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VOL. 129 | NO. 130 | Friday, July 4, 2014

Southwind Annexation Ruling Hinges on Timing

By Bill Dries

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The city of Memphis can collect property tax revenues from two parts of Southwind whose annexation was stopped in 2013 just days before the areas were to become part of the city.

The Tennessee Appeals Court has ruled the second part of the annexation of Southwind can proceed by the city of Memphis and the city can collect property tax revenue for the fiscal year that ended June 30.

(Daily News File/Lance Murphey)

That is the effect of a ruling Wednesday, July 2, from the Tennessee Appeals Court reversing the

earlier decision of Shelby County Chancellor Walter Evans.

The court ruled the city can move ahead with the second part of the Southwind annexation that began in 2006 because a recently enacted moratorium on annexation by the Tennessee Legislature does not apply to the earlier annexation decision.

Evans granted an injunction preventing the city from annexing the area until the state moratorium expired. Evans also denied the city’s request for a stay of his ruling pending an appeal.

With the ruling by the appeals court, the case has been remanded back to Evans.

Terms of the annexation were worked out in a 2006 consent agreement and order that was agreed to by the city of Memphis and the plaintiffs. The plaintiffs then sought to stop the second part of the annexation in 2013, citing the moratorium.

The appeals court acknowledged the significant changes in annexation procedures with the moratorium.

“There can be no dispute that the enactment … constitutes a significant change in the law with regard to a municipality’s power to annex property by ordinance,” Appeals Court Judge Steven Stafford wrote in the opinion. “The change at issue in this case is not merely a change in how a statute is interpreted by the court, but presents a substantive and significant alteration in the annexation power of municipalities.

But the Tennessee Legislature approved the 2013 limitations on future annexations by ordinance – specifically the moratorium – between the time the Southwind consent order was entered and when the annexation of the two parcels in Southwind at stake was to take effect at the end of 2013.

“Because the city’s ordinance became operative prior to the moratorium established by the Tennessee General Assembly, the trial court erred in setting aside the consent order,” Stafford wrote in the ruling.

The lawsuit hinged on the distinction – the difference between when the annexation ordinance became operative and when the annexation took effect.

“The Tennessee Supreme Court has previously held that there is a distinction between the operative date of an ordinance and the effective date of an annexation,” the appeals court noted.

The operative date was before the moratorium and because of that “the trial court erred in setting aside the consent order,” the court ruled.

The Southwind residents who took the city to court in 2013 after entering into the consent order in 2006 also argued the annexation was a moot point because of the lack of a consent order with the change in state law.

The city of Memphis disagreed.

“If the consent judgment is reinstated, including the Dec. 31, 2013 effective date of the annexation, the city asserts that it would be entitled to collect property taxes from the subject property for the entire fiscal year of 2014,” Stafford pointed out.

He contrasted that with a decision to allow the city to annex the two areas with no reinstatement of the consent judgment, which would mean no entitlement to property tax revenue in the fiscal year that ended June 30.

The appeals court in Wednesday’s ruling specifically reinstated the 2006 consent judgment.

Those opposing the Southwind annexation could seek an appeal to the Tennessee Supreme Court. An appeal to the Supreme Court is not automatic. If the court didn’t agree to hear the matter, the appeals court ruling would be the final legal word.

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