April 19, 2005
Dear Mayor:
You have four questions regarding the de-annexation of what is known as the “A”
property inside the Town of “B”, which apparently borders on the City of “C”, which is subject
to a pre-Chapter 1101 annexation reserve agreement between the Cities of “C” and “B”, which
the “A”’s have requested to be de-annexed, and upon which the City of “C” proposes to build an
industrial park:
1. Is the city obligated by the annexation reserve agreement between the Cities of
“C” and “B” in 1996 to de-annex the “A” property, and is “C” authorized by virtue of the
same agreement to annex that property?
2. If the property is de-annexed, does it remain within the City of “B”‘s urban
growth boundary (UGB):
- Before it is annexed by the City of “C”?
- After it is annexed by the City of “C”?
3. Can the City of “C” build an industrial park in the territory proposed for deannexation:
- If that territory is not de-annexed by the City of “B”?
- If the territory is de-annexed by the City of “B” and annexed by the City of “C”?
4. Is the industrial park subject to the zoning regulations of the City of “B” if:
- It is not de-annexed and remains in the City of “B”?
- It is de-annexed but remains in the City of
“B”‘s UGB?
Here let me say that as is often common with respect to questions I get from
municipalities, I have not been given all the documents related to the questions. The annexation
reserve agreement between the Cities of “C” and “B” speaks of Appendix A, which apparently
contains a map of the territory to which the agreement applies. The materials you sent do not
include that appendix. In addition, I am not sure that I have a copy of the City of “B”‘s urban
April 19, 2005
Page 2
growth boundary. The map included in the materials you sent to me is labeled “Proposed urban
growth boundary.” Even the letter from the Tennessee State Planning Office included in the
materials indicates that the TSPO does not know whether the annexation reserve agreement was
taken into account in drawing the City of “B”‘s urban growth boundary.
However, I think I can answer your questions without having all those documents because
they do not appear to depend on the above missing materials.
The answer to question 1 is probably yes.
Analysis of Question 1
The Cities of “C” and “B” entered into an “AGREEMENT OF INTENT FOR FUTURE
ANNEXATION” ON July 10, 1996. Because it appears to me that the City of “B” clearly
accepts the proposition that the “A” property is subject to de-annexation by the City of “B” and
annexation by the City of “C”, I will not cities the provisions of the Agreement that support that
conclusion. Although I do not have the map of that area from Appendix A that apparently shows
that property, I have another map on which the details of the property clearly appear.
Before the adoption of Chapter 1101 in 1998, it was my opinion that annexation reserve
agreements, including the above agreement, were void. The reason was that they reflected
contracts in which municipalities surrendered their governmental powers to annex property. It is
the law in Tennessee that municipalities cannot enter into contracts in which they surrender their
governmental powers, and that such contracts are void. [See City of Paris v. Paris-Henry County
Public Utility District, 340 S.W.2d 885 (Tenn. 1960).] But in Chapter 1101, the Tennessee
General Assembly put its imprimatur on annexation reserve contracts entered into both before
and after the adoption of Chapter 1101. [See Tennessee Code Annotated, ' 6-58-104.] The
General Assembly undoubtedly has that authority. [See Hudson v. City of Chattanooga, 512
S.W.2d 555 (Tenn. 1974); Johnson City v. State, 304 S.W.2d 317 (1957); Witt v. McCanless,
292 S.W.2d 392 (1956).]
With respect to such agreements adopted before the adoption of Chapter 1101, Tennessee
Code Annotated, ' 6-58-104(a)(7)A), says:
Notwithstanding any provisions of this chapter or any other
provision of law to the contrary, any annexation reserve agreement
or any agreement of any kind between municipalities....setting out
areas reserved for future municipal annexation and in effect on
May 19, 1998, are ratified and remain binding and in full force and
effect. Any such agreement may be amended from time to time by
April 19, 2005
Page 3
mutual agreement of the parties....
Under Tennessee Code Annotated, ' 6-58-104(a)(6)(C), such contracts adopted after
May 19, 1998, have a term limit of five years, but Chapter 1101 contains no similar limitation for
pre-Chapter 1101 annexation reserve agreements.
One can argue that the Tennessee Code Annotated, ' 6-58-104(a)(7)(A) does not cover
de-annexation agreements. But that statute applies to “any annexation reserve agreement or any
agreement of any kind between municipalities...setting out areas reserved for future municipal
annexation....” The agreement between the Cities of “C” and “B” probably qualifies as “any
agreement of any kind....” There appears to be no question about whether the City of “B”
voluntarily entered into the agreement.
