James L. Murphy Ill jmurphy@bradley.com 615.252.2303 direct 615.252.6303 fax

October 31, 2019

VIA EMAIL AND FIRST CLASS U.S. MAIL Adam Tucker City Attorney Legal Department City of Murfreesboro 111 West Vine Street Murfreesboro, TN 37130

RE: Sale of Electric System

Dear Adam:

Bradley

You have advised that the City of Murfreesboro (the "City") is proposing to sell the City-owned electric system (the "System") to Middle Tennessee Electric Membership Corporation ("MTEMC"). You have requested our opinion on whether the City would be required to conduct a referendum before it could proceed with the sale to MTEMC.

The Charter for the City (the Charter") was adopted by the Tennessee General Assembly pursuant to 1931 Private Acts, Chapter 429, as amended. Section 4 of the Charter contains the general enumeration of the powers of the City. Section 4(13) of the Charter provides in part that the City has the power "(t)o acquire, by purchase, condemnation or in other lawful manner, construct, own, operate, maintain, or sell, lease, mortgage, pledge or otherwise dispose of . . . electric generating plants, electric distribution systems, street lighting systems, . .. and other public utilities or services and any utility of service to the city or any part thereof, and necessary, appropriate or useful parts, equipment, appurtenances and accessories therefor or in connection therewith ... " (Emphasis added). Under Section 4(13) of the Charter, the City is expressly authorized to sell the System. Unless some other provision of applicable law would require that the sale of the System be approved by a referendum before the City could proceed with the sale, no referendum would be required.

Section 4(10) of the Charter contains additional language regarding the acquisition or disposition of property by the City. Section 4(10) of the Charter provides that the City is authorized "(t)o acquire or receive by purchase, gift, devise or otherwise, and to hold, maintain, improve, sell, lease, mortgage, pledge or otherwise dispose of property, real, personal and mixed, and any estate or interest therein, within or without the corporate limits, for any lawful corporate or public purpose, or for any purpose necessary or proper in effectuating any of the powers, purposes and objects of the corporation." Section 4(10) of the Charter would not require a sale of any City property to be approved by a referendum before the City could proceed with the sale.

The Attorney General has previously addressed whether the City of Memphis was authorized to sell its electric system in Tenn. Op. Atty. Gen. No. 05-006, 2005 WL 273519 (Jan.

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Adam Tucker October 31, 2019 Page 2

20, 2005). In that opinion, the Attorney General opined that the Memphis City Council was authorized by the Charter of the City of Memphis and Tenn. Code Ann. § 9-21-101, et seq., to acquire and dispose of a "public works project." The Attorney General noted that the definition of a public works project in the Charter of the City of Memphis and at Tenn. Code Ann. § 9-21-105(21 )(A) included an electric system. The Attorney General also pointed out that no statute required customer approval for the sale of the electric system owned by the City of Memphis, but if the electric plant was acquired with bonds issued under Tenn. Code Ann. §§ 7-52-101, et seq., then the sale must be first approved in a referendum election pursuant to Tenn. Code Ann. § 7-52-132. I

The referendum requirement referenced by the Attorney General is part of the Municipal Electric Plant Law of 1935, 1935 Pub Acts, Ch. 32 (the "MEPL"), codified at Tenn. Code Ann.§§ 7-52-101, et seq. As noted by the Attorney General, a referendum is required before a municipality may dispose of all or substantially all of an electric plant acquired by means of bonds issued under the MEPL. "Electric plant" as defined in Tenn. Code Ann. § 7-52-102(3), "means generating, transmission, or distribution systems, together with all other facilities, equipment and appurtenances necessary or appropriate to any such systems for the furnishing of electric power and energy for lighting, heating, power or any other purpose for which electric power and energy can be used." "Acquire" as defined in Tenn. Code Ann.§ 7-52-102(1), "means to purchase, lease, construct, reconstruct, replace, or acquire by gift." Therefore the referendum requirement applies if bonds issued under the MEPL were used to purchase, lease, construct, reconstruct or replace any electric generating, transmission, or distribution systems and all other facilities, equipment and appurtenances necessary or appropriate to any such systems for the furnishing of electric power and energy.

