Can a Tennessee county water and wastewater authority extend service into Georgia or into other Tennessee counties outside its original service area?

Subject

Opinion No. 11-53, Powers of Water and Wastewater Treatment Authority Outside of its Service Area, June 30, 2011

Plain-English summary

Representative Gerald McCormick asked four practical questions about the Hamilton County Water and Wastewater Treatment Authority, the public agency that runs sewers for the unincorporated parts of Hamilton County and several incorporated cities around Chattanooga. The questions all dealt with whether the Authority's reach can cross either the Tennessee/Georgia state line or the Hamilton/Meigs County line.

The AG's bottom-line answer to all four questions was yes. The statute creating these authorities expressly authorizes them to "plan, establish, acquire, construct, improve and operate one (1) or more treatment works within or without the creating and participating governmental entities and within this state and within any adjoining state." That phrase ("any adjoining state") does the heavy lifting. The Hamilton County authority therefore can:

1. Contract to provide sewer service to Lookout Mountain, Georgia (a separately incorporated city just across the state line from Lookout Mountain, Tennessee).
2. Own pipes, easements, and pump stations physically located in Georgia for that purpose.
3. Accept ownership of a privately developed sewer system in Meigs County, Tennessee (an adjacent Tennessee county) and operate it there.
4. Accept ownership of a privately developed sewer system in Catoosa County, Georgia.

Two big caveats. First, when the Authority operates in Georgia, Georgia law governs the Authority's activities there. Georgia has parallel interlocal-cooperation legislation under Ga. Code Ann. § 36-69A-8 that allows the Authority to enter an interlocal agreement with a Georgia city or county. Second, even within Tennessee, an authority cannot just barge into the franchise area of an existing utility district. Under Tenn. Code Ann. § 5-6-120(a)(1), an authority is the sole and exclusive provider in its own service area, but its service area cannot include territory already served by another governmental entity. Utility districts have similar exclusive-franchise protection under Tenn. Code Ann. § 7-82-301(a)(1)(B), and that exclusivity can only be modified by the prescribed legal process.

Currency note

This opinion was issued in 2011. 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 Water and Wastewater Treatment Authority Act has been amended over the years, and any specific scenario involving cross-border or cross-district utility service should be checked against current versions of Title 68, Chapter 221 and Title 7, Chapter 82. Georgia interlocal law has also evolved. Anyone planning an actual transaction along these lines should retain Tennessee and Georgia utility counsel.

Background and statutory framework

The authority's creation and powers. Under Tenn. Code Ann. § 68-221-604, a city, metropolitan government, or county may create a water and wastewater treatment authority. Tenn. Code Ann. § 68-221-607(a) gives the authority broad operational powers: planning, establishing, acquiring, constructing, improving, and operating treatment works "within or without the creating and participating governmental entities and within this state and within any adjoining state." Subsection (a)(3) allows the authority to acquire real or personal property "by gift, lease or purchase, for any of the purposes herein provided."

The exclusive-service-area framework. Tenn. Code Ann. § 5-6-120(a)(1) makes an authority the sole and exclusive provider of its authorized services in its designated service area, but the service area "shall not include any area located within the boundaries of another governmental entity providing the same function or service on the date the service area is established." The authority may cede portions of its service area to another governmental entity if its board finds the public convenience requires it. Utility districts have similar protection under Tenn. Code Ann. § 7-82-301(a)(1)(B), and the City of Crossville and White House Gas Utility District cases hold that a utility district's exclusive franchise area can only be modified by the county executive of the county where the district was incorporated.

Interlocal agreements with Georgia. Tenn. Code Ann. § 12-9-108 authorizes Tennessee public agencies to contract with other public agencies (including political subdivisions of other states) to perform governmental services. Ga. Code Ann. § 36-69A-8 is the mirror provision on the Georgia side. So an interlocal agreement between the Hamilton authority and the City of Lookout Mountain, Georgia is the structurally appropriate vehicle.

Common questions

Can a Tennessee water authority simply walk into Georgia and start hooking up customers?

No. The authority has Tennessee statutory authority to operate in Georgia, but it does not have Georgia regulatory permission. It needs to enter an interlocal agreement (or similar arrangement) with the relevant Georgia local government and comply with Georgia law, including any Georgia franchise rights of an existing utility there. Tennessee law gives the authority the power to act; Georgia law tells the authority how it must act once it does.

Could the Hamilton County authority bypass an existing utility district in Meigs County by accepting a private developer's transferred system?

No. If a Meigs County utility district already holds the exclusive franchise for sewer service in that area, the authority cannot displace it. The authority "may not extend its service area into Meigs County and become the exclusive provider of sewer services there if the area in question falls within the boundaries of another governmental entity already providing the service." Acceptance of a transferred system would still leave the existing utility district's exclusive franchise intact, and the Authority's power would be limited accordingly.

Does the Authority own property in Georgia like a private company would?

