Title: An act relating to ambulance and emergency medical service funding.

Brief Description: Authorizing local government funding of ambulance and emergency services.

Sponsors: Representatives Kessler, Haler, Clibborn, Jarrett, O'Brien, Hankins, Ericks, Grant, Buck, Chase and Kenney.

Brief History:

Local Government: 2/21/05, 3/1/05 [DPS].

HOUSE COMMITTEE ON LOCAL GOVERNMENT

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 5 members: Representatives Simpson, Chair; Clibborn, Vice Chair; Schindler, Ranking Minority Member; B. Sullivan and Takko.

Minority Report: Do not pass. Signed by 2 members: Representatives Ahern, Assistant Ranking Minority Member; and Woods.

Staff: CeCe Clynch (786-7168).

Background:

Cities have, for some time, been authorized to establish a system of ambulance service to be operated as a public utility when the city is not adequately served by existing private ambulance service. They also have the authority to levy and collect:

• a business and occupation tax for the privilege of engaging in the ambulance business; and
• excise taxes from persons, industry, and businesses who are served and billed for ambulance service.

All proceeds must be used only for the operation, maintenance, and capital needs of the municipally owned, operated, leased, or contracted for ambulance service.

Pursuant to an ordinance adopted in 1989, the City of Kennewick imposed what it called an "excise tax" in the form of a monthly flat fee of $2.60 upon each household, business, and industry within the area served by the emergency medical and ambulance services. The city's authority to do so was challenged in court. Subsequent to the case being filed, the ordinance was amended to change the "excise tax" to a "utility charge" but, according to the court, it remained the same in all other respects except for the name.

In Arborwood Idaho, L.L.C. v. City of Kennewick, the Washington Supreme Court held that the city lacked necessary, specific statutory authority to levy an excise tax upon all households, businesses, and industry for availability, as opposed to actual utilization, of the ambulance service. The court further held that the charge did not meet the test for a regulatory fee and, instead, was an unauthorized tax. In holding that the charge was not a fee, but a tax, the court noted that it was a flat charge which did not take into account benefits or burdens.

Summary of Substitute Bill:

Specific findings are included as to the benefit to persons, businesses, and industries from the availability of ambulance and emergency medical services. It is explicitly recognized that local jurisdictions have the ability and the authority to collect utility service charges to fund ambulance and emergency medical service systems that are based, at least in part, on a charge for the availability of the service.

Cities are authorized to establish an ambulance service but they may not compete with an existing private service unless a determination is made that the city, or a large protion of the city, is not adequately served by the private service and the private service cannot be encouraged to expand its service. Whether the private service is adequate or not is to be determined by the legislative authority of the city using objective generally accepted medical standards and reasonable levels of service.

Cities are authorized to set and collect rates and charges in an amount sufficient to regulate, operate, and maintain an ambulance utility, however, prior to setting such rates and charges, a cost-of-service study must be completed. Total costs for the purpose of determining rates and charges may not include capital costs of construction, major renovation, or major repair of the physical plant. Additionally, total costs for the purpose of determining rates and charges must be reduced by:

• 90 percent of any general fund moneys allocated by the city toward the ambulance prior to filing of the Washington Supreme Court's opinion on May 6, 2004;
• emergency medical service levy funds; and
• revenues received from direct billing.

Availability costs may include costs for dispatch, labor, training, equipment, patient care supplies, and maintenance of equipment. Demand costs, on the other hand, include costs related to the burden placed on the ambulance service by individual calls for service, including frequency of calls, distances from hospitals, and other factors identified as burdens in the cost-of-service study. Availability costs are to be uniform for every physical address.

Demand costs are to be billed to the residences, businesses, and other ambulance service users that produce a burden on the ambulance utility. Rates and charges for demand shall reflect an exemption consistent with Article VIII, section 7 of the Washington Constitution which prohibits the lending of money or credit by cities except for the necessary support of the poor and infirm. Those amounts exempted are to be billed and charged as a cost of availability.

The total revenue generated by the rates and charges may not exceed total costs and all such revenues must be deposited in a separate fund and used only for the purpose of paying for the costs of regulating, maintaining, and operating the ambulance utility.

