When a transit authority like CARTA serves multiple cities and counties, which jurisdiction's purchasing rules apply to its contracts?

Subject

Whether the Chattanooga Area Regional Transportation Authority (CARTA) and other transit authorities created by Tennessee local governments under Tenn. Code Ann. §§ 7-56-101 to -109 are subject to the same purchasing laws (competitive-bidding, contract-execution requirements) that apply to the participating municipalities and counties.

Plain-English summary

State Senator Todd Gardenhire asked the AG which purchasing rules apply to CARTA, the regional transit authority for Chattanooga and Hamilton County. The question matters because CARTA is a creature of multiple local governments (originally including governments in Georgia, now just Chattanooga and Hamilton County), and each participating government has its own purchasing-law framework.

The AG's answer comes in two parts:

First, transit authorities under §§ 7-56-101 to -109 are subject to the same purchasing laws as their participating governments. § 7-56-103 provides that contracts of a transit authority "shall be entered into and executed in such manner as may be prescribed by the charter of the municipality, or the general laws of this state." This makes the transit authority an "arm" or instrumentality of its participating local governments for purchasing purposes. The Tennessee Court of Appeals confirmed this in Chattanooga Area Reg'l Transp. Authority v. T.U. Parks Construction Co. (1999), where it held CARTA's arbitration clause was ultra vires because CARTA, as a governmental entity, lacked authority to agree to arbitration.

The AG also noted that nothing in §§ 7-56-101 to -109 exempts transit authorities from the competitive-bidding rules that apply to municipalities and counties. By contrast, the Public-Private Transportation Act of 2016 (§ 54-6-104) does explicitly exempt certain "public entities" from purchasing requirements; the absence of a similar exemption for §§ 7-56-101 transit authorities is meaningful.

Second, when multiple jurisdictions participate, the authority must follow the most stringent applicable purchasing rule. This isn't new; the AG's office reached the same conclusion for solid-waste authorities in Op. 97-145 (reaffirmed in 04-101 and applied to interlocal-agreement entities in 06-081). The reasoning is twofold:

1. Competitive-bidding laws benefit the public, and the public's money is being spent.
2. Each participating government is responsible for ensuring its share of the funds is spent in compliance with its own laws. Following the most stringent rule guarantees every participating government's obligations are satisfied.

For CARTA specifically: Chattanooga's purchasing laws and Hamilton County's purchasing laws may differ on thresholds, bidding procedures, sole-source justifications, and similar specifics. CARTA must compare them and follow the stricter one for any given purchase. If Chattanooga requires competitive bids over $25,000 and Hamilton County requires them over $20,000, CARTA must use the $20,000 threshold.

What this means for you

Transit authority boards and executives

Under this opinion, a transit authority created under §§ 7-56-101 to -109 is subject to the same purchasing laws that apply to the municipality or county that established it, because § 7-56-103 requires its contracts to be executed "in such manner as may be prescribed by the charter of the municipality, or the general laws of this state." The opinion treats the authority as an "arm" or instrumentality of its participating governments for contracting purposes. Where more than one government participates, the opinion concludes the authority must follow the most stringent applicable purchasing law. For CARTA, that means comparing the City of Chattanooga's and Hamilton County's purchasing rules and applying the stricter one to a given purchase.

City attorneys and county attorneys for participating governments

The opinion holds that the transit authority stands in the same shoes as the government that formed it and is not exempt from the competitive-bidding laws that apply to that government. It draws a contrast with § 54-6-104 (Public-Private Transportation Act of 2016), which expressly exempts certain "public entities" from purchasing requirements, and notes that §§ 7-56-101 to -109 contains no comparable exemption.

Vendors and taxpayers

For a multi-government authority like CARTA, the opinion's rule is that the most stringent applicable purchasing law governs a given purchase, so that each participating government's procurement obligations are satisfied. The opinion grounds this in its prior solid-waste-authority opinions (Op. 97-145, reaffirmed in 04-101) and the rationale that competitive-bidding laws exist to protect the taxpayer money being spent.

Common questions

Q: Which government's purchasing rules does CARTA follow?

Both. The opinion concludes that where more than one municipality or county participates, the authority must take into account the purchasing laws of each participating entity and follow the most stringent applicable law for the particular purchase, so that every participating entity's obligations are met.

Q: Is a transit authority exempt from competitive bidding because it is a separate entity?

