December 15, 2008
Dear Madam:
You have the following question: Can the City enter into a land “swap” with the owner of
private property, which land swap will be of great benefit to the city?
The only Tennessee case that I can find that deals with the express question of whether a
municipality in Tennessee can swap property with a private person or entity is the unreported
case of Helton v. City of East Ridge, 1993 WL 124673 (Tenn. Ct. App.). That case involves a
complicated transaction (which many land swaps involve) between the city and a private
developer that included a land swap. The city owned a recreational area known as Camp Jordan
Park. Following some necessary zoning changes to allow the construction of a golf driving range
and related facilities on a 27.5 acre part of the Park by HAF, Inc., the city entered into a long
term lease with HAF under which HAF would operate the golf facility for a term of 25 years, for
which HAF would pay the city $1 a year for 12 years ($500 a month thereafter), plus HAF’s
conveyance to the city of a 28 acre tract of land next to the Park. The agreement between the city
and HAF was challenged on a number of grounds, one of which was the agreement was
unreasonable and unfair to the taxpayers of the city, and violated the Fourteenth Amendment to
the U.S. Constitution. They argued that the land swapped to the city had to be at least as valuable
as the land being leased by the city to HAF.
The Court declared that the plaintiff’s Fourteenth Amendment claim is “somewhat
ambagious,” and apparently rested on their “right to have a fair chance to bid on proposals by the
City of East Ridge” The court concluded that the plaintiffs cited no authority to support their
claim, and the court’s research had led to no federal or state case to support it. [At 4]
The court also rejected the plaintiff’s claim that the lease violated Tennessee Code
Annotated, ' 7-51-902. The court reasoned that statute governs the length of term that applies to
leases of capital improvement property by municipalities, reasoning that in this case the lease
involved the city’s lease of property to another party.
That case is not very informative on the law in Tennessee governing land swaps by cities,
and it could be argued that the plaintiffs could have made much better arguments against the land
swap in Helton. But one must conclude that if the court itself researched the plaintiff’s
Fourteenth Amendment claim, it could have raised any other problems with land swaps in
general, and this one in particular, had there been any indicating that the transaction was illegal
or otherwise reflected an abuse of discretion on the part of the city.
December 15, 2008
Page 2
My previous research on the question of whether land swaps by municipalities in
Tennessee are legal indicates that generally they are legal if they are supported by express or
implied authority under general law or the particular city’s charter, reflects a public purpose, does
not involve the transfer by the city of trust property, and is not otherwise an abuse of discretion.
That position appears to be supported by 60 A.L.A. 2d 220, Power of municipal corporations to
exchange its real property.
Some states have statutes that expressly govern land swaps or exchanges, or that
expressly govern the sale of property by municipalities. Tennessee has no general laws on either
subject, but most municipal charters in this state contain statutes that govern the acquisition and
sale of property by municipalities. The City’s charter provides that the city has the power:
- ' 9(5): “To acquire, dispose of, and hold in trust or otherwise any real, personal or
mixed property, inside or outside of the city.”
- '9(10): “To provide for the acquisition, construction, building, operation and
maintenance of public ways, parks, public grounds, cemeteries, markets and market houses,
public buildings, libraries, sewers, drains, sewerage treatment plants, airports, hospitals, and
charitable, educational, recreational, sport, curative, corrective, decennial, penal and medical
institutions, agencies and facilities and any other public improvements, inside or outside the
city....”
- '9(23) “To exercise and enjoy all other powers, functions, rights, privileges and
immunities necessary or desirable to promote or protect the safety, health, peace, security, good
order, comfort, convenience, morals, and general welfare of the city and its inhabitants, and all
implied powers necessary to carry into execution all powers granted in this Act as if fully and
completely as if such powers were fully enumerated herein. No enumeration of particular powers
in this Act shall be held to be exclusive of others nor restrictive of general words and phrases
granting powers, but shall be held to be in addition to such powers unless expressly prohibited to
cities under the constitution or applicable public acts of the State.”
[This power takes on significance due to the narrowing of Dillon’s Rule in Tennessee by
a case we will consider below.]
- ' 13.07: “That the mayor by and with the consent of a majority of the Board of
Aldermen may sell any city property which is obsolete, surplus or unusable.”
