State Highways
All costs of designing, constructing, and maintaining a state highway through a city are paid by the state.

The state may contract with a city and reimburse it for constructing a state highway through the city. T.C.A. § 54-5-201.

The state may contract with a city to maintain a state highway through the city. All reimbursements under the contract must be approved by the state Department of Transportation. T.C.A. § 54-5-203.

Cities may improve or add to the state highway system at their own expense. The project must be approved by the commissioner of transportation. Upon completion of the project in conformance with state standards, the state Department of Transportation must assume maintenance responsibilities. T.C.A. § 54-5-140.

The state has sole authority to select which streets will be designated state highways and to determine construction specifications for highways. T.C.A. § 54-5-202, T.C.A. § 54-5-205.

Interstate Highway System
Parts of interstates running through cities must be maintained by the state. However, the city, not the state, has authority to maintain and pay for interstate lighting. Such lighting must meet state-prescribed standards. T.C.A. § 54-5-206.

If a city fails to enter into an agreement with the state about acquiring rights of way for interstate highways or does not abide by such an agreement, the state may, on its own, locate and construct interstate highways in a municipality. This includes exercising eminent domain and adjusting or relocating utility facilities. T.C.A. §§ 54-5-207–208.

No ordinance may be passed by a city that would cause the state to lose federal aid funds for interstates. T.C.A. § 54-5-209. The costs of relocating utility facilities for interstates may be borne by the state, provided funds are available and the work meets state approval. T.C.A. §§ 54-5-801–807.

If interstate connector routes are required, cities and counties may enter into construction agreements with the state. The city or county must agree to pay 50 percent of the project and assume all maintenance costs after construction is complete. The city must deposit with the state 50 percent of right-of-way acquisition costs before any land is obtained for the project. Work will not be started until 50 percent of the remaining cost is deposited with the state. The same rules apply to fully controlled-access highway connector routes. T.C.A. §§ 54-5-501–508.

Metropolitan Planning Organizations
Federal highway legislation requires cities in metropolitan areas to participate in regional transportation planning organizations in order to receive federal funding for highways and other transportation projects. The state Department of Transportation participates in the Metropolitan Planning Organization process and manages federal planning funds. State law authorizes these cooperative planning agreements. T.C.A. §§ 54-18-101–104.