The Star-News


Crash tax not a good idea for municipality

Thu, Jun 10 2010 03:33 PM Posted By: By Ed Herrera

As municipal government and public agency budgets continue to feel the ripple effect of the nation-wide recession, we have begun to observe one of either or a combination of reforms, budget cuts, increased scrutiny of wasteful spending followed immediately by an action plan, or some simply refuse to make reforms and/or adopt aggressive economic development strategies opting for new taxes/fees or tax increases to cope.

While deep budgetary cuts have been made, many reforms which have been advocated since beginning of the recession have yet to be made at city hall. Even so, city politicians pushed against public opposition to increasing the cost of living by spending $255, 000 to place a flawed, misguided tax increase on the 2009 ballot and another $19,800 in taxpayer dollars to conduct non-publicized phone survey. The tax increase would be defeated by a whopping 68 percent of voters.

Fast-forward a year to the date of defeat of the tax increase. Enter the "Emergency Services Cost Recovery Fee" or more accurately, the Crash/Accident Tax-rendered for costs of services at the scene of an accident where liquid is spilt (hazardous waste). The fees would range from $435 up to $2,100 and would be collected (billed to the "at fault" driver's insurance agency by a third party vendor cost recovery fee collection LLC (Fire Recovery USA). The sliding scale would be adjusted based on the severity of the accident and services utilized such as traffic control, body extraction, and helicopter assistance.

The "Emergency Services Cost Recovery Fee " first appeared on the city's May 4, 2010, but was pulled at the very last minute. Incidentally, the very same crash tax was being proposed on the same day as the meeting of the National City Council. Now the crash tax is back and is being recommended for approval at the June 15, 2010 meeting of the Chula Vista City Council.

There are several problems. First and most importantly, Chula Vista taxpayers already pay for these services. The property and local income taxes that help pay for first-responder services fees are currently attached to motor vehicle registrations, traffic citations,and other vehicle-related programs. Furthermore, many municipalities including the city of Chula Vista calculates its tax structure based on the services provided, thus adding charge backs as a source of revenue is a form of double taxation. In other words, the accident response fees levied by local governments to taxpayers amount to nothing more than additional "back door" taxes. Let us assume that we are OK with that. As written, funds collected through the crash tax are not earmarked and can be misallocated-it happens, often. The bottom line-no guarantees that tax dollars will be used appropriately.

Therefore, not only is it irresponsible, it sets a dangerous precedent in which other city departments will most assuredly follow by proposing and enacting additional layers of "fees" passing on the burden to taxpayers rather than make necessary adjustments to its budgetary spending priorities.

OK it is bad public policy. What about insurance? Here's what's going on. In last few years third party cost recovery vendors (Fire Recovery USA, LLC for example) have gone out and marketed to municipalities and public agencies such as the city of Chula Vista, raking in an average of 10-15 percent commission, 17 percent in the case of Chula Vista if approved. These third party cost recovery vendors are telling agencies and thereby, residents: "It's OK. We'll just bill their insurance. It was their fault they caused the accident. It's a win-win." The fact is many insurance policies do not cover these fees and therefore, the cost is passed back down to the driver.

In the township of Radnor in Pennsylvania not only did end its program of charging accident response fees, but it refunded the more than $46,000 collected from out-of- town motorists. According to the Philadelphia Inquirer, in 2006 the township hired Cost Recovery Corporation on commission to collect the fee from motorists or their insurance company.

Township Commissioner William Spingler was reported to say that the company was aggressive in its collection practices threatening people's credit. For township officials, the public relations black eye was not worth the fees collected. (Philadelphia Inquirer Feb. 27, 2007)

And what about uninsured drivers? They get a pass. This sends a bad message: "Don't follow the law and get away with it."

The truth is at least nine states have already banned these cost recovery fee schemes with more legislation and states expected to follow.

If residents allow this dangerous trend in the region of passing so dubbed "emergency services recovery fees", insurance rates will most assuredly increase in order to adopt coverage.

It's clear: the proposed crash tax/"emergency services cost recovery fee" in the city of Chula Vista is just bad public policy.

Herrera is president of the Chula Vista Civic Association and CEO of the San Diego South County Chamber of Commerce .


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