March 5, 2012
Dear Mayor:
The City has the following questions:
1. Actually the first question is whether MTAS can draft an agreement between the City
of and the utility district under which the city can cut-off the utility district’s water service for
non-payment of the City’s sewer bills. Apparently, either the city has already installed, or is
contemplating the installation of, “secondary” water meters with respect to the utility district’s
water meters on property on which the utility district provides water service, or the City provides
sewer service. However, I have decided to treat this request as a question of whether the
utility district and the City can enter into such an agreement.
It appears to me that none of the statutes that authorize contracts between utilities that
provide sewer services and utilities that provide water services for the collection of sewer fees
authorize the contract to include a provision for the water cut-off to be performed by the utility
that provides the water service.
Municipalities have the authority to cut-off water and sewer service for non-payment of
water and sewer bills, under several old, but still good cases, and state statutes (although I
routinely and strongly advise utilities not to cut-off sewer service because of sanitation
hazards that can be caused by such action). In Jones v. Nashville, 109 Tenn. 550, 72 S.W. 895
(1902), a person sued the City of Nashville for failing to supply her with water. The city
defended its action on the ground that it had an ordinance requiring the city to cut-off water to
any person indebted to the city for past water service, and that the person refused to pay her
water bill. Citing earlier Tennessee cases and cases from other states, the Tennessee Supreme
Court upheld the ordinance. Quoting from Tacoma Hotel Co. v. Tacoma Light & Water Co., 3
Wash.316 (28 Pac. 516), it declared that:
Mayor Bill Fultz
Page 2
March 5, 2012
A rule of the water company which requires rates to be paid
quarterly, adds a penalty of vie per cent. [sic] in case of default of
payment in ten days, and provides that after default for fifteen days
the water shall be shut off from the premises is a reasonable
regulation.
The Tennessee Supreme Court said essentially the same thing in Patterson v.
Chattanooga, 241 S.W.2d 291 (1951). There the question was whether a water company could
cut-off the water of a property owner who refused to pay a sewer service charge. The question,
said the Court, was “Does the discontinuance of the water service deprive the property owner of
property rights in violation of Article I, Secs. VIII and XXI, of the Constitution of Tennessee, or
the 4th Amendment of the Constitution of the United States”? No, declared the Court, reasoning
that:
The general rule is that those furnishing the public with its water
supply either in a private or a municipal capacity, may adopt, as a
reasonable regulation for conducting said business, a rule
providing that the water so furnished may be cut off for
nonpayment therefor; and in pursuance of such regulation the
water supply may be discontinued on failure of the customer to pay
the water rate....In so far as we can find every state in the Union,
where the question has arisen, has held in accordance with the
quotation last above quoted. [Citing a Georgia case, and a long
line of cases from both Tennessee and other states.] [At 294-95]
However, the U.S. Supreme Court held in Memphis LG&W v. Craft, 436 U.S.1 (1978),
that utility services were property rights that could not be taken away except after where two
procedural safeguards were followed:
- The utility must have in place a process for providing a termination notice.
- The notice of termination must include notice that the customer has the right to a
hearing, if he wants one, before the termination.
The legal basis for the Craft Court’s decision was that under Tennessee law, utility
customers have a property right in utility service. But the Court declared that “In defining a
public utility’s privilege to terminate for the nonpayment of proper charges, Tennessee
decisional law draws a line between utility bills that are the subject of bona fide dispute and
those that are not.” [At 1560]
Mayor Bill Fultz
Page 3
March 5, 2012
Utilities apparently have an argument that Craft applies only to disputed utility bills. In
the unreported case of Hargis v. City of Cookeville, 92 Fed. Appx. 190, 2004 WL 237655 (C.A.6
(Tenn.)), the U.S. Sixth Circuit Court of Appeals also found that the city’s cut-off policy was
defective because it did not notify the customer that he had the right to object to the termination
of service, but also declared that Craft applied to cases of disputed water bills, and only when the
cut-off had caused the customer damage. In that case there was no actual cut-off of utility
service. However, it seems a wise policy for a utility to terminate utility service for any reason
only after notice and hearing that meets the Craft standards.
