In the Final Session of the 113th General Assembly, Tennessee legislators focused particularly on public-private partnerships that aid in the creation of housing. The Bass, Berry & Sims Public Finance team tracked bills related to these state-wide housing initiatives as well as numerous other bills of narrower application that impacted only specific entities. In this update, you will find a brief summary of three newly enacted public chapters that provide local governments with opportunities to partner with private enterprises to facilitate the construction of additional housing developments in their communities. You will also find a brief summary of a new reporting requirement that is coming soon for fiscal year 2024 related to hotel/motel taxes levied by local governments. Please feel free to contact us with any questions.
Housing Initiatives
Residential Infrastructure Development Act of 2024. Public Chapter No. 860, which went into effect on May 1, 2024, authorizes municipalities to create "Infrastructure Development Districts" that have a capital investment of at least $5 million or are at least five acres in size of which half of the area is to be used for residential housing—single family or multifamily. Special assessments may be levied within the boundaries of the district and used to reimburse the developer for required infrastructure costs or pledged to the payment of bonds to finance those infrastructure costs and issued by either the municipality or a designated industrial development or public building authority.
Housing Opportunity Counties. Public Chapter No. 956, which went into effect on May 9, 2024, authorizes the state of Tennessee to set up a grant or loan fund to incentivize residential housing developments in counties experiencing rapid growth due to large economic development projects—this state program was not funded in the fiscal year 2025 state budget. As an alternative, though, this new law also authorizes industrial development boards to finance public infrastructure for residential developments in these rapidly growing counties through tax increment financing.
Preservation of Naturally-Occurring Affordable Housing. Public Chapter No. 1012, which went into effect on May 28, 2024, authorizes certain local governments to grant, contribute or pledge non-ad valorem tax revenues to support the payment of debt service on bonds issued by industrial development boards to finance certain low or moderate-income multifamily housing facilities. The local government must have some amount of long-term general obligation indebtedness outstanding that is rated in not lower than the third rating category for long-term debt instruments (AA/Aa2). Every proposed project utilizing this new legal authority must receive a best-interest determination from the Comptroller's Office.
Hotel/Motel Taxes
New State Oversight of Hotel/Motel Taxes. Public Chapter No. 1016, which went into effect on May 28, 2024, requires local governments that levy hotel/motel taxes pursuant to Tenn. Code Ann. § 67-4-1402 to submit a written report, 30 days or more after the end of the fiscal year, accounting for the amounts and designated uses of hotel/motel tax revenue spent by the local government. This report must be submitted to the Comptroller of the Treasury, the Commissioner of the Tennessee Department of Tourism Development, the Chair of the State and Local Government Committee of the Senate, and the Chair of the Local Government Committee of the House of Representatives. In addition, if a local government receives an audit finding related to improper usage of hotel/motel tax revenues, the local government will be required to appropriate general funds in the same amount that were spent improperly for tourism purposes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.