During the effort to sell Murfreesboro Electric Department, city leaders have said the utility is not subject to a particular state law that calls for public referendums to dispose of such assets, but historic city records show officials acknowledging that the law has applied to the department in the past.
Tennessee Code Annotated 7-52-132 titled “Disposition of plant Election resolution Notice Ballot Election,” or the “Municipal Plant Act Law of 1935,” lays out requirements for selling a municipal utility, including a citizen referendum. The city has maintained that this law calls for a referendum when a city bought a utility using a certain type of bond, which they say Murfreesboro did not use.
Specifically, the Plant Act says:
The governing body of the municipality may dispose of all or substantially all of the electric plant acquired by means of bonds issued under this part, but only with the approval of the supervisory body and a majority of those voting in an election held as follows:
(1) The governing body of the municipality shall adopt a resolution, which shall state in substance:
(A) That the supervisory body has approved the proposed disposition;
(B) A full description of the property to be disposed of;
(C) The purchaser or purchasers of the property;
(D) The purchase price;
(E) The terms or conditions of sale if such disposition is not for cash, payable in full at the time of such disposition;
(F) The date on which such election will be held;
(G) The place or places where votes may be cast; and
(H) The hours between which such voting places may be open; and
(2) At such election the ballot shall contain the words “For the disposition of the electric plant” and “Against the disposition of the electric plant.”
In searching public records, the Murfreesboro Post found several instances in which the City of Murfreesboro and/or MED acknowledged the Plant Act has or has had authority over the utility. The records are:
- An MED annual report to the Tennessee Valley Authority for the year ended June 30, 2019. Page 30 has a question asking for the statutes the electric department was created under. The replies are “The Municipal Electric Plant Act of 1935” and “City of Murfreesboro Ordinance 18-0-47.” (The next question asks for the current statute: City Ordinance 18-0-47
- City of Murfreesboro, Tennessee Electric System Revenue Refunding and Improvement Bonds, Series 1999 for $6,350,000. As well as describing the bond issue, this document provides a biography of MED. Page 11 says, “The Murfreesboro Electric Department (the “Department”) is a municipal corporation owned by the Municipality and organized pursuant to the Municipal Electric Plant Act of 1935, Tennessee Code Annotated 7-52-101 et. Seq., which operates an electric system.”
- City of Murfreesboro, Tennessee Electric System Revenue Refunding and Improvement Bonds, Series 1999, $6,295,000. Page 11 of this bond issue also says MED is “organized pursuant to the Municipal Plant Act of 1935.”
Will AG weigh in?
Tennessee Valley Authority approval is required for the sale of Murfreesboro Electric to proceed. As part of the process, TVA asked for an opinion by Tennessee Attorney General Herbert H. Slatery III with regard to the need for a referendum approving the sale.
The attorney general’s office previously told the Murfreesboro Post it cannot confirm or deny requests for opinions as those are protected by attorney-client privilege. After the Post confirmed through an independent source that a request had been made, however, MTEMC said in January it had made the request to the AG through State Senate Majority Leader Jack Johnson’s office.
An anonymous source later told the Post that the request may be routed through the Municipal Technical Advisory Service (MTAS), an agency that advises city governments, rather than through the attorney general since the AG advises on state matters, not local matters.
MTAS said they had not received such a request, leaving the matter of a ruling on a referendum unanswered.
MTEMC previously said that Senate Majority Leader Jack Johnson asked Slatery to issue an opinion on the referendum.
Adam Elrod, communications coordinator for MTEMC, said that the co-op had not heard any answers on the referendum question from Johnson nor any decision by TVA on approving the sale. He said he was not familiar with MTAS’ possible involvement.
“We’re like anybody else – we’re waiting to see what TVA says,” Elrod said. “This is a situation where two great utility providers are going to come together and be better. We’ve been thinking about this for several months, and this will be a situation that will be good for the City of Murfreesboro and MTEMC ratepayers.”
During an interview leading up to the sale, the Post asked City Manager Craig Tindall about the attorney general matter. The city manager, who was once the city attorney, acknowledged TVA has asked for an opinion and the city was discussing that request with TVA. He said he does not believe the AG legal opinion is necessary, nor is it a legal ruling – a legal ruling only comes from a court, while an AG ruling is an opinion, he said.
“We have legal opinions, we feel we don’t need any others,” Tindall said.
Tindall said the city did not buy MED using bonds as defined by the Plant Act. Tindall also said that America operates as a representative democracy. The council’s city charter allows it, and only it, to decide to sell MED: holding a referendum would be abrogating that authority. The city’s recent charter change allows the council to sell MED. If a referendum were held, one issue is that businesses, unlike individual residents, do not vote in city elections, and so would have no voice, Tindall said.
Who has the power?
The Post’s search of public documents shows one form that discusses who has control over MED.
Page 30 of the June 2019 report to TVA (referenced above) says the Power Board is MED’s manager in response to a question asking for the “form of management of electric system (Power board, Mayor and council, etc.).”
The next question is: “List any other departments or lines of business over which management exercises control.” MED’s answer is “none.”
When the City Council voted 6-1 on Jan. 9 to sell MED, Mayor Shane McFarland argued against a referendum, saying he checked with the Rutherford County Election Commission and the city cannot hold a referendum for “anything we want.”
Some legal opinions, made available through freedom of information act requests, have raised the possibility of a referendum being required.
One such public document is a letter by Hodges Doughty & Carson Attorneys: “It is our opinion that the election (referendum) requirements of Tenn. Code Ann. 7-52-132 apply to the proposed sale of the City’s electric System to MTEMC because the System was acquired by means of bonds issued pursuant to the Municipal Electric Plant Act of 1935 (the ‘Act’).”
In its conclusion, the letter says, ‘’We agree with the conclusion of the City of Murfreesboro Attorney on June 4, 2015 that: ‘The safest legal course of action would be to assume that Tenn. Code Ann. Section 7-52-132 applies and that approval of the Power Board and the electorate is required.’”
That reference was to former City Attorney Susan Emery McGannon, who had written a memo to McFarland and former City Manager Rob Lyons. In addition to calling a referendum the “safest course,” she also said, “A plausible case also exists that such double approvals are not required based on the City’s Charter and it’s (sic) method of purchasing the initial assets of MED. The City may wish to seek an Attorney General’s opinion. …”
McGannon preceded Tindall as city attorney.