|Legal Opinion: Municipal Utility Donations to Non-Profit Corporations public.docx|
Text of Document: From: Ashburn, Melissa Ann
Sent: Monday, May 12, 2014 1:05 PM
To: Angerer, David P
Subject: RE: Municipal Utility Donations to Non-Profit Corporations
In my opinion, the authority granted to governing bodies to make donations of municipal funds to non-profit entities does not apply when the governing body is acting as the supervisory body for the utility. That law is applicable to municipal governing bodies and general fund amounts only, and does not extend when that governing body is acting as the utility board. If there is a surplus in the utility revenue accounts, and there is no need for capital improvements or other work within the utility, then it is time to revise and lower rates. This falls in line with the principle that public utilities are not to operate for profit.
This is the only authority under which a municipal utility board can make contributions to charities or non-profit entities, and it does not involve utility revenues:
(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
Tenn. Code Ann. § 7-34-115 (West)
This language above addresses those actions by utilities to seek donations from customers to use for those who have trouble paying their utility bills – no utility revenue is used in these activities, only voluntary donations made for that purpose.
When the Attorney General was asked if local school boards have authority to make such donations with public money, he provided this response:
To contrast, the Tennessee legislature has expressly provided authority to county and municipal legislative bodies to make charitable contributions under certain conditions. See generally Tenn. Code Ann §§ 5-9-109 and 6-54-111. If the Tennessee legislature had intended to provide authority to local school boards to make charitable contributions, it would have expressly provided such authority.
Tenn. Op. Att'y Gen. No. 09-46 (Apr. 2, 2009)
I find no language in the code sections applicable to municipal utilities that states utility boards have the power to donate utility revenue. As the Attorney General explains above, if the legislature intended that utility revenues be used in this manner, they would have expressly provided authority to make such donations in the law. That authority is not stated in the law, and for that reason, it is my opinion they have no such authority.
If the City is certain they want to make this donation, they should ask the Comptroller first. Only written permission by the Comptroller can protect this decision when they are audited in the future.
I hope this is helpful,
Melissa A. Ashburn
University of Tennessee
Institute for Public Service
Municipal Technical Advisory Service