Does a Texas city that limits police tow fees have to follow the state tow-fee study law?

TX AG Opinion GA-0315: Must a city that caps police tow fees follow the state tow-fee study law?

Plain-English summary

When the police order a car towed (after an arrest or a crash, for example), the driver does not get to pick the towing company; the city does. That is a "nonconsent tow." Transportation Code section 643.204 says that a city which "regulates" nonconsent tow fees must do two things: set up a procedure by which a towing company can ask for a "towing fee study," and set the allowed fees at amounts reflecting the fair value of the towing service. The City of Victoria had an ordinance capping what towing companies could charge for police-initiated nonconsent tows, but it never created the fee-study procedure. The Texas Towing and Storage Association complained, and a state representative asked the Attorney General whether Victoria was ducking its duty under section 643.204.

The Attorney General concluded Victoria probably was not "regulating" nonconsent tow fees in the way the statute means. The key move was deciding what "regulate" means, a term chapter 643 does not define. Because chapter 643 lets a city control towing only "to the extent allowed by federal law," and because the section was designed against the backdrop of federal towing deregulation, the opinion borrowed the federal courts' test. Under the Fifth Circuit's Cardinal Towing decision, a city that acts as a market participant, buying towing services for itself the way a private business would, is not "regulating" the towing market, while a city that broadly controls the towing market is. The test asks whether the city's action reflects its own interest in efficiently procuring services, and whether the action's narrow scope defeats any inference that it was setting general policy.

Applying that test, the opinion found Victoria's ordinance looked like Bedford's. It controlled only police-initiated nonconsent tows from public property, left private-property tows alone, and the city expressly treated the rate limits as contract terms with the companies on its rotation list, not as regulations. The opinion noted one caveat from Cardinal Towing: in some cities police tows might so dominate the towing business that controlling them effectively regulates the whole market. But neither the request nor the towing association offered any facts showing such special circumstances in Victoria. On the general analysis, the opinion concluded Victoria was not regulating the nonconsent tow market and therefore was not impermissibly ignoring section 643.204. It also restated the baseline rule that a city which does regulate nonconsent tow fees must comply with section 643.204, since all Texas cities must follow state law.

Currency note

This opinion was issued in 2005. 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.

Who this opinion affected (as of 2005)

Cities with towing ordinances: The opinion drew the line between regulating tow fees (which triggers section 643.204's fee-study procedure and fair-value duties) and acting as a market participant in procuring police tows (which does not). A narrow ordinance controlling only police-initiated nonconsent tows from public property, treated as contract terms, looked to the opinion like market participation rather than regulation.

Towing companies: The opinion meant that a company subject to a city's police-tow rate cap, structured as a contract term on a rotation list, could not necessarily invoke section 643.204's fee-study procedure, unless it showed the city was actually regulating the nonconsent tow market (for example, with facts that police tows dominate the local industry).

Legislators and the public: The opinion explained why a fee cap on police tows is not automatically "regulation," and pointed to the federal market-participant doctrine that controls the question under chapter 643.

Common questions

What does Transportation Code section 643.204 require of a city?
The opinion explained that a city which regulates nonconsent tow fees must establish a procedure for towing companies to request a towing fee study and must set allowed fees at amounts reflecting the fair value of the service.

Why didn't Victoria's fee cap count as regulating tow fees?
The opinion treated Victoria as a market participant rather than a regulator. Under the federal Cardinal Towing test, a city procuring police-tow services efficiently for itself, through a narrow ordinance it treats as contract terms, is not regulating the towing market.

What is the difference between a city "regulating" and "participating in" the towing market?
The opinion described regulation as broadly controlling the towing market and market participation as the city acting like a private buyer for its own needs. The test asks whether the action reflects the city's own procurement interest and whether its narrow scope rules out a general-policy purpose.

Could the answer change for a different city?
Yes. The opinion noted Cardinal Towing's caveat that in some places police tows make up so much of the towing business that controlling them effectively regulates the whole market. Facts showing that kind of special circumstance could change the result.

Does a city that really does regulate nonconsent tow fees have to comply with section 643.204?
Yes. The opinion was explicit that all Texas cities must follow state law, so a city that regulates nonconsent tow fees must follow the plain language of section 643.204.