The provisions authorizing the issuance of bonds under the MEPL are found in Section 3(d) and Sections 4 through 12 of 1935 Pub Acts, Ch. 32. Section 4 of the MEPL provided that before any bonds could be issued pursuant to the MEPL, an election must be held in the municipality. Section 5 of the MEPL provided that if a majority of the voters in such election voted "For the Issuance of Electric Plant Bonds", the governing body of the municipality could

1 Tenn. Code Ann.§§ 9-21-101, et seq. provides as follows: 7-52-132. Plant disposition; election; resolution by governing body; ballot wording

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."

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proceed to issue the bonds. Therefore an election would have to be held before any bonds could be issued under the MEPL to fund the initial acquisition of the electric system and any replacement or reconstruction of the electric system, and a referendum would be required by Tenn. Code Ann. § 7-52-132 before a municipality could dispose of an electric system acquired with bonds that had been approved by an election or elections.

The MEPL was amended in 1988 by 1988 Pub. Acts, Ch. 750 to provide that a municipality acting pursuant to the MEPL would thereafter issue bonds or notes for the acquisition or improvement of an electric plant pursuant to the Local Government Public Obligations Act of 1986, Tenn. Code Ann. §§ 9-21-101, et seq. (the "LGPOA") rather than pursuant to the MEPL. The powers granted under the LGPOA are in addition and supplemental to the powers conferred by any other law and not in substitution for the powers conferred by any other law. Tenn. Code Ann. § 9-21-124. In the event the provisions of the LGOPA conflict with any other law or are inconsistent with any other law, the provisions of the LGOPA will prevail with respect to all bonds and notes issued under the LGOPA. Tenn. Code Ann.§ 9-21-124.

Our understanding of the facts is that:

• The System was initially acquired by the City from the Tennessee Electric Power Company in 1939.

• On April 25, 1939, the City Council of the City adopted a resolution authorizing "Revenue Bonds to be issued by the City of Murfreesboro pursuant to the Revenue Bond Act of 1935, as amended (Public Acts of Tennessee, 1935, ex. ses., Ch. 33 as amended) .... "2 The City Council of the City adopted an initial bond resolution on June 9, 1939, approving issuance of the $590,000 Electric System Revenue Bonds pursuant to the Revenue Bond Act of 1935. On August 3, 1939, the City Council adopted a resolution approving the sale of the $590,000 Electric System Revenue Bonds. Therefore the initial acquisition of the System was not funded with bonds issued pursuant to the MEPL.

• The City created the Board of Public Utilities to operate the System in 1946 as authorized by Tenn. Code Ann.§ 7-52-107. 3

• A review of the bond resolutions4 for the bonds issued by the City for the System from 1939 until the 1988 amendment to the MEPL (which provided that all future

2 The Revenue Bond Act of 1935 is codified at Tenn. Code Ann.§§ 7-34-101, et seq. 3 See Resolution of the City Council adopted May 16, 1946, as amended by Resolution adopted on November 17, 1966, Resolution adopted on October 10, 1969, Ordinance No 82-2, adopted on June 3, 1982, and Ordinance No. 86-1, adopted on January 9, 1086. Tenn. Code Ann.§ 7-52-107 provides that any municipality that owns or operates an electric plant under the MEPL or any other law may appoint a board of public utilities. Thus Tenn. Code Ann. § 7-52-107 authorized a municipality that has not issued bonds pursuant to the MEPL, to appoint a board of public utilities. See Tenn. Op. Atty. Gen. No. 11-29, 2011 WL 3013835 (March 25, 2011). 4 Initial Resolution authorizing $148,000 Electric System Revenue Bonds, Refunding Series, pursuant to the Revenue Bond Refinancing Act of 1937, adopted on November 4, 1943, and Resolution approving the sale of the $148,000 Electric System Revenue Bonds, Refunding Series A, adopted on November 18, 1943; Initial Resolution authorizing $303,000 Electric System Revenue Bonds, Refunding Series B, pursuant to the Revenue Bond Refinancing Act of 1937, adopted on April 13, 1944, and Resolution approving the sale of the $303,000 Electric System Revenue Bonds, Refunding Series B, adopted on April 27, 1944; Initial Resolution authorizing $150,000 Electric System Revenue

