'Crash Tax' More Bust Than Boom For Many Cities

New York City's fire department recently caused an uproar when it said it would start charging motorists a fee for responding to traffic accidents.

New York is not the first city to implement the policy, however: According to an insurance industry group, cities in 26 states now have an accident response fee, or what's commonly called a "crash tax."

"Like a lot of cities, we're really struggling here," says John Brown, the city manager of Petaluma, Calif. "All my departments have been trying to find new revenues or cut costs."

The question, then, is why not pull in an extra $100,000 a year for doing something the city already does anyway? Residents shouldn't mind because only out-of-towners get hit with the crash tax, and then only if they're at fault. Although how much drivers are charged, Brown explains, depends on the kind of accident.

"We have a basic engine response, which totals about $435; there is also a $60 per incident environmental cleanup charge," Brown says as he lists the different expenses. The tax can go as high as $2,500, though he says the average charge is between $400 and $500.

For Petaluma, the total revenue last fiscal year was only $14,000, and it expects about $20,000 this year — far less than the $100,000 the city had hoped for.

Brown explains that the crash tax is administered by a contractor, who sends the bills to the driver's insurance company. This has become a problem in some instances because some insurance companies have refused to pay.

"[This is] because the typical insurance policy covers injuries and damage to property, and what these fees are is the cost of the fire department to come to the scene of the accident," says Sam Sorich, president of the Association of California Insurance Companies. "It doesn't involve injury, doesn't involve property damage."

Which means the tax is not usually covered by most policies, and if the insurance company does decide to pay, that'll still cost the motorist in the end, according to Sorich.

"It adds to our cost of doing business and what that ultimately means is that we'll have to adjust the price of our product," says Sorich.

Recently, another Northern California city, Roseville, repealed its crash tax. City Manager Ray Kerridge says it just wasn't worth the bother. "We were expecting something like $200,000 and we actually got about $40,000," he says.

And it wasn't only a matter of money, says Kerridge; the fire department was complaining about the program. "It was keeping rigs out on the scene a lot longer. Why? Because they were collecting a lot of information for insurance; it took them out of service for fires and other emergencies."

Then there are also public relations problems. Kerridge explains that Roseville is the retail shopping hub for the region. "We want people to come to Roseville and spend their money here. So really, it was sending the wrong message to the people," he says.

So far 10 states have agreed it sends the wrong message and have outlawed the crash tax. Republican state Sen. Tony Strickland is hoping California will be the next state to ban it.

"All this is, is a double tax on hard-working Californians who are living paycheck to paycheck right now," says Strickland.

But Strickland's bill wouldn't ban the crash tax in the 50-some cities that already have it. They can continue to rely on the misfortunes of out-of-town drivers to keep their cities from bleeding red ink.

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