and organized by local governments under another state's law is likely a political subdivision (Davis v. Powell's Valley Water Dist. recognized water districts as political subdivisions under Kentucky law; Tenn. Att'y Gen. Op. 03-17 recognized utility districts as municipal corporations). The contract route is straightforward.

The membership question (Question 2) is harder because no Tennessee statute expressly authorizes a Tennessee city to be a voting member of an out-of-state public agency. Tennessee follows Dillon's Rule: municipalities have only those powers expressly granted or necessarily implied (Allmand v. Pavletic; Southern Constructors v. Loudon County Bd. of Educ.). Courts resolve doubts against authority (Southern Constructors).

But the Interlocal Cooperation Act fairly implies the power. § 12-9-102's purpose clause emphasizes cooperation "on a basis of mutual advantage." § 12-9-104(a)(1) lets a Tennessee public agency exercise its powers "jointly with any public agency of any other state or the United States to the extent that laws of such other state or of the United States permit such joint exercise or enjoyment." That cross-border joint-exercise language reads naturally to permit membership in an out-of-state joint enterprise, including a water commission.

Membership comes with constraints. Unlike a § 12-9-108 contract, a § 12-9-104 joint undertaking is subject to § 12-9-104(c)-(f). Subdivision (b) requires authorization by the governing bodies of all participating public agencies. Subdivision (e)(1) says no agreement may relieve a public agency of obligations imposed by law. As the AG explained (citing Op. 06-81), a Tennessee city cannot become a member of a water commission that exercises powers the city itself does not possess. The city's authority is the floor of what the joint enterprise can do on its behalf.

Currency note

This opinion was issued in 2014. 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

What is the Interlocal Cooperation Act?

A statutory framework letting Tennessee local governments cooperate with each other and (with appropriate findings about the other state's law) with out-of-state local governments to deliver services more efficiently. § 12-9-102 explains the purpose: "to permit local governmental units the most efficient use of their powers by enabling them to cooperate with other localities on a basis of mutual advantage."

What is the difference between contracting and membership?

A contract under § 12-9-108 is bilateral: one party (the city) buys a service from another (the water commission). Membership under § 12-9-104 is a joint enterprise: the city becomes part of the entity that delivers the service. The contract path is simpler; the membership path adds substantive procedural protections and operational constraints.

What did the AG mean about powers the city itself does not possess?

§ 12-9-104(e)(1) says joint undertakings cannot relieve a public agency of legal obligations. The AG read that to mean the joint enterprise cannot effectively give a Tennessee city more authority than Tennessee law gives it. If an out-of-state commission has powers (eminent domain over a multistate watershed, for example) that the Tennessee city itself does not possess, the city cannot become a voting member if that would functionally extend its own authority through the joint enterprise.

Who has to approve membership?

Both governing bodies. The Tennessee city's governing body must authorize the agreement under § 12-9-104(b), and the other state's commission must authorize it under its own law.

Does this work for water supply across the state line?

Yes, this is the paradigm case. A Tennessee city near a state line could obtain water from an out-of-state regional utility under either a § 12-9-108 contract or a § 12-9-104 joint undertaking. The choice usually depends on whether the city wants a service relationship (contract) or a governance stake (membership).

What general authorities does a Tennessee city have over water service?

§§ 7-34-104, 7-35-416, and 9-21-107 give Tennessee cities general authority to own and operate water systems and to contract for water services. The Interlocal Cooperation Act builds on that base.

Background and statutory framework

The Interlocal Cooperation Act addresses a recurring problem in local government: services often cross municipal boundaries (and sometimes state lines), but Dillon's Rule (Tennessee follows it) tightly limits municipal authority. The Act gives a statutory authorization sufficient to support cooperative arrangements that would otherwise be doubtful. The 1976 enactment and subsequent amendments reflect Tennessee's willingness to enable cooperative service delivery while preserving statutory and constitutional limits on municipal power.

The contracting vs. membership distinction is the heart of the analysis. Contracts are easy; both sides agree to a discrete service or transaction. Memberships entail governance rights and responsibilities, so Tennessee insists on procedural and substantive constraints to ensure the Tennessee participant does not exceed its own authority through joint action.

