§ 6-51-111 — Municipal property and services

(a) Upon referendum approval of an annexation resolution as provided in this part, an annexing municipality and any affected instrumentality of the state, including, but not limited to, a utility district, sanitary district, school district, or other public service district, shall attempt to reach agreement in writing for allocation and conveyance to the annexing municipality of any or all public functions, rights, duties, property, assets and liabilities of such state instrumentality that justice and reason may require in the circumstances. Any and all agreements entered into before March 8, 1955, relating to annexation shall be preserved. The annexing municipality, if and to the extent that it may choose, shall have the exclusive right to perform or provide municipal and utility functions and services in any territory that it annexes, notwithstanding § 7-82-301 or any other statute, subject, however, to the provisions of this section with respect to electric cooperatives. (b) Subject to such exclusive right, any such matters upon which the respective parties are not in agreement in writing within sixty (60) days after the operative date of such annexation shall be settled by arbitration with the laws of arbitration of this state effective at the time of submission to the arbitrators, and § 29-5-101(2) shall not apply to any arbitration arising under this part and § 6-51-301 . The award so rendered shall be transmitted to the chancery court of the county in which the annexing municipality is situated, and thereupon shall be subject to review in accordance with §§ 29-5-113 - 29-5-115 and 29-5-118. (c) (1) If the annexed territory is then being provided with a utility service by a state instrumentality that has outstanding bonds or other obligations payable from the revenues derived from the sale of such utility service, the agreement or arbitration award referred to in subsections (a) and (b) shall also provide that: (A) The municipality will operate the utility property in such territory and account for the revenues therefrom in such manner as not to impair the obligations of contract with reference to such bonds or other obligations; or (B) The municipality will assume the operation of the entire utility system of such state instrumentality and the payment of such bonds or other obligations in accordance with their terms. (2) Such agreement or arbitration award shall fully preserve and protect the contract rights vested in the holders of such outstanding bonds or other obligations. (d) (1) Notwithstanding any law to the contrary, if a private individual or business entity provides utility service within the boundaries of a municipality under the terms of a privilege, franchise, license, or agreement granted or entered into by the municipality, and if the municipality annexes territory that includes the service area of a utility district, then such private individual or business entity and the utility district shall attempt to reach agreement in writing for allocation and conveyance to such private individual or business entity of any or all public functions, rights, duties, property, assets, and liabilities of such utility district that justice and reason may require in the circumstances. If an agreement is not reached, then notwithstanding the change of municipal boundaries, the service area of the utility district shall remain unchanged, and such private individual or business entity shall not provide utility service in the service area of the utility district. (2) Nothing in subdivision (d)(1) shall be construed to diminish the authority of any municipality to annex. (e) If at the time of annexation, the annexed territory is being provided with utility service by a municipal utility system or other state instrumentality, including but not limited to, a utility district, the annexing municipality shall, by delivering written notice of its election to the municipal utility system or other state instrumentality, have the right to purchase all or any part of the utility system of the municipal utility system or other state instrumentality then providing utility service to the area being annexed that the annexing municipality has elected to serve under this section. The purchase price shall be a price agreed upon by the parties for the properties comprising the utility system, or part thereof, that is being acquired and payment of such purchase price shall be on terms agreed to by the parties. In the event the parties cannot agree on a purchase price, then a final determination of the fair market value of the properties being acquired and all other outstanding issues related to the provision of utility services in the annexed area shall be made using the arbitration provisions of subsection (b); provided, that the arbitrator or arbitrators shall be a person or persons experienced and qualified to value public utility properties and any such arbitrator or arbitrators shall be agreed upon by the parties. If the parties cannot agree, the selection of an arbitrator shall be as otherwise provided by the laws of arbitration of this state. Such method and determination shall be the sole means by which the annexing municipality may acquire the facilities of a municipal utility or other state instrumentality located in the annexed territory. (f) Notwithstanding a municipality's exclusive right to perform or provide municipal and utility functions and services in a territory as described in this section, a municipal water system may enter into an agreement with a water utility district, an investor-owned water utility, a county water system, a county water authority, or a county water and wastewater system treatment authority to permit that other entity to operate within the municipal water system's territory. A municipal water system shall establish a method by which the system's ratepayers may petition the system to consider entering into an agreement pursuant to this subsection (f).

Legislative History

Amended by 2022 Tenn. Acts, ch. 889, s 1, eff. 4/14/2022. Amended by 2015 Tenn. Acts, ch. 512, s 7, eff. 5/20/2015. Acts 1955, ch. 113, § 9; 1957, ch. 381, § 1; 1968, ch. 413, § 1; T.C.A., § 6-318; Acts 1993, ch. 375, § 1; 1998, ch. 586, § 1; 2003 , ch. 93, § 1.