LOMPOC FIRE DEPARTMENT Fire Fees Kurt Latipow Fire Chief What services will the Fire Department bill for? The Fire Department will bill to recover costs of providing services such as plan checks, Fire Code required permits and other fire prevention related activities. In addition, like many other agencies in the state, we will attempt to recover response related costs to motor vehicle accidents, vehicle fires, hazardous materials releases, stand-by for bomb threats, pipeline ruptures (i.e., gas, sewer, septic, water), arson investigations and structure fires. Are Fire Department Fees new? No. Since the passage of Proposition 13, communities such as ours have enacted fees in an attempt to recover the cost of providing services, softening the impact of ever increasing demands on an already over burdened general fund. The updated fee schedule includes clarification of categories and addition of some emergency response related fees. Are you billing for medical emergencies? No. AMR, as a requirement of the County Contact, reimburses the Department approximately $65,000 per year for Basic EMS response. Who is doing the billing? The City of Lompoc has entered into a service agreement with a private billing service called Fire Recovery USA who specializes in fire department fee recovery throughout the country. This was done because Fire Recovery USA has an established relationship with the insurance industry, an acceptable rate of return for recovering costs, and charges a reasonable rate for this service. We determined that there was no way that our existing administrative staff could have taken on this additional work and been as successful in fee recovery as an established company already doing it. Who will be billed?
Page 2 of 6 The insurance company, person or party responsible for the emergency will be billed for the Fire Department fee identified in the fee schedule. How does the emergency response billing occur? The Fire Department will respond to the emergency call and take the appropriate actions to protect life or property. Fire personnel will then collect the identification and insurance information of the person, or parties, involved. When the firefighters return to the station this information, along with the details of the call and fire department actions, is entered into the Fire Department s secure records management system. The Officer in charge of the cost recovery program (Deputy Fire Marshal) will review the information and if he/she finds it correct and accurate, will electronically submit this information to Fire Recovery USA, a third-party billing company. Fire Recovery USA will submit the bill to the insurance company, person or party, responsible for the emergency and pursue payment from the company representing the person or party responsible for the emergency (e.g., atfault driver of a traffic accident). Why is the Lompoc Fire Department doing this? The city relies on a combination of general taxes, fees, and charges for services and a previously awarded SAFER Grant to support its fire protection system, along with other governmental activities, the largest components of which are discretionary revenues from sales and property taxes. The city was hit especially hard in sales and property tax revenues following the 2008 real estate/financial market collapse. The loss of major retailers, car dealerships, supermarkets, and restaurants has reduced sales tax revenues by a cumulative $2,140,000 since 2007 a drop of 11% compared with flat sales tax revenues over the same period reduced the availability of revenue for fire department expenditures by 8.6% ($1,100,000) in FY 2009 2010. Cumulative lost revenue of $2,140,000 from 2007 to 2012 represents over 50% of the fire department s funding needs for FY 2013-14. The second major revenue source for the city, property tax revenues, dropped 12.5% from peak collections during FY 2007-08 to the projected FY 2013-14 collections. As property tax revenues lag behind actual changes in real estate values because of the nature of the taxation process, the lag time for Lompoc can be as long as two (2) years. This lag time makes it more difficult to plan accordingly for losses, especially as property taxes continue to struggle to recover. Growth has been stagnant and is expected to remain so over the next three (3) to five (5) years. Property taxes are projected to be $500,000 lower in FY 2013-14 than they were at their peak in FY 2007-08. Compounding the challenges of economic recovery is the fact that in 1980 California voters passed Proposition 13, capping annual property tax increases at 2% per year. In addition, Proposition 13 allows for property owners to petition the County Assessor to further reduce their property taxes if they feel values are below what has been assessed. The impact
