Tenn. Code § 7-35-416
Any city or town operating a waterworks or sewerage system under this part is authorized and empowered to contract with one (1) or more other cities or towns or with corporations, firms, or individuals to furnish service by such works, and to collect charges for the service, and such other cities, towns, corporations, firms and individuals are authorized to enter into such contracts for such service, but only to the extent of the capacity of the works, without impairing the usefulness of the works to the owners. Cities or towns entering into contracts with owners of waterworks or sewerage systems under this part are authorized to establish, charge, and adjust by ordinance, rates and charges for the service rendered by such system or systems. Revenues derived from this source shall be used to meet the obligations of the contract. The income received by the owner of the works under any such contract shall be deemed to be a part of the revenues of the works, and shall be applied only as provided in this part for the application of such revenues.
T.C.A. § 7-35-416