‘Crash taxes’ are growing in popularity among cash-strapped California cities
One more good reason to drive safely in California: If you cause an accident, you may be on the hook to pay the police and firefighters who show up to help.
At least 50 cities in the state have adopted so-called crash-tax laws allowing local governments to seek reimbursement from insurance companies for the costs of sending public emergency crews to accident scenes. The fees can amount to hundreds or even thousands of dollars. If insurers don’t pay, cities can hire collection agents to seek payment from the motorists involved.
Billing crash victims might seem heartless. But public officials said that budget woes are compelling them to find new ways to raise revenue. Over the last six years, Costa Mesa, Fullerton, Garden Grove, Santa Ana, Hemet and other cities have started charging fees for accident-related public services.
Sacramento, with nearly half a million residents, soon could be the largest city in California to do so. The City Council has scheduled a vote next month to establish what it’s calling a “fire cost recovery charge.” The fee would reimburse the city for a variety of emergency-related chores, including cleaning up hazardous fluids, putting out vehicle fires and responding to gas line explosions and downed power poles. Proposed fees would range from $432 for a “scene stabilization” to $2,275 for a helicopter evacuation. The measure is expected to raise as much as $500,000 a year, city spokeswoman Linda Tucker said.
“We’d like to be able to recover some costs … from the at-fault party,” she said.
Critics, however, are incensed that communities are now charging extra for what once were considered core services.
“To me, it’s an outrage. We’re already paying these people — the police department, the fire department, the emergency vehicle drivers — handsome salaries and benefits,” said Lew Uhler, president of the National Tax Limitation Committee. “Either we stop this kind of nonsense or we should quit paying taxes for these kind of services.”
The practice isn’t limited to cities in struggling California. It’s gaining momentum nationwide as cash-strapped communities seek a way to offset budget cuts.
This month, New York Mayor Michael R. Bloomberg proposed charging drivers there as much as $490 when firefighters respond to an accident or a vehicle fire, beginning July 1. A public hearing is set for January.
Public officials defend the fees as legal and justified. Communities have long required auto insurance companies to pay for ambulance services provided to their policyholders by local fire departments. Charging for road cleanup and other accident-related expenses is simply a logical extension of that precedent, public officials contend.
Costa Mesa in July 2009 started sending bills for what it called “motor vehicle accident cost recovery” fees to the insurers of motorists found at fault for crashes. The fees are based on the number and types of personnel and equipment dispatched to an accident scene as well as the cost of materials used in the cleanup. So far, Costa Mesa has received $91,000 after paying commissions to an outside contractor hired to file the claims. The city still is trying to collect $186,000 in outstanding claims.
Local taxpayers shouldn’t have to pay for accidents they had no part in creating, said Costa Mesa Fire Battalion Chief Bill Kershaw.
“Someone has to pay for the cleanup,” he said. “We’re subsidizing the insurance companies” if cities don’t collect from the responsible parties.
Insurers counter that public safety is a vital government function that should be funded through general taxation. Crash taxes, they said, could create financial hardships for motorists who have already suffered the expense and trauma of being in a vehicle accident. It will also lead to higher auto insurance rates, said Sam Sorich, president of the Assn. of California Insurance Companies.
“It’s not a question that what [the cities] are doing is illegal; rather, is what they are doing good public policy?” Sorich said. “We have to change our rates to pay for the tax.... It’s not good for consumers.”
Others worry that crash taxes could hurt tourism, an important industry in California. That’s because a number of cities are charging the fee only to nonresidents. Concerned about a potential public relations fallout that could harm its lucrative visitor trade, the Huntington Beach City Council in November repealed an auto crash-tax ordinance it approved on a 6-1 vote only three months earlier.
At least one legislator is looking to put an end to the fees for good.
State Sen. Tony Strickland (R-Moorpark) introduced legislation in mid-December to outlaw crash taxes. Strickland’s measure, SB 49, will have its first legislative hearing late next month. A similar bill failed last year.
“Hardworking Californians already are struggling to make ends meet and simply cannot afford yet another tax,” Strickland said.
Strickland’s most powerful ally probably will be the insurance industry, which operates one of the most influential lobbying machines at the state Capitol. Insurers gave Strickland more than $200,000 in political contributions in the last four years, according to MAPlight.org, a nonpartisan group that promotes government and political transparency. Farmers Insurance Group, Mercury General Corp. and the Personal Insurance Federation of California were among Strickland’s top 10 contributors, MAPlight reported.
Insurance industry officials said they never asked Strickland to help them ban crash taxes, although they back his efforts.
“He hasn’t talked to us. He did this on his own,” said Sorich, the trade group president. “We support the bill because things are getting a little ridiculous out there. It’s become a crazy quilt of these things all over the place. The state has to come in and create some order here.”
At least 10 states, including Florida, Georgia and Pennsylvania, have already banned the collection of accident-response fees, according to A.M. Best Co., an independent insurance information service based in Oldwick, N.J.
But California cities and the companies they hire to collect accident fees are gearing up for a fight. The Strickland bill would prohibit local governments from collecting for all types of emergency services, including fire, police and medical, they said.
Such a ban “could devastate city services and economic health,” the League of California Cities said in a letter to lawmakers.
Insurance companies are trying to harness populist antitax sentiment, typified by the “tea party” movement, to protect their own profits, said Rick Benner, chief financial officer of Fire Recovery USA.
The company, based in Roseville near Sacramento, bills for fire and emergency services for more than 60 California municipalities, he said. Although he declined to provide exact numbers, Benner said Fire Recovery collects 60% to 90% of its reimbursement claims.
“The insurance companies have skated free on this issue for a number of years,” Benner said. “The cities have done this work on their own. There were claims they could have filed and they didn’t file them.
“Now it’s come to the point that cities and counties can’t afford to fund their fire departments. They’re relooking at their business models.”