No. The opinion states that nothing in §§ 7-56-101 to -109 exempts a transit authority from the competitive-bidding laws that apply to its participating governments, and contrasts that with the express exemption Tennessee gave certain entities under the 2016 Public-Private Transportation Act (§ 54-6-104).

Q: Why does the most stringent rule apply instead of, say, the rule of the city where the authority sits?

The opinion adopts the reasoning from its solid-waste-authority opinion (Op. 97-145): competitive-bidding laws protect taxpayer money, and each participating government must satisfy its own legal obligations. Following the most stringent applicable rule is how the authority assures that each participant's obligations are met.

Q: Does the opinion address federal grant rules, past contracts, or contracted-out operations?

No. The opinion answers only which Tennessee purchasing laws apply to a transit authority's own purchases. It does not address federal procurement rules, the status of past contracts, or services the authority contracts out.

Background and statutory framework

§§ 7-56-101 to -109 (Transit Authority Act). Originally 1970 Public Acts, ch. 515 (amended 1971). Authorizes any Tennessee municipality, county, or combination thereof to establish a public transportation system, optionally through a transit authority. § 7-56-101(a) sets the basic authorization. § 7-56-102(a) lists the transit authority's powers (acquiring, operating, contracting, etc.). § 7-56-103 specifies how contracts are to be executed: "in such manner as may be prescribed by the charter of the municipality, or the general laws of this state." § 7-56-108 makes the act part of every Tennessee municipality's charter and authority for any county to create or join a transit authority.

Municipal and county purchasing laws. §§ 6-56-301 et seq. (Municipal Purchasing Law of 1983); §§ 5-14-101 (County Purchasing Law of 1957); §§ 5-14-201 et seq. (County Purchasing Law of 1983); §§ 5-21-101 et seq. (County Financial Management System of 1981); § 12-3-1204 (applicable to municipalities and counties with population > 150,000). Different cities and counties operate under different purchasing-law regimes; the most-stringent-rule analysis requires identifying which regime each participating government uses.

Public-Private Transportation Act of 2016 (§ 54-6-104). Exempts "public entities" under that Act from purchasing requirements under Title 6 and Title 12, Chapter 3. The AG noted this contrast: §§ 7-56-101 to -109 contains no comparable exemption.

Interlocal Cooperation Act (§§ 12-9-101 et seq.). Authorizes interlocal entities. The AG's office has applied the most-stringent-rule framework to such entities in Tenn. Att'y Gen. Op. 06-081.

CARTA's history. Created in 1971 under §§ 7-56-101 to -109 by Chattanooga Ord. 6310. Originally included Georgia local governments and several other Tennessee participants. As of 2022, only Chattanooga and Hamilton County participate (the only two entities currently appointing board members). Tenn. Att'y Gen. Op. 78-346 references the broader original membership.

Solid-waste-authority precedent. Tenn. Att'y Gen. Op. 97-145 (solid-waste authorities follow the most stringent applicable competitive-bidding law), reaffirmed in 04-101.

Chattanooga Area Reg'l Transp. Authority v. T.U. Parks Constr. Co. (Tenn. Ct. App. 1999) held that CARTA could not bind itself to arbitration because it is a governmental entity. The case establishes the broader proposition that a transit authority is bound by the same governmental-disability rules as its participating governments.

Statutory-construction precedents. In re Estate of Tanner (statute language not in vacuum), Jordan v. Knox Cnty. (county-charter history), and Voldafone Americas Holdings (common-sense construction) all support the AG's reading of § 7-56-103.