The extent to which municipalities in Tennessee have the authority to dispose of land is
seen in State ex rel. Association for the Preservation of Tennessee Antiquities v. City of
Jackson, 753 S.W.2d 750 (Tenn. 1978). There the Tennessee Supreme Court upheld a long-term
December 15, 2008
Page 3
lease by the City of Jackson to the Association for the Preservation of Tennessee Antiquities of
the Casey Jones Railroad Museum, which the city owned. The museum had been operating at a
considerable financial loss for the city. The Court reasoned that (which I will quote at
considerable length):
In the present case no question is raised as to the legality of the
initial acquisition of the “Casey Jones Museum” by the City of
Jackson or the property of its subsequent use by the City for the
combined cultural, commercial and educational purposes shown in
the record. It seems to us, therefore, at a minimum, that it was a
matter of judgment to be exercised by the duly elected City
officials as to whether the continued operation of that facility at a
financial loss was or was not in the public interest and as to
whether the leasing of the facility for operation under private
management was or was not a suitable alternative. We find no
abuse of discretion by the City officials in their decision to permit
the removal of the residence and artifacts from their original site.
The lease amply secures the City in the event of a default by tenant.
The City may then terminate the lease short notice and require the
tenant to restore the properties to the original site or to any other
public location. No question is raised in the present record as to
the solvency or responsibility of the tenant.
Insofar as prior cases have held that cities are without authority to
dispose of publically owned facilities by lease, sale or otherwise,
where the properties are held in a “governmental capacity,” we are
of the opinion that each case must be examined in light of its own
facts and circumstances. Obviously cities must be and legally are
free, within their charter provisions, to dispose of outmoded,
surplus or unprofitable properties, where these are not held under
a grant imposing a specific trust or other limitation upon
ownership or use. [Emphasis is mine.]
In the present case the Jackson charter expressly confers upon the
city, without limitation, the authority:
“To acquire or receive and hold, maintain, improve, sell, lease,
mortgage, pledge, or otherwise dispose of any property, real or
personal, and any estate or interest therein, within or without the
City or State.”
December 15, 2008
Page 4
The charter also contains language that its terms are not to be
deemed restrictive and that they shall be construed “...so as to
permit the City to exercise freely any one or more such powers as
to any one or more such objects for any one or more of such
purposes.”
We are not prepared to decide this case solely upon the proposition
that the City may have acquired and held the “Casey Jones
Museum” in part at least, in a “proprietary” capacity. On the other
hand, we are of the opinion that appellants have failed to
demonstrate that the subject lease is contrary to the public interest,
that it represents a misuse or abuse of the discretion and authority
of the Board of Commissioners, or that it is in any other way ultra
vires or beyond the legitimate charter powers of the City. [At 775]
The provisions in your City Charter cited above expressly and impliedly authorizing the
city acquire and to dispose of property are similar to the provisions in the Jackson City Charter
on the same subject, although those found in the Jackson City Charter are more broad. But that
difference is probably not significant for your City, given recent changes to Dillon’s Rule by the
Tennessee Supreme Court.
Dillon’s Rule has been abolished in some states but in the recent case of Southern
Contractors v. Loudon County Board of Education, 58 S.W.3d 706 (Tenn. 2001), the Tennessee
Supreme Court announced that Dillon’s Rule still lives in Tennessee, and applied it to hold that
while a county school board did not have the express authority to arbitrate a contract a county
school board had the implied power to arbitrate the contract at issue. But the Court also pointed
out that Dillon’s Rule is only a rule of statutory construction that applies when a statute is
ambiguous, and that “several important exceptions to that rule have diminished its practical
importance”:
- Does not apply to home rule municipalities;
- Where the General Assembly has granted local governments “comprehensive
governmental power...without either enumerating the powers or expressly limiting the scope of
that authority,” that “general provision” [will] be “liberally construed.” The Court cited three
examples of comprehensive grants of powers to municipalities from the general law municipal
charters found in Tennessee Code Annotated, title 6:
December 15, 2008
Page 5
- ' 6-19-102 of the general law manager-commission charter: “The enumeration
of particular powers in this charter is not exclusive of others, or restrictive of general words or
phrases granting powers, nor shall a grant or failure to grant power in this chapter impair a power
granted in any other part of this chapter, and whether powers, objects or purposes are expressed
conjunctively or disjunctively, they shall be construed so as to permit the city to exercise freely
any one (1) or more such powers as to any one (1) or more objects for any one (1) or more such
purposes.”
