Can Tennessee give state gasoline tax revenue to a private property owners association to maintain private roads that the public uses?

Subject

Opinion No. 13-32, Allocation of State Gasoline Tax Revenue to Private Property Owners Association, April 24, 2013

Plain-English summary

Tennessee imposes a privilege tax on all gasoline imported into or manufactured in the state (Tenn. Code Ann. § 67-3-201(a)). Most of the revenue goes to counties and municipalities for public roads, bridges, and other public ways (§ 67-3-901). Senator Overbey asked whether the legislature could constitutionally direct some gasoline tax revenue to a private property owners association for maintenance of private roads that are open to public travel.

The AG concluded yes. Article II, sections 24 and 31, of the Tennessee Constitution require that public money be appropriated only for public purposes. But the "public purpose" requirement isn't broken when a private entity is involved or when the state doesn't own the asset. The test is whether the ultimate end is a public benefit, not who owns the road or who incidentally profits.

The Tennessee Supreme Court has long held that building and maintaining roads used by the public is a public purpose, even where the roads are privately owned. Pack v. Southern Bell Tel. & Tel. Co., 215 Tenn. 503, 387 S.W.2d 789 (1965), quotes Minneapolis Gas Co. v. Zimmerman for the proposition that "[t]he mere fact that some private interest may derive an incidental benefit from the activity does not deprive the activity of its public nature if its primary purpose is public." Bedford County Hospital v. Browning, 189 Tenn. 227, 225 S.W.2d 41 (1949), put it even more directly: "the vital point in all such appropriations is whether the purpose is public; and that, if it is, it does not matter whether the agency through which it is dispensed is public or is not."

So a statute directing part of the gasoline tax to a private property owners association to maintain private roads that the public actually drives on would be constitutionally defensible, provided the legislative findings establish that the roads serve the public.

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 Tennessee public purpose doctrine remains stable. Pack, Bedford County Hospital, and the underlying principles continue to govern. Specific gasoline tax rates and allocation formulas have changed since 2013 (Tennessee's IMPROVE Act of 2017 raised the fuel tax substantially). Anyone evaluating a current proposal should pull the current statutes and the current allocation formula.

Background and statutory framework

The gasoline tax. Tenn. Code Ann. § 67-3-201(a) imposes a privilege tax on gasoline imported into, manufactured, or produced in Tennessee. The revenue goes to the highway fund and is then distributed under § 67-3-901, which allocates a portion to counties and municipalities for building and maintaining public roads, bridges, and other public ways. There was no statutory provision in 2013 for distributing any of the revenue to a private property owners association.

The public purpose constraint. Both Article II, section 24 (no public money expended except pursuant to appropriations made by law) and Article II, section 31 (general provision on public funds and credit) have been interpreted to prohibit using public money for non-public purposes. Tennessee courts have addressed the "public purpose" question primarily under section 31, but the AG had previously opined that the same requirement applies under section 24. Op. 00-104 (June 1, 2000); Op. 83-489 (Nov. 10, 1983).

The Tennessee public purpose test. From Pack:

What is a 'public purpose' that will justify the expenditure of public money is not capable of a precise definition, but the courts generally construe it to mean such an activity as will serve as a benefit to the community as a body and which, at the same time, is directly related to the functions of government.

The mere fact that some private interest may derive an incidental benefit from the activity does not deprive the activity of its public nature if its primary purpose is public.

215 Tenn. at 515-16, 387 S.W.2d at 794.

State ownership not required. Bedford County Hospital, 225 S.W.2d at 44, made the point explicit: the test is "not authorization or retention of title by the State, but rather the right of use by the State for its benefit" (emphasis in original). And quoting Hager v. Kentucky Children's Home Society, 83 S.W. 605 (Ky. 1904): "the vital point in all such appropriations is whether the purpose is public; and that, if it is, it does not matter whether the agency through which it is dispensed is public or is not; that the appropriation is not made for the agency, but for the object which it serves; the test is in the end, not in the means."

Applying the test. Building and maintaining a road that the public uses is a public purpose. Pack, 387 S.W.2d at 792. The road's ownership doesn't change the analysis. If the road is open to public travel and the public actually drives on it, then using state money to maintain it serves a public purpose.

The AG noted no other constitutional concerns with legislation directing a portion of gasoline tax revenue to a private property owners association maintaining private roads open to public travel. So the legislation would be constitutionally defensible.

Common questions

Doesn't using public money for private roads violate the public purpose doctrine?

No, if the roads are actually used by the public. The Tennessee public purpose test is about the end served, not the asset's ownership. Pack and Bedford County Hospital both confirm that a privately-owned facility can serve a public purpose, especially when it provides a service (transportation) that government would otherwise be responsible for.

What if some private owners benefit from the road being maintained?

That's fine. Under Pack, incidental private benefit doesn't defeat the public purpose if the primary purpose is public. A road that serves both the abutting property owners and the general public is no less a public purpose because the abutters happen to benefit.

Does the road have to actually be open to the public?

That's the linchpin of the analysis. The opinion specifically conditioned its conclusion on the roads being "open to travel by the general public." A gated private community's internal roads, accessible only to residents, would be a much harder case. The opinion didn't reach that scenario.

What if a private association mismanages the funds?

