(dissenting).
With all due respect, I do not believe that Congress ever intended the result reached here. As I read the 1940 amendment to Section 13, no obligation was imposed upon TVA to provide for tax equivalent payments in its contracts with municipalities, but if such payments are provided they must be “conditioned upon a proper distribution by the municipality of any amounts collected by it in lieu of State or county taxes upon any such distribution system or property * *
The majority’s holding in this case permits a municipality to include in the rates, which it charges to users of electricity, sums in lieu of county taxes when in reality they are for no such purpose, but are used by the municipality for its own purposes. In my judgment, this constitutes not only a misrepresentation to the consuming public if the sums were not intended to be used for the purpose for which they were charged and collected, but also a conversion of funds which in equity and good conscience be*693long to the county. To allow such a windfall to the municipality does violence to the manifest purpose of tax equivalent payments. State and county governments are just as much entitled to receive their distributive share of tax equivalents as municipalities.
When Congress authorized the TVA to acquire. property previously subject to state, county and local taxation, a specific formula was enacted in Section 13 to provide recompense for the loss of taxes to the states and local governments. Cf. T.V.A. v. Polk County, D.C., 68 F.Supp. 692, aff’d 158 F.2d 96 (CA 6). The in-lieu-of-tax payments were so formalized that the Act even directed that payments be in equal monthly installments.
We are here concerned, not with property acquired by TVA, but with distribution facilities and systems owned by a municipality. The TVA was empowered by the statute to make contracts which provide for “tax-equivalent payments to the municipality in lieu of State, county and municipal taxes upon any distribution system or property owned by the municipality * *
As stated in the 1941 Annual Report of TVA at page 24: “It remains for the municipalities or the state legislatures to devise formulas for distributing a portion of these funds back to the counties .and the states.” The municipality was ■obligated to devise the formula in negotiations with the county and state. One .guideline, which may be considered in the negotiations, would be the prevailing county and state tax rates on the value of the electric system. The formula used by one municipality might not be identical with that of another, but this does not preclude devising it. In my opinion, the Act, as a condition subsequent to the tax equivalent payments to the municipality, mandates a distribution to the county and state of their respective tax equivalents initially collected by the municipality.
The requirement of distribution is not contrary to other provisions of the Power Contract between TVA and appellant. Clause 6 enumerates the priority of the disposition of revenues from the municipality’s electric operations.1 Tax equivalent payments are placed fifth.
The Schedule of Terms and Conditions in the contract provided the manner in which the tax equivalents should be taken from the electric system’s revenues and placed in the municipality’s general fund. Paragraph 10(e) (2) allows the municipality to receive and distribute an amount “calculated by applying the prevailing county and state tax rates to the value of the electric system.” The municipality is specifically prohibited however from distributing to the county and state in-lieu-of-tax payments that “would exceed the amount derived by applying the prevailing county and state tax rates to the value of the electric system.” (Paragraph 10(c) (2))
The distribution of tax equivalents is not absolute, but conditional. Unlike the *694statutory payments by TV A in the initial part of Section 13, the tax equivalents by the municipality to the county or state are subject to numerous contingencies. For example, tax equivalents could not be withdrawn if the electric system operated with a deficit or failed to satisfy the prior obligations of Clause 6(a)-(d), supra.
Allowing the municipality to withdraw and retain an amount covering tax equivalents in lieu of the state and county taxes without a distribution thereof was, in my opinion, neither intended nor sanctioned by Section 13. When the parties contracted and thereby incorporated all provisions of the TVA Act, as amended,2 the municipality accepted the benefits, as well as the responsibilities, one of which was to fashion a distribution formula of tax equivalents to the county and state.
I think a formula was devised by the City of Tullahoma when it included in its rates the sums in lieu of Coffee County taxes. True, it did not negotiate this formula with the county, but it is clear that the county acquiesced therein by demanding the sums to which it was entitled thereunder. Upon the collection of these sums, it became the duty of the municipality to distribute them to Coffee County.
In my judgment, the Supreme Court of Tennessee correctly interpreted the statute in Rutherford County v. City of Murfreesboro, 205 Tenn. 362, 326 S.W.2d 653, cert. denied 361 U.S. 919, 80 S.Ct. 257, 4 L.Ed.2d 187. While the denial of certiorari by the Supreme Court does not constitute an affirmance or even approval of the judgment, I feel certain that the Supreme Court would have acted in the case if it believed that the TVA statute, 16 U.S.C. § 831Í, had been grossly misapplied by the state court.
I would affirm the judgment of the District Court.
. 6. Disposition of Revenues: Municipality agrees to dispose of its gross revenues from, electric operations in the following manner:
(a) Revenues shall first be used for the payment of all current operating expenses, including salaries, wages, cost of materials and supplies, power at wholesale, and insurance.
(b) From remaining revenues Municipality shall next currently provide for the payment at maturity of interest accrued on all System Indebtedness, and for amortization charges and/or sinking fund payments thereon.
(e) Thereafter, revenues shall be used ■ currently to set up reasonable reserves for replacements, new construction, and contingencies, and to provide a reasonable amount of cash working capital.
(d) From remaining revenues Municipality may thereafter pay into its General Fund a return on its investment, as provided in the Financial and Accounting Policy in the Schedule of Terms and Conditions attached hereto.
(e) From remaining revenues Municipality may thereafter pay into its General Fund a tax equivalent as provided in the Financial and Accounting Policy in the Schedule of Terms and Conditions attached hereto.
. The contract, in part, provided: “Now, therefore, for and in consideration of the mutual covenants herein contained and subject to all of the provisions of the Tennessee Valley Authority Act of 1933 as amended, the parties hereto mutually covenant and agree as follows.. * * ■* ”