Tennessee § 68-221-1010 - Facilities with earnings or operating deficit, or operating in default.

§ 68-221-1010. Facilities with earnings or operating deficit, or operating in default.

Within sixty (60) days from the time that an audit of a water system or wastewater facility is filed with the comptroller of the treasury, the comptroller of the treasury shall file with the board the audited annual financial report of any water system or wastewater facility that has a deficit total net position in any one (1) year, has a negative change in net position for two (2) consecutive years, or is currently in default on any of its debt instruments. For purposes of this section, “change in net position” means total revenues less all grants, capital contributions, and expenses, but without reduction for any excluded non-cash items. For purposes of this section, “excluded non-cash items” means any non-cash charges arising from changes to or the implementation of pension and other post-employment benefit standards promulgated by the governmental accounting standards board. Notwithstanding any other law to the contrary, a government joint venture that supplies or treats water or wastewater for wholesale use only to other governments shall not fall under the jurisdiction of the water and wastewater financing board for the purpose of reporting negative change in the net position annually, but must be referred to the board if the government joint venture is in a deficit or default position as provided herein. Within sixty (60) days from the receipt of the audited annual financial report filed by the comptroller of the treasury, the board shall schedule a hearing to determine whether the water system or wastewater facility described in the report is likely to continue in a deficit position. In reaching its determination, the board shall consider current user rates charged by the water system or wastewater facility, the size of the facility and the local government served by it, the quality of the facility's operation and management, and other relevant criteria. Upon a determination that the water system or wastewater facility is likely to remain in a deficit position, the board may order the management of the water system or wastewater facility to adopt and maintain user rate structures necessary to: Fund operation, maintenance, principal and interest obligations and adequate depreciation to recover the cost of the water system or wastewater facility over its useful life; Liquidate in an orderly fashion any deficit in total net position; and Cure a default on any indebtedness of the water system and wastewater facility. Any such order shall become final and not subject to review unless the parties named therein request by written petition a hearing before the board, as provided in §§ 68-221-1007 — 68-221-1013, no later than thirty (30) days after the date such order is served. Any hearing or rehearing provided by §§ 68-221-1007 — 68-221-1013 shall be brought pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3. Such hearing may be conducted by the board at a regular or special meeting by any member or panel of members as designated by the chair to act on its behalf, or the chair may designate an administrative judge who shall have the power and authority to conduct hearings in the name of the board to issue initial orders pursuant to the Uniform Administrative Procedures Act. In the event a water system and wastewater facility fails to adopt user rate structures pursuant to a final order of the board, the board may petition the chancery court in a jurisdiction in which the water system and wastewater facility is situated or in the chancery court of Davidson County to require the adoption of the user rate structures ordered by the board or to obtain other remedial action, which, in the discretion of the court, may be required to cause the water system and wastewater facility to be operated in a financially self-sufficient manner. Within sixty (60) days from the time that an audit of a water system is filed with the comptroller of the treasury, the comptroller of the treasury shall file with the board the audited annual financial report of any water system whose water loss as reported in the audit is excessive as established by rules promulgated by the board. Failure of the water system to include the schedule required in this section constitutes excessive water loss and the water system shall be referred to the water and wastewater financing board. In the event a water system fails to take the appropriate actions required by the board to reduce the water loss to an acceptable level pursuant to § 68-221-1009(a)(7), the board may petition the chancery court in a jurisdiction in which the water system is operating to require the water system to take such actions. By February 1 of each year, the comptroller of the treasury shall provide a written report to the speaker of the house of representatives and the speaker of the senate listing the average annual water loss contained in the annual audit for those utility systems described in § 68-221-1007. Acts 1987, ch. 299, § 10; T.C.A., § 68-13-1010 ; Acts 1992, ch. 1023, § 1; 1993, ch. 288, § 1; 1993, ch. 329, §§ 1, 2; 1997, ch. 483, §§ 16, 17; 1998, ch. 981, § 1; 2004, ch. 619, §§ 1-6; 2007, ch. 243, § 7; 2009, ch. 72, § 3; 2010, ch. 876, §§ 2, 4; 2013, ch. 141, §§ 7, 13; 2014, ch. 628, §§ 13-15; 2017, ch. 132, § 2; 2018, ch. 646, § 2. Compiler's Notes. Former title 68, ch. 13, parts 1-10 were transferred to title 68, ch. 221, parts 1-10, respectively, in 1992. See the parallel reference table in § 68-221-101 for the former and new section locations. The language “water system and wastewater facility” has been substituted for “wastewater system” near the beginning of the second sentence in (a)(1), in accord with the apparent legislative intent of Acts 1997, ch. 483, § 16. Amendments. The 2013 amendment, in (d), deleted “unaccounted for” preceding “water loss” in the first sentence of (1) and added (3). The 2014 amendment substituted “audited annual financial report” for “audit report” throughout the section; substituted “net position” for “net assets” in the first and second sentences of (a); and substituted “in total net position” for “total net assets” in (b)(2)(B). The 2017 amendment, in (a), designated the former first sentence as (1) and designated the former second sentence as (2), added the second sentence in present (1), and substituted “but must be” for “but shall be” in present (2). The 2018 amendment rewrote the second sentence of (a)(1) which read: “For purposes of this subdivision (a)(1), a ‘change in net position’ means total revenues less all grants, capital contributions, and expenses.”; and added the third sentence. Effective Dates. Acts 2013, ch. 141, § 14. April 12, 2013. Acts 2014, ch. 628, § 18. April 4, 2014. Acts 2017, ch. 132, § 3. April 17, 2017. Acts 2018, ch. 646, § 3. April 9, 2018. Attorney General Opinions. If, after applying the accounting method provided for in former subdivision (a)(2) of T.C.A. § 68-221-1010 , a water system or wastewater facility is in a deficit position and is referred to the water and wastewater financing board, the board must continue using that same accounting method, i.e., not depreciating grant fund acquired assets, in determining user rates to correct the deficit, OAG 01-097 (6/13/01). The accounting method provided for in former subdivision (a)(2) of T.C.A. 68-221-1010, i.e., not depreciating grant fund acquired assets, is to be used in all subsequent financial audits, as long as the system's or facility's user base remains at 900 or fewer customers, OAG 01-097 (6/13/01). Any conflict between general accounting principles and the accounting principles provided for in former subdivision (a)(2) of T.C.A. § 68-221-1010 , which provides for not depreciating grant fund acquired assets, is to be resolved in favor of a strict interpretation of the statute, that is, not depreciating those particular assets, OAG 01-097 (6/13/01).