Grappling with a $35 million budget deficit, the Sacramento City Council voted 5-to-4 last month to impose a “crash tax” on non-residents who are involved in auto accidents requiring a fire department response. A typical auto accident would result in a fee of $495 but if more department activity is needed, a non-resident driver could be billed for up to $2,275. The City of Sacramento projects the new program will generate between $300,000 and $500,000 annually.
This controversial vote by Sacramento’s City Council has ignited a backlash in neighboring areas. The chairman of the Yolo County Board of Supervisors, Matt Rexroad, has vowed to retaliate with his own ordinance charging Sacramento drivers. Yolo County Supervisor Mike McGowan urges Sacramento to reverse its decision and is calling for his constituents to boycott Sacramento. The Sacramento Bee has editorialized several times on the issue and has characterized Sacramento’s crash tax as a “train wreck” and a “30-car pile-up.” ThePress-Enterprise editorialized in favor of a statewide ban and called crash taxes “pernicious and unfair.” Bloggers are burning up their keyboards, as are readers giving feedback to media coverage. Sacramento Councilman Darrell Fong, who voted against the ordinance, reports that city hall is receiving a steady stream of calls and emails opposing the new crash tax.
This negative feedback is understandable because crash taxes are unfair and bad public policy. Throughout California, 60 different cities and fire districts have adopted similar ordinances. Typically these ordinances anticipate contracting with a vendor that will bill auto insurance companies for the fees. But the fact is that the typical auto insurance policy does not pay for a fire department’s response to an accident. The revenue these ordinances project is unlikely to be realized. As these ordinances become more prevalent and policies do cover the fees, the cost of auto insurance increases and consumers will have to pay more for insurance protection.
Insurers are joining the opposition to these crash taxes because they are harmful to our customers. As insurance companies, we are in the business of resolving auto accident claims. We know how traumatic an auto accident can be for our customers. These ordinances add insult to injury. A driver is a victim of an auto accident and then they get hit with a bill for hundreds, if not thousands, of dollars.
The latest ordinance approved in Sacramento sends the wrong message about California’s capital city. Thousands of drivers come to Sacramento each day to shop, work, park, stay in hotels, dine in restaurants and attend entertainment events. This ordinance tells these supporters of Sacramento’s economy that they are second-class citizens who are not welcome.
A new national poll shows there is strong public opposition across the country to charging accident response fees. The recent Harris Interactive poll, conducted by telephone for the Property Casualty Insurers Association of America, found that a resounding three out of four adults (76 percent) believe their taxes should cover the time and services provided by emergency response providers following a traffic accident. According to this survey, only one-third of adults believe charging these fees is appropriate, while six in ten people disagree with the practice. The opposition grows to 66 percent if it leads to higher insurance costs and 70 percent are opposed if only non-residents are charged. The poll interviewed 1,428 adults nationally.
A poll by the Insurance Information Network of California recently found that 50 percent of Californians objected to cities charging fees for emergency services at traffic accidents; only 21 percent supported the fees. Moreover, 62 percent said they opposed insurers being billed for the fees.
Local governments are discussing accident taxes across the country including New York City, Denver and Tulsa. Ten states, including Alabama, Florida and Pennsylvania, have already approved legislation restricting local governments from charging accident response fees. The issue is likely to be discussed this year by the California Legislature. Senator Tony Strickland, R-Thousand Oaks, has introduced SB 49 which would prevent local governments from imposing new response fees. Legislatures in Arizona and Michigan are debating similar bills.
The Sacramento City Council should follow in the footsteps of the City of Huntington Beach which reversed its decision and overturned the crash tax. Unfortunately, given the difficult economy, state and local governments will continue to face dwindling coffers. Elected officials should plug the budget gaps another way because opposition to these crash taxes is growing and it’s the wrong way to solve cities’ fiscal problems.