Tennessee Department of Revenue takes over 911 fee collections

State Sen. Todd Gardenhire

NASHVILLE - Officials hope a new state law will end legal disputes between Tennessee's local emergency communications districts and telecommunications companies over 911 fee collections.

The law effectively puts the Tennessee Department of Revenue in charge of ensuring telecommunications firms such as AT&T collect and turn over state-mandated surcharges on landline and cellphone bills. The fees go to county 911 centers to provide operations and support for fire, police, medical and other emergency communications.

Previously, the telecoms had turned over collections reports and payments on many of their charges to the Tennessee Emergency Communications Board.

Sen. Todd Gardenhire, R-Chattanooga, sponsored the Senate bill and Rep. Judd Matheny, R-Tullahoma, handled the House version. It passed in 2016 and took effect July 1 of this year.

Gardenhire and Curtis Sutton, executive director of the Tennessee Emergency Communications Board, said Sutton's agency had no authority to examine details of the telecoms' reports on the number of lines, fees and customers.

So, Gardenhire said, collection and remittance of 911 fees effectively "was an honor system" because the board "had no way of knowing" whether the figures were accurate.

"I'm not trying to paint them as evil people," Gardenhire said of telecom officials, noting they were concerned about compromising proprietary information, such as details about their customer base.

Sutton said while his agency had good relations with the telecom companies, they basically "would send us what they said they'd collected. ... There was no way for us to actually go back and actually verify."

But the Department of Revenue does have such authority, Gardenhire said, and with its famously strict secrecy laws there are no concerns about divulging companies' proprietary concerns.

photo Judd Matheny

The department has some experience in the collections, as well, because it already receives 911 surcharges on prepaid wireless phones sold by retailers.

During House debate in 2016, Rep. Matheny told colleagues that while the phone carriers "participated and cooperated" on the legislation, they nonetheless were neither supporting or opposing the bill.

Emergency 911 systems in Tennessee and several other states have complained about surcharge collections by telecommunications companies. Tennessee 911 districts have alleged in court documents that companies sometimes don't charge fees on all the lines they should and/or don't remit them all to the government.

A lawsuit by Hamilton County 911 Emergency Communications District and at least nine other county 911 districts against AT&T and several other telecoms has been pending since 2011 in federal court. The districts allege they've been shortchanged millions of dollars by telecoms.

U.S. District Court Judge Curtis Collier ruled in January 2016 that AT&T or its predecessor, BellSouth, didn't have to pay the 911 districts. Collier ruled any undercharges should have been caught and corrected by audits reviewed by the Tennessee Regulatory Authority.

But the 6th U.S. Circuit Court of Appeals reversed Collier's decision and sent the case back to court in Chattanooga.

"Districts' funding is utterly dependent on BellSouth's proper billing, collecting and remitting of the 911 Charges," the 6th Circuit ruling said. "Therefore, the Districts' very existence depends upon BellSouth's proper compliance with the 911 Law."

Gardenhire and other officials estimate about $110 million in annual 911 surcharges is collected from residential, business, government and other lines.

The senator said he thinks more money will be collected with Revenue Department officials in charge.

The new law isn't expected to affect previous actions that fueled the federal lawsuits.

John S. Stuermer, executive director of the Hamilton County 911 Emergency Communications District, said he is hopeful about the situation going forward.

"Historically, the districts have been relying on the word of the telecos for what they've collected," Stuermer said. "There have always been questions, there's always been, you know, 'just something doesn't seem right.'"

When 911 officials would question companies, Stuermer said, "They would come back and say well, we 'trued' up at the end of the year, which means they verified and fixed everything at the end of the year. Well, it's their numbers, again. And there's no way of understanding what they're doing. And districts rely 100 percent on those telecos for their revenue."

The 911 districts charge that through new technology, AT&T has been able to service 23 channels on a single line but charge just one 911 fee. It's being done to undercut the company's competitors and 911 funding is suffering, the districts allege.

But AT&T has retorted in its own legal filings that allegations by the 911 districts are based on "apples-to-oranges" comparisons.

As a result, they don't hold up, the company said.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550. Follow on twitter @AndySher1.