Background and statutory framework

Transportation Code chapter 643 lets a political subdivision regulate nonconsent tow fees in its territory (§ 643.203), and section 643.204 conditions that power on establishing a fee-study procedure and setting fair-value fees. A "nonconsent tow" is any tow not initiated by the vehicle's owner or operator (§ 643.201(e)(2), (e)(4)), and includes police-initiated and city-initiated tows from public property and private-party tows from private property (§§ 684.014, 684.054). The pivotal interpretive problem was that chapter 643 does not define "regulate." Section 643.201(a) lets a subdivision regulate tow trucks "to the extent allowed by federal law," and the legislative history (House Research Organization analysis of H.B. 849) framed the sections against federal deregulation and the federal exemption that lets states and localities regulate nonconsent tow fees (49 U.S.C. § 14501(c)(2)(C)).

The opinion therefore applied the federal market-participant doctrine from Cardinal Towing & Auto Repair, Inc. v. City of Bedford, 180 F.3d 686 (5th Cir. 1999), which drew on the U.S. Supreme Court's market-participant analysis in Bldg. and Constr. Trades Council v. Associated Builders & Contractors, Inc., 507 U.S. 218 (1993). Cardinal Towing upheld a single-contractor police-tow ordinance as market participation; Stucky v. City of San Antonio, 260 F.3d 424 (5th Cir. 2001), by contrast, treated San Antonio's broad towing ordinances (requiring a city contract for any tow) as regulation. Measuring Victoria's narrow, public-property police-tow ordinance against these cases, and finding no facts showing special circumstances, the opinion placed Victoria on the market-participant side. It also grounded the baseline duty to follow state law in Texas Constitution article XI, sections 4 and 5 (general-law and home-rule cities).

Citations

Statutes and constitutional provisions:

• Tex. Transp. Code Ann. §§ 643.002-.254, 643.201(a), (e)(2), (e)(4), 643.203, 643.204, 643.204(a) (Vernon 1999 & Supp. 2004-05)
• Tex. Transp. Code Ann. §§ 684.014 (Vernon 1999), 684.054
• 49 U.S.C. § 14501(c)(2)(C) (2000)
• Tex. Const. art. XI, §§ 4, 5

Cases:

• Cardinal Towing & Auto Repair, Inc. v. City of Bedford, Tex., 180 F.3d 686, 691 (5th Cir. 1999)
• Bldg. and Constr. Trades Council v. Associated Builders & Contractors, Inc., 507 U.S. 218, 227 (1993)
• Stucky v. City of San Antonio, 260 F.3d 424 (5th Cir. 2001), rev'd and remanded on other grounds, 536 U.S. 936 (2002)

Other authorities:

• House Research Organization, Bill Analysis, Tex. H.B. 849, 78th Leg., R.S. (2003)
• Victoria, Tex., Code of Ordinances secs. 23-65(a), 23-75

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0315
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2005/ga0315.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

April 5, 2005

The Honorable Robert E. Talton
Chair, Committee on Urban Affairs
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. GA-0315

Re: Whether a municipality that limits fees for police-initiated nonconsent tows must comply with Transportation Code section 643.204 (RQ-0281-GA)

Dear Representative Talton:

You ask whether a municipality that limits fees for police-initiated nonconsent tows must comply with Transportation Code section 643.204.[1]

Transportation Code section 643.201 defines a "consent tow" as "any tow of a motor vehicle initiated by the owner or operator of the vehicle or by a person who has possession, custody, or control of the vehicle. The term does not include a tow of a motor vehicle initiated by a peace officer investigating a traffic accident or a traffic incident that involves the vehicle." TEX. TRANSP. CODE ANN. § 643.201(e)(2) (Vernon Supp. 2004-05). A "nonconsent tow" is "any tow of a motor vehicle that is not a consent tow." Id. § 643.201(e)(4). Nonconsent tows include police-initiated tows from public property, see id. § 643.201(e)(2), (4), city-initiated tows from public property, see id. § 684.054 (authorizing a towing company to remove a vehicle from a public roadway at the request of a municipal employee designated by the municipality to make such requests), and private-party initiated tows from private property, see, e.g., id. § 684.014 (Vernon 1999) (authorizing a towing company to remove a vehicle from a private parking facility at the parking facility owner's request).

