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Hendersonville to send response to Sumner County over Adequate Facilities Tax demands after county lists unpaid commercial permits
Summary
City staff reported Sumner County sent a demand totaling about $225,000 alleging the city failed to verify Adequate Facilities Tax (AFT) payments on certain commercial permits; the committee directed staff to send a formal response disputing enforceability and outlining the city's position.
Hendersonville staff reported that Sumner County sent a July demand listing permits for which the county says the city did not verify Adequate Facilities Tax (AFT) payments, and the county seeks roughly $225,000 dating back to a February 2024 notice. The Finance Committee voted to send a response letter laying out the city's position and the factual findings compiled by staff.
City legal staff summarized the background: Sumner County adopted a private act in 1999 to impose an AFT on new residential and industrial development; historically the city verified that developers had paid the AFT at permit application. In February 2024 the county sent a letter to municipalities attaching a list of industrial categories (SIC) and noting potential confusion about what qualifies as industrial; that letter did not explicitly direct cities to begin assessing AFT on commercial development, according to staff.
"In 1999, the County adopted a private act, for adequate facilities tax, AFT, on new development for residential and industrial," said Lance Ray, a staff member summarizing his findings. Ray said the county later sent a letter in April 2025 indicating the city had not been verifying AFT payments for commercial development, and the county followed with a demand in July for unpaid amounts going back to the February 2024 notice. Staff reported the county's list of permits totaled around $225,000 and asked that the city remit the amount within 14 days.
City staff told the committee there may be legal vulnerabilities to the county's position, including constitutional questions and whether state law allows one public entity to require another to indemnify it for unpaid taxes. Staff recommended preparing a formal response that: (1) memorializes the city's factual findings about when applications and permits were filed and issued; (2) notes the February 2024 county communication did not explicitly require assessment of commercial permits; and (3) requests that the county pursue collections from the developers or entities that allegedly owe the amounts.
A committee member moved to send the response letter and another seconded the motion. The motion passed by unanimous voice vote. Staff will include the packet of findings presented by Lance Ray in the city's formal response to Sumner County.
