If a Tennessee county rescinds a GO bond resolution to avoid a forced referendum, can it then use a different financing method without an election?

Subject

Opinion No. 18-41, County Debt Financing, September 4, 2018

Plain-English summary

Senator Jack Johnson asked an important sequencing question. Under Tennessee's Local Government Public Obligations Act of 1986, a resolution authorizing general obligation bonds gives 10% of the local registered voters a 20-day window to file a protest petition. If they do, the local government has to put the bond proposition to a referendum. The question was: if the local government instead rescinds the original resolution and adopts a different debt financing plan that wouldn't normally trigger an election, does the previously-filed protest petition force an election anyway?

The AG said no. The opinion built directly on Tenn. Att'y Gen. Op. 13-87 (Nov. 6, 2018, sic), which had concluded that rescinding the original resolution removes the election trigger. The reasoning: § 9-21-209 requires the governing body to adopt an election resolution only "[i]f it is necessary to hold an election on the proposition to issue general obligation bonds." Once the underlying bond resolution is rescinded, there's no proposition left to vote on, so an election is not "necessary."

A new debt financing plan adopted after the rescission is analyzed on its own terms. If the new plan is itself subject to an election requirement (the opinion gave § 9-21-905 refunding bonds as an example), an election is required. If the new plan is not subject to a referendum trigger, no election is required, regardless of the prior protest petition.

The practical effect is that Tennessee local governments can effectively avoid forced referenda on GO bond proposals by withdrawing the proposal and switching to alternatives like revenue bonds, capital outlay notes, or other financing instruments that don't carry the same petition-trigger mechanism.

Currency note

This opinion was issued in 2018. 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

Tennessee's Local Government Public Obligations Act of 1986 (Tenn. Code Ann. ch. 9, pt. 21) is the main framework for local debt issuance. Two provisions matter here:

• § 9-21-207(b): When a local government adopts a resolution authorizing GO bonds, it must publish notice. If 10% of the local registered voters file a protest petition within 20 days, the local government must hold a referendum.
• § 9-21-209: If a referendum is necessary, the governing body adopts an election resolution. The statute opens with "[i]f it is necessary to hold an election on the proposition to issue general obligation bonds," which the AG read as a contingency on the underlying proposition still being live.

The AG's earlier opinion at Tenn. Att'y Gen. Op. 13-87 walked through the same logic for a single-action rescission. Opinion 18-41 extends that to the more politically realistic scenario: rescind, then adopt an alternative.

The new-plan caveat in this opinion is important. Some debt instruments carry their own election triggers. § 9-21-905 specifically subjects certain general obligation refunding bonds to the same notice and election requirements as ordinary GO bonds under §§ 9-21-207 and 9-21-209. Counsel structuring a replacement financing has to check the specific instrument's statutory framework, not just whether the prior protest petition has been "neutralized."

Common questions

Why does Tennessee require referenda on some local government debt at all?

The protest-petition mechanism in § 9-21-207(b) is a check on local governing bodies. The drafters of the 1986 Act wanted voters to have a veto power over significant general obligation pledges of local government taxing authority, which is why GO bonds carry the 20-day petition window and revenue bonds (which are repaid from project-specific revenue, not local taxes) generally do not.

What kinds of financing don't trigger the protest-petition mechanism?

The opinion didn't enumerate them, but in practice the alternatives include revenue bonds (repayable from project revenue), capital outlay notes (short-term, smaller-dollar), and various lease-purchase and conduit financing structures. Each instrument has its own statutory framework that should be checked before relying on it as a substitute.

Can a county switch to a financing alternative midway through the protest petition window?

The opinion implied yes, but it specifically addressed the situation where the resolution is rescinded. The cleanest sequence is: adopt the original GO bond resolution, see the protest petition filed, rescind the GO bond resolution, then adopt the alternative. Courts haven't ruled on whether a county that simply lets the protest petition expire without acting can later substitute a different instrument; the AG opinion didn't reach that variation.

