Town of Middleton, Tennessee, et al. v. City of Bolivar, Tennessee, et al.

In this case, we are asked to address the question of whether the Municipal Gas System Tax Equivalent Law of 1987, Tennessee Code Annotated Section 7-39-401 through 406, or the Revenue Bond Law, Tennessee Code Annotated Section 7-34-101, et seq., negate the provisions of ordinances passed by Appellees, the Town of Middleton, Tennessee and the Town of Whiteville, Tennessee, which granted Appellant, the City of Bolivar and its municipal utility, the right to franchise in the Appellee towns. We conclude that: (1) Appellants may be liable for both franchise fees under the ordinances, and for payments in lieu of taxes under the Municipal Gas System Tax Equivalent Law because franchise fees are not in the nature of taxes on the valuation of property and are “operating expenses” for the privilege of doing business; (2) although the ordinances initially granted Bolivar’s utility exemption from payments in lieu of taxes to Appellees, by resolution, Bolivar waived its exemption and is now obligated to make payments in lieu of taxes to Appellees under the Municipal Gas System Tax Equivalent Law; (3) to the extent that the Whiteville ordinance conflicts with Bolivar’s statutory right to charge consumers for the actual costs of its services (which would include the franchise fee expenses), it is void; (4) the trial court’s award of pendente lite payments to Appellees was not reversible error in light of our holding that Appellees were (and are) entitled to the franchise fees. Reversed in part, affirmed in part, and remanded.