Tennessee Code Annotated, § 7-35-201(3), provides for water and sewer cuts-offs, in the
following language:
If any city, town, or utility district also operates a water system,
and can do so without the impairment of contract rights vested in
the holders of any bonds payable from the revenues of such water
system to combine charges for sewer and water systems in one (1)
statement and to bill the beneficiary of such services therefor in
such manner as to require the payment of both charges as a unit,
and to enforce the payment of such charges by discontinuing either
the water service or the sewer service, or both;... [Emphasis is
mine]
Tennessee Code Annotated, § 7-35-201 et seq., applies to cities that have issued bonds
for the construction of a water and/or sewer system. However, Tennessee Code Annotated, § 735-201(3), appears to apply to cases where the city has both a water and sewer system, and
combines water and sewer charges. Tennessee Code Annotated, § 7-35-201, also contains other
provisions for the collection of water and sewer bills, including, among other things, advance
deposits [Subsection (4)], action ex contractu [Subsection (5)]. However, subsection (6)(A) also
provides for the utilities to do as follows:
(6)(A) To enter into contracts for the collection of such sewer service charges with any public
or private corporation or municipal utilities board or commission operating a water system, and
any public corporation or municipal utilities board or commission is authorized and empowered
to make contracts with any other city, town or utility district:
(i) To meter, bill and collect sewer service charges as an added designated item on its water
service bills, or otherwise;
(ii) To discontinue water service to sewer service users who fail or refuse to pay sewer service
charges;
Mayor Bill Fultz
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March 5, 2012
(iii) Not to accept payment of water service charge from any customer without receiving at the
same time payment of any sewer service charged owed by such customer; and
(iv) Not to reestablish water service for any customer until such time as all past due sewer
service charges owed by such customer have been paid.
(B) Such public service corporation or municipal utilities board or commission is hereby
authorized to perform all acts and discharge all obligations required by the provisions of any
such contract or contracts.
A similar provision is found in Tennessee Code Annotated, 68-221-208. It provides that,
“All municipalities receiving grants from the state under this part shall establish a graduated
sewer user’s fee on each user of the sanitary sewers provided by the municipality….”
The problem with both those statutes is that neither appears to indicate that the contract
between the parties contemplates the city that provides the sewer service performing the water
cut-off. They contemplate that the utility that provides the water service perform the water cutoff and no “secondary” meter system is envisioned in those statutes. Utility service in Tennessee
is a proprietary function performed under a utility service contract between the utility provider
and the utility customer. But it is clearly also the law that such contract must conform to the
requirements set out in utility contracts by the General Assembly. It is extremely doubtful that
such contracts can violate those requirements.
Municipalities that operate sewer systems but no water systems obviously are at a
disadvantage in collecting delinquent sewer bills. That problem is compounded by the
probability that cutting-off sewer service has public health implications that do not apply to the
cutting-off of water. For that reason, the courts might not view the cutting-off of sewer service
with the same degree of tolerance they would view the cutting-off of water service, particularly
where municipalities are authorized to collect sewer bills through actions in contract and debt,
and in the case of some cities, actions on taxes. [See Tennessee Code Annotated, section 7-35202]
2. Can the City require persons in the city to connect to the public sewer, and if
they do not do so, charge such persons a minimum sewer bill?
The answer is yes, the person in question has an “available sewer.”
Two state statutes authorize municipalities to require property owners, tenants or
occupants to connect to the public sewer:
Mayor Bill Fultz
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March 5, 2012
1. Tennessee Code Annotated, § 7-35-201 provides that a municipality which has or
shall issue revenue bonds to construct public sewers may by resolution require an “owner, tenant
or occupant” of a building sitting on property abutting a street or public way to connect to the
sanitary sewer. The teeth in that statute specify that:
In addition to any other method of enforcing such requirement, a
city, town or utility district also providing water service to such
property, may within or without its borders, refuse water service to
such owner or occupant until there has been compliance and may
discontinue water service to an owner, tenant or occupant failing to
comply within thirty (30) days after notice to comply.
The U.S. District Court for the Eastern District of Tennessee in Hedge v. Stout, 377
F.Supp. 131 (1974) upheld the constitutionality of that statute against a challenge of a city
resident whose water service was disconnected by the City of Mountain City after he refused to
connect to the public sewer. The meaning of “any other method” of enforcement of the
requirement that a property owner, tenants, or occupant connect to the public sewer is not clear,
but it probably includes enforcement by injunction. That statute also authorizes various methods
for municipalities and utility districts to collect water and sewer bills, including contracts with
each other for the collection of such bills. Those will be discussed below in connection with
another statute that contains similar authorization.
2. Tennessee Code Annotated, § 68-221-208, in language almost identical to that found
in Tennessee Code Annotated, § 7-35-201, authorizes municipalities that have constructed
wastewater treatment systems with state funds to require property owners, tenants and occupants
to connect to the public sewer on penalty of having their water service disconnected for
noncompliance.
