YOUNGSTOWN — After the financial crisis of 2008, some municipalities nationwide shored up declining revenue by charging for public safety responses to car accidents and house fires.
These are sometimes dubbed a "crash tax" or an "accident tax."
While some states have prohibited the practice, Ohio has not and Youngstown will start charging for fire department services in February. City council approved the plan by a 4-3 vote at an Oct. 2 meeting.
The program will not impose fees on fires, however. Per the city's contract with Fire Recovery USA, as detailed in the Vindicator, the city will charge $487 per car accident, $677 per car fire, $1,461 to extract someone from a car and $554 to clean up a fluid spill.
If a city resident's insurance provider refuses to pay, the cost will be written off. City residents without insurance will not be charged. Non-residents will be billed for any amount that insurance doesn't cover.
The city has hired Fire Recovery USA to collect the fees. The Roseville, Calif.-based billing company has contracts with nearly 1,300 fire departments nationwide.
Ohio Insurance Institute President Dean Fadel calls the practice "an extra fee on top of a tax."
In fact, he detailed the trade organization's opposition to the practice in a letter to city council President DeMaine Kitchen dated last May.
"Insurance is not intended to cover local government budget shortfalls or city services," Fadel wrote. "Falling back on insurance policy coverage as a way to solve a municipality's fiscal problems is not a reasonable or sustainable solution."
Residents are already paying for these services, Fadel argued.
That's one of the reasons that Ward 1 Councilman Julius Oliver voted against the plan.
"I think it's a deterrent for people coming to our city. I think it's unnecessary because taxpayers already pay for their fire services," said Oliver. "This is just an overcharge in my eyes."
Regarding the assertion that the fees amount to a form of double taxation, Fire Recovery USA CEO Craig Nagler said, "The insurance lobbies created that."
Nagler justifies the fees, arguing that they ensure fire departments are compensated for responding to incidents involving non-residents.
"If you live in one county and have an accident in another, you don't pay taxes in that county for that county to respond, so it kind of balances the field," said Nagler.
Fadel argues there is no guarantee that insurance companies will cover the fees.
"Companies don't have to pay [for] it. Most of the policies this day and age exclude it," said Fadel. Nagler made the opposite claim, saying that few insurance companies refuse to pay.
Even if taxpayers can get the fees covered by insurance, the program could affect insurance premiums.
"Premiums are based on the probability of loss and the cost of that loss. If this has an impact of increasing the cost of losses, premiums will go up," said Fadel. "If you want your insurance policy to also support the public service of fire protection, yes, everybody's going to pay a lot more for their homeowner's insurance and potentially their auto insurance, too."
In his letter to Kitchen, Fadel cites multiple Ohio communities that have stopped the practice after receiving pushback from residents and the media. According to the Akron Beacon-Journal, the billing company used by the city of Macedonia did not cap fees or disclose the percentage of paid fees it kept. The city ended the practice in July 2011.
Fire Recovery USA will charge the city 20 percent of the fees collected. Nagler said the company's rate is between 20 and 22 percent nationwide.
"We have a reputation for only billing things that are appropriate to bill," said Nagler. "The goal is to recover the funds for the fire department, and if you're unreasonable in your quest, you're not going to recover the funds."
But, Oliver fears that the program could deter people from seeking emergency help.
"Right now, Youngstown needs to do more to get more people to come to Youngstown and stay in Youngstown rather than doing things that potentially could push people out," Oliver said. "[Residents] need to be able to look to their city and be able to receive help and support."