No on Crash Tax in Chula Vista

Guest Commentary
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, and increased scrutiny of wasteful spending, followed immediately by an action plan, or a simple refusal to make reforms and/or adopt aggressive economic development strategies opting for tax increases or fees to cope.

While deep budgetary cuts have been made, many reforms, which have been advocated since the 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 to “at-fault” drivers for costs of services at the scene of an accident.

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 to the Chula Vista City Council. The Emergency Services Cost Recovery Fee has been promoted to members of the public, the city council, and the media as a simple hazardous waste mitigation fee. However, upon closer inspection of the actual contract (Attachment B; City Council packet 6/15/10 and resolution updating CVFD master fee schedule as proposed by Fire Recovery USA, LLC), what is being recommended for approval is a five-level billing program (for various services such as putting out a fire.) The first tier [or charge] begins at $435 for a simple on-scene investigation, which may include contact with the involved parties and traffic control up to $2,100 for level 5 services. In the fine print Fire Recovery USA, LLC is given legal authority to act on behalf of the Chula Vista Fire Department in the billing of all five levels. The contract is signed by the City Attorney and awaits the approval of the City Council.

Putting that aside, there are several other problems. First and most importantly, Chula Vista taxpayers already pay for these services. Many municipalities including the City of Chula Vista calculate their tax structure based on the services provided. Property and local income taxes that help pay for these first-responder services; fees are currently attached to motor vehicle registrations, traffic citations and other vehicle-related programs. Therefore, the implementation of charge backs as a source of revenue to address budget concerns are a form of double taxation. This Emergency Services Cost Recovery Fee program amounts to nothing short of  “back door” taxation.

And what about tourists and the thousands of out of town visitors, our lifeline, which our cities rely on to shop and dine? For them, it is taxation without representation. For those who work to increase investment, promote economic development, and encourage tourism, this crash tax program delivers a black eye .

Proposals like these are not only harmful to the economic wellness of our city, it is fiscally irresponsible and has the potential to set our cities back for many years where any progress in budgetary reform has been made or yet to be made, as it sets up a dangerous precedent for other city departments to follow down the same path by proposing and enacting additional layers of so called “fees.”

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% commission, 17% to 20% in the case of Chula Vista if approved.  These third party cost recovery vendors are telling agencies and thereby, residents: “It’s O.K. 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.

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 very similar emergency services 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.

Lastly, to base bill collection on at-fault drivers dependent on police reports is yet another example of how flawed the proposal truly is. Police reports aren’t always accurate and are many times contestable.

In spite of overwhelming opposition to the crash tax, with the exception of one representative from the third party limited liability cost recovery company, a majority of Chula Vista City Council made several comments appearing to be in support of the fees until a motion led by Councilmember Steve Castaneda was made to hold off on a decision, this time to find out how fees such as this would affect insurance rates.  Although multiple speakers testified and cited statements from the insurance industry, the motion passed 4-1 to delay. Later that week, The San Diego Union Tribune would report: “…the president with the Association of California Insurance Companies said the fees [in question] result in higher insurance rates.

It’s clear: the proposed crash tax/ “emergency services cost recovery fee” in the City of Chula Vista is just bad public policy.

###

Ed Herrera is President of the Chula Vista Civic Association