Can a Tennessee city or county buy used equipment from a private seller without bidding, using Craigslist prices to set value?

Subject

Opinion No. 13-44, Purchase of Used or Secondhand Items by Municipalities and Counties, June 10, 2013

Plain-English summary

Tennessee normally requires municipalities and counties to use competitive bidding for purchases. But Tenn. Code Ann. § 12-3-1003(b) creates an exception for used or secondhand items: the municipality or county can buy from a private individual or entity without bidding, as long as:

1. The municipality/county documents the value of the item using either (a) an appraisal by a licensed appraiser, or (b) "the general range of value of the purchased item through a listing in a nationally recognized publication," AND
2. The price isn't more than 5% above the highest value in the documented range.

Sen. Gardenhire asked whether prices listed for similar used items on commercial websites count as a "nationally recognized publication" for valuation purposes.

The AG said no.

The reasoning starts with the word "value." The statute doesn't define it, so courts look to dictionary definitions. Eastman Chemical Co. v. Johnson, 151 S.W.3d 503 (Tenn. 2004). Webster's defines "value" as "the monetary worth of a thing: MARKET PRICE." Read in context, the General Assembly meant fair market value. Lee Medical, Inc. v. Beecher, 312 S.W.3d 515 (Tenn. 2010).

Fair market value isn't just what one seller is asking. It's what a willing buyer and a willing seller would actually agree on, given the actual condition and market. The statute's reference to "nationally recognized publications" contemplates pricing sources that compile fair market data across many actual transactions. Industry-standard examples include:

• Vehicles: NADA Used Car Guide; Kelley Blue Book. Clement v. Clement, 2004 WL 3396472 (Tenn. App. 2004).
• Aircraft: Aircraft Bluebook. CB Aviation, LLC v. Hawker Beechcraft Corp., 2011 WL 5386359 (E.D. Pa. 2011).
• Heavy equipment: Green Guide. Rosebud Co. v. Dept. of Revenue, 849 P.2d 177 (Mont. 1993).

A single listing on a website is one seller's asking price, not market data. The seller's asking price may or may not reflect actual market value. Port Everglades Launch Service, Inc. v. M/Y SITUATIONS, 2011 WL 1196017 (S.D. Fla. 2011), rejected expert testimony on fair market value that relied on listed prices rather than actual sales prices.

So if a Tennessee city or county wants to buy a used pickup truck or a used piece of equipment without bidding, it needs to either get a licensed appraisal or use a nationally recognized pricing publication. Browsing Craigslist or a similar website to set the value doesn't satisfy the statute.

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.

Tenn. Code Ann. § 12-3-1003 has been amended. Anyone advising a current Tennessee municipal or county purchase of used equipment should pull the current statute. The basic principle (you need an authoritative valuation source, not a single seller's asking price) likely remains.

Background and statutory framework

The general rule and the used-item exception. Tennessee normally requires competitive bidding for local government purchases. Tenn. Code Ann. § 12-3-1003(b) creates an exception for used and secondhand items, but requires valuation documentation:

Notwithstanding any charter, private act, or general law requirements, any municipality or any county may purchase used or secondhand articles consisting of goods, equipment, materials, supplies, or commodities from any private individual or entity without public advertisement and competitive bidding as long as the purchasing government documents the general range of value of the purchased item through a listing in a nationally recognized publication or through an appraisal by a licensed appraiser, and the price is not more than five percent (5%) higher than the highest value of the documented range.

Two paths to the no-bidding exception:

• Appraisal path: Licensed appraiser evaluates the specific item. Result: a documented value.
• Publication path: Documented general range of value from a "nationally recognized publication." Result: a documented range.

"Value" means fair market value. Statute doesn't define the term, so courts apply the ordinary meaning. Eastman Chemical. Webster's defines value as "1: a fair return or equivalent in money, goods, or services for something exchanged; 2: the monetary worth of a thing: MARKET PRICE." The legislature, using "value" in a procurement context, meant fair market value. Lee Medical; State v. Bobo, 727 S.W.2d 945 (Tenn. 1987); Weaver v. Woods, 594 S.W.2d 693 (Tenn. 1980).

