What kinds of fees can a Tennessee county or city charge a private ambulance service operating in its area?

Subject

Opinion No. 13-09, Ambulance Service Fees, February 4, 2013

Plain-English summary

A state representative asked the AG to walk through how Tennessee counties and cities could charge fees on private ambulance services. The opinion answers eight related questions covering when a county can impose a fee, what kinds of fees are allowed, how they're set and collected, and what happens when the ambulance provider operates across county or city lines.

The basic rule under Tenn. Code Ann. § 7-61-103 is that any county or city may "license, franchise, or contract for private operators . . . to provide ambulance services" and may "adopt and enforce reasonable regulations to control" them. As part of that regulatory authority, the county or city can charge a franchise fee that is "reasonably related to the regulation of the ambulance provider, including defrayment of the costs of regulating the ambulance provider." The provider's location (based in the county, based in a city within the county, or based outside the county entirely) does not change the basic authority; what matters is whether the provider is operating within the regulating jurisdiction's boundaries.

The fee has to be a real fee, not a tax. Tennessee courts (City of Tullahoma v. Bedford County; Fowler v. Warren County; Gray's Disposal v. Metro. Gov't of Nashville) distinguish a "tax" (a revenue-raising measure for general government debts) from a "fee" (a charge to regulate a specific activity or defray the cost of a service). And per S & P Enterprises v. City of Memphis, "it is no objection to a regulatory license that it produces more income than is required for its administration and enforcement," provided the fees bear "some reasonable relation to the expenses involved."

A city or county cannot extend its ambulance service into another jurisdiction without the other's approval. Tenn. Code Ann. § 7-61-104(a). Joint operations across boundaries are typically structured as interlocal agreements under Tenn. Code Ann. §§ 5-1-113 to -114 and § 7-61-104(b), and the franchise-fee terms can be addressed in that agreement.

If an ambulance provider doesn't pay the fee, the county can enforce by "fines, forfeitures and penalties, and by other actions or proceedings in any court of competent jurisdiction" under Tenn. Code Ann. §§ 5-1-118 and 6-2-201(28)(A). The Fowler court used an injunction against a non-paying provider; the Morristown Emergency case used a permanent injunction against an unfranchised one.

Section 7-61-103 makes no distinction between for-profit and not-for-profit ambulance services, so the analysis applies equally to both.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Tennessee's EMS-licensing and ambulance-service framework has seen amendments since 2013, particularly around state Department of Health licensing fees and the regulation of advanced-life-support providers. Anyone setting franchise rates or drafting interlocal agreements today should pull current versions of §§ 7-61-101 to -104, the §§ 68-140 EMS chapter, and any updated Tennessee rules (Ch. 1200-12-1).

Background and statutory framework

The ambulance-services chapter of Title 7 (§§ 7-61-101 to -104) gives counties and cities broad authority to provide or regulate ambulance service. The provider can be the local government itself, a contractor, a franchisee, or a licensee. The same chapter limits cross-boundary service: a county can't push into a city in or outside its borders without that city's or county's consent, and a city can't push outside its corporate boundaries without consent of the area to be served. Subsection 7-61-104(b) permits two or more counties and municipalities to enter joint agreements for ambulance service, with a special provision for large-population counties.

Reasonableness of the fee was the recurring theme. The Tennessee Court of Appeals in Fowler v. Warren County upheld a county franchise fee against a private ambulance operator who challenged it. That decision in turn relied on the tax-versus-fee distinction in City of Tullahoma v. Bedford County and the latitude in S & P Enterprises v. City of Memphis for fees to exceed bare administrative cost as long as they bear "some reasonable relation" to expenses involved.

Equal protection concerns surface when a county or city wants to classify providers differently. Gray's Disposal Co. v. Metropolitan Government of Nashville set the controlling Tennessee standard: classifications must have a "reasonable basis" that is satisfied if "any state of facts may reasonably be conceived to justify it." That's a deferential standard, but it isn't a free pass; an arbitrary classification (charging out-of-county providers wildly more than in-county providers for no reason tied to actual regulatory burden, for example) could be vulnerable.

On enforcement, Tenn. Code Ann. § 5-1-118(a) allows counties to exercise certain enumerated municipal powers by resolution, including the power in Tenn. Code Ann. § 6-2-201(28)(A) to "[e]nforce any ordinance, rule or regulation by fines, forfeitures and penalties, and by other actions or proceedings in any court of competent jurisdiction." The Fowler and Morristown Emergency cases provide the practical model: injunctive relief against a non-paying or unfranchised provider.