Under Tennessee Code Annotated, § 68-221-208, if the municipality receives grant funds
under Tennessee Code Annotated, Title 68, Chapter 221 Part 2, apparently may require a
property owner, tenant or occupant who refuses to connect to a public sewer to pay a sewer
service charge. That statute provides that municipalities “shall” establish a “graduated sewer
user’s fee on each user of the sanitary sewers provided by the municipality.” A “User” as
defined by Tennessee Code Annotated, § 68-221-201(9), is:
... The owner, tenant or occupant of any lot or parcel of land
connected to a sanitary sewer, or for which a sanitary sewer line is
available if a municipality levies a sewer charge on the basis of
such availability. [Emphasis is mine]
Mayor Bill Fultz
Page 6
March 6, 2012
The term “available sewer” is not defined in that statute, but Tennessee Code Annotated,
§ 68-221-208 provides that in order to protect the public health and in order to assure the
payment of bonds issued for sewerage treatment works, a municipality is authorized by
resolution:
To require the power, tenant or occupant of each parcel of land
which abuts upon a street or other public way containing a sanitary
sewer and upon which lot or parcel a building exists for residential,
commercial or industrial use, to connect such building with such
sanitary sewer and to cease to use any other means for the disposal
of sewerage, waste or other polluting matter.
It is typical for many sewer use ordinances to define the term “available sewer” in terms
of distance from the sewer main to the parcel of property, such as 100 feet.
Generally, then, municipalities having state-financed sewer systems have statutory
authority to levy a sewer service charge in cases where the sewer line is merely available because
the property owner, tenant or occupant is a “user” within the meaning of Tennessee Code
Annotated, § 68-221-208.
That result was reached in the unreported case of Phillips v. Metropolitan Government of
Nashville and Davidson County, 1991 WL 202479 (Tenn. Ct. App.). There Phillips challenged
the demand by Metro. that he pay a sewer service charge between 1987 and 1989, a period in
which he was not connected to the public sewer. Metro ultimately cut-off his water and sewer
service. The evidence showed that the public sewer had been available since 1964. In reaching
that result, the Court pointed to the city’s remedies under Tennessee Code Annotated, §§ 7-35201 and 68-13-208 [now 68-221-208], as well as to the city’s rate-making authority under
Tennessee Code Annotated, §§ 9-21-101 et seq., 7-34-101, et seq., and 7-35-101 et seq. The
sewer connection was not a prerequisite to the charge for sewer service, said the Court.
If the municipal wastewater treatment works is not financed by state funds, there appears
to be no state statutory authority for a municipality to levy a sewer availability charge on a
property owner, tenant or occupant who refuses to connect to the public sewer. The
municipality’s remedy in such cases falls under Tennessee Code Annotated, § 7-35-201, which is
to discontinue water service, or presumably, to seek injunctive relief.
3. How are unpaid sewer bills collected by the City?
The answers to questions 1 and 3 provide the means by which such bills are collected.
Unfortunately, none of the means reflect a silver bullet. In each case, the process is often
arduous and, at the end, unsuccessful.
Mayor Bill Fultz
Page 7
March 5, 2012
4. If the college/university turns down the City’s proposal for the collection of tap
fees, what is the city’s remedy?
I do not know under what authority the city is charging tap fees, what the parties agreed
to with respect to tap fees, or what the city’s proposal reflects.
I have previously said this abut the authority of cities to levy tap fees:
Tennessee Code Annotated, § 7-34-104(5) authorizes municipalities to "Prescribe and
collect rates, fees, and charges for the services, facilities and commodities furnished by such
public works [water and sewer systems]. Tennessee Code Annotated, § 7-34-114(a) further
provides that:
The governing body of a municipality issuing bonds pursuant to
this chapter shall prescribe and collect reasonable rates, fees or
charges for the services, facilities and commodities of such public
works [water and sewer systems], and shall revise such rates, fees
or charges from time to time whenever necessary so that such
public works shall be and always remain self-supporting.
The same statute goes on to provide that the rates, fees or charges shall be sufficient to
provide revenue to pay for bonds and for the cost of the operation of the system.
Tennessee Attorney General's Opinion 91-17 opines that this statute is effective even if
the bonds a municipality has issued have been retired. That opinion also appears correct.