What counts as a "nationally recognized publication." Tennessee and federal cases recognize specific publications as fair-market-value authorities:

• Vehicles: NADA Used Car Guide, Kelley Blue Book. Clement v. Clement.
• Aircraft: Aircraft Bluebook. CB Aviation.
• Heavy equipment: Green Guide. Rosebud Co..

These publications compile actual market data across many transactions, are produced by recognized trade authorities, and are used industry-wide for valuation purposes.

Why website listings fail the test. A website listing is one seller's asking price for one item. The seller may be ambitious (high price) or motivated (low price). Without aggregation across multiple transactions, a single listing is not market data. Port Everglades Launch Service v. M/Y SITUATIONS, 2011 WL 1196017 (S.D. Fla. 2011), refused to credit expert testimony that relied on listed prices instead of actual sales prices.

Statutory construction. When statute is unambiguous, court applies plain meaning. In re Hogue, 286 S.W.3d 890 (Tenn. 2009). The legislature chose specific language ("nationally recognized publication"), and that language doesn't fit website listings of individual seller asks.

Common questions

Can I use Craigslist or Facebook Marketplace to value items I'm buying for the city?

No. These are individual seller listings, not aggregated fair market data. The statute requires a "nationally recognized publication" or a licensed appraisal. A licensed appraiser could potentially look at comparable listings as one input, but the appraisal itself is what satisfies the statute.

What about KBB, NADA, and similar guides?

Yes. Those are explicitly the kind of publications the statute contemplates. They compile market data across many actual sales and are produced by recognized industry authorities. Most courts treat them as authoritative fair-market-value sources.

What about industry-specific publications for less common items?

Yes, if the publication is nationally recognized in its industry and compiles market data. Aircraft Bluebook, the Green Guide for heavy equipment, and similar industry resources qualify. The opinion specifically cites these.

What if there's no published guide for the kind of item I need to buy?

Use the appraisal path. A licensed appraiser can evaluate the specific item and document the value. This works for unusual items, items where no published guide exists, or items where the published guide doesn't reflect current market conditions.

What's the 5% limit?

After documenting the value range, the price the city/county pays can't exceed the highest documented value by more than 5%. So if NADA says a used truck is worth between $8,000 and $10,000, the city can pay up to $10,500 ($10,000 + 5%). Beyond that, the no-bidding exception doesn't apply and competitive bidding is required.

Does this opinion apply to all government purchases?

The statute applies to municipalities and counties for used or secondhand items. New items, state-level purchases, and items above certain thresholds typically have different rules. This opinion addresses the specific used-item exception in § 12-3-1003(b).

Citations

Tenn. Code Ann. § 12-3-1003 (municipal/county used-item purchases). Cases: Eastman Chemical Co. v. Johnson, 151 S.W.3d 503 (Tenn. 2004); State v. Clark, 355 S.W.3d 590 (Tenn. Crim. App. 2011); Lee Medical, Inc. v. Beecher, 312 S.W.3d 515 (Tenn. 2010); State v. Bobo, 727 S.W.2d 945 (Tenn. 1987); Weaver v. Woods, 594 S.W.2d 693 (Tenn. 1980); Clement v. Clement, 2004 WL 3396472 (Tenn. App. Dec. 30, 2004); CB Aviation, LLC v. Hawker Beechcraft Corp., 2011 WL 5386359 (E.D. Pa. Nov. 8, 2011); Rosebud Co. v. Dept. of Revenue, 849 P.2d 177 (Mont. 1993); Port Everglades Launch Service, Inc. v. M/Y SITUATIONS, 2011 WL 1196017 (S.D. Fla. Mar. 29, 2011); In re Hogue, 286 S.W.3d 890 (Tenn. 2009).

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-044.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 10, 2013

Opinion No. 13-44

Purchase of Used or Secondhand Items by Municipalities and Counties

QUESTION

Is a municipality or county authorized to purchase a used or secondhand item from a private individual or entity without public advertisement and competitive bidding following a valuation of the item based on advertised prices for similar used and secondhand items listed for sale on websites?

OPINION

No.

