                              ATTORNEY           GENERALOFTEXAS
                                           GREG       ABBOTT



                                                April 5,2005



The Honorable Robert E. Talton                       Opinion No. GA-03 15
Chair, Committee on Urban Affairs
Texas House of Representatives                       Re: Whether a municipality that limits fees for
Post Office Box 2910                                 police-initiated nonconsent tows must comply with
Austin, Texas 787682910                              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.’

         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. 5 643.201 (e)(2) (Vernon Supp. 2004-05). A “nonconsent tow” is “any tow of a motor vehicle
that is not a consent tow.” Id. f$ 643.201(e)(4). N onconsent tows include police-initiated tows
from public property, see id. 5 643.201(e)(2), (4), city-initiated tows from public property, see id.
5 684.054 (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., 5 684.014 (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.
5 643.203 (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.



         ‘See Letter from Honorable Robert E. T&on, 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:llwww.oag.state.tx.us) [hereinafter Request Letter].
The Honorable Robert E. Talton       - Page 2           (GA-0315)




                         (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. 5 643.204 (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, supva note 1, at 1 and attachment A.*
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 ofTransportation 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 ORDINANCESsec. 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, supru note 1, at 1 and attachment B.’ 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 643.2041 by refusing to set procedures even though [it has] set fees
for nonconsent tows.” Id.




        ‘VICTORIA,
                 TX., CODEOFORDINANCES
                                     sec. 23-75 Rates.

        ‘See Letter fmmlany Cemosek, Chairman, Texas Towing and StorageAssociation, to Will Armstrong, Mayor,
and Denny Arnold, City Manager, City of Victoria (June 16,2004).
The Honorable Robert E. Talton     - Page 3         (GA-0315)




         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.CODEANN. $643.204 (Vernon
Supp. 2004-05).

        We assume, however, that your question, though broad in scope, refers to the more specific
circumstances ofVictoria’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 HOUSERESEARCH        ORGANIZATION,BILLANALYSIS,         Tex. H.B. 849,78th Leg., R.S. (2003)
at 2 (“The U.S. Supreme Court has upheld local government regulation ofthe towing industry in the
wake of federal deregulation.“); see also 49 U.S.C. 5 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 byfederal law         _” TEX. TRANSP.CODEANN.
§ 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.
The Honorable Robert E. Talton - Page 4                          (GA-03 15)




        In Cardinnl 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.” M4 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 Y. 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



         ‘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,

          ‘See Brief’from Miles K. Risley, Senior Assistant City Attorney, City of Victoria, to Nancy S. Fuller, Chair,
Opinion Committee, Office ofAttorney General, at 3 (Nov. 15,2004) (on file with Opinion Committee) [hereinafler City
Brief] (citing VICTORIA,TX., CODEOFORDINANCES       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
                                                                                                               (continued...)
The Honorable Robert E. Talton          - Page 5              (GA-0315)




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 ORDINANCESsec. 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, supru 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 proprietaryproblem.  Moreover, Victoria expressly considers itspolice-
initiated nonconsent tow rate limits to be elements of a contract between itself and a towing privilege
holder. See Request Letter, supru 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 ofmarket 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.
5 643.204(a) (Vernon Supp. 2004-05) (“The governing body of a political subdivision that regulates
nonconsent towfees . .“) (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


        ‘(...continued)
        impounded, the police officer investigating such incident OImaking such arrest shall request the driver
        of such vehicle to designate a tow truck operator which the driver desires to mnwe such vehicle.
        When the driver has so designated the tow truck operator, the police off&r shall communicate that
        fact immediately to the police communications officer on duty, and it shall be the duty of such
        communications off%~r to call the designated tow truck operator to send a tow truck to the scene or
        site of the incident OTarrest. In the event such driver is physically unable to designate a tow truck
        operator, or refuses to designate one, the police offtcer 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 tick to the scene or site of such
        incident 01 arrest.

VICTORIA, TX., CODEOFORDMANCES        sec. 23-65(a).
The Honorable Robert E. Talton        - Page 6            (GA-0315)




                 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, sup-u 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.




        %Yeealso Brief from Larry Cemosek, Chairman, Texas Towing and Storage Association, to Nancy S. Fuller,
Chair, Opinion Committee, Ofice of Attorney General (Nov. 19,2004) (on file with Opinion Committee).
The Honorable Robert E. Talton     - Page 7        (GA-03 15)




                                       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
