7-34-115 - Operation of utility systems Disposition of revenue.
7-34-115. Operation of utility systems Disposition of revenue.
(a) Notwithstanding the provisions of any other law to the contrary, as a matter of public policy, municipal utility systems shall be operated on sound business principles as self-sufficient entities. User charges, rates and fees shall reflect the actual cost of providing the services rendered. No public works shall operate for gain or profit or as a source of revenue to a governmental entity, but shall operate for the use and benefit of the consumers served by such public works and for the improvement of the health and safety of the inhabitants of the area served. Nothing in this section shall preclude a municipality from subsidizing, in accordance with the adopted budget of the municipality, a public works system with tax revenues. Nothing in this section shall preclude a municipal utility system from operating water and sewer systems as individual or combined entities. Nothing in this section shall preclude a municipal utility system from operating a public works system as a special revenue fund when the governing body of the municipality determines that it is in the best interest of the customers of the public works system and the citizens of the municipality. To the extent of any conflict between this section and the Wastewater Facilities Act of 1987, compiled in title 68, chapter 221, part 10, the latter statute shall control. Any municipality shall devote all revenues derived from a public works to or for:
(1) The payment of all operating expenses;
(2) Bond interest and retirement or sinking fund payments, or both;
(3) The acquisition and improvement of public works;
(4) Contingencies;
(5) The payment of other obligations incurred in the operation and maintenance of the public works and the furnishing of services;
(6) The redemption and purchase of bonds, in which case such bonds shall be cancelled;
(7) The creation and maintenance of a cash working fund;
(8) The payment of an amount to the general fund of the municipality not to exceed a cumulative return of six percent (6%) per annum of any equity invested from the general fund, if any, of the municipality. Equity investment includes any contributions or purchases made by the municipality from the general fund, including, but not limited to, cash contributions, retirement of debt service and purchases of equipment, so long as these contributions are reflected in the utility's financial statement; provided, that such definition of equity investment shall not change the status under this section of any payments made pursuant to any provision of a city charter in existence on or before July 1, 1993; and
(9) If the governing body of the municipality by resolution so requests, payments to the municipality in lieu of ad valorem tax on the property of the public works within the corporate limits of the municipality not to exceed the amount of taxes payable on privately owned property of similar nature.
(b) Any surplus remaining, after establishment of proper reserves, if any, shall be devoted solely to the reduction of rates.
(c) In the event a municipality establishes a pension plan for employees of public works, expenditures incident to inaugurating and maintaining such plan shall be deemed an operating expense for purposes of this section.
(d) In computing the equity investment of the municipality, the value of the public works shall be taken as its historical cost. The payment of bonds or the acquisition or improvement of property from the receipts derived from a public works or any other operation of the public works as such shall not be considered to increase the equity investment of the municipality.
(e) Nothing in this section shall be construed to limit the power of the municipality to make contracts with the purchasers of bonds:
(1) As to the use and disposition of the revenues otherwise than as set forth in subsection (a);
(2) As to the order of application of such revenues; or
(3) As to limitations on the amount of payments to the municipality either as a return on the equity investment of the municipality, if any, or as a payment in lieu of taxes.
(f) If a municipality violates the provisions of this section, it must repay any funds illegally transferred. If the municipality does not have sufficient funds to repay any funds illegally transferred, the municipality is required to submit a plan covering a period not to exceed five (5) years in which to repay the funds. The plan shall be submitted to and approved by the director of local finance in the office of the comptroller of the treasury. Upon discovery of such violation through an audit, any city official in violation of this section is subject to ouster under title 8, chapter 47.
(g) (1) Anything contained in this section to the contrary notwithstanding, a local government shall be entitled to receive from a utility:
(A) The amount of direct, but not indirect, operating expenses incurred by the municipality on behalf of the utility; plus
(B) The larger of:
(i) The amount determined in accordance with subdivision (g)(1)(A), excluding direct but not indirect operating expenses; or
(ii) The amount previously paid, as defined in subdivision (g)(2).
(2) As used in subdivision (g)(1)(B)(ii), amount previously paid means:
(A) For the fiscal year beginning July 1, 1993, one hundred percent (100%) of the aggregate amount, excluding direct, but not indirect, operating expenses, paid such local government by such utility in the fiscal year 1992, beginning July 1, 1992;
(B) For the fiscal year beginning July 1, 1994, eighty percent (80%) of such aggregate amount, excluding such direct operating expenses, so paid in fiscal year 1992;
(C) For the fiscal year beginning July 1, 1995, sixty percent (60%) of such aggregate amount, excluding such direct operating expenses, so paid in fiscal year 1992;
(D) For the fiscal year beginning July 1, 1996, forty percent (40%) of such aggregate amount, excluding such direct operating expenses, so paid in fiscal year 1992;
(E) For the fiscal year beginning July 1, 1997, twenty percent (20%) of such aggregate amount, excluding such direct operating expenses, so paid in fiscal year 1992; and
(F) For the fiscal year beginning July 1, 1998, zero percent (0%) of such aggregate amount, excluding such direct operating expenses, so paid in fiscal year 1992.
(h) To the extent of any conflict between this section and § 7-39-404, or chapter 52, part 3 of this title, provisions of § 7-39-404, or chapter 52, part 3 of this title shall control.
(i) (1) In addition to the authority granted under otherwise applicable law, a municipality operating a municipal utility system has the power and is authorized, acting through the authorization of the board or supervisory body having responsibility for the municipal utility system, to accept and distribute voluntary contributions for bona fide charitable purposes pursuant to programs approved by the board or supervisory body, which programs may include, but shall not be limited to, programs in which utility bills are rounded up to the next dollar when such contribution is shown as a separate line on the utility bill.
(2) Contributions accepted by a municipal utility system pursuant to programs authorized by subdivision (i)(1) shall not be considered revenue to the municipal utility system, and such contributions shall be used only for charitable purposes.
(3) For purposes of this subdivision (i)(1), a charitable purpose is one that provides relief to the poor or underprivileged, advances education or science, addresses community deterioration, provides community assistance, assists in economic development, provides for the erection of public buildings, monuments or works, assists in historic preservation, or promotes social welfare through nonprofit or governmental organizations designed to accomplish any of the purposes listed in this subdivision (i)(3).
[Acts 1935 (E.S.), ch. 33, § 11; 1949, ch. 43, § 1; C. Supp. 1950, § 4406.52 (Williams, § 4406.44); Acts 1969, ch. 335, § 2; T.C.A. (orig. ed.), § 6-1315; Acts 1986, ch. 533, § 1; 1993, ch. 509, § 1; 1998, ch. 763, § 1; 2003, ch. 181, § 1.]