The answer to question 2 is probably that the de-annexed territory remains in the
City of “B”‘s UGB until it is annexed by the City of “C”, at which time it automatically
comes within the City of “C”‘s UGB.
Analysis of Question 2
Unfortunately, Chapter 1101 does not expressly indicate whether de-annexed property
remains within the de-annexing municipality’s UGB. Your question is complicated by the fact,
that under the annexation reserve agreement between the Cities of “B” and “C”, the latter has the
right to annex the de-annexed property. Tennessee Code Annotated, ' 6-58-104(c)(1), says with
respect to the adoption of the growth plan by the coordinating committee and the local
government planning advisory committee, that, “In addition, in any county with a charter form of
government, the annexation reserve agreements in effect on January 1, 1998, are deemed to
satisfy the requirement of a growth plan, and the local government planning advisory committee
shall approve such plan.” Your County is not a charter county, but as pointed out in the answer to
Question 1, Tennessee Code Annotated, ' 6-58-104, says that:
...any annexation reserve agreement or any agreement of any kind
between municipalities or between municipalities and counties
setting out areas reserved for future municipal annexation and in
effect on May 19, 1998, are ratified and remain binding in full
force and effect....
It seems a foregone conclusion under Chapter 1101 that property inside municipal limits
is within the UGB of the municipality in which the property is located. [See Tennessee Code
Annotated, ' 6-58-106.] It appears logical then, that if a city is obligated in an annexation
April 19, 2005
Page 4
reserve agreement to de-annex property that was inside its city limits upon the adoption of the
growth plan, that property remains in that city’s UGB until it is annexed by the city authorized in
the agreement to annex it. At that time, logic suggests that the property would automatically
become part of the annexing city’s UGB.
Several annexation statutes support that conclusion. Chapter 1101 provides that as an
alternative to changing the UGB after the adoption of the growth plan by proposing the change to
the coordinating committee, “the municipality may annex the territory by referendum as provided
in '' 6-51-104 and 6-51-105.” [See Tennessee Code Annotated, ' 6-58-111(a)(2).] Chapter
1101 is silent on the question of whether one municipality can, under that statute annex territory
in another city’s UGB. But that question does not need an answer for one to reach the conclusion
that whether the property in question was part of another city’s UGB or the county’s Planned
Growth Area, upon annexation [assuming the annexation is otherwise legal] , the property
becomes a part of the annexing city. If that is so, the property must be a part of the annexing
city’s UGB.
It is conceptually difficult to see what the term “UGB” even has with respect to property
inside a city limits, except as to one of Chapter 1101's policies: that urban growth occur on
available land in municipalities before it spreads to the city’s UGB outside its city limits. The
city of which annexed property is a part already has all the rights over that territory that cities
have over territory within their limits under the laws of the state. Indeed, Tennessee Code
Annotated, ' 6-51-108, gives persons in annexed areas the same rights as citizens of the existing
city. Tennessee Code Annotated, ' 6-58-111, gives the annexing city the right to perform most
of the municipal and utility functions in the annexed territory. That being true, it is difficult to
see how the property in question could remain a part of “B”‘s UGB if, under the annexation
reserve agreement, the City of “B” de-annexed it, and the City of “C” annexed it, except for the
period between the de-annexation and the annexation.
The answer to Question 3 is as follows:
If the City of “B” does not de-annex the territory in question, and if the City of “C” issues
bonds to build an industrial park inside the City of “B”, the City of “C” can build the industrial
park only with the permission of the City of “B”. If the City of “B” de-annexes the territory and
for some reason the City of “C” does not annex the territory, the territory will, of course, be in
Your County. If the City of “C” issues bonds to build an industrial park in Your County, it can
do so only with the permission of Your County. In either case, if the City of “C” does not issue
bonds to build the industrial park, it will not need the permission of the particular government in
which the industrial park is to be located.
If the City of “B” de-annexes the area, on which the industrial park is to be built by the
April 19, 2005
Page 5
City of “C”, and the City of “C” annexes that territory, it will be building the industrial
park inside its own territory and can issue bonds to build the industrial park without either the
permission of the City of “B” or Your County.
It does not appear to me under Chapter 1101 or any other statute, that it matters whether
the industrial park is built within “C”‘s UGB or the City of “B”‘s UGB.