State-level licensure of ambulance providers is separate. Under Tenn. Code Ann. §§ 68-140-501 et seq., the Division of Emergency Services within the Tennessee Department of Health licenses ambulance services, with permitting and certification fees under § 68-140-517 and Tenn. Rules & Regs. Ch. 1200-12-1-.06. Those state-level fees pass through into the provider's cost base but do not displace local franchise fees.

Common questions

Can my county charge a flat annual fee, a per-call fee, or a percentage-of-gross-billings fee?

Section 7-61-103 doesn't dictate the structure. The opinion allows "any reasonable fee," whether a flat annual fee, a per-call fee, or some other arrangement, as long as it's tied to the cost of regulating the provider and is treated as a fee rather than a tax. S & P Enterprises makes clear that the fee can produce more revenue than the bare administrative cost, but the relationship to regulatory expense has to be real.

Can an ambulance based outside my county operate inside it?

Only with the consent of the governing body where it would operate. Tenn. Code Ann. § 7-61-104(a) forbids a county from extending ambulance service into another county or into a city without that other jurisdiction's approval. The same restriction applies to cities pushing outside their corporate boundaries. Joint operations are usually handled through an interlocal agreement under § 7-61-104(b) and §§ 5-1-113 to -114.

Can a city or county classify ambulance providers differently for fee purposes?

Yes, but the classification needs a rational basis under the Gray's Disposal / Tennessee Small School Sys. equal protection framework. Some plausible bases: differences in regulatory burden, the volume of in-jurisdiction calls, the need for additional inspections for out-of-jurisdiction providers, or the level of service (BLS vs. ALS). Arbitrary distinctions that don't track any actual difference in regulatory burden risk reversal.

What happens if the provider refuses to pay?

The county can sue. Section 5-1-118(a) gives counties certain municipal enforcement powers, and § 6-2-201(28)(A) authorizes enforcement of any ordinance, rule, or regulation by "fines, forfeitures and penalties, and by other actions or proceedings in any court of competent jurisdiction." Fowler v. Warren County and Morristown Emergency and Rescue Squad both involved injunctive relief to stop unauthorized or non-paying providers from operating.

Does it matter if the ambulance company is a nonprofit?

No. Section 7-61-103 makes no distinction between for-profit and not-for-profit private ambulance services. The same fee and regulatory framework applies to both. (Section 7-16-103 specifically references both "private operators" and "nonprofit general welfare corporations.")

Can a city charge a separate franchise fee on an ambulance service authorized by the county?

If the ambulance service operates within the city's corporate boundaries, then yes, subject to the consent rules in § 7-61-104(a) and the general "reasonable fee" standard. The opinion's discussion of in-jurisdiction operations suggests that the governing body whose territory the service operates within may impose its own fee. In practice, this is most cleanly handled in an interlocal agreement between the city and the county.

Citations

• Tenn. Code Ann. §§ 7-61-101 to -104 (ambulance services chapter)
• Tenn. Code Ann. § 7-61-103 (franchise/license/contract authority and regulatory powers)
• Tenn. Code Ann. § 7-61-104 (cross-boundary consent and interlocal agreements)
• Tenn. Code Ann. §§ 5-1-113 to -114 (interlocal cooperation/compact authority)
• Tenn. Code Ann. § 5-1-118 (county exercise of certain municipal powers)
• Tenn. Code Ann. § 6-2-201(28)(A) (enforcement by fines and court proceedings)
• Tenn. Code Ann. § 7-16-103 (private/nonprofit ambulance service)
• Tenn. Code Ann. §§ 68-140-501 et seq. (state EMS standards)
• Fowler v. Warren County, 2008 WL 204118 (Tenn. Ct. App. 2008) (upholding county franchise fee on ambulance provider)
• City of Tullahoma v. Bedford County, 938 S.W.2d 408 (Tenn. 1997) (tax vs. fee distinction)
• Gray's Disposal Co. v. Metropolitan Gov't of Nashville, 122 S.W.3d 148 (Tenn. Ct. App. 2002) (rational-basis review of fee classifications)
• S & P Enterprises, Inc. v. City of Memphis, 672 S.W.2d 213 (Tenn. Ct. App. 1983) (regulatory fee can exceed bare administrative cost)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-009.pdf

Original opinion text

S T A T E O F T E N N E S S E E
OFFICE OF THE
ATTORNEY GENERAL
PO BOX 20207
NASHVILLE, TENNESSEE 37202

February 4, 2013

Opinion No. 13-09

Ambulance Service Fees

QUESTIONS

1. Under what circumstances are counties empowered to charge franchise or other fees to private ambulance services: (a) based within the county as a whole; (b) based within a municipality in the county; and (c) based outside the boundaries of the county?