- ' 19-101(33) of the general law city manager commission charter: “[Ever city
incorporated under chapters 18-22 of this title may] [h]ave and exercise all powers that now or
hereafter it would be competent for this charter specifically to enumerate, as fully and completely
as though such powers were specifically enumerated in this section.”
- ' 6-2-201(32) of the general law mayor-aldermanic charter: “[Every
municipality incorporated under this charter may] [h]ave and exercise all powers
that now or hereafter it would be competent for this charter specifically to
enumerate, as fully and completely as though these powers were specifically
enumerated.”
- Where the General Assembly has conferred “general welfare authority to protect the
citizens’ health, convenience and safety [police power], Dillon’s Rule cannot be used to
challenge the exercise of that authority as beyond the scope of delegated power.” Grants of
police power are to be broadly construed, and ordinances adopted under that power will be
upheld as long as they are not “unreasonable or oppressive.” The Court cited two examples of
broad grants of police powers to municipalities from the general law municipal charters found in
Tennessee Code Annotated, title 6:
- ' 6-2-201(22) of the general law mayor-aldermanic charter: “[Every
municipality incorporated under this charter may] [d]efine, prohibit, abate, suppress, prevent and
regulate all acts, practices, conduct, business, occupations, callings, trades, uses of property and
all other things whatsoever detrimental, or liable to be detrimental, to the health, morals, comfort,
safety, convenience or welfare of the inhabitants of the municipality, and exercise general police
powers.”
- ' 6-19-101(22) of the general law manager-commission charter: “[Every city
incorporated under chapters 18-22 of this title may] [d]efine, prohibit, abate, suppress, prevent
and regulate all acts, practices, conduct, business, occupations, callings, trades, uses of property
and all other things whatsoever detrimental to the health, morals, comfort, safety, convenience,
or welfare of the inhabitants of the city, and to exercise general police powers.”
December 15, 2008
Page 6
In the final paragraph of that case, the Court declared:
We hold that grants of power to local governments will continue to
receive a strict, but reasonable, construction under the canon of
judicial construction known as Dillon’s Rule. This rule of
construction reflects the proper nature of local governmental power
in this state, and its several broad exceptions significantly alleviate
its shortcoming. [At 718]
With respect to municipalities, the Court’s focus on the “several broad exceptions” to
Dillon’s Rule were confined to home rule municipalities and the general law mayor-aldermanic
and manager-commission charter governments. But undoubtedly those exceptions apply to any
similar grants of power by the General Assembly in the private act charters. The broad grants of
power to the City in '' 9(10) and 9(23), noted above, appear to allow the interpretation of ''
9(5) and 13.07 ), which, respectively, give the city the right to acquire and dispose of property,
and gives the mayor, with the consent of the board of aldermen, the right to “sell” obsolete,
surplus or unuseable property.
The question has arisen whether the power to sell includes the power to exchange
property. 60 A.L.R.2d 220 says the cases have gone both ways on that question, and does not
indicate what direction reflects the weight of authority. But that treatise appears to me misplaced
in its conclusion. My research indicates that no modern case on land swaps has held that
municipalities if the municipality has either express or implied power to make them, and the
cases involving implied power appear to suggest that such power is broad. In fact, that treatise’s
citation of Carter v. City of Greeneville, 178 S.E.508 (S.C. 1935) for the proposition that it held
that the power to sell property ordinarily means to sell for cash is misleading. That case clearly
and unequivocally holds that a state statute that gave South Carolina cites the authority to
“purchase, hold, enjoy and possess, for the use of said city ... and sell, alien [sic?] and convey the
same at will,” gave the city the authority to enter into a land swap. The court does say that “It is
true that the power to sell ordinarily means to sell for cash and does not include the right to
accept property in exchange” But in the next sentence, the court said, “However, the city has the
power both to buy and sell, and those powers include the right to exchange.” [citing 3 McQuillin,
Municipal Corporations (d Ed.) ' 1242] [At 511] In this case, the city transferred the property on
which its city hall sat to the U.S. Government for the latter’s construction of a new federal
courthouse and post office, in exchange for the U.S. Government’s transfer to it of its old
courthouse and post office, which the city would use as a city hall, library and other city
facilities. In upholding that land exchange, the court declared that:
In considering those questions, it should be pointed out that the
December 15, 2008
Page 7
court is not concerned with the advisability of the purpose change
in the location of the city hall. This is a matter which rests solely
within the discretion of city council, and in the absence of
illegality, fraud, or clear abuse of their authority, their discretion
governs, and having exercised it by adopting the resolution and
approving the present scheme, the court is bound thereby. [At 509]
The City mayor, with the advice of the board of aldermen, clearly has the authority to sell
surplus, obsolete and unuseable property.
