Cost Accounting in Local Government

Are “Crash Taxes” for You?

As cities look farther and deeper for additional revenue, some cities have started charging for emergency response to accident scenes. Enough cities have adopted these fees that the media has gotten a hold of the story and dubbed them “Crash Taxes.” Catchy. And, of course, inaccurate, since these are fees and not taxes. But the public’s understanding of the difference between fees and taxes is a story for another day.

But are these accident response fees a good idea for your city? Let’s set aside the philosophical and political issues of whether you should charge these fees. Let’s look at whether it is a practical fee that will actually get your city extra revenue. I have seen many quotes about the amount of revenue that is projected from these fees when they are first set up. But I have seen very little information about cities actually receiving substantial revenues. One example, though, since July, 2009, the City of Costa Mesa has collected $91,000 in revenues after paying commissions to a collection agency, according to a Los Angeles Times article. The City is still trying to collect on $186,000 in outstanding bills.

So if you are thinking about this fee, you should ask yourself and your Police and Fire Departments the following questions:

• Who would be expected to pay this fee? Only non-residents? Only the at-fault party?

• If only non-residents are going to pay, how broadly do you define a non-resident? Is a business owner a non-resident? Is someone visiting a resident or a business in town going to pay the fee? What if that person is an employee of a business in town?  What if someone is just renting a room?

• If only the at-fault party is going to pay, how do you define at-fault? In many accidents there is more than one at-fault party? If someone is more than 50% at fault do they pay the whole bill or only their proportionate share?

• Who is going to do the billing and the collecting? What percent of bills will you expect to be uncollectable? Is that a realistic percentage?

Cities have charged DUI accidents the cost of accident response for years, with generally a pretty dismal collection rate since many courts don’t like to add these fees onto what that person is already paying in fines and restitution. With a DUI accident it is easy to define who pays the fee. As you can see from the above questions, it is far more difficult to define who will pay a general accident response fee. And, of course, the general accident response fee would in most cases be paid by insurance companies, and they have made it clear that they will fight these fees.

So there may be some extra revenue available through this fee for some cities, especially those near a freeway. But you should make sure that you are one of those cities before the fee is in place and not after.

I would love to hear anyone’s experience with accident response fees. Feel free to comment on our blog.

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