2. What types of franchise or other fees, such as a flat fee per call, a percentage of gross billings, or a fixed annual or other periodic fee, are permissible for counties to charge privately owned and operated ambulance services?

3. How are such fees established?

4. To whom are such fees paid?

5. How are such fees collected in the event of a failure to pay the fee?

6. Is a municipality empowered to require and charge the same or different franchise or other fees to a county-authorized ambulance service operating within the corporate limits of the municipality if the county-authorized ambulance service is not based within the corporate limits of the municipality?

7. Is a county empowered to require and charge the same or different franchise or other fees to a municipality-authorized ambulance service operating within the corporate limits of the county under the following circumstances: (a) the municipality-authorized ambulance service is based within the corporate limits of the municipality or (b) the municipality-authorized ambulance service is not based within the corporate limits of the municipality?

8. Are there any distinctions or differences in the above answers if the private ambulance service is a for-profit rather than a not-for-profit ambulance service?

OPINIONS

1. A county may establish the payment of any reasonable fee by a private ambulance service authorized to operate within the county's boundaries, regardless of where the ambulance service provider is based.

2. A county may establish any fee that is reasonably related to the regulation of the ambulance provider, including the defrayment of the county's costs in regulating the ambulance provider.

3 & 4. A county's governing body regulates ambulance services, including setting ambulance service fees. Those fees are collected pursuant to the rules and regulations adopted by the governing body.

5. Counties may enforce any ordinance, rule or regulation by fines, forfeitures, penalties, or proceedings in any court of competent jurisdiction.

6 & 7. A municipality or county-authorized ambulance service may only provide service within the boundaries of another municipality or county with the approval of that municipality's or county's governing body. Should a municipality or county enter into an agreement with one or more contiguous municipalities or counties to jointly provide for ambulance services in their respective jurisdictions pursuant to Tenn. Code Ann. § 7-61-104(b), then the terms governing how such services are to be provided should be set forth in that interlocal agreement. Such terms may address any franchise fees to be paid by the ambulance provider to any municipality or county in which the provider is operating and the amounts to be paid to the ambulance provider for its services.

8. No. Tenn. Code Ann. § 7-61-103 does not differentiate between for-profit and not-for-profit private ambulance service providers.

ANALYSIS

1. The provision of ambulance services by a Tennessee county or city is governed by Tenn. Code Ann. §§ 7-61-101 to -104. The governing body of any Tennessee county or city may "provide and maintain and do all things necessary to provide ambulance service as a public service." Tenn. Code Ann. § 7-61-102. See also Morristown Emergency and Rescue Squad, Inc. v. Volunteer Dev. Co., Inc., 793 S.W.2d 262, 264 (Tenn. Ct. App. 1990). To this end, a county or city may "license, franchise, or contract for private operators . . . to provide ambulance services." Tenn. Code Ann. § 7-61-103. The governing body may also adopt and enforce reasonable regulations to control the private or nonprofit ambulance service. Id. In so doing, the county may charge to the provider of ambulance services a franchise fee that is reasonably related to the regulation of the ambulance provider, including defrayment of the costs of regulating the ambulance provider. See id. See also Fowler v. Warren County, No. M2007-01004-COA-R3-CV, 2008 WL 204118, at *1 (Tenn. Ct. App. Jan. 24, 2008).

A city or county may not extend ambulance services within the boundaries of another city or county without the approval of that city's or county's governing body. Tenn. Code Ann. § 7-61-104(a) provides:

No county may provide and maintain, license, franchise, or contract for ambulance service within the boundaries of a city or another county, and no city may provide and maintain, license, franchise, or contract for ambulance service outside its corporate boundaries, without the approval of the governing body of the area to be served.