The Transportation Code permits a political subdivision's governing body to regulate fees associated with "nonconsent tows" originating in the political subdivision's territory. See id. § 643.203 (Vernon Supp. 2004-05). If a political subdivision's governing body chooses to regulate the fees for a nonconsent tow, Transportation Code section 643.204 provides that:

(a) The governing body of a political subdivision that regulates nonconsent tow fees shall establish procedures by which a towing company may request that a towing fee study be performed.

(b) The governing body of the political subdivision shall establish or amend the allowable fees for nonconsent tows at amounts that represent the fair value of the services of a towing company and are reasonably related to any financial or accounting information provided to the governing body.

Id. § 643.204 (emphasis added).

You inform us that the City of Victoria ("Victoria") has an ordinance pertaining to police-initiated nonconsent tows in its territory. See Request Letter, supra note 1, at 1 and attachment A.[2] Specifically, the Victoria ordinance reads:

(a) All tow truck permit holders operating permitted tow trucks on the public streets shall charge no more than the storage rates prescribed by the Texas Department of Transportation for performing nonconsent tows. A charge for any storage service exceeding the rates prescribed or in addition to the storage related services prescribed shall constitute a violation of this article.

(b) The city manager may establish further rate limits in the city's contracts with rotation list privilege holders. These rate limits shall not be considered rate regulations, but shall instead be considered contractual obligations pursuant to the city's provision of referrals to contractees. Failure to comply with any such contractual rate limits shall not be punishable as a violation of this ordinance, but shall instead merely give the city the right to declare a breach of contract and potentially terminate said contract.

VICTORIA, TX., CODE OF ORDINANCES sec. 23-75 Rates.

You further inform us that the Texas Towing and Storage Association considers the ordinance to be a regulation of nonconsent tow fees but notes that Victoria has not established procedures by which a towing company may request a towing fee study be performed. See Request Letter, supra note 1, at 1 and attachment B.[3] You agree with the association's assessment that the ordinance is regulating nonconsent tow fees and question whether Victoria is impermissibly ignoring its statutory duty. See Request Letter, supra note 1, at 1. Particularly, you ask "whether a city can bypass the clear intent of [section 643.204] by refusing to set procedures even though [it has] set fees for nonconsent tows." Id.

In answer to your broader question, without reference to a specific city, we note that Texas cities, be they general-law or home-rule cities, are required to comply with state law. See TEX. CONST. art. XI, §§ 4, 5. Thus, a city must follow the plain language of section 643.204, if the city regulates nonconsent towing fees in its territory. See TEX. TRANSP. CODE ANN. § 643.204 (Vernon Supp. 2004-05).

We assume, however, that your question, though broad in scope, refers to the more specific circumstances of Victoria's ordinance. In Victoria's case, we must determine as a threshold matter whether the city regulates nonconsent tow fees.

Here we observe that the legislature has not defined the term "regulate" as it is used in Transportation Code chapter 643. See id. §§ 643.002-.254 (Vernon 1999 & Supp. 2004-05). In a bill analysis for House Bill 849, which enacted the section construed in this opinion, the legislature discussed regulation in the federal context and apparently designed these sections to address federal law. See HOUSE RESEARCH ORGANIZATION, BILL ANALYSIS, Tex. H.B. 849, 78th Leg., R.S. (2003) at 2 ("The U.S. Supreme Court has upheld local government regulation of the towing industry in the wake of federal deregulation."); see also 49 U.S.C. § 14501(c)(2)(C) (2000) (granting a limited exemption to a state or its political subdivisions from the federally preempted regulation of the towing industry by permitting a state or its political subdivisions to regulate nonconsent tow fees). Moreover, Transportation Code section 643.201 permits political subdivisions in Texas to "regulate the operation of a tow truck to the extent allowed by federal law . . . ." TEX. TRANSP. CODE ANN. § 643.201(a) (Vernon 2004-05) (emphasis added). Accordingly, we look to federal law concerning the towing industry to determine the meaning of "regulate" and whether Victoria regulates nonconsent tow fees.