Tennessee Code Annotated, section 68-221-210(a)--(b) also provides with respect to
municipalities that have obtained grants under Tennessee Code Annotated, title 68, chapter 221,
to construct wastewater treatment facilities, that:
The municipality collecting the user's fee shall have in addition the
authority to fix, levy and collect fees, rents, tolls or other changes
in an amount necessary to provide for the maintenance and
operation of sewage treatment works and payment of any
indebtedness.
(b) This authority shall be in addition to other authority to set like
fees or to levy taxes pursuant to any other authority granted by the
state of Tennessee.
Mayor Bill Fultz
Page 8
March 5, 2012
All of the above statutes appear broad enough to permit municipalities to impose tap fees
without express legislative authority. In addition, Patterson v. City of Chattanooga, 192 Tenn.
267, 241 S.W.2d 291 (1951) declares that general law authorizing cities to construct public
works should be liberally interpreted.
As far as I can determine, there are no Tennessee cases on the specific question of
whether a municipality can impose a tap fee absent express specific legislative authority.
However, several cases in other jurisdictions have upheld such fees on the basis of the municipal
utility’s general rate-making power. The most recent of those is Bertone v. Department of Public
Utilities, 583 N.E.2d 829 (Mass. 1992). There the court pointed to Massachusetts statutes that,
among other things, provided that the electric utility in question was empowered to "maintain
and operate” a light plant [statutory citation omitted], and to have “full charge of the ...
distribution of ... electricity ... [and] the method, time, price, quantity and quality of supply"
[statutory citation omitted]... [At 832] “Consistent with those statutes” declared the Court:
HMLP has broad discretion to expend money and to set rates, and
to determine rate practices. [Citations omitted] We have
recognized the authority of municipal utilities to establish terms
and conditions for service to prospective customers [citations
omitted], and we have inferred that a municipal facility, as part of
its rate-making function, may impose a hook-up charge to deal
with the increasing cumulative demands of new development.
[Citations omitted] [At 832-33]
Clearly, the statutory authority upon which the Bertone Court relied to give the
municipality the authority to impose a tap fee was even more general than the authority given to
Tennessee municipalities under the statutes cited above. In addition, Bertone points to several
other cases in which the courts in other states have upheld tap fees, relying upon statutes similar
to those at issue in that case. [See Hollis Homes, Inc. v. Public Utility. Dist No. 1 of Snohomish
County, 105 Wash.2d 288, 298, 714 P.2d 1163 (1986); Contractors & Builders Ass'n of Pinellas
County v. Dunedin, 329 So.2d 314, 318-321 (Fla.), cert. denied, 444 U.S 867, 100 S.C. 140, 62
L.Ed.2d 91 (1976)]
However, as the language of Bertone indicates, the tap on fees must be reasonably related
to the cost of adding new customers. Other cases have made the same point. [City of Pontiac v.
50 Ill. App.3d 102 (4th Dist. 1977); Tidewater Assn. of Homebuilders v. City of Virginia Beach,
400 S.E.2d 523 (Va. 1991)].
Tennessee Code Annotated, section 7-35-414 provides that it is the duty of the
municipality "by ordinance to establish and maintain just and equitable rates and charges for the
use of and the service rendered by such waterworks and/or sewer system." Presumably, that
Mayor Bill Fultz
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March 5, 2012
provision applies to charges and rates of every kind, including tap fees. In any event, the
Tennessee courts have said the same thing. [City of Parsons v. Perryville Utility District, 594
S.W.2d 401, 406 (Tenn. App. 2979).]
So have the courts in other jurisdictions. However, it has also been held that, "A
presumption of validity is accorded to rates enacted by municipal ordinance and plaintiffs bear a
heavy burden of proving that the rates charged are unjustly discriminatory and unreasonable."
[Inland Real Estate Corp. v. Palatine, 146 Ill. Alp.3d 92, 99(1st Dist.1986). Also see Village of
Nile v. City of Chicago, 101 Ill. Alp. 3d 651 (1st Dist. 1990)]. In Handy v. City of Rutland, 598
A.2d 114 (Vt. 1990), the plaintiffs could not prove a $10,000 sewer connection charge
unreasonable; they could produce no cost analysis to that effect. However, I am not sure the
Tennessee courts would generally approve tap fees in that amount.
If the tap fees imposed by the City are legal and the college/university will not pay them,
presumably, the city's alternative is to sue for their recovery.
Sincerely,
Sidney D. Hemsley
Legal Consultant
cc: Margaret Norris, Management Consultant