What if the protest petition reflects strong community opposition? Doesn't the rescind-and-substitute path defeat the petition right?

The opinion treated the petition right as triggered specifically by the GO bond proposition, not as a general veto over any local debt. From the voter perspective, that means the petition is only as strong as the financing alternatives available to the county. A protest against a GO bond doesn't translate into a referendum on a follow-on revenue bond. Voters who want broader veto rights would need to seek statutory amendment.

Does the new financing plan get its own analysis?

Yes. The AG was clear that "if the new debt financing plan adopted by the local government itself is subject to or triggers an election requirement, then the governing body would be required to hold an election." § 9-21-905 GO refunding bonds were given as an example. Counsel should evaluate each replacement instrument independently.

Does this opinion bind the courts?

No. AG opinions in Tennessee are persuasive authority. The conclusion here aligns with the plain reading of § 9-21-209 (the "if necessary" trigger language), but a court reviewing a particular rescind-and-substitute sequence in a contested case is free to do its own analysis.

Citations

Statutes

• Tenn. Code Ann. § 9-21-207 (publication of bond resolution; protest petition mechanism)
• Tenn. Code Ann. § 9-21-209 (election resolution required only when election is necessary)
• Tenn. Code Ann. § 9-21-905 (certain GO refunding bonds subject to notice and election requirements)

Prior AG opinions

• Tenn. Att'y Gen. Op. 13-87 (Nov. 6, 2018) (foundational holding that rescinding the GO bond resolution removes the election trigger)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2018/op18-41.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
September 4, 2018

Opinion No. 18-41

County Debt Financing

Question

If a local government rescinds a resolution authorizing the issuance of general obligation bonds, on which a referendum election would have been required, and instead adopts a different debt financing plan, on which a referendum election would not normally be required, must the local government hold an election?

Opinion

No.

ANALYSIS

The Local Government Public Obligations Act of 1986 requires a local government to hold a referendum election on a resolution authorizing the issuance of general obligation bonds if a protest petition signed by ten percent of the registered voters is filed within twenty days of the publication of the resolution. See Tenn. Code Ann. § 9-21-207(b); Tenn. Att'y Gen. Op. 13-87 (Nov. 6, 2018). This Office has opined, however, that when "the resolution authorizing the issuance of the general obligations bonds has been rescinded," the local government is not required to hold an election. Tenn. Att'y Gen. Op. 13-87, at 3.

As explained in that opinion, Tenn. Code Ann. § 9-21-209 requires the governing body of a local government to adopt an election resolution only "[i]f it is necessary to hold an election on the proposition to issue general obligation bonds." Tenn. Att'y Gen. Op. 13-87 at 2 (emphasis added). When the governing body has rescinded the resolution authorizing the issuance of general obligation bonds, it is no longer "necessary" to hold an election on that proposition. Id. at 3. Accordingly, if the governing body of a local government rescinds a resolution authorizing the issuance of general obligation bonds, it need not hold a referendum election, even if a protest petition that satisfies the requirements of § 9-21-207(b) has been filed. Id.

The fact that a local government has adopted a new debt financing plan after rescinding the original resolution does not alter this analysis. If the resolution on which an election would have been required has been rescinded, an election is no longer necessary within the meaning of § 9-21-209, even if the governing body has adopted a new debt financing plan. Of course, if the new debt financing plan adopted by the local government itself is subject to or triggers an election requirement, then the governing body would be required to hold an election. See, e.g., Tenn. Code Ann. § 9-21-905 (subjecting a particular type of general obligation refunding bonds to the notice and election requirements for general obligation bonds in §§ 9-21-207 and 9-21-209). But that analysis depends wholly on the new debt financing plan and would not be affected by the prior adoption and rescission of the general obligation bond resolution or the filing of the protest petition.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

JANET M. KLEINFELTER
Deputy Attorney General

Requested by:
The Honorable Jack Johnson
State Senator
776 Cordell Hull Building
Nashville, Tennessee 37243