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bonds would be issued pursuant to the LGPOA), reveals that the bonds issued by the City for the System were issued under either the Revenue Bond Refinancing Act of 19375 or the Revenue Bond Act of 1935, and not the MEPL.

• A review of the bond resolutions6 for the bonds issued by the City for the System following the 1988 amendment to the MEPL, reveals that those bonds were issued under the LGPOA, but were not preceded by an election authorizing the issuance of the bonds as contemplated by the MEPL. Elections preceding the issuance of general obligation bonds are permitted by the LGPOA pursuant to Tenn. Code Ann. § 9-21-207 and Tenn. Code Ann. § 9-21-209.

Based on the foregoing, since all of the bonds issued by the City for the System prior to 1988 were issued pursuant to either the Revenue Bond Refinancing Act of 193 7 or the Revenue Bond Act of 1935, and none of the bonds issued by the City for the System pursuant to the LGPOA were comparable to bonds issued under the MEPL, the referendum requirement of Tenn. Code Ann.§ 7-52-132 would not apply to the proposed sale of the System to MTEMC.

Sincerely,

BRADLEY ARANT BOULT CUMMINGS, LLP

Bonds, Refunding Series C, pursuant to the Revenue Bond Refinancing Act of 1937, adopted on May 16, 1957, and Resolution approving the sale of the $150,000 Electric System Revenue Bonds, Refunding Series C, adopted on June 6, 1957; Initial Resolution authorizing $600,000 Electric System Revenue Bonds, Series A, pursuant to the Revenue Bond Act of 1935, adopted on June 1, 1967, and Resolution approving the sale of the $600,000 Electric System Revenue Bonds, Series A, adopted on August 10, 1967; and Initial Resolution authorizing $1,000,000 Electric System Revenue Bonds, Series 1975, pursuant to the Revenue Bond Act of 1935, adopted on October 9, 1975, and Resolution approving the sale of the $1,000,000 Electric System Revenue Bonds, Series 1975, adopted on November 6, 1975. 5 The Revenue Bond Refinancing Act of 1937, formerly codified at Tenn. Code Ann. §§ 9-21-101, et seq., was repealed by 1988 Pub. Acts, Ch. 750. 6 Initial Resolution authorizing $4,000,000 Electric System Revenue Bonds, Series 1992, pursuant to the LGPOA, adopted on January 24, 1992, and Resolution authorizing the sale of the $4,000,000 Electric System Revenue Bonds, Series 1992, adopted on March 19, 1992; Initial Resolution 95-R-3.0 authorizing $3,500,000 Electric System Revenue Bonds, Series 1995, pursuant to the LGPOA, adopted on March 9, 1995, and Resolution 95-R-2, authorizing the sale of the $3,500,000 Electric System Revenue Bonds, Series 1995, adopted on March 9, 1995; Initial Resolution 99-R-l O authorizing $4,200,000 Electric System Revenue Bonds, Series 1999, pursuant to the LGPOA, adopted on June 4, 1999, and Resolution 09-R-2, authorizing the sale of the $4,200,000 Electric System Revenue Bonds, Series 1999, adopted on June 4, 1999; and Initial Resolution 09-R-25 authorizing $1,730,000 Electric System Revenue and Tax Refunding Bonds, Series 2009, pursuant to the LGPOA, adopted on August 13, 2009, and Resolution No 09-R-26, authorizing the sale of the $15,605,000 Electric System Revenue and Tax Refunding Bonds, Series 2009, adopted on August 27, 1999

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