Federal law recognizes a distinction between towing regulation and actions a governmental body takes in a proprietary capacity. See Cardinal Towing & Auto Repair, Inc. v. City of Bedford, Tex., 180 F.3d 686, 691 (5th Cir. 1999). A state or municipality acting as a market participant "in a narrow and focused manner consistent with the behavior of other market participants" is not regulating the towing market. Id. (citing Bldg. and Constr. Trades Council v. Associated Builders & Contractors, Inc., 507 U.S. 218, 227 (1993)). Consequently, when called upon to determine if an ordinance such as Victoria's ordinance constitutes the regulation of towing, the federal courts have resolved it by answering two questions:

First, does the challenged action essentially reflect the entity's own interest in its efficient procurement of needed goods and services, as measured by comparison with the typical behavior of private parties in similar circumstances? Second, does the narrow scope of the challenged action defeat an inference that its primary goal was to encourage a general policy rather than address a specific proprietary problem?

Id. at 693.

In Cardinal Towing, in the context of analyzing a municipal towing ordinance, the Fifth Circuit answered these two questions in the affirmative. See id. In that case, the court was presented with a city ordinance that required the City of Bedford to contract only with one towing company to meet Bedford's police-initiated nonconsent towing needs. See id. at 688-89. The court observed that because of the "odd structure of the towing industry," nonconsent tows do not provide an opportunity for the vehicle's owner to participate in negotiating the towing contract. See id. at 696. Rather, "the real decision is made by the party who ordered the tow, who chooses both to remove the vehicle and the party to perform the service." Id.[4] Accordingly, the court found that Bedford's ordinance was not a towing regulation because Bedford was merely creating efficiencies for itself by way of an ordinance that controlled the small arena of police-initiated nonconsent tows. Id. at 694-95.

In a similar case, the Fifth Circuit answered the same questions and found San Antonio's towing ordinances, which prohibited all towing companies from performing any type of tow unless under contract with the city, to be regulations. See Stucky v. City of San Antonio, 260 F.3d 424 (5th Cir. 2001), rev'd and remanded on other grounds, 536 U.S. 936 (2002). There the court reasoned that San Antonio's ordinances controlled so broadly the towing market that it had the direct effect of reducing the market's size. See id. at 436. "This effect [did] not speak to a private proprietary purchase, but rather to a public regulatory plan." Id. Furthermore, this effect, coupled with the court's finding that San Antonio expressly considered its ordinances to be regulations, gave the court sufficient proof to conclude that San Antonio's interaction with the market was not so narrowly focused that it could safely rule out the city's regulatory impulse. See id. at 438-39 (citing Cardinal Towing, 180 F.3d at 693).

Here, under the ordinance, a towing company is limited to the fee maximum only when a driver is arrested, has been involved in an accident, or has an otherwise disabled vehicle and fails or refuses to designate a tow truck company to move the driver's vehicle from public property.[5] In such a police-initiated nonconsent tow situation, the police officer investigating the incident is required to relay this information to the police communications officer on duty, who in turn is required to select from a list of towing companies that have contracted with the city to perform police-initiated nonconsent tows. See VICTORIA, TX., CODE OF ORDINANCES sec. 23-65(a); City Brief, supra note 5, at 3. However, Victoria does not require the use of any particular towing company for private matters. See City Brief, supra note 5, at 2-3. A towing company that performs nonconsent tows from private property is not required to contract with Victoria and therefore is not subject to a fee limitation. See id.

Victoria's ordinance resembles the ordinance at issue in Cardinal Towing. Victoria clearly limits its ordinance to control police-initiated nonconsent tows to create efficiencies for itself. In addition, the narrow scope of its ordinance, which appears to control only a portion of the nonconsent tow market, defeats the inference that its primary goal is to encourage a general policy rather than address a specific proprietary problem. Moreover, Victoria expressly considers its police-initiated nonconsent tow rate limits to be elements of a contract between itself and a towing privilege holder. See Request Letter, supra note 1, at attachment A ("These rate limits shall not be considered rate regulations, but shall be considered contractual obligations pursuant to the city's provision of referrals to contractees." VICTORIA, TX., CODE OF ORDINANCES sec. 23-75(b) Rates).

