Present law authorizes the state to make repayable grants to a municipality to assist the municipality in the construction of sewage treatment works. Present law requires the Tennessee local development authority to establish the repayment schedule for the repayment of the repayable grant. Present law does not require a uniform test for all repayable grants, instead authorizing the authority to exercise discretion based on the facts and circumstances of each repayable grant. In exercising its discretion, present law requires the authority to take into consideration the general financial condition of the municipality receiving the repayable grant and the ability of the system, for which the repayable grant is to be made, to generate user fees sufficient to pay the costs of operation, maintenance, and debt service of the system, including depreciation in accordance with generally accepted accounting principles. Present law requires municipalities receiving grants from the state to establish a graduated sewer user's fee and/or ad valorem tax on each user of the sanitary sewers provided by the municipality as necessary to provide funds sufficient to pay the monthly payments established, plus the costs of operation and maintenance of the sewage treatment work, including depreciation according to generally accepted accounting principles and any other debt service requirements of the system. This bill revises these provisions by excluding the consideration of depreciation by the authority and the municipality.
WATERWORKS CONSTRUCTION LOAN ACT OF 1974
The Waterworks Construction Loan Act of 1974 authorizes the state to make loans to a municipality for the construction of waterworks. Present law requires the Tennessee local development authority to establish the repayment schedule for the repayment of the loan. Present law does not require a uniform test for all loans, and instead authorizes the authority to exercise discretion based on the facts and circumstances of each loan. In exercising its discretion, present law requires the authority to take into consideration the general financial condition of the municipality receiving the loan and the ability of the system, for which the loan is to be made, to generate user fees sufficient to pay the costs of operation, maintenance and debt service of the system, including depreciation in accordance with generally accepted accounting principles. Present law requires the municipality to establish a water service fee and/or such ad valorem tax as necessary to provide funds sufficient to pay the monthly payments established, plus the costs of operation and maintenance of the water works, including depreciation according to generally accepted accounting principles, and any other debt service expense of the system. This bill revises these provisions by excluding the consideration of depreciation by the authority and the municipality.
THE WASTEWATER TREATMENT WORKS CONSTRUCTION GRANT ACT OF 1984
The Wastewater Treatment Works Construction Grant Act of 1984 authorizes the state to make grants to municipalities to assist them in the construction of wastewater treatment works, including preliminary engineering. Present law requires the department of environment and conservation to promulgate rules to assure selection of appropriate technology, cost effective design, and use of value engineering in the construction of wastewater treatment works, and also to establish a peer review system for review of construction projects prior to any grants being made. Present law requires the department to adopt rules to assure that municipalities receiving grants adopt and maintain user rate structures that will fund operation, maintenance, principal, and interest obligations and an adequate depreciation account to replace the cost of the wastewater treatment works over its useful life based upon the straight line method of accounting. This bill revises these provisions by removing the inclusion of an adequate depreciation account to replace the cost of the wastewater treatment works over its useful life based upon the straight line method of accounting in structuring the user rates.
ON APRIL 17, 2024, THE SENATE ADOPTED AMENDMENT #2 AND PASSED SENATE BILL 129, AS AMENDED.
AMENDMENT #2 rewrites the bill to, instead, prohibit the comptroller of the treasury, in determining whether a utility system is financially distressed, from considering the straight-line depreciation of an asset acquired or completed in the 12 calendar months preceding the audit, so long as the asset's depreciation is calculated in accordance with generally accepted accounting principles. This amendment only applies to the determination of whether a utility system is financially distressed. A utility system's financial statements must still be completed in accordance with generally accepted accounting principles. This amendment only applies if it is approved by a simple majority vote of the governing body of a utility system at a meeting of the governing body.

Statutes affected:
Introduced: 68-221-202(a), 68-221-202, 68-221-208(b), 68-221-208, 68-221-503(a)(4)(B), 68-221-503, 68-221-510(b), 68-221-510, 68-221-809(b)(1), 68-221-809