“Crash Tax” Revenue Stops Short
Tuesday, February 15, 2011
We'll find out about the status of the "crash tax" in California. Where did the idea for the tax come from and who is responsible for paying?
California cities and counties have been finding revenue hard to come by in recent years. So, any idea to generate much needed cash-flow has been getting attention, and in some cases votes from local politicians.
As many as 60 cities across the state, including three communities here in San Diego county have adopted what's being called the "crash tax." That's where out-of-towners are charged for emergency services if they have a car accident within city limits. But new numbers reveal that the amount of "crash cash" for cities has apparently been oversold.
KPBS Senior Metro Reporter, Alison St. John
MAUREEN CAVANAUGH: We just heard a news conference from president Obama talking about the hard task of finding revenue to balance the nation's budget. California cities and counties have also been finding revenue hard to come by in recent years, as a result, as many as 60 cities across the state, inluding three communities here in San Diego County, have adopted what's been called the crash tax, that's where out-of-towners are charged for emergency services if they have a car accident within city limits. But new numbers reveal the amount of crash cash for cities has apparently been over sold. I'd like to welcome my guest, KPBS senior retro reporter Alison St. John. Good morning, Alison.
ST. JOHN: Good morning. Maureen.
MAUREEN CAVANAUGH: So where did the idea for this emergency response tax that we call the crash tax come from.
ST. JOHN: Well it's just as you're saying, Maureen. I think the cities and the communities around San Diego are like where everywhere else, are turning over every rock to try to find some source of income to help balance their budgets, and since they can't raise taxes without a vote of the people, this is one idea which came and was actually sold, in many cases to the fire departments, which in many cases are the departments that respond to motor vehicle accidents, either manslaughter or fire or police, and the idea is, it's cost recovery, that they're wanting to cover the cost to respond to accidents, by charging people for the response to those accidents. And the idea came from these private fee collection agencies, who in fact are the ones that are collecting the fees, they take 17 percent of every one of these fees. They are the ones who have been selling this idea as a revenue booster to fire departments around the state.
MAUREEN CAVANAUGH: I see. So who is responsible for actually paying this tax.
ST. JOHN: Well, depends on what the particular details are. In different places, the tax applies to only people who don't live in that city. But in some places it even applies to residents, in some places, it applies to people who are at fault in the accident, and in some cases, it applies to anyone, whether you're at fault or not. So there's a wide variety, a spectrum, of different ways this crash tax is being applied. And of course most people aren't even aware that it's passed so they don't even know this it's happened, until boom, you know, they get in the situation, and they get the bill. And I think the big question is, who pays the bill? Is it your insurance company or is it you yourself? And Peter Moraga of the Insurance Information Network, which is an industry group, makes a point that this is a bit of a question and it's not always resolved the same way. Here's what he has to say.
PETER MORAGA: When the driver is involved in one of these accidents and gets the bill, they may automatically assume that that would be covered, so that may submit it to the insurer, and like I said, some insurers may pay it, but many will not. And where we see some problems down the line is if this does become something that insurers are required to pay, then that would adversely affect the cost of your insurance and premiums would have to go up.
MAUREEN CAVANAUGH: I see. So that was Peter Moraga of the insurance information network. So it all seems a little murky, and it goes from community to community based on who's actually responsible for paying for emergency services. So which communities actually have the mother-in-law response tax in place here in San Diego.
ST. JOHN: The only San Diego that has actually adopted it officially, that the council has voted for it, is Oceanside. But the communities of Fallbrook and Spring Valley have it in place. Their fire diameters have said this would be a useful way to raise revenues for them. The city of Chula Vista did discuss it last year but it was rejected as being a form of double taxation, the idea that people are paying their taxes anyway, so having to pay for emergency taxes again if they got in an accident would be double taxation.
MAUREEN CAVANAUGH: Well, how well is this working.
ST. JOHN: It does turn out that a couple of cities around California that are sort of backtracking on this, and have decided to repeal it again, because it's proving very unpopular, businesses are saying if people are starting to realize, that if our community has this tax, people went come over here, [CHECK] then it's a question of how much money is it actual low raising? And I think it's turning out that it may have been over sold to the cities by these private fee collection agencies. The city of Oceanside, for example, the fire department there was told they could raise revenues by about $260,000 a year. And so far in the fiscal year, they've only raised about 16000. That's not such a [CHECK] Joey Kern is making the point that it's not just a shortfall, it's actually going to affect the budget. Here's what he has to say.
NEW SPEAKER: If we were at flush times and we had reserves that we could draw to back fill at -- we have no reserves. We can't back fill.
ST. JOHN: [CHECK] they actually bottomed with this money as part of their budget, they were relying on it, and when it doesn't come in, that means they're having deeper problems in the middle of the bottoming year to figure out how to cover it.
MAUREEN CAVANAUGH: In reading your report, and in other material about this so called crash tax, there have been some people who have been up in arms about the idea that the fee collection agencies actually promoted this idea, and perhaps are the only ones who are really making any significant money from it.
ST. JOHN: Well, that's right. And it's a little bit like this other controversy that we have heard so much about, the red lights running a red light, that you get these huge fines and the people who are actually collecting those feigns are taking a cut and they're doing okay, but there has been a lot of multi[CHECK] and 93s, it's in some ways not quite as painful to the individual driver, or at least it doesn't appear to be, because you assume you can pas that bill onto your insurance company. [CHECK] so I believe the fee collection agencies, well, in this case, it's not gonna are your individual driver who's gonna feel the he, it's gonna be your insurance company. You sort of pass it on to them. But [CHECK] there may be some items in an insurance policy that does cover ambulance. So that's why, in fact, there's some revenue coming in, because even the insurance companies are unclear about where the legal lineup lies, and how much they're obliged to cover.
MAUREEN CAVANAUGH: Allison, how is the crash tax viewed in the[].
ST. JOHN: Five or sings years in other states, Florida, Pennsylvania, Louisiana, are just three of the states who have already banned it. [CHECK] miles an hour 60 cities that have adopted it, and it seems like the tide is beginning to turn as cities realize that the insurance companies won't always cover these, and they're proving to be extremely unpopular, and maybe this is not the best way to try to raise more revenues. Huntington Beach, for example, has just repealed it. On the other hand Sacramento has just passed one. Today, this very morning, we have the city of Vista, is considering the possibility. They have been promised a helped and $60,000 a year, if they pass this. So it's still very much on the plate, on the menu of options, that cities are considering. But I think it's up in the air, the question is, is it really something -- it's really not pain free because the insurance companies are digging in their heels, so individual drivers are taking the wrap.
MAUREEN CAVANAUGH: Alison. I'm sorry, go ahead.
ST. JOHN: No, go ahead, Maureen.
MAUREEN CAVANAUGH: I was just gonna ask you, what is the possibility that this is gonna be outlawed in the State of California? Is there any pending legislation that would make it illegal for cities and communities to charge for emergency services.
ST. JOHN: There is some legislation, the Strickland legislation, which I believe is now in Sacramento is being discussed and debated, and the league of California cities, is opposing it. [CHECK] however, it remains uncertain how that is going to turn out, so we shall wait and see.
MAUREEN CAVANAUGH: Okay. Well, I want to thank you so much for talking to us about it. Thank you Allison.
ST. JOHN: A pleasure, Maureen.
MAUREEN CAVANAUGH: I've been speaking with senior metro reporter Allison Saint John. If you would like to comment, please go on-line, KPBS.org/These Days.
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