Thus, in accordance with Tenn. Code Ann. § 7-61-104(a), a county may not provide and maintain an ambulance service within the boundaries of a city in or outside the county, or within the boundaries of another county, without the consent of that city's or county's governing body. Pursuant to Tenn. Code Ann. § 7-61-104(b), counties and cities may enter agreements with each other to permit joint or cooperative action to provide for ambulance services in their respective jurisdictions. Tenn. Code Ann. § 7-61-104(b) specifically states:

(b)(1) Except as provided in subdivision (b)(2), any two (2) or more counties and municipalities may enter into agreements with each other and with persons providing both emergency and nonemergency ambulance service for a county or counties on a county-wide basis, for joint or cooperative action to provide for ambulance service as authorized in this chapter.

(2) In any county having a metropolitan form of government and a population in excess of five hundred thousand (500,000), or in any county having a population of not less than eight hundred twenty-five thousand (825,000) nor more than eight hundred thirty thousand (830,000), according to the 1990 federal census or any subsequent federal census, any two (2) or more counties and municipalities may enter into agreements for joint or cooperative action to provide for ambulance service as authorized in this chapter.

Any joint agreement between one or more contiguous cities and counties to maintain and provide ambulance services in their respective jurisdictions would be in the form of an interlocal agreement or compact as set forth by Tenn. Code Ann. §§ 5-1-113 to -114. See also Tenn. Att'y Gen. Op. 08-148 (Sept. 18, 2008); Tenn. Att'y Gen. Op. 03-073 (June 10, 2003).

2. As discussed above, Tenn. Code Ann. § 7-61-103 grants counties the authority to license, franchise, or contract for privately owned and operated ambulance services and to regulate their use. Tenn. Code Ann. § 7-61-104 provides that "[i]n order to protect the public health and welfare, any county or city may adopt and enforce reasonable regulations to control the provision of private or nonprofit ambulance service." To this end, counties may adopt regulations and require the payment of fees by the ambulance service provider. See Fowler, 2008 WL 204118, at *1.

As the Fowler court noted, the fee must be an actual fee and not a tax. Id. Tennessee courts have recognized that a "tax is a revenue raising measure levied for the purpose of paying the government's general debts and liabilities" whereas a "fee is imposed for the purpose of regulating a specific activity or defraying the cost of providing a service or benefit to the party paying the fee." City of Tullahoma v. Bedford County, 938 S.W.2d 408, 412 (Tenn. 1997). See also Fowler, 2008 WL 204118, at *2; Gray's Disposal Co., Inc. v. Metro. Gov't of Nashville, 122 S.W.3d 148, 159 (Tenn. Ct. App. 2002).

Any fee imposed must be reasonable. Tenn. Code Ann. § 7-61-103 states that "in order to protect the public health and welfare, any county or city may adopt and enforce reasonable regulations to control the provision of private or nonprofit ambulance service" (emphasis added). See also Fowler, 2008 WL 204118, at 2. To establish reasonableness, "it is only required that the fees bear some reasonable relation to the expenses involved and it is no objection to a regulatory license that it produces more income than is required for its administration and enforcement." S & P Enterprises, Inc. v. City of Memphis, 672 S.W.2d 213, 216 (Tenn. Ct. App. 1983). See also Fowler, 2008 WL 204118, at 2.

3 & 4. The governing body of a county may adopt and enforce reasonable regulations providing for ambulance services, including the payment of any reasonable fee to a city or county by an ambulance provider operating in its jurisdiction. Tenn. Code Ann. § 7-61-103. Such rules might also be incorporated in any interlocal agreement executed between one or more contiguous cities and counties to provide ambulance services in their respective jurisdictions. See Tenn. Code Ann. §§ 5-1-113 to -114 & 7-61-104. As this Office has previously opined:

Under Tenn. Code Ann. § 7-61-104, in Davidson and Shelby Counties, any two or more counties and municipalities may enter into agreements for joint or cooperative action to provide for ambulance service authorized under Tenn. Code Ann. §§ 7-61-102 and -103. No county or city may set standards less stringent than state standards adopted under Tenn. Code Ann. §§ 68-140-501, et seq. Tenn. Code Ann. § 68-140-506(g). These standards do not address ambulance fees. But the Division of Emergency Services within the Tennessee Department of Health charges licensing, permitting, and certification fees to ambulance service providers. Tenn. Code Ann. § 68-140-517; Tenn. Rules and Regulations Ch. 1200-12-1-.06. These fees, if applicable, would be part of an ambulance provider's costs and, presumably, reflected in service fees. If the city or county provides ambulance service directly, the governing body of the city or county would set the fees. Where the county or city licenses, franchises, or contracts with a private entity to provide the service, the local government could regulate fees under its service contract or franchise agreement, or through licenses.