Citations

• Tenn. Code Ann. § 5-14-101 (County Purchasing Law of 1957)
• Tenn. Code Ann. §§ 5-14-201, et seq. (County Purchasing Law of 1983)
• Tenn. Code Ann. §§ 5-21-101, et seq. (County Financial Management System of 1981)
• Tenn. Code Ann. §§ 6-18-101, et seq. (City Manager-Commission form)
• Tenn. Code Ann. §§ 6-30-101, et seq. (Modified City Manager-Council form)
• Tenn. Code Ann. §§ 6-56-301, et seq. (Municipal Purchasing Law of 1983)
• Tenn. Code Ann. § 7-56-101(a) (transit-authority creation)
• Tenn. Code Ann. § 7-56-102(a) (transit-authority powers)
• Tenn. Code Ann. § 7-56-103 (contract-execution requirement)
• Tenn. Code Ann. § 7-56-108 (Act forms part of all municipal charters)
• Tenn. Code Ann. §§ 7-56-101 to -109 (full Transit Authority Act)
• Tenn. Code Ann. § 12-3-1204 (large-population purchasing rule)
• Tenn. Code Ann. §§ 12-9-101, et seq. (Interlocal Cooperation Act)
• Tenn. Code Ann. § 54-6-104 (PPP Act exemption from purchasing rules)
• Chattanooga Area Reg'l Transp. Authority v. T.U. Parks Constr. Co., 1999 WL 76074 (Tenn. Ct. App. 1999) (CARTA as governmental entity)
• In re Estate of Tanner, 295 S.W.3d 610 (Tenn. 2009) (statute language in context)
• Jordan v. Knox Cnty., 213 S.W.3d 751 (Tenn. 2007) (county-charter history)
• Voldafone Americas Holdings, Inc. v. Roberts, 486 S.W.3d 496 (Tenn. 2016) (common-sense construction)
• Dove v. Chattanooga Area Reg'l Transp. Authority, 539 F. Supp. 36 (E.D. Tenn. 1981) (CARTA's Tennessee/Georgia membership)
• Tenn. Att'y Gen. Op. 97-145 (Oct. 23, 1997) (most-stringent-rule for solid-waste authorities)
• Tenn. Att'y Gen. Op. 04-101 (July 2, 2004) (reaffirming 97-145)
• Tenn. Att'y Gen. Op. 06-081 (May 1, 2006) (Interlocal Cooperation Act entities)
• Tenn. Att'y Gen. Op. 78-346 (Sept. 21, 1978) (CARTA original membership)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2022/op22-14.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
November 15, 2022
Opinion No. 22-14
Purchasing Laws Applicable to Transit Authorities Created Under Tenn. Code Ann. §§ 7-
56-101 to -109
Question
Is the Chattanooga Area Regional Transportation Authority required to comply with the
Municipal Purchasing Law of 1983?
Opinion
When a transit authority is created by a municipality or county under Tenn. Code Ann.
§§ 7-56-101 to -109, the transit authority is subject to the same purchasing laws that apply to the
municipality or county that established it. And when there is more than one municipality or county
participating in a transit authority created under Tenn. Code Ann. §§ 7-56-101 to -109, the transit
authority must take into account the purchasing laws applicable to each participating entity and
follow the most stringent applicable law to assure that each participating entity satisfies its legal
obligations. Thus, in the case of the Chattanooga Area Regional Transportation Authority, which
both the City of Chattanooga and Hamilton County participate in and subsidize, the Authority must
consider the purchasing laws applicable to both the City and the County and follow the most
stringent law applicable to the particular purchase.
ANALYSIS
In 1970, the General Assembly passed an Act to empower "[a]ny municipality or county
… or any combination thereof … to establish … a public transportation system." 1970 Public
Acts, ch. 515, § 1, as amended by 1971 Public Acts, ch. 160, § 5 (codified at Tenn. Code Ann. § 7-
56-101(a)). The Act provided that such a public transportation system may be under the direct
jurisdiction, control, and management of a municipality, county, or combination thereof; or that a
municipality, county, or combination thereof is permitted "to create a transit authority or other
operating or management entity by ordinance or resolution, for the purpose of managing such a
public transportation system, and to prescribe the qualifications and eligibility of members of such
a transit authority, their terms of office, powers and duties." Id. Further, the General Assembly
specified that the Act "shall form a part of the charters of all incorporated municipalities in the
State of Tennessee and shall be authority for any of the counties of Tennessee to provide public
transportation or to join with any municipality or combination of municipalities, either in the State
of Tennessee or in other states, for the purpose of providing such public transportation." 1970
Public Acts, ch. 515, § 8 (codified at Tenn. Code Ann. § 7-56-108).
The following year, the Board of Commissioners for the City of Chattanooga passed an
ordinance to create "a METROPOLITAN TRANSIT AUTHORITY for the City of Chattanooga,
Tennessee and Hamilton County, Tennessee … to be called the Chattanooga Area Regional
Transportation Authority (CARTA)." City of Chattanooga, Tenn., Ordinance 6310 (June 29,
1971) (citing 1970 Public Acts, ch. 515, as amended by 1971 Public Acts, ch. 160, as authority for
the ordinance). Consistent with the authority granted by the Act, the ordinance provided that the
Board of CARTA shall consist of one member appointed by each governmental entity that
participates in CARTA, other than the City of Chattanooga, which is to appoint a number of
members to the Board equal to the total of all participating governmental entities plus one.
