SB 26
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
January 25, 2025
Fiscal Analyst: Justin Billingsley | Email: justin.billingsley@capitol.tn.gov | Phone: 615-741-2564
SB 26
SUMMARY OF BILL: Reduces, from $5,000,000 to $1,000,000, the minimum amount of
contemplated capital cost which one or more host municipalities must project in order to form an
infrastructure development district (IDD) under the Residential Infrastructure Development Act of 2024
(Act).
FISCAL IMPACT:
OTHER FISCAL IMPACT
A precise impact to local government revenue and expenditures cannot be estimated with
reasonable certainty, but any such impacts are considered permissive.
Assumptions:
• The Act authorizes host municipalities to establish IDDs as an alternative funding
mechanism to finance the infrastructure costs associated with residential development
through the levy and collection of special assessments.
• In addition to levying assessments, a host municipality may borrow money and issue bonds
or obligations, pledge payment on bonds or obligations, delegate authority to issue bonds to
other local entities, and make proceeds of bonds available to developers.
• Pursuant to Tenn. Code Ann. § 7-84-711:
o An IDD must be composed of not less than five acres or contemplate a capital cost
of at least $5,000,000, and it must use at a minimum one-half of the area in the IDD
for residential development; and
o The creation or existence of a district is not subject to challenge if any of the
projections of capital costs, residential use, or other matters contained in an
initiating petition are not achieved.
• While an IDD that does not achieve its projected capital cost is not subject to challenge, it
is assumed that significantly lowering this threshold to $1,000,000 may result in additional
IDDs being formed in this state.
• An IDD is initiated by the filing of a petition with a municipality’s clerk and subsequent
approval of establishment resolution by the local governing body (LGB) at a public hearing.
Public notice of the hearing must be mailed to each property owner within the IDD.
• Public hearings to consider petitions will be conducted during regularly scheduled LGB
meetings, resulting in no significant increase in local government expenditures. Should a
joint public hearing be held, there may be permissive local expenditures for an LGB.
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• Mailing requirements to property owners will result in a permissive increase in local
government expenditures; however, the number of proposed IDDs and property owners
within the proposed IDDs cannot be precisely estimated.
• Upon the filing of a petition and the adoption of an establishment resolution, municipalities
may levy assessments on all properties located within the IDD, resulting in an increase in
local government revenue.
• For IDDs spanning multiple municipalities, only one municipality may levy an assessment
on a property.
• Government-owned property is not subject to a special assessment without the approval of
the applicable governing body. It is assumed most governmental entities will not consent to
the levy of a special assessment; any impact to local government revenue and expenditures
is estimated to be not significant.
• Assessment revenue must be applied to the cost of all expenses of making public
improvements within the IDD, including the following:
o Infrastructure costs;
o Payment of the principal, premium, and interest on any bonds, notes, or other debt
obligations issued for the purpose of the IDD; and
o Administrative costs, of which five percent of the total assessment may be set aside.
• An assessment, any interest on the assessment, and the costs of the collection of the
assessment constitutes a lien on the property upon which the assessment is levied.
• Municipalities are authorized to impose interest of one percent per month and a one
percent per month penalty on delinquent assessments, which may result in an increase in
local revenue; however, due to the unknown number of delinquencies that would occur, a
precise increase in local government revenue cannot be determined.
• The proposed legislation will result in permissive expenditures for any municipality that
elects to establish an IDD. However, such municipality may also incur cost savings as
infrastructure expenses would be paid by special assessments of property owners within the
IDD.
• Additionally, the portion of special assessment revenue that may be allocated to the
municipality for the administrative costs of the IDD is capped, including costs to municipal
officers, assessors of property, trustees, or other tax collecting officials. It is not known if
the portion allocated to a municipality will cover the full cost of administrative duties.
• The accounts and financial records of an IDD are subject to annual audit by the COT.
• Certified public accountant firms are hired to perform audits of local governmental entities
via a three-party contract between the specific entity, the firm, and the COT. The
municipality will pay the cost of any audit of an IDD.
• The COT will absorb any additional audit responsibilities utilizing existing staff and
resources, resulting in no significant increase in state expenditures.
• All audits must be completed as soon as practicable after the end of the fiscal year of the
municipality, and one copy must be furnished to each LGB member and the COT. A
permissive increase in local expenditures for IDD audits cannot be estimated with certainty.
• The fiscal impact of the proposed legislation is dependent on the number of municipalities
that establish an IDD as a direct result of this legislation, the specific parameters of such
development plans, the rate of special assessment levied, the number of property owners to
which the assessment is levied, and the amount of such assessment collected.
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• Due to a number of unknown factors, a permissive impact to local government revenue
and expenditures cannot be precisely estimated.
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director