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Reviewed Date: December 05, 2016
Contracts--Laws and regulations
MTAS was asked about the relationship between the governing body and the utility board of the city, whether utility extensions are required to be approved by ordinance, and whether the city is required to approve every contract by ordinance.
Knowledgebase-Utility ExtensionsOctober 22, 1996 You have the following questions: 1. What is the relationship between the governing body and the utility board of the your city, with particular respect to the power to approve utility extensions? Answer: The relationship between the governing body and utility board of the city is laid out in the analysis of Question 1. With particular respect to utility extensions, the authority to approve those resides in the city's governing body. 2. Are utility extensions required to be approved by ordinance? Answer: That is an open question. However, in light of article 2, section 9, of your city charter, the city should probably approve such extensions by ordinance until certain language contained in that provision can be changed. 3. Is the city required to approve every contract by ordinance? Answer: That is also an open question. However, in light of article 2, section 9, of your city charter, the city should probably approve each contract by ordinance until certain language contained in that provision can be changed. I am sorry for the delay in answering these questions. Unfortunately, I am so covered up with questions that I cannot address them all in a timely manner. Question 1 Apparently your city's utility board is organized under Tennessee Code Annotated, section 7-35-401 et seq. [See your municipal code, section 18-101, footnote 2.] Under that statute, the city's governing body appoints the board of waterworks and/or sewerage commission. [Tennessee Code Annotated, section 7-35-401 et seq..] However, the board of waterworks and/or sewer commissioners has the board power and duty to: 1. "take all steps and proceedings and to make and enter into all contracts and agreements necessary or incidental to the performance of its duties and the execution of its powers under this part, subject only to limitations on matters requiring approval of the governing body of the city or own in question." [Emphasis is mine.] 2. Act in an advisory capacity to the city's governing body "in all matters pertaining to the financing of the enterprise and the acquisition of any or all parts or the proposed works or extensions thereto by purchase, condemnation or construction..." 3. "collect and furnish all necessary data and information, and to recommend such appropriate action by the governing body as may appear to the board to be necessary from time to time." 4. "Subject to and after approval by the governing body of the city or town, the board shall have the power and it shall be its duty to proceed with all matters pertaining to construction, extensions, improvements and repairs necessary to proper completion of the works." [Emphasis is mine.] 5. "After completion and acceptance of the works by the board, and approval of such acceptance by the governing body of the city or town, the board shall have the power and it shall be its duty to proceed with all matter and perform everything necessary to the proper operation of the works and the collection of charges for service renders, subject only to the limitation of funds available for operation." 6. "employ such employees as in its judgment may be necessary and may fix their compensation, all of whom shall do such work as the board may direct. 7. "employ engineers and attorneys whenever in its judgment such services are necessary." [Tennessee Code Annotated, section 7-35-412.] The governing body of the city has the power to: 1. Finance, acquire "any or all parts of the proposed works or extensions thereto by purchase, condemnation or construction." 2. Approve "construction, extensions, improvements and repairs necessary to proper completion of the works," and to approve and accept such completions. 3. By ordinance, to establish and maintain just and equitable rates and charges. [Tennessee Code Annotated, sections 7-35-412 and 414.] Although some of these provisions might be somewhat vague in some contexts, it seems clear that it is within the power of the city's governing body to approve (or to disapprove) utility extensions. The utility board's function in such extensions is to give advice to the city’s governing body. Most cities have adopted water and sewer extensions regulations, usually by ordinance. I see no evidence in your municipal code that the city has done so. There are some water system design and distribution regulations in sections 18-213 and 8-214 of that code, but those do not indicate how water system extensions are approved and/or financed. Question 2 Unless a municipal governing body is required to act by ordinance, it can act by resolution. [See City of Lebanon v. Baird, 756 S.W.2d 236 (Tenn. 1988).] I see no requirement in Tennessee Code Annotated, section 7-35-401 et seq., in the city's charter, or in the city's utility regulations that directly require utility extensions to be done by ordinance. However, article 2, section 9, of your city charter provides that the city shall have certain enumerated powers "by ordinance...." Among those powers is the power to "Acquire, construct, own, operate and maintain....public utilities...." [Article 2, section 9(11).] In theory, a municipal charter provision prescribing action by ordinance is mandatory. [See Baird.] In addition, as I read the facts in your letter relevant to your questions, as might be expected, the utility extension involves the acquisition of easements, either through "acceptance" or through "contract with a neighboring city." Among the enumerated powers of the city to be exercised by ordinance under article 2, section 9, of your city charter is the power of condemnation. [Article 2, section 9(9).] Neither the general condemnation statutes used by municipalities [Tennessee Code Annotated, section 29-17-801 et seq. and 29-16-101 et seq.] nor the condemnation statute related to water and sewage systems established under Tennessee Code Annotated, title 7, chapter 35 [Tennessee Code Annotated, section 7-35-403] appear to require condemnation be accomplished by ordinance. However, arguably, if your city must acquire any of the water line extensions by easement, it must do so by ordinance. Question 3 The logic of the analyses in Question 2 applies to Question 3. Among the enumerated powers to be exercised by the city "by ordinance" under your city charter is the power to "contract and be contracted with." [Article 2, section 9(4)]. Citing Baird, OAG Opinion U94-124 opines that a similar ordinance provision previously found in the general law manager-commission charter is mandatory. I do not know what a court would do if faced with the direct question of whether such a provision required every contract, large and small, to be approved by ordinance. Baird suggests that most such contracts already executed by the city are probably valid. Such provisions in municipal charters are fairly common, and when MTAS sees them, it recommends they be eliminated because they represent a potential problem. The safe approach to this problem is to obey such provisions until they can be eliminated from the charter. Let me know if I can help you further in this or any other matter. Sincerely, Sidney D. Hemsley Senior Law ConsultantSDH/