Effectively yes, but subject to Georgia property law. Tenn. Code Ann. § 68-221-607(a)(3) lets the Authority acquire real or personal property "for any of the purposes herein provided." Property physically in Georgia is then governed by Georgia title, recording, eminent-domain, and utility-easement law, not Tennessee's.

Why does the AG keep saying "subject to applicable Georgia law"?

Because state authority over public utilities is generally not extraterritorial. Tennessee can authorize its own creature (the Authority) to act, but Tennessee cannot make Georgia accept that action on Georgia soil. The Authority's Georgia operations are layered: Tennessee says yes, but Georgia gets to set the regulatory and procedural rules for how the Authority actually does it.

What happens if a private developer transfers a sewer system to the Authority but the Authority can't legally serve there?

Practically, the Authority would refuse the transfer at the board level. The opinion does not address what happens to the developer's investment if the transfer fails. That is a private contractual problem between the developer and any prospective acquirer.

Citations

• Tenn. Code Ann. §§ 68-221-601 et seq. (Water and Wastewater Treatment Authority Act)
• Tenn. Code Ann. §§ 68-221-604, -604(e)(1), -607, -607(a)(2), -607(a)(3)
• Tenn. Code Ann. § 5-6-120
• Tenn. Code Ann. § 7-82-301(a)(1)(B)
• Tenn. Code Ann. § 12-9-108 (Interlocal Cooperation Act)
• Ga. Code Ann. § 36-69A-8
• City of Crossville v. Middle Tennessee Utility District, 208 Tenn. 268, 345 S.W.2d 865 (1961)
• White House Gas Utility District v. Cross Plains Natural Gas Utility District, 60 Tenn. App. 162, 445 S.W.2d 459 (1969)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2011/op11-053.pdf

Original opinion text

June 30, 2011
Opinion No. 11-53
Powers of Water and Wastewater Treatment Authority Outside of its Service Area

QUESTIONS

1. The Hamilton County Water and Wastewater Treatment Authority (the "Authority") was created under Tenn. Code Ann. §§ 68-221-601, et seq. Is the Authority authorized to provide sewer services to customers located in Lookout Mountain, Georgia?

2. If the answer to question 1 is yes, is the Authority authorized to own parts of the sewer system, including easements, piping, and pump stations, that are located in Georgia?

3. A private developer has proposed creating a private residential development in Meigs County, Tennessee, which borders on Hamilton County. The developer would build a private sewer system in a subdivision and then transfer ownership and operation of the system to the Authority. Is the Authority authorized to accept the system and operate it in Meigs County, Tennessee?

4. A private developer has proposed creating a private residential development in Catoosa County, Georgia, which borders on Hamilton County. The developer would build a private sewer system in a subdivision and then turn over all ownership and operations to the Authority. Is the Authority authorized to accept the system and operate it in Catoosa County, Georgia?

OPINIONS

1. Yes, under its governing statute, the Authority is authorized to provide sewer service to customers located in Lookout Mountain, Georgia. Should the Authority opt to provide this service, the Authority would also be subject to any applicable Georgia law as well as the rights and powers of any local government or private utility providing service in the same area.

2. Yes, under its governing statute, the Authority is authorized to acquire and operate any property necessary to provide sewer service in Georgia. As stated in the answer to Question 1, the Authority would then be subject to any applicable Georgia law and to the rights and powers of any local government or private utility providing service in the same area.

3. Yes, under its governing statute, the Authority is authorized to own and operate a treatment works in Meigs County, Tennessee. The Authority nonetheless is subject to the rights and powers of any local government or private utility providing service in the same area.

4. Yes, under its governing statute, the Authority is authorized to own and operate a treatment works in Catoosa County, Georgia. As stated in the answer to Questions 1 and 2, the Authority would also be subject to any applicable Georgia law and the rights and powers of any local government or private utility providing service in the same area.

ANALYSIS

This opinion concerns the authority of the Hamilton County Water and Wastewater Treatment Authority (the "Authority") to own and operate utility systems outside its service area. The Authority was created under Tenn. Code Ann. §§ 68-221-601, et seq. According to the Authority's web site, the Authority is responsible for the public sewer system in the unincorporated areas of Hamilton County, Tennessee and in East Ridge, Lakesite, Lookout Mountain, Red Bank, Ridgeside, Signal Mountain, and Soddy Daisy. All of these cities are incorporated in Tennessee and located in Hamilton County.

Under Tenn. Code Ann. § 68-221-604, a city, metropolitan government, or county may create a water and wastewater treatment authority. The government creating the entity and any participating governmental entity are authorized by agreement to transfer their treatment works properties, functions, service areas, and outstanding obligations to the authority. Tenn. Code Ann. § 68-221-604(e)(1).

Tenn. Code Ann. § 68-221-607 lists the powers of an authority created under this statute. The statute provides in relevant part:

(a) An authority has all powers necessary to accomplish the purposes of this part (excluding the power to levy and collect taxes) including, but not limited to, the following:

(2) Plan, establish, acquire, construct, improve and operate one (1) or more treatment works within or without the creating and participating governmental entities and within this state and within any adjoining state;

(3) Acquire real or personal property of any interest therein by gift, lease or purchase, for any of the purposes herein provided; and to sell, lease or otherwise dispose of any such property[.]