Analysis of Question 3
Tennessee Code Annotated, section 13-16-203(a) gives municipalities the power to
“Acquire land and rights and easements therein by gift, purchase, or eminent domain, and
develop the land into industrial parks within or without the municipality, and maintain and
operate such industrial parks; ....” [Emphasis is mine.] It is the law in Tennessee that where the
legislature has bestowed upon a municipality the power of eminent domain, including the power
to exercise it outside its boundaries, the municipality can condemn property to the state line. [See
McLaughlin v. Chattanooga, 180 Tenn. 638, 177 S.W.2d 823 (1944), and the unreported case of
Fayetteville v. Matthews. Also see Silverman v. City of Chattanooga, 165 Tenn. 642, 57 S.W.2d
552 (1932), and Patterson v. City of Chattanooga, 192 Tenn. 267, 241 S.W.2d 291 (Tenn. 1951).]
However, there is a limitation on that authority where a government issues bonds to
finance a project. Tennessee Code Annotated, ' 9-21-107(1), which is part of the local
Government Public Obligations Act, and under which local government issues bonds and notes,
gives all local governments the following authority:
Engage in the construction of any public works project which may
be constructed within or without the local government, or partially
within and partially without the local government. However, no
local government shall engage in the construction of a public
works project wholly or partly within the legal boundaries of
another local government; provided, that any county or
metropolitan government may contract a public works project
within a municipality within the county or metropolitan
government without the permission of the governing body of a
municipality.
If my memory serves me correctly, one of the major catalysts for that provision was an
attempt by the City of Morristown to build an industrial park in Jefferson County near White
Pine in the early or mid 1990s.
Answer to Question 4
April 19, 2005
Page 6
The answer is probably that the industrial park would not be subject to the City of “B”‘s
zoning regulations in either case.
Analysis of Question 4
There is no statute on this question, and the only Tennessee case that addresses it is
Davidson County v. Harmon, 292 S.W.2d 777 (Tenn. 1956). There the question was whether a
county’s zoning ordinance applied to the construction of a mental hospital by the State of
Tennessee. No, held the court, reasoning that the state was sovereign with respect to its
subordinate political entities, and that unless the legislature expressly authorized the state to be
bound to local zoning ordinances, it was exempt from them. The court did note that similar
questions in other states have turned on the question of whether the land use by the state is a
governmental or proprietary function and that if the former the state is exempt from the zoning
ordinance, and if the latter it is exempt from the zoning ordinance. But the question of whether a
municipality authorized to acquire land by eminent domain in another political jurisdiction is
bound in the use of that land by that political jurisdiction’s zoning regulations has never been
directly addressed in Tennessee.
However, that question has frequently been addressed in other states, and the heavy
weight of authority in the United States is that a municipality is not bound by the zoning
regulations of another political jurisdiction in which the land lies. That result is reached on two
principal grounds:
1. The use of the land is for a governmental rather than a proprietary purpose.
2. A statute that gives a government the power of eminent domain has the effect of
exempting that government from zoning ordinances. [See 61 A.L.R.2d 970.]
If the Tennessee courts resolved that question on the first ground, my opinion is that they
would hold an industrial park to be a governmental purpose. It is said in 56 Am. Jur.2d
Municipal Corporations, sec. 200, that:
While it is well established that municipalities act in a dual
capacity and engage in some activities which are private or
proprietary and others which are public or government, and while
general rules and tests have been evolved and stated in the cases
and textbooks to distinguish the two, none of these rules is
conclusive; a great deal of confusion has resulted with regard to
their application, and uniformity in application has not been
April 19, 2005
Page 7
attained. Where there is some substantial question as to the nature
of a municipal corporations’s powers as governmental or
proprietary, each case is subject for individual determination in
light of its own facts.
The confusion between governmental and proprietary functions is also reflected in
Tennessee law. It is said in Irvine v. Chattanooga, 101 Tenn. 291, 47 S.W. 419, 421 that
the cases which distinguish between those functions “may be a little metaphysical, and, at times,
difficult of application.” Unfortunately, I can find no case in any jurisdiction involving the
question of whether an industrial park is a governmental or proprietary function, but the courts
have gone different directions on other functions.