Specific provision is included that the rates are not otherwise prohibited by law, and that they do not constitute taxes or charges under any of several impact fee statutes.

Substitute Bill Compared to Original Bill:

While in both the original and the substitute, cities and regional fire protection service authorities are authorized to operate an ambulance service as a utility, the substitute addresses the authority of the cities separately from the authority of the regional services.

Cities are authorized to establish an ambulance utility as they were in the original bill but, if there is an existing private service, cities may not compete with that service except where the private service is inadequate and the private service cannot be encouraged to expand its service. Very specific provisions governing the noticing and establishment of performance standards for the purpose of determining the adequacy of an existing ambulance service are deleted and replaced with a more general directive to take into consideration objective medical standards and reasonable levels of service when making such a determination.

Both the original and the substitute bills authorize cities to set rates and charges which may include availability costs, but the substitute requires a cost-of-service study, specifically defines availability and demand charges, specifies what can and cannot be included in total costs, and directs how the rates and charges are to be billed.

Appropriation: None.

Fiscal Note: Available.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of session in which bill is passed.

Testimony For: With the Supreme Court decision, many cities lost the ability to supply ambulance service. This bill is important to the survival of these cities' ambulance services. Charging only for actual use is a poor way to fund this service. Cities have the authority to operate this service as a public utility. They need to have the flexibility to structure fees. For over 30 years, the City of Richland has operated an ambulance service and has received many compliments on their service. At this point, the Richland ambulance service is funded only through June 2005. With the Supreme Court decision, the service lost up to $600,000. This was a fee which was palatable to the citizens. In contrast, a recent effort to fund an Emergency Medical Services levy lid to raise these funds from an alternative source, the property tax, failed. The only ambulance service in Aberdeen is the city service. Aberdeen will not be able to cover the costs of the service by relying solely on a per ride basis. The only way such a service will work is to use the utility model as was done for years. Twelve cities had ambulance services funded in this manner: Kennewick, Aberdeen, Bothell, Bridgeport, Bothell, Ellensburg, Hoquiam, Mercer Island, Montesano, Port Angeles, Richland, Sunnyside, and Pasco. This bill would be unlikely to put private ambulance services out of business because: (1) there would first have to be a determination of inadequacy on the part of the private service; and (2) cities that are not already operating ambulance services will not be anxious to get into this business. Cities must have an adequate, fair funding source for ambulance services and this accomplishes that. There are protections for private services. The EMS levies do not provide a fair and adequate alternative funding source, especially when real property, such as that in the Grays Harbor area, has a low assessed value. Such a funding source would not cover the need. A levy shifts the costs to high end homes and big industry and this is unacceptable and bears no relation to actual use of ambulance and EMS. There is statutory authority to operate as a utility already. This bill is needed to allow funding as a utility.

Testimony Against: This bill would allow ambulance and emergency medical services to be funded with a utility fee. Cities should not be given the authority to determine whether a private service is adequate. This is like having the fox guard the henhouse. It should be the role of an outside entity. If this bill passes, cities would have no incentive to use general funds or pass EMS levies. This amounts to a tax on seniors. Facilities should not be considered the end user. It is the individual who is the end user. Senior citizens and the ill and vulnerable will be hardest hit. There was not a problem with the way the 10-12 cities operated and funded this service prior to the Supreme Court decision. There is a fear that some cities will use this bill to increase the fee tenfold. This is a tax not a fee. The bill does not solve the problem and is unconstitutional. Money for these services can be raised by way of the property tax or an excise tax but not via the mechanism contained in this bill.

Persons Testifying: (In support) Representative Kessler, prime sponsor; Representative Haler; Carol Moser, Grant Baynes and Scott Brines, City of Richland; Eric Nelson, City of Aberdeen; Jim Justin, Association of Washington Cities; Dan McKeen, Port Angeles Fire Chief; Londi Lindell, Mercer Island City Attorney; and Bud Sizemore, Washington State Council of Fire Fighters.

(Opposed) Bob Bershauer, American Medical Response; Deb Murphy, Washington Association of Housing for Seniors; Kevin Fletcher, Washington Healthcare Association; Jerry Neilly; and Doug Neyhart and Bill Severson, Rental Housing Association of Puget Sound.

Persons Signed In To Testify But Not Testifying: None.