FROM: Sid Hemsley, Senior Law Consultant
DATE: September 18, 2006
RE: Interlocal Agreement
I have reviewed your account of the interlocal agreement between two cities and the lawsuit settlement agreement with respect to the question of whether a city can enter into an agreement that impinges on the authority of one or both cities to zone territory within its/or their corporate limits. Your account indicates that the interlocal agreement provides for a special overlay district in which future development is limited to residential, churches, schools and other public purposes. The agreement also contains restrictions related to lot areas, setbacks, green spaces, and height restrictions. Both cities have annexed the overlay districts within their UGB’s. I have not actually seen the interlocal agreement or the settlement agreement. In addition, apparently a property owner in the overlay district at issue has sued the city over the agreement. In addition, I am reluctant to issue opinions on issues where a lawsuit has already been filed. For those reasons, I will speak only to the general question of whether cities can surrender their zoning powers by interlocal agreement under Chapter 1101.
There are several provisions in Tennessee Code Annotated, § 6-58-104 authorizing and ratifying annexation reserve agreements between municipalities and between municipalities and counties, and authorizing annexation contracts between municipalities and property owners, in effect on May 19, 1998. None of those apply to the question at issue.
However, Tennessee Code Annotated, § 6-58-104(a)(6) provides that:
(6)(A) A municipality may make binding agreements with other municipalities and with municipalities to refrain from exercising any power or privilege granted to the municipality by this title, to any degree contained in the agreement including, but not limited to, the authority to annex.
(B) A county may make binding agreements with municipalities to refrain from exercising any power or privilege granted to the county by title 5, to any degree contained in the agreement including, but not limited to, the authority to receive annexation day revenue.
(C) Any agreement made pursuant to this subdivision need not have a set term, but after the agreement has been in effect for five (5) years, any party upon giving ninety (90) days written notice to the other party is entitled to a renegotiation or termination of the agreement.
The italicized portion of Subsection (6)(A), above appears to limit the agreements to powers and privileges granted by the municipality by Tennessee Code Annotated, Title 6, which, presumably, would include all of Title 6, including Chapter 58 [Comprehensive Growth Plan] and Chapter 51 [Annexation Law and other subjects relating to municipal boundaries not at issue here] there is nothing in any of the language in Subsection (6), or any other language I can find in Title 6, that suggests that it means the contract can include zoning contracts between municipalities in which the zoning power of either, or both, municipalities, is constrained.
Zoning is a police power delegated by the state to municipalities and counties. [See Fiser v. City of Knoxville, 584 S.W.2d 659 (Tenn. Ct. App. 1979); Keeton v. City of Gatlinburg, 684 S.W.2d 97 (Tenn. Ct. App. 1984). Generally, the police power is a governmental power that cannot be surrendered by contract. In City of Paris v. Paris-Henry County Public Utility District, 340 S.W.2d 885 (Tenn. 1960), the question was whether a utility district could make excavations in the city’s streets without complying with the city’s ordinance governing such excavations. The city had by ordinance 295 in May, 1956, granted to the utility district a franchise to lay, construct and maintain its gas lines under the city’s streets. Following the utility district’s failure to restore streets it had excavated for that purpose, the City of Paris, by ordinance 316 in May, 1959, required any person making a street excavation to obtain a permit from the city.
The utility district argued that ordinance 316 was unconstitutional and an impairment of a contract under Article I, Section 20, of the Tennessee Constitution on the ground that ordinance 295 provided that utility district’s agreement to the contract would be the consideration and “in lieu of all other fees, charges and licenses which the City might impose for the rights and privileges herein granted.” The Court rejected the utility district’s argument.
It was true, said the Court, that when the utility district accepted the franchise, it became binding upon the city, and that the franchise gave the utility district the right to use thecity’s streets to install its pipes, and that the contract right created by the franchise could not be revoked or impaired by the city. However, continued the Court, the utility district’s right was:
....subject to regulation by the City, acting in its governmental capacity under the police power, delegated to it by the State, to regulate and control its streets for the public health and safety. Such power is broad and cannot be limited by contract. [Citations omitted]
The Court also held ordinance 316 to be a valid police power regulation, reasoning that:
Such right [of the utility district to use the city’s streets under the franchise], was subject to regulation by the City, acting in its governmental capacity under the police power, delegated to it by the State, to regulate and control its streets for the public health and safety. Such power is broad and cannot be limited by contract. [At 888] [Citations omitted] [Emphasis is mine]
The same logic probably applies to zoning to prohibit municipalities from contracting to limit their zoning authority.
The Interlocal Government Cooperation Act found at Tennessee Code Annotated, § 12-9-101 et seq., gives local governments broad authority to enter into interlocal agreements among themselves. But Tennessee Code Annotated, § 12-9- 104(a)(1), says that, “No joint or cooperative agreement shall be entered into affecting or relating to the constitutional or statutory powers, privileges or authority of officers of political subdivisions....” As pointed out above, zoning is a state power delegated by statute to municipalities. A strong argument can be made that in light of that language, the Interlocal Government Cooperation Act does not contemplate contracts that interfere with that statutory power.