Distressed District Information

Statutory Authority of the ECB

Under T.C.A. § 7-86-304, the State 911 Board is authorized to supervise and evaluate financially distressed districts, and can prescribe a rate structure that eliminates the fiscal distress. T.C.A. § 7-86-304(d) provides that:

"Any emergency communications district that is a financially distressed emergency communications district shall be subject to the supervision and evaluation to the board. For the purposes of this chapter, a 'financially distressed emergency communications district' is a district, which, as shown by the annual audits:
1. Fails to produce revenues sufficient to provide for all expenses and maintenance of the district, including reserves thereof, for a period of three (3) consecutive years;
2. Has a deficit retained earnings balance; or
3. Is in default on any indebtedness.
   
After reviewing the financial statements of any financially distressed emergency communications district, and after holding a public hearing within such districts service area, the board may prescribe a rate structure, up to the maximum established pursuant to § 7-86-108(a)(2)(A), to be adopted by the district, as may be necessary to cause the district to liquidate in an orderly fashion any retained earnings deficits and/or to cure a default on any indebtedness of the of the district."

T.C.A. § 7-86-304(e) further provides that:

"If the board of an emergency communications district fails to adopt the prescribed rate structure, the board may, in addition to any and all other remedial actions available to it, petition the chancery court in a jurisdiction in which the emergency communications district is operating to require the adoption of the rate structure prescribed by the board or such other remedial actions, which, in the opinion of the court, may be required to cause the district to be operated in accordance with the provisions of state law."

Under T.C.A. § 7-86-305, the State 911 Board has the statutory authority to study the consolidation or merger of the distressed district with another ECD.

1. As a means to restore financial stability to financially distressed emergency communications districts and to ensure continued 911 service for the benefit of the public, the board may study the possible consolidation or merger of two (2) or more adjacent emergency communications districts if at least one (1) such emergency communications district is financially distressed. In the event that the board determines that such a consolidation or merger is in the best interest of the public, and after holding public hearings within the service areas of the affected emergency communications districts, the board may order the consolidation or merger. The board shall establish rules and policies concerning the composition and selection of the board of directors, and shall establish technical and operating standards and a rate structure for such multi-jurisdictional emergency communications district; provided, that such action shall not threaten the financial integrity or stability of the affected mergency communications districts, or the level and quality of 911 service.
   
2. Notwithstanding the provisions of subsection (a) to the contrary, a merger or consolidation affecting a non-financially distressed emergency communications district shall not become effective without the prior approval of the board of directors of such non-financially distressed emergency communications district.

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