The opinion didn't address this. As a practical matter, legislation directing public money to a private entity would normally include accountability mechanisms (reporting requirements, audit rights, restrictions on use). The constitutional question is whether the appropriation itself is allowed; whether the appropriation should include accountability provisions is a separate legislative drafting question.

Were there other constitutional concerns the AG flagged?

The opinion stated: "This Office is unaware of any other constitutional concerns with legislation providing that a portion of gasoline tax revenue be allocated to a private property owners association to maintain private roads open to public travel." The public purpose framework was the main constitutional analysis.

Citations

Tenn. Code Ann. § 67-3-201(a) (gasoline privilege tax); § 67-3-901 (county/municipal road allocations). Tenn. Const. art. II, § 24 (appropriations); art. II, § 31 (state finance). Cases: Pack v. Southern Bell Tel. & Tel. Co., 215 Tenn. 503, 387 S.W.2d 789 (1965); Bedford County Hospital v. Browning, 189 Tenn. 227, 225 S.W.2d 41 (1949); Hager v. Kentucky Children's Home Society, 119 Ky. 235, 83 S.W. 605 (1904); Minneapolis Gas Co. v. Zimmerman, 253 Minn. 164, 91 N.W.2d 642 (1958). Prior AG opinions: Op. 12-07 (Jan. 13, 2012); Op. 00-104 (June 1, 2000); Op. 83-489 (Nov. 10, 1983).

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-032.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

April 24, 2013

Opinion No. 13-32

Allocation of State Gasoline Tax Revenue to Private Property Owners Association

QUESTION

Would allocating a portion of the state gasoline tax revenue to a private property owners association for the purpose of maintaining private roads that are open to travel by the general public be constitutionally permissible?

OPINION

Yes. The building and maintenance of roads used by the public is a public purpose, even if the roads are privately owned, so that allocation of State revenues for those purposes is permissible under Article II, Sections 24 and 31, of the Tennessee Constitution.

ANALYSIS

The General Assembly has imposed a privilege tax on all gasoline imported into or manufactured or produced in Tennessee. Tenn. Code Ann. § 67-3-201(a). A portion of the gasoline tax revenue is allocated to counties and municipalities for the building and maintenance of roads, bridges, and other public ways. Tenn. Code Ann. § 67-3-901. Tennessee law does not currently provide for the allocation of any part of the gasoline tax revenue to a private property owners association for the purpose of maintaining private roads that are open to the public. The question presented is whether such a provision, if enacted, would be constitutional.

As noted in a recent opinion of this Office, Tennessee courts have interpreted Article II, Sections 24 and 31, of the Tennessee Constitution, to prohibit the appropriation of public monies for other than public purposes. See Tenn. Att'y Gen. Op. No. 12-07, at 3 (Jan. 13, 2012). Tennessee courts have reviewed the "public purpose" provision under Article II, Section 31, but do not appear to have done so with regard to Article II, Section 24. See Tenn. Att'y Gen. Op. No. 00-104, at 2 (June 1, 2000). Nonetheless, this Office previously opined that the "public purpose" requirement of Article II, Section 31, is applicable to Article II, Section 24. Id. (citing Tenn. Att'y Gen. Op. 83-489 (Nov. 10, 1983)).

The Tennessee Supreme Court has long acknowledged that the building and maintenance of public roads is a public purpose. Pack v. Southern Bell Tel. & Tel. Co., 215 Tenn. 503, 510, 387 S.W.2d 789, 792 (1965). Because an activity may serve a public purpose even though a private person benefits from it, it is not necessary that the State own the roads being built and maintained. As the Tennessee Supreme Court explained:

What is a 'public purpose' that will justify the expenditure of public money is not capable of a precise definition, but the courts generally construe it to mean such an activity as will serve as a benefit to the community as a body and which, at the same time, is directly related to the functions of government.

The mere fact that some private interest may derive an incidental benefit from the activity does not deprive the activity of its public nature if its primary purpose is public.

Id. at 515-16, 387 S.W.2d at 794 (quoting Minneapolis Gas Co. v. Zimmerman, 253 Minn. 164, 91 N.W.2d 642 (1958)). The public purpose test "is not authorization or retention of title by the State, but rather the right of use by the State for its benefit." Bedford County Hospital v. Browning, 189 Tenn. 227, 235, 225 S.W.2d 41, 44 (1949) (emphasis in original). The Court in Bedford observed that

the vital point in all such appropriations is whether the purpose is public; and that, if it is, it does not matter whether the agency through which it is dispensed is public or is not; that the appropriation is not made for the agency, but for the object which it serves; the test is in the end, not in the means.

Id., 225 S.W.2d at 45 (quoting Hager v. Kentucky Children's Home Society, 119 Ky. 235, 83 S.W. 605 (1904)). Accordingly, "the true test of public purpose as regards the expenditure of public funds is in the end or total result, and definitely not the element of State control or use." Pack, 387 S.W.2d at 795.

This Office is unaware of any other constitutional concerns with legislation providing that a portion of gasoline tax revenue be allocated to a private property owners association to maintain private roads open to public travel. Accordingly, such legislation is constitutionally defensible.

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

NICHOLAS G. BARCA
Assistant Attorney General

Requested by:
The Honorable Doug Overbey
State Senator
4 Legislative Plaza
Nashville, Tennessee 37243-0208