. . . .

The second question is what role the State plays in regulating fees. Under current law, these fees are set by the local governing bodies providing or contracting for the service . . . Fees for ambulance service in Shelby County would be set by the county if it provides the service directly, through its service contract or franchise agreement with a private entity to provide the service, or under licenses it might issue to private ambulance services or regulations it might adopt to govern provision of ambulance service. If the county has entered into an interlocal agreement with other counties or with cities, then fees would be set under that agreement. Under current law, no state agency plays a direct role in setting county . . . ambulance service fees.

Tenn. Att'y Gen. Op. 08-148 at 2.

5. The next question posed is how any fees assessed against an ambulance service are collected. Tenn. Code Ann. § 7-61-103 provides that "any county or city may adopt and enforce reasonable regulations to control the provision of private or nonprofit ambulance service" (emphasis added.) The statute is silent as to specific means of enforcement.

However, under Tenn. Code Ann. § 5-1-118(a) a county, by resolution of its legislative body, may exercise certain powers granted to municipalities, including the enforcement of the county's rules and regulations. Specifically, a county may "[e]nforce any ordinance, rule or regulation by fines, forfeitures and penalties, and by other actions or proceedings in any court of competent jurisdiction." Tenn. Code Ann. § 6-2-201(28)(A).

For example, in the previously referenced Fowler case, the Circuit Court for Warren County enjoined a private ambulance service from doing business for failure to pay fees imposed by the county on ambulance service providers. Fowler, 2008 WL 204118, at *1. Likewise, the Hamblen County Chancery Court permanently enjoined an unfranchised ambulance service from operation. Morristown Emergency and Rescue Squad, Inc., 793 S.W.2d at 263. Although the issue in Morristown involved ambulance service franchises rather than ambulance service franchise fees, the analysis is the same.

6 & 7. The next questions concern the amount and type of fees that a county or municipality may impose upon an ambulance provider operating within its boundaries, where the ambulance provider may or may not be based in the municipality or county. Contiguous counties and municipalities are free to enter into agreements with each other and with those providing ambulances services. See Tenn. Code Ann. § 7-61-104. But if a county or municipality wishes to maintain, license, franchise, or contract for ambulance services that extends beyond the municipality's or county's boundaries or into the boundaries of a municipality within a county, then that municipality or county must obtain formal approval through an agreement with the governing body of the other municipality or county. See Tenn. Att'y Gen. Op. 08-148 at 2: Tenn. Att'y Gen. Op. 03-073 at 1-2. The statute does not set or limit the type or amount of franchise or other fees a governing body may charge nor does it make a distinction about who owns the ambulance service or where it is located, although as previously discussed franchise fees must be reasonably related to the regulation of the ambulance service. Furthermore, if ambulance providers are placed in different classifications for purposes of establishing the franchise fee to be paid and each classification pays a different fee, then a reasonable basis must exist for the classification to avoid a violation of equal protection guarantees under the federal and Tennessee Constitutions. See, e.g., Gray's Disposal Co., Inc. v. Metropolitan Government of Nashville, 122 S.W.3d 148, 161-64 (Tenn. Ct. App. 2002). A reasonable basis exists for a legislative classification "if any state of facts may reasonably be conceived to justify it." Id. at 163 (quoting Tennessee Small School Sys. v. McWherter, 851 S.W.2d 139, 153 (Tenn. 1993)). As regards any payments for the services actually provided by the ambulance company to a county or city, counties and municipalities are generally free to negotiate whatever terms they desire for the provision of such ambulance services.

8. Finally, these statutes make no distinction between for-profit and not-for-profit private ambulance services. See Tenn. Code Ann. § 7-16-103 (stating "[t]he governing body of any county or city may license, franchise, or contract for private operators or nonprofit general welfare corporations to provide ambulance service"). Therefore, the analysis above is equally applicable to for-profit and not-for-profit ambulance service providers.

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

DEREK C. JUMPER
Assistant Attorney General

Requested by:

Dennis Powers
State Representative
202 War Memorial Building
Nashville, TN 37243-0136