ANALYSIS

Tennessee law authorizes municipalities and counties to purchase used and secondhand items from private individuals and entities without public advertisement and competitive bidding when certain requirements are met, stating specifically as follows:

Notwithstanding any charter, private act, or general law requirements, any municipality or any county may purchase used or secondhand articles consisting of goods, equipment, materials, supplies, or commodities from any private individual or entity without public advertisement and competitive bidding as long as the purchasing government documents the general range of value of the purchased item through a listing in a nationally recognized publication or through an appraisal by a licensed appraiser, and the price is not more than five percent (5%) higher than the highest value of the documented range.

Tenn. Code Ann. § 12-3-1003(b).

As set forth above, there are two methods whereby a municipality or county may purchase used or secondhand items from a private individual or entity without public advertisement and competitive bidding. A municipality or county may document the value either "through an appraisal by a licensed appraiser" or by establishing "the general range of value of the purchased item through a listing in a nationally recognized publication." If either of these tests are met, then the municipality or county may purchase the item if the price of the item is not more than five percent higher than the highest value of the documented range.

A municipality or county may not comply with the requirement of "document[ing] the general range of value of the purchased item through a listing in a nationally recognized publication" by establishing a "value" on the used or secondhand item based on advertised prices for similar used and secondhand items listed for sale on websites. The word "value" is not defined by Tenn. Code Ann. § 12-3-1003(b). In such cases courts will look to dictionary definitions to determine the commonly accepted meaning of an undefined word used in a statute. Eastman Chemical Co. v. Johnson, 151 S.W.3d 503, 508 (Tenn. 2004); State v. Clark, 355 S.W.3d 590, 592-93 (Tenn. Crim. App. 2011). "Value" is generally defined as "1: a fair return or equivalent in money, goods, or services for something exchanged; 2: the monetary worth of a thing: MARKET PRICE." Merriam–Webster's Dictionary 547 (New ed. 2005). Thus, giving the word "value" its plain and ordinary meaning, the General Assembly intended it to mean fair market value. See, e.g., Lee Medical, Inc. v. Beecher, 312 S.W.3d 515, 526 (Tenn. 2010); State v. Bobo, 727 S.W.2d 945, 952 (Tenn. 1987); Weaver v. Woods, 594 S.W.2d 693, 695 (Tenn. 1980).

The provisions of Tenn. Code Ann. § 12-3-1003(b) expressly state that "fair market value" shall be determined by consulting "nationally recognized publications" that publish current fair market values of the item that the municipality or county wishes to purchase. For instance, the National Automobile Dealers Association ("NADA") Used Car Guide and the Kelley Blue Book are nationally recognized authorities that are used to determine the fair market value of used vehicles. See Clement v. Clement, No. W2003-02388-COA-R3-CV, 2004 WL 3396472 at * 18-19 (Tenn. App. Dec. 30, 2004). Similarly, the Aircraft Bluebook is a publication utilized in the aviation industry to determine the fair market value of aircraft, and the Green Guide is a trade publication that supplies current information as to equipment values. See CB Aviation, LLC v. Hawker Beechcraft Corp., Civil Action No. 2:10-cv-1411-JD, 2011 WL 5386359 at 5 (E.D. Pa. Nov. 8, 2011); Rosebud Co. v. Dept. of Revenue, 849 P.2d 177, 178 (Mont. 1993). In contrast, a sale price listed by a single individual or entity for a used or secondhand item on a website may or may not reflect the actual fair market value of the item. See Port Everglades Launch Service, Inc. v. M/Y SITUATIONS, No. 10-60571-CIV, 2011 WL 1196017 at 5 (S.D. Fla. Mar. 29, 2011) (rejecting testimony to establish fair market value that relied upon listed prices as opposed to actual sales prices). Thus, a website that simply lists items for sale is not a "nationally recognized publication" that contains the current fair market value of the item, as required by Tenn. Code Ann. § 12-3-1003(b). See, e.g., In re Hogue, 286 S.W.3d 890, 894 (Tenn. 2009).

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

LAURA T. KIDWELL
Senior Counsel

Requested by:
Honorable Todd Gardenhire
State Senator
Suite 11A Legislative Plaza
Nashville, TN 37243