If a Tennessee county commission cut the debt service allocations in its budget below what the budget committee set, who can sue to enforce the rule that says it can't?

Plain-English summary

A county operating under the County Financial Management System of 1981 (CMFS, Tenn. Code Ann. §§ 5-21-101 to -130) faced a recurring fight: the budget committee proposed a 2014-2015 budget that included full provision for debt service, as § 5-21-110(d)(2) requires. The county commission then voted to cut the debt-service line items and simultaneously raised the debt-service tax rate to cover the obligations. The question for the AG was whether that move violated § 5-21-111(e)(1), which allows the commission to alter or revise the proposed budget "except as to provision for debt service requirements and for other expenditures required by law."

The AG said yes, the commission violated the statute. The verbs "alter" and "revise" both mean to change, and the legislature carved debt-service provisions out of the commission's revision power. Raising the tax rate elsewhere does not cure the violation; the commission still changed the debt-service line items it was forbidden to change. The opinion follows Tenn. Att'y Gen. Op. 14-09 (Jan. 15, 2014), which reached the same conclusion on the prior year's budget.

On enforcement, the AG describes three tracks:

1. Quo warranto, the historical proceeding for removing public officials who breach their duties. CMFS imposes removal-from-office and (probably unconstitutional, per Op. 05-017) Class C misdemeanor penalties at § 5-21-125 but does not prescribe a procedure, so common-law quo warranto applies (State ex rel. Wallen v. Miller). Quo warranto is generally initiated by the district attorney general (§ 29-35-109); a private citizen can bring one in limited circumstances under § 29-35-110 but must serve the complaint on the district attorney general, who decides whether to join. If the district attorney general unjustifiably refuses, the trial court can let the citizen proceed in the State's name after an in limine hearing (Jordan v. Knox County; Bennett v. Stutts). The citizen must aver a special interest or injury not common to the public (Ray v. Weaver; State ex rel. Vaughn v. King). Quo warranto actions are usually filed in chancery court in the county where the office is held.

2. Declaratory judgment, with injunctive relief, brought by the county itself. The AG concludes a declaratory judgment action is proper when quo warranto is not an adequate remedy (State ex rel. Earhart v. City of Bristol), particularly to govern future budget cycles rather than unwind a past one. The opinion is sensitive to the fact that the 2014-2015 budget was already adopted, so quo warranto would only indirectly produce future compliance.

3. Standing for outsiders. Bondholders may sue if their bond covenants are breached (§§ 9-21-216 general obligation bonds, 9-21-310 revenue bonds). Creditors may sue for breach of contract if the county defaults. Taxpayers may sue under the Cobb v. Shelby County framework if they plead a specific illegality in expenditure and have made a prior demand on the entity (excused if the involved officials are themselves the offenders, per Badgett/Fannon footnote). Suits like these are typically equity actions in chancery court.

Currency note

This opinion was issued in 2015. 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

Q: Can the county commission just raise the tax rate to cover the debt service it cut, and call that compliance?
A: The AG concluded no. The statute removed debt-service provisions from the commission's alter/revise authority. Bridging the gap with a tax-rate increase is a separate fiscal choice; it does not cure the underlying breach of § 5-21-111(e)(1).

Q: Who actually files a quo warranto case?
A: Usually the district attorney general. A citizen who suffers a special injury can demand the DA file the action or, if refused, ask the trial court to let the action proceed in the State's name. The case is filed in the chancery court of the county where the office is held.

Q: Are bondholders likely to sue?
A: Only if covenants in the bond documents are breached by the changes, or if the changes threaten the county's ability to pay. Otherwise, bondholders typically lack a concrete enough injury.

Q: Do all taxpayers have standing?
A: No. Tennessee distinguishes between "improvident" expenditures (no standing) and "illegal" ones (standing if specific illegality is pleaded and prior demand was made, per Cobb v. Shelby County and Fannon v. City of LaFollette). Pleading must identify the legal prohibition or absence of statutory authority.

Q: Would the criminal penalty in § 5-21-125 ever stick?
A: This Office previously opined the criminal piece of § 5-21-125 is probably unconstitutional (Op. 05-017), so prosecutors generally do not pursue it.

Background and statutory framework

CMFS is one of Tennessee's optional county-finance frameworks. Counties adopting CMFS subject themselves to its budget process: the budget committee proposes (including debt service per § 5-21-110(d)(2)), the committee holds a public hearing, and the commission then takes up the proposal subject to the alter/revise restrictions in § 5-21-111(e)(1). The carve-out for "debt service requirements and other expenditures required by law" exists because those obligations are not really discretionary; once the county has issued bonds or incurred fixed-by-law obligations, the legal duty to pay does not yield to political budget choices.