In McKinney v. City of Abilene, 250 S.W2d 924 (Civ. App.1952), the court
struck down a land transfer, but only because the city council did not follow the procedure
prescribed in its charter for the sale of city property. On the question of whether the city had the
power to make land swaps, the court declared that:
In statutes, the word “sale” is usually construed as including an
exchange of property. [At 925-26] [Citations omitted by me.]
We hold that the provision of the charter of the City of Abilene
restricting the “sale” of City property should be construed in a
broad sense so as to cover and apply to the disposition of land
owned by the City by means of exchange. It is agreed that the
charter provision requiring notice and hearing was not complied
with. [At 926]
That case supports the proposition that land exchanges are generally authorized if the
city’s charter provides that the city has the authority to sell property. It also stands for the
common sense proposition that if a city intends to exchange property it should insure that the
exchange be accompanied by the procedural rules, if any, that govern land sales.
Article II, ' 29, of the Tennessee Constitution, provides that “The General Assembly
shall have power to authorize the several counties and incorporated towns in this State, to impose
taxes for County and Corporation purposes respectively, in such manner as shall be prescribed by
law....” I have been unable to find a case in which Article II, ' 29, has been applied to a land
swap in Tennessee. The reason I point to that constitutional provision is that the question of
whether a land swap was for a public purpose arose in Bishop v. City of Burlington, 631 N.W.2d
656 (Wis. 2001). There the city was engaged in a redevelopment plan, and as a part of that plan
conveyed to the developer a downtown parking lot, for which the developer agreed to the
following obligations: rehabilitation of a certain building, the conveyance to the city of a certain
piece of property for park use, and a promise to maintain the parking lot as a public facility for
December 15, 2008
Page 8
three years and as a parking lot for 10 years.
The Court held that the conveyance did not violate the public purpose doctrine in
Wisconsin. The case indicates that the public purpose doctrine in Wisconsin is similar to the
public purpose doctrine in Tennessee; both limit the expenditure of public funds to public
purposes, but Bishop applied the public purpose doctrine to the land swap. In support of its
holding the Court pointed to a Wisconsin statute that gave municipalities power to acquire real
property for public purposes, and to sell such property. The public purpose, said the Court, was
advanced through the general economic improvement of deteriorating downtown property. The
City Charter, ' 9(5) gives the city the right to acquire and dispose of property, and ' 13.07 gives
the city the right to sell obsolete, surplus and unusable property.
The Bishop Court also rejected the plaintiff’s claims that the conveyance was an abuse of
discretion because the conveyance did not reflect a fair consideration for the city. It reasoned
that consideration need not necessarily involve money:
In addition, we concur with the view held by courts in other states
that it is proper when determining the adequacy of consideration of
transfers of public property to private entities, to evaluate the entire
transaction as a whole. Tomasic, 701 Pl.2d at 1334. The
consideration may consist of benefits other than or in addition to,
money, such as the public benefit which flows from the transfer
and the obligations the private actor assumes under the agreement.
See e.g. Burkhardt v. City of Enid, 771 P.2d 608, 611 ((Okla.
1989) (obligations assumed by private college and direct economic
benefits expected to flow from its presence were adequate
consideration); Bryant, 707 A.2d at 1081 (financial obligations of
redeveloper and economic by-products of expected development
were adequate consideration). We find support for this approach in
Wisconsin case law, but only in the context of nonprofit
corporations. See Rath 160 Wis.2d at 865, 467 N.W.2d 150
(nonprofit hospital’s binding commitment to use property for
health care is adequate consideration.) State ex rel. State Historical
Soc’y v. Carrol, 2671 Wis. 6 24, 1 N.W.2d 723 (1952) (finding
adequate consideration where no cash payment but obligations
assumed by nonprofit foundations.).... [At 664-65]
December 15, 2008
Page 9
Both Association for the Preservation of Tennessee Antiquities and Bishop, stand for the
proposition that the courts can look at the question of whether a land swap is for a public purpose
even those technically not tax funds were involved in the exchange, and whether the exchange
would be an abuse of discretion on the City’s part. Presumably, the land swap in question would
survive such an inquiry.
Sincerely,
Sidney D. Hemsley
Senior Law Consultant
SDH/