Cities can link nearby sewer service to affordable housing payments

A qualifying city may extend sewer service or allow a connection in an adjacency area if the owner or developer agrees to pay a housing surcharge, or the city assesses one. This applies to a Tennessee city that runs a sewer system outside its borders and has barred new outside connections for at least five straight years. The property must be in an area next to the city where service could reasonably be provided and capacity is available. The city may allow payment over no more than five years, with interest, or use increased county property tax revenue only with county approval and a written agreement. The city may deny service if it lacks capacity and the developer cannot or will not help pay for needed sewer upgrades. Other customary fees still apply, and the owner or developer must pay all sewer extension and connection costs. The law took effect when it became law.

The city must deposit surcharge payments into an affordable housing fund and use them only for eligible affordable housing projects within city limits. Eligible projects include buying land, building or repairing affordable homes, and preserving affordable units inside the city. The city may support projects directly or through a public authority, and may issue bonds backed by fund revenue and other legally available funds approved by the city. The bonds are not general debts of the city, and the city's credit and taxing power do not secure them. If a developer pays in full, the city may reserve an equal amount for up to five years for eligible projects in which the developer has a role or interest. Reserved money cannot be refunded. Any amount the city reserves must be committed or spent within five years of payment. Any unused amount returns to the fund's general balance.

When a surcharge is assessed and not paid in full, the city must bill the unpaid amount, with authorized interest, as a separate line on the utility bill. The payment obligation applies only to the property receiving sewer service and ends when the surcharge is paid in full. The city may collect unpaid installments like utility charges, including by combining bills or discontinuing service for nonpayment. The city must tell the owner the balance and payment terms when billing begins and when asked. Before a property is transferred with deferred payments, the developer must disclose the obligation in the sale contract and give the city proof of that disclosure. Payment may be spread over no more than five years. The obligation ends when the surcharge is paid in full.