The opinion's procedural piece is essentially a primer on three enforcement tools, all of which sit in equity: the historical quo warranto remedy, the modern declaratory-judgment remedy, and taxpayer/bondholder standing doctrine. Together they describe what is realistic if a county persists in cutting debt-service allocations.

Citations and references

Statutes:

• Tenn. Code Ann. §§ 5-21-101 to -130 (CMFS)
• Tenn. Code Ann. § 5-21-110(d)(2) (budget committee duty to include debt service)
• Tenn. Code Ann. § 5-21-111(e)(1), (e)(2) (commission alter/revise authority and limits; adoption timeline)
• Tenn. Code Ann. § 5-21-125 (penalties)
• Tenn. Code Ann. §§ 29-35-101 to -121 (quo warranto)
• Tenn. Code Ann. § 29-35-109 (DA general as quo warranto initiator)
• Tenn. Code Ann. § 29-35-110 (citizen-initiated quo warranto)
• Tenn. Code Ann. §§ 29-14-102, -103 (Declaratory Judgment Act)
• Tenn. Code Ann. §§ 9-21-216, 9-21-310 (bondholder remedies)

Cases (Tennessee Supreme Court unless noted):

• Montgomery v. Hoskins, 222 Tenn. 45, 432 S.W.2d 654 (1968)
• State ex rel. Wallen v. Miller, 202 Tenn. 498, 304 S.W.2d 654 (1957)
• Jordan v. Knox Cnty., 213 S.W.3d 751 (Tenn. 2007)
• Bennett v. Stutts, 521 S.W.2d 575 (Tenn. 1975)
• Ray v. Weaver, 586 S.W.2d 828 (Tenn. 1979)
• State ex rel. Vaughn v. King, 653 S.W.2d 727 (Tenn. Ct. App. 1982) (Tennessee Court of Appeals)
• Town of Smyrna v. Ridley, 730 S.W.2d 318 (Tenn. 1987)
• State ex rel. Inman v. Brock, 622 S.W.2d 36 (Tenn. 1981)
• Weaver v. Maxwell, 189 Tenn. 183, 224 S.W.2d 832 (1949)
• State ex rel. Earhart v. City of Bristol, 970 S.W.2d 948 (Tenn. 1998)
• City of Rockwood v. Chamberlain Memorial Hosp., 221 Tenn. 468, 427 S.W.2d 829 (1968)
• City of Kingsport v. Lay, 62 Tenn. App. 145, 459 S.W.2d 786 (1970) (Tennessee Court of Appeals)
• Highwoods Properties, Inc. v. City of Memphis, 297 S.W.3d 695 (Tenn. 2009)
• Abel v. Welch, 204 Tenn. 6, 315 S.W.2d 268 (1958)
• Shelby Cnty. Bd. of Comm'rs v. Shelby Cnty. Quarterly Court, 216 Tenn. 470, 392 S.W.2d 935 (1965)
• Crockett Cnty. v. Walters, 170 Tenn. 337, 95 S.W.2d 305 (1936)
• Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827 (Tenn. 2008)
• Badgett v. Rogers, 222 Tenn. 374, 436 S.W.2d 292 (1969)
• Skelton v. Barnett, 190 Tenn. 70, 227 S.W.2d 774 (1950)
• Cobb v. Shelby Cnty. Bd. of Comm'rs, 771 S.W.2d 124 (Tenn. 1989)
• Soukup v. Sell, 171 Tenn. 437, 104 S.W.2d 830 (1937)
• Fannon v. City of LaFollette, 329 S.W.3d 418 (Tenn. 2010)
• State ex. rel. Baird v. Wilson Cnty., 212 Tenn. 619, 371 S.W.2d 434 (1963)
• Pope v. Dykes, 116 Tenn. 230, 93 S.W. 85 (1905)
• Simpson v. Sumner County, 669 S.W.2d 657 (Tenn. Ct. App. 1983) (Tennessee Court of Appeals)

Earlier AG opinions:

• Tenn. Att'y Gen. Op. 14-09 (Jan. 15, 2014)
• Tenn. Att'y Gen. Op. 05-017 (Feb. 3, 2005)

Subject

Opinion No. 15-02, County Financial Management System of 1981– Debt Service Requirements, January 7, 2015