Page 3 of 6 of this cap means that even when the economy returns to a robust pace of recovery, City revenue growth will lag far behind market value growth in property values. This has had, and will continue to have, a direct affect on budgeting for fire department expenditures through the remainder of the FY 2013-15 budget cycle and beyond. Lompoc does not project increases in property tax revenues to exceed 2% for the foreseeable future, which is in stark contrast to the double digit property tax revenue gains during the real estate boom of 2004-2008. The above revenue reductions may be further compounded by unexpected and unpredictable losses in sales and property tax receipts as a result of the passage of California AB 26 (2011). The bill allowed for the dissolution of redevelopment agencies, enabling the state to transfer $1.7 billion in property tax revenue to schools and other programs. The City has had to pay the state in excess of $3,617,000 as its share of the $1.7 billion, and, since the dissolution of the redevelopment agency in Lompoc has occurred so recently, the city is unsure how much more revenue it has lost in that dissolution, which likely will lead to further reductions. In 2008, Local Measure T2008 Public Safety Act, a 0.25% General Sales Tax increase was presented to Lompoc voters in order to generate revenue to fund fire department staffing. It was not successful. Our financial outlook in the foreseeable future is that existing revenue streams will continue to fall short of what is required to fund improvements. In order to continue to deliver and improve service to our community maintaining and up to date fee schedule will offset costs to the general fund while recovering costs of some of the many services provided. How did this process get approved or adopted? The updated fee schedule was first introduced to the City Council during the January 7, 2014 City Council meeting. What authority does the City, or the Fire Department, have to bill for these services? The cost recovery of services is permitted by State statute and city Ordinance No.1599 (14). We already pay taxes for the City to provide essential services and public safety. Shouldn t fire protection already be funded by those taxes? Since the passage of Props 13 and 98 and Education Revenue Augmentation Funds legislation, the City received as little as 14 cents on every dollar of taxes paid and no more than 18 cents, depending on the area of the City you live in. For a typical resident paying $1,200 for the 1% tax authorized by Proposition 13, 80%
Page 4 of 6 to 85% is retained by the County or disbursed to various school districts, roughly $1,000 of the $1,200 annually. The City receives between 14% and 18% or about $175 annually. The rest is allocated to various special districts for their services. Isn t this considered double-dipping or a double-tax? Those that live and shop in Lompoc pay taxes and those taxes help to fund the Fire Department s operation, but it is not enough. By billing the person receiving the services, and in some cases insurance company representing the person responsible for the emergency for the use of our services, this becomes a fee for service. Without the ability to collect fees for some services, public safety services would need to be reduced to levels that would be unsafe for the community, including residents, property owners, firefighters and police officers. As revenues decrease, or fail to keep up with operating costs, what are the options that the City has to maintain the Fire Department s funding? 1. Lower the service provided by reducing staffing 2. Increase taxes to cover the actual costs of operation 3. Bill those individuals that use our services their fair share of the service 4. Bill the insurance companies of those using our services their fair share of the service None of the options above are a simple or popular solution. Increasing taxes is a very unpopular option because this negatively impacts everyone who lives in Lompoc, and most of these people will never use the Fire Department or our services in their lifetime. The Departments billing company will make every attempt to bill the responsible party s insurance company. Billing insurance companies for an emergency response allows us to target the negligent party creating the emergency situation without charging them directly. This process has a much higher collection rate and charges the fee against an insurance policy that, in many cases, covers these costs with no adverse affect to the policyholder. This process will allow us to recover some of our response costs so that we remain staffed and equipped to respond to anyone who needs our help which benefits everyone in the community. Won t my insurance premiums go up if my insurance receives a fire department response bill? There are a variety of factors that influence a premium increase and you may, or may not, see an increase in your premium. It is important to understand that this