However, Cardinal Towing was concerned with an ordinance that controlled a small portion of the towing market and the regulatory effect such an ordinance had on a city's whole towing market, which included a large set of market behaviors. But the Texas legislature is concerned with ordinances that have a regulatory effect only on the nonconsent towing market, which includes a smaller set of market behaviors relative to the entire towing industry. See TEX. TRANSP. CODE ANN. § 643.204(a) (Vernon Supp. 2004-05) ("The governing body of a political subdivision that regulates nonconsent tow fees . . . .") (emphasis added). As such, we take heed of the Fifth Circuit's caveat in Cardinal Towing that in determining an ordinance's nature, general analysis yields to special circumstances. See Cardinal Towing, 180 F.3d at 696 n.5. Specifically, the Cardinal Towing court said:

Cardinal has failed to argue or allege that the structure of Bedford towing industry involves special circumstances justifying deviation from our general analysis. There may be municipalities in which police tows constitute such an overwhelming portion of the industry that failure to share in the municipality's business forecloses effective competition in other segments of the industry.

Id.

Nevertheless, neither the request letter nor the Texas Towing and Storage Association have provided us with any facts that suggest there are special circumstances in Victoria that would require something more than Cardinal Towing's general analysis. See Request Letter, supra note 1, at 1 and attachment B.[6] Under this general analysis, we do not believe Victoria is regulating the nonconsent tow market, and neither, therefore, do we believe it is impermissibly ignoring section 643.204.

SUMMARY

Transportation Code section 643.204 requires a municipality that regulates nonconsent tow fees to establish a procedure by which a towing company may request that a towing fee study be performed. The City of Victoria, Code of Ordinances section 23-75 limits the maximum fee that a towing company can assess for police-initiated nonconsent tows. The City of Victoria's ordinance does not appear to regulate nonconsent tow fees. The ordinance is designed to create efficiencies for the city, and its narrow scope, which controls only a portion of the nonconsent tow market, defeats the inference that its primary goal is to encourage a general policy rather than address a specific proprietary problem. Thus, Victoria is not impermissibly ignoring Transportation Code section 643.204.

BARRY R. McBee
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Daniel C. Bradford
Assistant Attorney General, Opinion Committee

Footnotes

[1] See Letter from Honorable Robert E. Talton, Chair, Committee on Urban Affairs, Texas House of Representatives, to Honorable Greg Abbott, Texas Attorney General (Oct. 20, 2004) (on file with Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] VICTORIA, TX., CODE OF ORDINANCES sec. 23-75 Rates.

[3] See Letter from Larry Cernosek, Chairman, Texas Towing and Storage Association, to Will Armstrong, Mayor, and Denny Arnold, City Manager, City of Victoria (June 16, 2004).

[4] The Cardinal Towing court elaborated: Because the owner of the vehicle will by necessity be unable to choose a towing company in nonconsent situations, the only party that can make the type of merit selection inherent in market transactions is the party ordering the tow. In the situations addressed by [Bedford's] ordinance, that party is the City, and by its choosing the company best able to guarantee fast, reliable towing service, the City exemplifies the market forces Congress sought to encourage. Cardinal Towing, 180 F.3d at 695.

[5] See Brief from Miles K. Risley, Senior Assistant City Attorney, City of Victoria, to Nancy S. Fuller, Chair, Opinion Committee, Office of Attorney General, at 3 (Nov. 15, 2004) (on file with Opinion Committee) [hereinafter City Brief] (citing VICTORIA, TX., CODE OF ORDINANCES sec. 23-65(a)). Sec. 23-65(a) reads: When a vehicle which has been involved in a collision or accident, or which is otherwise disabled, is unable to proceed safely, or when a driver of a vehicle is physically unable to drive such vehicle, or when a police officer arrests the driver of a vehicle and determines that the vehicle is to be impounded, the police officer investigating such incident or making such arrest shall request the driver of such vehicle to designate a tow truck operator which the driver desires to move such vehicle. When the driver has so designated the tow truck operator, the police officer shall communicate that fact immediately to the police communications officer on duty, and it shall be the duty of such communications officer to call the designated tow truck operator to send a tow truck to the scene or site of the incident or arrest. In the event such driver is physically unable to designate a tow truck operator, or refuses to designate one, the police officer investigating such incident or making such arrest shall notify the police communications office of such fact, and the communications officer shall select a privilege holder and call the privilege holder to send a tow truck to the scene or site of such incident or arrest. VICTORIA, TX., CODE OF ORDINANCES sec. 23-65(a).

[6] See also Brief from Larry Cernosek, Chairman, Texas Towing and Storage Association, to Nancy S. Fuller, Chair, Opinion Committee, Office of Attorney General (Nov. 19, 2004) (on file with Opinion Committee).