Tennessee Code Title 7. Consolidated Governments and Local Governmental Functions and Entities § 7-35-433

(1) “Adjacency area” means the area outside the corporate limits of a participating municipality but contiguous to or adjacent to those limits and situated such that the participating municipality's provision of sewer service to that area could be reasonably construed pursuant to § 7-82-702(b)(1)(E)(i);  provided, capacity to serve new customers is available;

(2) “Affordable housing trust fund” means a separate fund established by a participating municipality into which surcharge proceeds are deposited and expended solely for affordable housing purposes within the participating municipality's corporate limits;

(3) “Commercial development” means any multifamily residential structure that is part of a mixed-use or planned commercial development, or non-residential building, site, or structure to be served by the participating municipality's sewerage system;

(4) “Housing surcharge” means a fee or assessment collected for affordable housing within the corporate limits of the participating municipality as authorized by this section for sewer connection of properties located within the adjacency area;

(5) “Participating municipality” means an incorporated city or town in this state that operates a sewerage system outside of its corporate boundaries, including cities or towns subject to § 7-35-417(a), and has imposed a moratorium on new sewer connections outside of its corporate boundaries for a period of five (5) or more consecutive years;

(6) “Public authority” means any agency, authority, or instrumentality created or authorized by any participating municipality or by two (2) or more participating municipalities acting jointly under a general statute or private act, including, but not limited to, an industrial development corporation organized pursuant to title 7, chapter 53, a health, educational and housing facility corporation organized pursuant to title 48, chapter 101, part 3, and a housing authority organized pursuant to title 13, chapter 20, part 1;  and

(7) “Residential lot” means a platted lot or parcel designated for a single-family detached dwelling within an approved single-family residential development.

(1) A participating municipality may extend sanitary sewer service or allow sewer connection only to property located within an adjacency area if the property owner or developer agrees to pay, or the municipality assesses, a housing surcharge as provided in this section.

(2) Property outside the adjacency area is ineligible for sewerage service under this section.

(3) The municipality may:

(4) This section does not exempt a property owner or developer from any other fees, charges, or other assessments customarily imposed by the municipality, county, or utility in connection with the development of property or the provision of sewer service.  All such fees and charges apply in addition to the surcharge authorized by this section.

(5) Notwithstanding a law to the contrary, a participating municipality may deny a sewer extension or connection request for sewerage services in the event the participating municipality lacks sufficient capacity to provide such services as determined by a study, report, or other information and evidence obtained by the participating municipality and the developer requesting the sewer extension or connection is unable or not willing to financially contribute to necessary upgrades to the participating municipality's sewer system.

(1) For each residential lot in a single-family development located within an adjacency area, the housing surcharge must be an amount not to exceed three percent (3%) of the appraised value of the residential lot with improvements, as determined by an independent appraisal, if a principal structure has been constructed or a building permit for a principal structure has been issued at the time of sewer connection.  If a principal structure has not been constructed and a building permit for a principal structure has not been issued at the time of sewer connection, then the housing surcharge may be imposed in the following two (2) stages:

(2) For each commercial development located within an adjacency area, the housing surcharge shall be an amount not to exceed five percent (5%) of the appraised value of the commercial property with improvements, as determined by an independent appraisal, if a principal structure has been constructed or a building permit for a principal structure has been issued at the time of sewer connection.  If a principal structure has not been constructed and a building permit for a principal structure has not been issued at the time of sewer connection, then the housing surcharge may be imposed in the following two (2) stages:

(1) Notwithstanding § 7-34-115 or any other law to the contrary, a housing surcharge collected pursuant to this section is not revenue derived from public works for purposes of § 7-34-115 and must be deposited into the participating municipality's affordable housing trust fund.

(2) Revenues in the fund must be used solely to support affordable housing projects located within the participating municipality's corporate limits, including acquisition, development and construction, rehabilitation, or preservation of affordable units pursuant to the rules, requirements, and limitations of the participating municipality's affordable housing trust fund.

(3) A participating municipality may contribute or pledge revenues in the fund to a public authority for the purpose of financing affordable housing projects eligible under this section, which such affordable housing projects constitute projects eligible to be financed with bonds issued by any such public authority.

(5) The participating municipality shall include annual reporting of the fund's receipts and expenditures in its budget documents or municipal audit related to all housing surcharges.

(1) If the housing surcharge authorized by this section is not paid in full at the time of connection, closing, or acquisition of the property and is instead assessed to the property owner for payment over a period of time not to exceed five (5) years, then the participating municipality must bill the unpaid balance, including authorized interest, as a separate line item on the monthly utility bill for the premises served.

(2) Subject to subsection (d), for purposes of collection and enforcement, the billed installment constitutes a utility service charge and may be collected and enforced in the same manner as service charges pursuant to § 7-35-201, including combined billing and discontinuance of service for nonpayment.

(3) The municipality shall provide written disclosure of the remaining balance and payment terms to the property owner upon initiation of billing and upon request thereafter.

(4) The obligation to pay installments under this subsection (e) applies only to the premises served and terminates automatically upon payment in full.

(5) As a condition of authorizing deferred payment of the housing surcharge to be paid by a subsequent purchaser or property owner, the participating municipality shall require the developer to:

(1) A participating municipality has exclusive authority by ordinance to delineate the boundaries of the adjacency area eligible for service under this section but is inclusive of the area that could be reasonably construed pursuant to § 7-82-702(b)(1)(E).  Any modification of such boundaries must be approved in writing and by ordinance enacted by the participating municipality prior to such modification.

(2) Extension of sewer service under this section does not expand the corporate limits of the participating municipality for any purpose.

(2) The participating municipality shall not authorize the extension or connection of sewer service to any property located within the adjacency area unless and until the sewer connection agreement has been fully executed.

(3) All costs associated with any authorized sewer extension or sewer connection must be borne by the property owner or developer.

(1) This section does not impair, modify, or supersede vested property rights established pursuant to the Vested Property Rights Act of 2014, compiled in §§ 13-3-413 and 13-4-310.

(2) The housing surcharge, assessment, or other requirements authorized by this section only apply to development applications, sewer extension requests, or sewer connection requests submitted on or after the date that a municipality establishes the sewer extension policy authorized by this section.

(3) This subsection (i) does not limit the authority of a participating municipality to condition new or amended sewer extension or connection approvals on compliance with this section where vested rights have not otherwise been established under state law.