Page 5 of 6 could only occur if you are negligent and at-fault for the emergency. If you are not at-fault, then your insurance company should not increase your premium. As for whether the Fire Department s response bill to a motor vehicle accident will cause a premium increase, it is important to note that the insurance company may get many bills related to an accident. For example, they may receive medical bills, a bill from the ambulance company, a bill from the tow company, and a bill from the auto-body repair shop. A bill for $409.66 for the Fire Department to respond to check for injuries, provide extraction as needed, to secure the scene to prevent further injury, to check for and possibly remove hazardous fluids from the roadway, is probably not going to be the bill that causes premiums to go up. In a structure fire, for example, most insurance policies have money embedded in the policy to pay for a Fire Department response ranging from $500 - $1,000, yet most fire departments do not know this and never bill for this cost recovery. You, the policy holder, pay for this level of coverage in your annual premium and have probably been paying for this coverage for years without ever using this coverage, or in many cases, even knowing about it. We are merely charging our response costs against that money earmarked for that very purpose. Because the insurance company has that fee in each policy, the fact that you have a fire in your home or business and the Fire Department bills against it should not cause an increase in your premium. Remember, the quicker we respond, and the more effective we are at quickly extinguishing any fire, the lower the damage claims will be to the insurance company. Lesser damage also means less emotional and financial impact to you and your family if the fire occurs at home, or a lesser impact on productivity to you and your fellow employees for a fire that occurs at work. As for the concern that response billing will cause insurance rates to increase industry-wide, please keep in mind that an industry-wide rate adjustment or increase can only be approved by the California Insurance Commissioner and this review only occurs annually. It is important to know that there have been fire departments in California billing to recover response costs for many years, particularly Cal-Fire (previously the California Department of Forestry and Fire Protection) and so this is not new in the State. Won t people just stop calling the Fire Department to avoid these costs? There are many possible outcomes from this program. Some people may refuse to call us, some may call but then take it out on the firefighters that are there to help them, some may offer to pay the Fire Department direct rather than see a bill submitted to their insurance company, some may actually see some satisfaction knowing they are covered and putting their coverage to use, and many will probably never give it a second thought. Unfortunately we have no control over which outcome people take. We do, of course, hope that people do call us for help because the alternative could result in the further aggravation of an injury from a traffic accident, further damage to property and impact to life from a hazardous
Page 6 of 6 materials spill, or further property damage occurring from not calling us for a fire in a structure. In each of these cases, the result of not calling us for an emergency could result in greater personal injury or property damage well above the cost of the Fire Department s response fee. Our contact with other fire departments doing response billing has given us no indication they are seeing any drop in their calls for service after implementing this type of program. What Public Notification Was Given on This Process? The presentation of the updated fees and related ordinance and resolution was done at a regularly agendized meeting of the City Council with the staff report and associated documents posted well ahead of the meeting. At the meeting Council asked for and received public input. Is it True the fees collected via the approved fee schedule will offset the cost of the new Deputy Fire Marshal position? Yes. The Fire Department is projecting up to 75% of the costs related to the Deputy Fire Marshal position will be recovered via user fees most of which are fire code related, rather than direct impact on the general fund budget. Why does the City/Fire Department need a Deputy Fire Marshal? The Fire Department Master Plan notes that effective fire prevention programs have reduced the rate and severity of fires occurring across the United States. Both the number and rate of fires per 1,000 population has decreased in Lompoc over the past 10 years. There is still much more work to be done to control the devastating effects of fire and provide timely fire code related services. LFD operates an aggressive fire prevention program, consisting of new construction plans review, existing commercial building inspection, home safety inspections, fire investigation, and public safety education. As with other programs, fire prevention is accomplished mostly by operational staff as an additional duty. The fire code and fire prevention workload has increased to the point where it can no longer be carried out by the on duty crews. In addition the workload resulting from increased economic development is such that the Department must take steps to assure development moves forward. The Department will be adding a Deputy Fire Marshal position to take on responsibility for the Fire Department s fire and life-safety risk management programs, including such services as fire code enforcement, fire safety education, and fire investigations. Additionally, this proposed new position will provide the necessary flexibility the Fire Department requires, by assisting during fires and other emergencies as needed.