These statutes must be read together with Tenn. Code Ann. § 5-6-120, which provides:

(a)(1) The duties of the county mayor in regard to any petition filed pursuant to title 7, chapter 82, are transferred to the water and wastewater treatment authority board under title 68, chapter 221, part 6 in any county that has created such authority. From and after the creation of a water and wastewater treatment authority and the establishment of its service area, the authority shall be the sole and exclusive provider of its authorized services in its service area. The designated service area for any particular function or service shall not include any area located within the boundaries of another governmental entity providing the same function or service on the date the service area is established.

1. Contractually Providing Sewer Service in Lookout Mountain, Georgia

The first question is whether the Authority is authorized to provide sewer service to customers located in Lookout Mountain, Georgia. We assume that Lookout Mountain, Georgia and Lookout Mountain, Tennessee are two separately incorporated cities on each side of the Georgia/Tennessee boundary. Under Tenn. Code Ann. § 68-221-607(a)(2), the Authority is authorized to "[p]lan, establish, acquire, construct, improve and operate one (1) or more treatment works within or without the creating and participating governmental entities and within this state and within any adjoining state[.]" Clearly, then, under its governing statute, the Authority is authorized to provide sewer service to customers located in Lookout Mountain, Georgia. But the Authority is also subject to any applicable Georgia law and the rights and powers of any local government or private utility providing service in the same area.

Under Tennessee law, a Tennessee public agency may contract with another public agency to perform any governmental service that each agency entering into the contract is authorized by law to perform. Tenn. Code Ann. § 12-9-108. The Authority would be a "public agency" with this power. Georgia law also authorizes counties and cities to contract with any one or more public agencies of another state to perform any governmental service each public agency entering into the contract is authorized to perform. Ga. Code Ann. § 36-69A-8. Thus, an interlocal agreement between the Authority and the City of Lookout Mountain, Georgia could provide a legal framework for the Authority to provide these services.

2. Owning and Operating a Sewer System in Lookout Mountain, Georgia

The second question is whether the Authority may own parts of the sewer system, including easements, piping, and pump stations, that are located in Georgia. As previously discussed, the Authority's governing statute expressly authorizes it to own and operate a treatment works outside the State of Tennessee. Tenn. Code Ann. § 68-221-607(a)(2). Subsection (a)(3) of the same statute authorizes the Authority to "[a]cquire real or personal property or any interest therein by gift, lease or purchase, for any of the purposes herein provided[.]" Those purposes would include operating a treatment works. For this reason, under its governing statutes, the Authority may own parts of the sewer system located in Georgia, subject to applicable Georgia law and the rights of any local government or private utility providing service in the same area.

3. Owning and Operating a Sewer System in Meigs County, Tennessee

The next question concerns a proposed private development in the adjacent county of Meigs, Tennessee. The Authority by its governing statutes is expressly authorized to own and operate a treatment works "within or without the creating or participating governmental entities" and within Tennessee. Tenn. Code Ann. § 68-221-607(a)(2). Thus, the Authority is authorized to accept and operate a privately developed sewer system in Meigs County, Tennessee.

The Authority, however, is subject to the rights and powers of any local government or private utility providing service in the same area. Under Tenn. Code Ann. § 5-6-120(a)(1), a water and wastewater treatment authority is the sole and exclusive provider of its authorized services in its "service area," and the designated service area shall not include any area located within the boundaries of another governmental entity providing the same function or service on the date the service area is established. Thus, the Authority may not extend its service area into Meigs County and become the exclusive provider of sewer services there if the area in question falls within the boundaries of another governmental entity already providing the service. For example, so long as a utility district continues to furnish any of the utility services it is authorized to furnish, it is ordinarily the sole public corporation authorized to provide these services within the district. Tenn. Code Ann. § 7-82-301(a)(1)(B). Courts have concluded that the exclusive franchise area of a utility district can only be modified by the county executive for the county in which the petition for incorporation was presented and granted. City of Crossville v. Middle Tennessee Utility District, 208 Tenn. 268, 345 S.W.2d 865, 867 (1961); White House Gas Utility District v. Cross Plains Natural Gas Utility District, 60 Tenn. App. 162, 445 S.W.2d 459 (1969).

4. Owning and Operating a Sewer System in Catoosa County, Georgia

The last question concerns a proposed project in the adjacent county of Catoosa County, Georgia. As discussed in the answers to Questions 1 and 2, statutes governing the Authority authorize it to own and operate a treatment works in Georgia. The Authority would be subject to any applicable Georgia law and the rights and powers of any local government or private utility providing service in the same area.

ROBERT E. COOPER, JR.
Attorney General and Reporter

ANN LOUISE VIX
Senior Counsel

Requested by:
The Honorable Gerald McCormick
State Representative
18A Legislative Plaza
Nashville, Tennessee 37243-0128