Citations

• Tenn. Code Ann. §§ 12-9-101 to -112 (Tennessee Interlocal Cooperation Act)
• Tenn. Code Ann. § 12-9-102 (purpose: cooperation on basis of mutual advantage)
• Tenn. Code Ann. § 12-9-103(1) (definition of local government entity)
• Tenn. Code Ann. § 12-9-103(3)(A), (E) (definition of public agency includes Tennessee and out-of-state political subdivisions)
• Tenn. Code Ann. § 12-9-104(a)(1) (joint exercise of powers across state lines)
• Tenn. Code Ann. § 12-9-104(b) (governing body authorization required)
• Tenn. Code Ann. § 12-9-104(c)-(f) (joint undertaking restrictions)
• Tenn. Code Ann. § 12-9-104(e)(1) (no relief from obligations imposed by law)
• Tenn. Code Ann. § 12-9-108 (contracting authority between public agencies)
• Tenn. Code Ann. § 7-34-104 (city utility authority)
• Tenn. Code Ann. § 7-35-416 (water and sewerage system authority)
• Tenn. Code Ann. § 9-21-107 (municipal capital improvement authority)
• Allmand v. Pavletic, 292 S.W.3d 618 (Tenn. 2009) (Tennessee Supreme Court; municipalities have only express or necessarily implied powers)
• Southern Constructors, Inc. v. Loudon County Bd. of Educ., 58 S.W.3d 706 (Tenn. 2001) (Tennessee Supreme Court; doubt resolved against municipal authority; implied power from express grant)
• Davis v. Powell's Valley Water Dist., 920 S.W.2d 75 (Ky. Ct. App. 1995) (Kentucky Court of Appeals; water district as political subdivision)
• Tenn. Att'y Gen. Op. 03-17 (Feb. 19, 2003) (utility district as municipal corporation)
• Tenn. Att'y Gen. Op. 06-81 (May 1, 2006) (joint undertaking cannot exceed member city authority)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2014/op14-065.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
June 25, 2014
Opinion No. 14-65
City's Ability to Contract with Out-of-State Water Commission

QUESTIONS

1. Is a Tennessee city authorized to contract for the provision of water services with a water commission created under the laws of another state?

2. Is a Tennessee city authorized to serve as a member of a water commission created under the laws of another state?

OPINIONS

1. Under Tenn. Code Ann. § 12-9-108, a Tennessee city is authorized to contract with a political subdivision of another state for the provision of water services. A water commission organized by local governments of another state would likely meet the definition of "political subdivision" as used in this statutory scheme.

2. Assuming the other state's laws so permit, a Tennessee city may become a member of an out-of-state water commission pursuant to the Interlocal Cooperation Act, Tenn. Code Ann. §§ 12-9-101 to -112, under an agreement that satisfies the requirements of § 12-9-104.

ANALYSIS

1. Tennessee cities are generally authorized to own and operate water systems and to contract for the provision of water. See, e.g., Tenn. Code Ann. §§ 7-34-104; 7-35-416; 9-21-107. In addition, the Interlocal Cooperation Act, Tenn. Code Ann. §§ 12-9-101 to -112, authorizes cooperative action between and among governmental entities. Tenn. Code Ann. § 12-9-108 provides:

Any one (1) or more public agencies may contract with any one (1) or more public agencies to perform any governmental service, activity or undertaking which each public agency entering into the contract is authorized by law to perform; provided, that such contract shall be authorized by the governing body of each party to the contract. Such contract shall set forth fully the purposes, powers, rights, objectives, and responsibilities of the contracting parties. Contracts entered into pursuant to this section need not conform to the requirements set forth in this chapter for contracts for joint undertakings.