But in Tennessee the confusion probably ends where the General Assembly has declared
a certain function to be a governmental function. In Stocker v. City of Nashville, 126 S.W.2d
339 (Tenn. 1939), a statute declared that, “the construction maintenance and operation of
municipal airports is hereby declared a public governmental function....” Pointing to that statute,
the Court held that a municipal airport was a governmental rather than a proprietary function,
reasoning that:
The clear and unmistakable terms of the Act under which the City
of Nashville maintains and operates this Airport leaves no room
for the construction or debate as to classification and we find no
valid reason for refusing to give effect to its immunity provisions.
We have here a direct legislative declaration on which is
conditioned the grant of power to municipalities to engage in this
enterprise that it is a “public governmental function,” and that the
municipality shall not be subject to suit on account of the exercise
thereof. [at 340]
Although the declaration of purpose in Public Acts 1959, section 2, codified as the
Industrial Park Act, does not expressly declare industrial parks to be a governmental function, it
comes very close:
The future growth of population in this state, the employment of its
people, the proper utilization of its natural resources, and the
strengthening of its economy will depend in large measure on
growth of industry and related activities. In recent years,
increasing numbers of plants seek location in industrial parks or
districts where, in company with other plants, utilities and services
April 19, 2005
Page 8
may be jointly supplied, and in which suitable restrictions and
standards of construction and performances may be applied. It is
the intent of this act to facilitate the assembly of lands and
development of such industrial parks where feasible.
The Tennessee Supreme Court in Mayor & Aldermen of City of Fayetteville v. Wilson,
367 S.W.2d 772 (1963) upheld the constitutionality of the Industrial Park Act and certain bond
issues thereunder. In doing so, the Court connected the related purposes of the Industrial
Building Bond Act of 1955 and the Industrial Park Act:
The Legislature in the Industrial Building Bond Act of 1955
(Sections 6-2901 through 6-2916, T.C.A.) [Now Tennessee Code
Annotated, sections 7-55-101--7-55-116] taking note of
unemployment conditions existing in the State and evils attending
thereto has declared to provide against such evils is clearly a public
or corporate purpose .... The Industrial Park Act here in question
(Sec. 13-301 through 13-1307, T.C.A.) [now Tennessee Code
Annotated, sections 13-16-101--13-16-207] is the next step after
the Industrial Building Bond Act of 1955, and as noted by the
Chancellor might well have been enacted as a separate amendment
thereto rather than a separate measure. This Industrial Park Act to
accomplish the same purposes and containing similar reasonable
safeguards as the Industrial Building Bond Act of 1955 gives cities
and counties authority to acquire and develop industrial parks in
order to be more successful in attracting industry.... [at 774]
The Court’s declaration that purpose of those acts to correct the “evil” of unemployment
was a “public purpose” seems tantamount to its declaration that the Industrial Park Act is a
governmental purpose. The last line of the public purpose of the Industrial Park Act itself
declares that, “It is the intent of this act to facilitate the assembly of lands and the development of
such industrial parks where feasible and necessary,” which is the statutory method declared by
the General Assembly by which that “evil” is to be averted.
The extremely broad powers granted to municipalities under the Industrial Park Act
probably support that conclusion. They have the power of eminent domain, and can acquire and
develop land both “within and without” the municipality. In addition, the definition of
“industrial park project,” or “project” under that act:
Means the acquisition of land, rights, easements and franchises
relating thereto and/or the provision of any roads and streets, water
April 19, 2005
Page 9
and sewer facilities, utilities, docks and terminals, as well as any
appurtenant land that may be reasonably necessary for incidental
use thereof. [Tennessee Code Annotated, ' 13-16-203 and 207.
Also see Tennessee Code Annotated, '13-16-205.]
If the Tennessee courts resolved the question on the second ground, it is clear (as pointed
out above) that under the Industrial Park Act municipalities have the power of eminent domain
“within and without” the municipality, and that to subject such industrial parks to zoning
regulations would substantially defeat the purpose of the act. [See 61 A.L.R.2d 970.]
Two Tennessee Attorney General’s Opinions [89-143, and unnumbered opinion dated
March 11, 1985] have considered the question of whether a county is bound by a municipality’s
zoning powers in carrying out their governmental functions. Those are also useful in examining
the same question with respect to a municipality’s carrying out of governmental functions in
another municipality, although they do not address the question of whether an industrial park is a
governmental function. I have enclosed them for your reference.
Sincerely,
Sidney D. Hemsley
Senior Law Consultant
SDH/