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2015/op15-02.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
January 7, 2015
Opinion No. 15-02
County Financial Management System of 1981- Debt Service Requirements

QUESTIONS

A county commission operates under the County Financial Management System of 1981, codified at Tenn. Code Ann. §§ 5-21-101 to -130 ("CMFS"). As required by Tenn. Code Ann. § 5-21-110(d)(2), the county budget committee proposed an annual budget for 2014-2015 that included provision "for all requirements for debt service." Following a public hearing on the budget proposal, the budget committee submitted the proposal to the county commission. Tenn. Code Ann. § 5-21-111(e)(1) provides that "[t]he county legislative body may alter or revise the proposed budget except as to provision for debt service requirements and for other expenditures required by law." The county commission voted to reduce the proposed debt service allocations, but to increase the debt service tax rate to satisfy debt service requirements.

1. Did the county commission violate Tenn. Code Ann. § 5-21-111(e)(1)?

2. If the county commission violated Tenn. Code Ann. § 5-21-111(e)(1), who has the authority and obligation to enforce compliance with this statute?

3. If a county commission violated Tenn. Code Ann. § 5-21-111(e), who would have standing to sue? In what court would the case be filed? Under what statute?

OPINIONS

1. Yes.

2. A county official who violates Tenn. Code Ann. § 5-21-111(e)(1) is subject to the imposition of penalties set forth in Tenn. Code Ann. § 5-21-125. A suit to enforce the penalties would be a quo warranto action that ordinarily is initiated by the district attorney general. The county also has the authority to enforce future compliance with Tenn. Code Ann. § 5-21-111(e)(1) by instigating a declaratory judgment action that seeks injunctive relief.

3. Any person who suffers harm that is not common to every citizen may have standing to sue for violation of Tenn. Code Ann. § 5-21-111(e)(1). As discussed below, the type of harm suffered would dictate the type of case that could be brought.

ANALYSIS

1. In Tenn. Att'y Gen. Op. 14-09 (Jan. 15, 2014), this Office addressed whether the same county commission could vote to reduce the debt service portion of the 2013-2014 budget proposed by its budget committee after the budget committee had held a public hearing under Tenn. Code Ann. § 5-21-111. We opined that the county commission could not because the county commission would violate Tenn. Code Ann. § 5-21-111(e)(1), which clearly states that "[t]he county legislative body may alter or revise the proposed budget except as to provision for debt service requirements and for other expenditures required by law." See Tenn. Att'y Gen. Op. 14-09 at 2 (emphasis original).

Our opinion is the same with respect to the county commission's vote on the 2014-2015 proposed budget, even though the commission voted to increase the debt service tax rate at the same time that it voted to reduce the debt service allocations established by the budget committee. Under Tenn. Code Ann. § 5-21-111(e)(1), the county commission may "alter" or "revise" the proposed budget "except as to the provision for debt service requirements." The verb "alter" means "to change or make different; modify." American Heritage Dictionary 39 (3d Coll. ed. 1997). Similarly, the verb "revise" means "to reconsider and change or modify." Id. at 1169. Thus, under the plain meaning of the statute, the county commission may change the proposed budget except as to provision for debt service requirements. See Montgomery v. Hoskins, 222 Tenn. 45, 47, 432 S.W.2d 654, 665 (1968) ("Unambiguous statutes must be construed to mean what they say."). Consequently, we think the county commission may not change the budget committee's provision for debt service requirements, even if it increases the debt service tax rate to satisfy debt service requirements.

2. CMFS provides penalties for the violation of its provisions in Tenn. Code Ann. § 5-21-125. While Tenn. Code Ann. § 5-21-125 does not provide that a vote cast by a county official in violation of Tenn. Code Ann. § 5-21-111(e)(1) is void, it does provide that a violation of any provision of CMFS subjects the county official to removal from office. CMFS, though, does not provide a procedure to enforce the penalties set forth in Tenn. Code Ann. § 5-21-125.

When a statute provides for the imposition of penalties upon a public official who breaches a public duty but does not prescribe the procedure for enforcement, the proceeding is to be prosecuted according to the common law. See State ex rel. Wallen v. Miller, 202 Tenn. 498, 505, 304 S.W.2d 654, 657 (1957) (citation omitted). Accordingly, a suit to enforce the penalties set forth in Tenn. Code Ann. § 5-21-125 would be a quo warranto action. Id. at 506-08, 304 S.W.2d at 657-58 (under conflict of interest statutes that provide penalty of forfeiture of office for unlawful interest, quo warranto is proper remedy for violation in absence of any prescribed procedure for enforcement of the statutes).

