Can a Tennessee city spend hotel-motel tax revenue from a 1989 private act on any city department, and can it route the money to the parks and cemetery department as 'recreation' spending?

Plain-English summary

State Representative Judy Barker asked the AG two questions about how Union City could spend the proceeds of its hotel-motel tax. The tax was authorized by Chapter 41 of the 1989 Tennessee Private Acts. Section 3 of that private act said the money had to be used to maintain and increase employment by attracting "manufacturing, industrial, governmental, financial, service, commercial, recreational, and agricultural enterprises" to Union City or nearby Obion County. Section 11 sent the money to the city's general fund.

The first question: did Union City have to keep the hotel-motel money in a single line item, or could it spread the money across multiple departments that might also receive other appropriations? The AG said the private act did not require any particular administrative routing. The city could push the money through any department, provided the spending stayed inside the Section 3 purposes. The fact that a department also received unrelated city-budget money did not disqualify it.

The second question was more pointed. Could the city run the hotel-motel money through the cemetery and parks department on the theory that maintaining city parks "promotes recreation," which Section 3 listed as a goal? The AG concluded no. Section 3 framed "recreation" as one of the desired effects of the spending, but the actual spending obligation was to "induce" enterprises (manufacturing, industrial, recreational, agricultural, etc.) to locate to the city. Running general parks maintenance through the hotel-motel tax did not induce any such enterprise to relocate, so it fell outside what the private act authorized.

The AG distinguished the City of Goodlettsville. Goodlettsville's hotel-motel tax was authorized by Tenn. Code Ann. § 7-4-110(e), which permitted spending "exclusively for tourist related activities within the municipality." That broader framing let Goodlettsville pay for sporting events and similar visitor-attracting activities, but the Union City private act used different and narrower language.

Currency note

This opinion was issued in 2010. 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

Hotel-motel taxes (also called transient occupancy taxes) in Tennessee can be authorized in two ways. The general state law, Tenn. Code Ann. § 7-4-101 et seq., lets cities and counties impose the tax for tourism-related purposes. Some cities had their tax authorized earlier by a private act of the General Assembly, which can specify different rates, spending purposes, and administrative rules for that single city.

Union City's tax came from Chapter 41 of the 1989 Tennessee Private Acts, which allowed up to a 5 percent privilege tax on hotel occupancy. Section 3 of that act anchored every dollar to a single statutory purpose: inducing enterprises in a list of named categories (manufacturing, industrial, governmental, financial, service, commercial, recreational, agricultural) to locate in or near Union City within Obion County. Section 11 funneled the money to the city's general fund to be used only for those Section 3 purposes.

The Goodlettsville comparison in the opinion turned on the difference between the general-law statute's "tourist related activities" language and the Union City private act's enterprise-recruitment language. The same word, "recreation," can sit in two statutes and authorize two different spending plans.

Common questions

Q: Did this opinion mean Union City couldn't fund any park improvements with hotel-motel money?
A: The opinion concluded the money could not be routed through the parks and cemetery department as ordinary recreation spending. The AG did not rule out spending tied to attracting a recreational enterprise (the act named "recreational" as one of the seven enterprise categories), but routine parks maintenance was not the same thing.

Q: Could the city appropriate hotel-motel proceeds and general fund money to the same department?
A: Yes, according to the AG. The private act did not prohibit a department from receiving both. The constraint was on what the hotel-motel money paid for, not whether the department also received other appropriations.

Q: Why was Goodlettsville treated differently?
A: Goodlettsville's hotel-motel tax was authorized under the general statute, Tenn. Code Ann. § 7-4-110(e), which let proceeds be used "exclusively for tourist related activities." That language was broader than Union City's enterprise-recruitment language and covered visitor-attracting events. A 2008 AG opinion (08-158) had read the Goodlettsville statute to allow spending on sporting events and special events that drew outside visitors.

Q: What about other cities with private-act hotel-motel taxes?
A: The AG's reasoning was specific to the wording of the Union City private act. A different city's private act could have different language and produce different results. The AG would not opine generally on every private-act framework.

Citations and references

Statutes:

• Chapter 41, 1989 Tennessee Private Acts (Union City hotel-motel tax)
• Tenn. Code Ann. § 7-4-110(e) (general-law hotel-motel tax authorization, used for the Goodlettsville comparison)

Prior AG opinions:

• Op. Tenn. Att'y Gen. No. 08-158 (Oct. 8, 2008) (Goodlettsville hotel-motel tax)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2010/op10-005.pdf

Original opinion text

Union City Hotel-Motel Tax

QUESTIONS

1. May Union City appropriate some or all of the proceeds received from its hotel-motel tax levied under Chap. No. 41, 1989 Private Acts, to one or more departments of the city which may or may not also receive other appropriations in the city's budget if the department receiving the appropriation from the hotel-motel tax uses the appropriation for the purposes set forth in Section 3 of the Private Act?

2. May Union City also (or instead of its usual appropriation) appropriate proceeds from the hotel-motel tax to the city's cemetery and parks department as a means of "promoting recreation" as set forth in Section 3 of the Private Act?