Significantly, several governmental entities, including governmental entities in the State of
Georgia, participated in CARTA at its inception; but only the City of Chattanooga and Hamilton
County appear to currently participate in CARTA, as these are the only two entities that now
appoint members to the Board of CARTA. As explained below, the current composition of
CARTA directly bears on the query as to which laws govern purchases made by CARTA.
Transit authorities created under Tenn. Code Ann. §§ 7-56-101 to -109, like CARTA, have
wide-ranging powers, which include the power to make purchases and enter contracts. First, § 7-
56-102 grants a transit authority the power to "establish, acquire, purchase, construct, extend,
improve, maintain, operate or franchise a public transportation system" and to "make any and all
contracts" with persons, firms, agencies, municipalities, or public or private corporations.
Then, § 7-56-103 expounds on the contractual authority granted to a transit authority and
the manner in which contracts are to be executed: "[A] transit authority … has the right to make
any and all agreements with or applications to any person, firm, federal or state agency,
municipality, or public or private corporation, relating to the acquisition, construction, maintenance
and operation of all or any part of a public transportation system, and contracts for loans, grants
or other financial assistance from any state or federal agency. … Any such contracts made by …
a transit authority … shall be entered into and executed in such manner as may be prescribed by
the charter of the municipality, or the general laws of this state." (emphasis added).
In sum, Tennessee law grants transit authorities extensive power to make purchases and
enter contracts, but commands them to execute contracts "in such manner as may be prescribed by
the charter of the municipality, or the general laws of this state."
The requirement that transit authorities execute contracts "in such manner as may be
prescribed by the charter of the municipality, or the general laws of this state" conveys that when
the transit authority enters contracts it does so as an "arm" or instrumentality of the municipality
or county that has created it. Thus, when a transit authority contracts with others it stands in the
same shoes as the municipality or county that has formed it. See Chattanooga Area Reg'l Transp.
Authority v. T.U. Parks Constr. Co., No. 03-A01-9712-CH-00524, 1999 WL 76074 at *5 (Tenn.
Ct. App. 1999) (finding that CARTA's execution of a contract with a construction company that
provided for arbitration was ultra vires because CARTA is a governmental entity without authority
to agree to arbitration).
When municipalities and counties make purchases, they are generally required by charter,
Private Act, or Public Law to competitively bid the purchases. Nothing in Tenn. Code Ann. §§ 7-
56-101 to -109 exempts municipalities or counties—or transit authorities established by them—
from complying with competitive bidding laws. Compare Tenn. Code Ann. § 54-6-104
(exempting "public entities" under the Public-Private Transportation Act of 2016 from the
purchasing and contracting requirements under title 6 and title 12, chapter 3). Accordingly, when
a transit authority is created by a municipality or county under Tenn. Code Ann. §§ 7-56-101 to -
109, the transit authority is subject to the same purchasing laws that apply to the municipality or
county that established it.
When there is more than one municipality or county participating in a transit authority
created under Tenn. Code Ann. §§ 7-56-101 to -109, the question arises as to which purchasing
laws the transit authority must follow. In a prior Opinion, this Office concluded that a solid waste
authority that is a creation of multiple counties or the creation of counties and municipalities
participating by agreement must follow the most stringent applicable competitive bidding law,
whether county or municipal. Tenn. Att'y Gen. Op. 97-145 (Oct. 23, 1997). The rationale for
the conclusion was essentially two-fold: "[C]ompetitive bidding laws are primarily intended to
benefit the public, because it is taxpayer money that is being used for the purchase" and "every
participating entity must satisfy its legal obligations" with respect to the use of public funds and
"every procurement obligation is met." Id. (emphasis added). In other words, to protect the public
funds of the participating entities of the solid waste authority and to assure that each participating
entity satisfies its legal obligations to protect those funds, the solid waste authority must take into
account the purchasing laws applicable to each participating entity and then follow the most
stringent applicable law. See id.
Thus, in the case of CARTA, which both the City of Chattanooga and Hamilton County
participate in and subsidize, CARTA must consider all the purchasing laws applicable to both
entities and follow the most stringent law applicable to the particular purchase.
JONATHAN SKRMETTI
Attorney General and Reporter
ANDRÉE SOPHIA BLUMSTEIN
Solicitor General
LAURA T. KIDWELL
Assistant Solicitor General
Requested by:
The Honorable Todd Gardenhire
State Senator
425 Rep. John Lewis Way N.
Suite 732 Cordell Hull Building
Nashville, Tennessee 37243