Quo warranto is an extraordinary proceeding, prerogative in nature, addressed to preventing a continuing exercise of authority unlawfully asserted. See 65 Am.Jur.2d Quo Warranto § 2 (2014). The General Assembly has codified quo warranto at Tenn. Code Ann. §§ 29-35-101 to -121. Quo warranto actions are generally initiated by a district attorney general. See Tenn. Code Ann. § 29-35-109. In limited circumstances, a private citizen may file a quo warranto action. See Tenn. Code Ann. § 29-35-110. The suit, though, still must be brought in the name of the district attorney general. State ex rel. Wallen, 202 Tenn. at 508-09, 304 S.W.2d at 658-69. The plaintiff is required to serve a copy of the complaint upon the district attorney general, who must then decide whether to join in the petition. Jordan v. Knox Cnty., 213 S.W.3d 751, 765-66 n. 5 (Tenn. 2007); Bennett v. Stutts, 521 S.W.2d 575, 577 (Tenn. 1975). If the district attorney general does not consent to the lawsuit, the trial court then has the duty to conduct an in limine hearing to determine whether the plaintiff should be permitted to proceed without the district attorney general's participation. Id. If it is determined that the district attorney general unjustifiably refused to bring the action or to authorize the use of his or her name to institute the action, the trial court shall permit the action to proceed in the name of the State of Tennessee. Id. The plaintiff, though, must aver a special interest or injury not common to the public to invoke the jurisdiction of the court. Ray v. Weaver, 586 S.W.2d 828, 830 (Tenn. 1979); Bennett, 521 S.W.2d at 576-77; State ex rel. Vaughn v. King, 653 S.W.2d 727, 729 (Tenn. Ct. App. 1982).

Quo warranto actions are typically filed in the chancery court in the county in which the office is held. See, e.g., Town of Smyrna v. Ridley, 730 S.W.2d 318 (Tenn. 1987); State ex rel. Inman v. Brock, 622 S.W.2d 36 (Tenn. 1981); Weaver v. Maxwell, 189 Tenn. 183, 224 S.W.2d 832 (1949). See also Tenn. Code Ann. 29-35-111. In a quo warranto action, the chancery court may award any damages to which the plaintiff is entitled; and the court has jurisdiction to award a mandatory injunction, a peremptory mandamus, and all necessary writs to oust officers who have forfeited their offices, and plenary power in the same action to compel an officer to restore the status quo or do any other act the rights of the plaintiff or the public require. Henry R. Gibson, Gibson's Suits in Chancery § 40.02 (8th ed. 2004). See Tenn. Code Ann. §§ 29-35-106; 29-35-113.

We realize that in this instance restoring the status quo is not feasible because the county adopted its 2014-2015 budget in July. See Tenn. Code Ann. § 5-21-111(e)(2). Consequently, a successful quo warranto action against the county commissioners who voted to reduce the proposed debt service allocations, but to increase the debt service tax rate to satisfy debt service requirements, would only indirectly produce compliance with Tenn. Code Ann. § 5-21-111(e)(1) by other county commissioners in the future. While quo warranto proceedings are generally the only proper remedy in cases in which they are available, alternative remedies are not barred when quo warranto is not an adequate remedy. State ex rel. Earhart v. City of Bristol, 970 S.W.2d 948, 952 (Tenn. 1998). In a similar vein, our courts have also determined that quo warranto is not the only available remedy when a declaratory judgment action is proper. See City of Rockwood v. Chamberlain Memorial Hosp., 221 Tenn. 468, 474, 427 S.W.2d 829, 831 (Tenn. 1968); City of Kingsport v. Lay, 62 Tenn. App. 145, 459 S.W.2d 786 (1970). Cf. Highwoods Properties, Inc. v. City of Memphis, 297 S.W.3d 695 (Tenn. 2009) (declaratory judgment action should not be considered when special statutory proceedings provide an adequate remedy; thus quo warranto procedures established in annexation statutes precluded declaratory judgment action).

