Notwithstanding any provision to the contrary appearing in § 7-34-115 or in the provisions of any private act, home rule or metropolitan government charter, every municipality may pay or cause to be paid from its electric system revenues for each fiscal year an amount for payments in lieu of taxes, called “tax equivalents” in this part, on its electric system and electric operations, which, in the judgment of the municipality’s governing body after consultation with the supervisory body, shall represent the fair share of the cost of government properly to be borne by the municipality, subject, however, to the following conditions and limitations:

(1) The total amount so paid as tax equivalents for each fiscal year shall not exceed a maximum amount equal to the sum of the following:

Terms Used In Tennessee Code 7-52-304

  • Assessment ratio in effect: means that assessment ratio being applied by the comptroller of the treasury in assessing electric system property of electric cooperatives and electric membership corporations for ad valorem taxation or, if such assessment function ceases to be performed by the comptroller of the treasury, that assessment ratio applied by any authorized department, agency, comptroller of the treasury, or official of the state empowered to so apply such an assessment ratio in assessing electric system property of electric cooperatives and electric membership corporations. See Tennessee Code 7-52-303
  • Contract: A legal written agreement that becomes binding when signed.
  • Electric operations: means all activities associated with the establishment, development, and administration of an electric system and the business of supplying electricity and associated services to the public, including, but not limited to, the generation, purchase, and sale of electric energy and the purchase, use and consumption of electric energy by ultimate consumers. See Tennessee Code 7-52-303
  • Electric system: means all tangible and intangible property and resources of every kind and description used or held for use in the purchase, generation, transmission, distribution, and sale of electric energy. See Tennessee Code 7-52-303
  • Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
  • Fiscal year: means the year beginning July 1 of each calendar year. See Tennessee Code 7-52-303
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Metropolitan government: means the political entity created by consolidation of all, or substantially all, of the political and corporate functions of a county and a city or cities. See Tennessee Code 7-1-101
  • Municipality: means any incorporated city or town, metropolitan government, or county that now or hereafter owns and operates an electric system and buys all or part of its power requirements for resale and distribution from the Tennessee Valley authority. See Tennessee Code 7-52-303
  • Net plant value of the electric plant: means the depreciated original cost of the electric plant, in service and held for future use, and the book value of construction work in progress, all as shown on the books of the electric system and all of which are for use in the generation, transmission, and distribution of electricity. See Tennessee Code 7-52-303
  • Private act: includes , without limitation, the charter and any amendments to the charter of any home rule municipality or any metropolitan government. See Tennessee Code 7-52-303
  • Property: includes both personal and real property. See Tennessee Code 1-3-105
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • Supervisory body: means any board or other agency of a municipality established to supervise the management and operation of its electric system and electric operations, or, in the absence of a board or other agency, the governing body of the municipality. See Tennessee Code 7-52-303
  • Taxing jurisdiction: means any county, incorporated city or town, or metropolitan government in Tennessee having the power to levy taxes, or any special taxing district in Tennessee on behalf of which ad valorem property taxes may be levied, for the support of governmental and related activities and services. See Tennessee Code 7-52-303
  • Year: means a calendar year, unless otherwise expressed. See Tennessee Code 1-3-105
(A) With respect to each of the respective taxing jurisdictions in which the municipality’s electric system is located, the equalized property tax rate, determined as provided in this part, for the taxing jurisdiction as of the beginning of such fiscal year, multiplied by the net plant value of the electric plant and the book value of materials and supplies within the taxing jurisdiction as of the beginning of such fiscal year, multiplied by the assessment ratio in effect as of the beginning of such fiscal year; and
(B) Four percent (4%) of the average of revenue less power costs from electric operations for the preceding three (3) fiscal years;
(2) Such tax equivalent payments shall be made only from electric system revenues remaining after payment of, or making reasonable provision for payment of:

(A) Current electric system operating expenses, including salaries, wages, cost of materials and supplies, power at wholesale and insurance;
(B) Current payments of interest on indebtedness incurred or assumed by the municipality for the acquisition, extension, or improvement of the electric system, and the payment of principal amounts of such indebtedness, including sinking fund payments, when due;
(C) Reasonable reserves for renewals, replacements and contingencies; and
(D) Cash working capital adequate to cover operating expenses for a reasonable number of weeks;
(3) The total amount to be paid as tax equivalents for each fiscal year shall be in lieu of all state, county, city and other local taxes or charges on the municipality’s electric system and electric operations, except as provided in subdivision (6). Accordingly, after initial determination of such total tax equivalent amount to be paid in the absence of any such taxes or charges, such total tax equivalent amount shall be reduced by the aggregate amount of any such taxes or charges imposed for such fiscal year on the municipality’s electric system or electric operations by or for the benefit of the respective taxing jurisdictions, including the municipality, in which the municipality’s electric system is located and in which such electric operations are conducted, whether or not such taxes or other charges were imposed by the respective taxing jurisdictions receiving the benefit of such taxes or charges. Any amount allocated to any such taxing jurisdiction other than a municipality, as provided in § 7-52-306 or § 7-52-307, shall be reduced by the aggregate amount of any such taxes or charges imposed for that fiscal year for the benefit of that taxing jurisdiction. Only the respective amounts remaining after the allocated amounts provided for in this subdivision (3) have been so reduced shall be actually paid to the municipality and to such respective taxing jurisdictions;
(4) The total amount to be paid as tax equivalents, including that to be paid for a municipality and any other taxing jurisdiction, for each fiscal year, determined in accordance with and subject to this part, shall be set forth in a resolution adopted by the municipality’s governing body after consultation with the supervisory body, and the municipality’s electric system shall pay to the municipality and any other taxing jurisdictions the amounts as provided in the resolution. Such determination shall be made as early in such fiscal year as possible and shall become final at the end of such fiscal year; provided, that if no such determination is made by the municipality by the end of such fiscal year, the total amount actually expensed, consistent with this part, by the electric system as of the end of such fiscal year shall constitute a final determination; provided, further, that any reductions in such amount required by subdivision (3), to the extent not made during such fiscal year, shall be made as early as possible in the succeeding fiscal year until the full adjustments are completed;
(5)

(A) Notwithstanding subdivisions (1)-(4), until the first fiscal year in which the aforementioned maximum amount for equivalents, calculated as provided in subdivision (1), exceeds the tax equivalent amount for the twelve (12) months ended June 30, 1987:

(i) The maximum tax equivalent amount that may be paid for any fiscal year shall not be less than the tax equivalent amount for the twelve (12) months ended June 30, 1987; and
(ii) Notwithstanding any provision to the contrary in any private act, home rule or metropolitan government charter, or in the provisions of § 7-52-309, any distribution payment to a taxing jurisdiction for any fiscal year shall not be greater than the amount paid to such taxing jurisdiction for the twelve (12) months ended June 30, 1987;
(B) For purposes of subdivision (5)(A), “tax equivalent amount for the twelve (12) months ended June 30, 1987” means the tax equivalent amount actually expensed for, and applicable to such twelve (12) months, consistent with the power contract, in effect during such twelve (12) months, between the municipality and the Tennessee Valley authority. Thereafter, such maximum amount for any fiscal year shall not exceed the maximum amount calculated as provided in subdivision (1). All such maximum amounts shall be subject to the conditions and limitations of subdivisions (2), (3) and (4); and
(6) Notwithstanding anything in subdivisions (1)-(5) that might be construed to the contrary, properly authorized retail sales or use taxes on electric power or energy at the same rates applicable generally to sales or use of personal property or services, including natural or artificial gas, coal, and fuel oil, as well as electric power or energy, imposed upon the vendees or users of electric power or energy by the state, a county, or a city, including a municipality, on a statewide, countywide, or citywide basis, respectively, shall not be considered a tax or charge on the municipality’s electric system or its electric operations or properties for purposes of this part.
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