The term "public agency" includes "[a]ny political subdivision of this state" and "[a]ny political subdivision of another state." Tenn. Code Ann. § 12-9-103(3)(A), (E). A city is clearly a political subdivision within the meaning of the statute, so a Tennessee city is authorized to contract with a political subdivision of another state for the provision of water services. A water commission created under the laws of another state and organized by local governments of that state would likely also be a political subdivision under this statutory scheme. See Tenn. Code Ann. § 12-9-103(1) (defining "[l]ocal government entity" to include a "utility district . . . or other political subdivision of this state"); Tenn. Att'y Gen. Op. 03-17, at 3 (Feb. 19, 2003) ("A utility district, once incorporated, is a municipality or public corporation."). See also, e.g., Davis v. Powell's Valley Water Dist., 920 S.W.2d 75, 78 (Ky. Ct. App. 1995) ("a water district is a type of special district which constitutes a political subdivision of the [C]ommonwealth [of Kentucky]").

2. No general Tennessee law explicitly confers upon a city authority to become a member of an out-of-state water commission, and the general rule is that municipalities may exercise only those express or necessarily implied powers delegated to them by the legislature in their charters or under statutes. See, e.g., Allmand v. Pavletic, 292 S.W.3d 618, 625 (Tenn. 2009). If there is any fair doubt whether a local governmental entity possesses a particular authority, courts should resolve that doubt against the existence of that authority. Southern Constructors, Inc. v. Loudon County Board of Education, 58 S.W.3d 706, 710 (Tenn. 2001). Nevertheless, the General Assembly can supply direct evidence of its intent to grant broad local governmental powers when it chooses to do so. Id. at 712-13. In Southern Constructors, for example, the Tennessee Supreme Court found that the power of county school boards to arbitrate disputes arising out of construction contracts could be fairly implied by their express authority to contract. Id. at 714-18.

The power to become a member of a political subdivision of another state (by becoming a member of an out-of-state water commission) is fairly implied by the Interlocal Cooperation Act. This act confers broad authority on cities, as well as other Tennessee political subdivisions, to enter into joint projects with other political subdivisions both in and outside Tennessee. Tenn. Code Ann. § 12-9-102 provides:

It is the purpose of this chapter to permit local governmental units the most efficient use of their powers by enabling them to cooperate with other localities on a basis of mutual advantage and thereby provide services and facilities in a manner and pursuant to forms of governmental organization that will accord best with geographic, economic, population, and other factors influencing the needs and development of local communities.

(Emphases added.) And Tenn. Code Ann. § 12-9-104(a)(1) provides:

Any power or powers, privileges or authority exercised or capable of exercise by a public agency of this state, . . . may be exercised and enjoyed jointly with any other public agency of this state having the power or powers, privilege or authority, and jointly with any public agency of any other state or the United States to the extent that laws of such other state or of the United States permit such joint exercise or enjoyment. . . .

(Emphasis added.)

In contrast to a city's contracting with another public agency for water services pursuant to § 12-9-108, a city's becoming a voting member of another public agency pursuant to § 12-9-104 would be subject to requirements for joint undertakings under § 12-9-104. Consequently, while a city would have authority to become a member of an out-of-state water commission, such an undertaking could not affect the "powers, privileges or authority" of individual public officers or of an agency of the city with a separate governing body. Tenn. Code Ann. § 12-9-104(a)(1). Furthermore, appropriate action of the governing bodies of the participating public agencies must be secured before any agreement for joint or cooperative action may enter into force. Tenn. Code Ann. § 12-9-104(b). Tenn. Code Ann. § 12-9-108, discussed above, also requires that a contract between or among public agencies "be authorized by the governing body of each party to the contract." And such an agreement would be subject to all of the restrictions and limitations set out in Tenn. Code Ann. § 12-9-104(c)-(f). Subdivision (e)(1), for instance, provides that "[n]o agreement made pursuant to this chapter shall relieve any public agency of any obligation or responsibility imposed upon it by law." Therefore, a city may not become a member of a water commission if such commission exercises any powers that the city itself does not possess. See Tenn. Att'y Gen. Op. 06-81 (May 1, 2006).

ROBERT E. COOPER, JR.
Attorney General and Reporter

JOSEPH F. WHALEN
Solicitor General

ANN LOUISE VIX
Senior Counsel

Requested by:
The Honorable Joshua Evans
State Representative
G28 War Memorial Building
Nashville, Tennessee 37243