OPINIONS

1. Yes. The private act authorizing the Union City hotel-motel tax directs that proceeds from the hotel-motel tax are to be allocated to the city's general fund and used exclusively for the purposes specified in the act. The act does not require Union City to disburse the proceeds from the hotel-motel tax to a particular city department, nor does it prohibit a city department receiving hotel-motel tax proceeds from receiving other appropriations. Therefore, Union City may appropriate the proceeds received from its hotel-motel tax to any city department that will use the hotel-motel tax proceeds for the purposes set forth in the private act authorizing the hotel-motel tax.

2. No. The proceeds received from Union City's hotel-motel tax are not intended to be spent directly on "promoting recreation." Instead, Section 3 of the private act authorizing the hotel-motel tax directs that proceeds from the tax are to be spent on "inducing manufacturing, industrial, governmental, financial, service, commercial, recreational, and agricultural enterprises to locate in or near Union City (within Obion County)."

ANALYSIS

1. Chapter 41 of the Tennessee Private Acts of 1989 authorizes the Mayor and Council of Union City "to levy by ordinance a privilege tax, commencing not before January 1, 1990, upon the privilege of occupancy in any hotel of each transient in an amount not to exceed five percent (5%) of the consideration charged by the operator." Section 3 of the private act directs that the proceeds received by Union City from the hotel-motel tax "shall be designated and used to maintain and increase employment opportunities by promoting industry, commerce, tourism, and recreation by inducing manufacturing, industrial, governmental, financial, service, commercial, recreational and agricultural enterprises to locate in or near Union City (in Obion County)." Section 11 directs that the proceeds from the hotel-motel tax "shall be allocated to and placed in the General Fund of the City to be used for the purposes stated in Section 3 of this act."

The private act authorizing the Union City hotel-motel tax mandates that the proceeds received by Union City from its hotel-motel tax must be placed in the city's general fund and used exclusively for the purposes specified in the act. The act does not specify how the proceeds from the hotel-motel tax are to be distributed from the general fund to carry out the specified purposes, although the act does provide that the proceeds or a portion thereof may be distributed to a charitable corporation to expend the funds for any of the uses stated in Section 3. The act does not direct that Union City must distribute its hotel-motel tax proceeds to certain city departments, but not to others; the act only directs that the proceeds from the hotel-motel tax must be used exclusively for the specified purposes. The act also does not prohibit city departments that receive hotel-motel tax proceeds from receiving other appropriations. Accordingly, it is the opinion of this Office that Union City may distribute the proceeds from its hotel-motel tax to any of its departments, so long as the departments receiving hotel-motel tax proceeds use those proceeds for the purposes stated in Section 3 of the private act.

2. This Office is informed that Union City's cemetery and parks department maintains the city's parks for recreational purposes and city funds are appropriated to the department for its operation. We are asked if the city may appropriate proceeds from the hotel-motel tax to the cemetery and parks department, in lieu of or in addition to its usual appropriation, as a means of "promoting recreation" as set forth in Section 3 of the private act.

It is the opinion of this Office that the proceeds received from Union City's hotel-motel tax are not meant to be spent directly on "promoting recreation." Section 3 of the private act authorizing the hotel-motel tax directs that proceeds received from the tax must be spent on "inducing manufacturing, industrial, governmental, financial, service, commercial, recreational, and agricultural enterprises to locate in or near Union City (within Obion County)." The desired effect of this spending is "to maintain and increase employment opportunities by promoting industry, commerce, tourism, and recreation." Although "promoting recreation" is a desired effect of Union City's hotel-motel tax spending, it is clear from Section 3 of the private act that the proceeds from the hotel-motel tax are intended to be spent on inducing certain types of enterprises to locate to Union City. There is no indication that Union City's cemetery and parks department has any direct role in inducing manufacturing, industrial, governmental, financial, service, commercial, recreational, or agricultural enterprises to locate to Union City. Accordingly, proceeds from the hotel-motel tax should not be distributed to the cemetery and parks department for the purpose of "promoting recreation."

In a recent opinion, Op. Tenn. Att'y Gen. No. 08-158 (Oct. 8, 2008), we addressed similar questions regarding the City of Goodlettsville's hotel-motel tax. In that opinion, we determined that Goodlettsville may spend proceeds from its hotel-motel tax on maintenance of facilities and other expenses related to hosting sporting events and other special events that attract visitors from outside of Goodlettsville. Our conclusions regarding how Goodlettsville may spend its hotel-motel tax proceeds are not determinative of the question of how Union City may spend its hotel-motel tax proceeds because the acts authorizing the cities' hotel-motel taxes contain different directions on how the proceeds are to be spent. The statute authorizing Goodlettsville's hotel-motel tax directs that the proceeds are to be used "exclusively for tourist related activities within the municipality." Tenn. Code Ann. § 7-4-110(e). In contrast, the private act authorizing Union City's hotel-motel tax directs that the proceeds are to be used to induce "manufacturing, industrial, governmental, financial, service, commercial, recreational, and agricultural enterprises to locate in or near Union City (within Obion County)." In other words, Goodlettsville's hotel-motel tax proceeds are intended to be spent on inducing tourists to visit Goodlettsville, whereas Union City's hotel-motel tax proceeds are intended to be spent on inducing certain types of enterprises to locate in or near Union City.

ROBERT E. COOPER, JR.
Attorney General and Reporter

BARRY TURNER
Deputy Attorney General

R. MITCHELL PORCELLO
Assistant Attorney General

Requested by:
The Honorable Judy B. Barker
State Representative
24 Legislative Plaza
Nashville, Tennessee 37243-0177