To directly enforce the county commission's future compliance with Tenn. Code Ann. § 5-21-111(e)(1), the county could file a declaratory judgment action that seeks injunctive relief. See generally Abel v. Welch, 204 Tenn. 6, 13, 315 S.W.2d 268, 270-71 (1958) (where wrongs complained of involve the county government, county is real party in interest to seek declaratory judgment). Tennessee's Declaratory Judgment Act grants courts of record the power to construe statutes and declare rights, status, and other legal relations. Tenn. Code Ann. §§ 29-14-102; 29-14-103. Matters involving disputes concerning the legal relation of local governments and their officials have frequently been the subject of actions for declaratory judgment. See, e.g., Shelby Cnty. Bd. of Comm'rs v. Shelby Cnty. Quarterly Court, 216 Tenn. 470, 483, 392 S.W.2d 935, 941 (1965); Crockett Cnty. v. Walters, 170 Tenn. 337, 341, 95 S.W.2d 305, 306 (1936).

The county commissioners who voted to reduce the debt service allocations in the proposed budget, but to increase the debt service tax rate to satisfy debt service requirements, contend that they did not violate Tenn. Code Ann. § 5-21-111(e)(1), citing advice that they received to that effect. While we think a violation has occurred for the reasons stated above, no court has addressed the question. Thus, it appears that a bona fide disagreement exists. Moreover, the disagreement has existed for the past two budget years and is likely to persist with future budgets, based on the information provided. Thus, the issue seems to be a justiciable one under the Declaratory Judgment Act. See City of Rockwood, 221 Tenn. at 476-78, 427 S.W.2d at 832-33. Certainly if the county commission makes known that it plans to change the budget committee's provision as to debt service requirements for the 2015-2016 budget, a justiciable controversy would exist. See Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 836-37 (Tenn. 2008).

3. Others may also have standing to sue for a violation of Tenn. Code Ann. § 5-21-111(e)(1). While suit cannot be brought merely for the vindication of a public wrong, persons who suffer harm that is not common to every citizen have standing to sue. See Badgett v. Rogers, 222 Tenn. 374, 378-79, 436 S.W.2d 292, 293-94 (1969); Skelton v. Barnett, 190 Tenn. 70, 72-73, 227 S.W.2d 774, 775 (1950). Thus, bondholders, for instance, could have standing to sue if the county commission's changes to the debt service requirements have caused bond covenants to be breached. Bondholders who are harmed by such breach may maintain an action at law or in equity. See Tenn. Code Ann. § 9-21-216 (general obligation bonds); Tenn. Code Ann. § 9-21-310 (revenue bonds). Similarly, creditors of the county would have standing to sue if the county commission's changes to the debt service requirements cause the county to default on its obligations. Suits to redress this type of harm may be brought in any court having jurisdiction over breach of contract actions. See Simpson v. Sumner County, 669 S.W.2d 657, 660-61 (Tenn. Ct. App. 1983) (Governmental Tort Liability Act does not cover contract disputes with governmental entities despite the broad definition of "injury" contained therein).

Taxpayers may also have standing to sue. While taxpayers do not have standing to challenge the improvident expenditure of public funds, they do have standing to challenge the "illegal" use of public funds. Cobb v. Shelby Cnty. Bd. of Comm'rs, 771 S.W.2d 124, 126 (Tenn. 1989) (citing Soukup v. Sell, 171 Tenn. 437, 104 S.W.2d 830, 831 (1937)). Thus, Tennessee courts have conferred standing when a taxpayer (1) alleges a specific illegality in the expenditure of funds and (2) has made a prior demand on the governmental entity asking it to correct the alleged illegality. Fannon v. City of LaFollette, 329 S.W.3d 418, 427 (Tenn. 2010) (citing Cobb, 771 S.W.2d at 126). As explained in Cobb, the taxpayer's complaint must allege a specific legal prohibition on the disputed use of funds or demonstrate that it is outside the grant of authority to the local government. Id. See, e.g., State ex. rel. Baird v. Wilson Cnty., 212 Tenn. 619, 628-29, 371 S.W.2d 434, 439 (1963); Pope v. Dykes, 116 Tenn. 230, 241-42, 93 S.W. 85, 87-88 (1905). Consequently, county taxpayers could have standing to sue for a violation of Tenn. Code Ann. 5-21-111(e)(1) if the county commission's vote to reduce the budget committee's debt service allocations has resulted in the diversion of funds and the imposition of an additional tax burden. As demonstrated by the cases above, these types of suits are typically equitable ones brought in the chancery court.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

LAURA T. KIDWELL
Senior Counsel

Requested by:
The Honorable Rusty Crowe
State Senator
Suite 8, Legislative Plaza
Nashville, TN 37243-0203