All posts by johndoe

Is Cost Recovery New?

“NO”, cost recovery is currently being implemented in over 42 states. It was instituted over 17 years ago in response to increased fire department costs and decreasing tax revenues. Fire department charters’ stipulate that the department provide fire protection services. Yet, the overwhelming majority of responses today are not fire related. In a typical department over 50% of all responses are for medical help. Fire fighters are the largest group of providers of pre-hospital emergency care in North America.  Cost recovery, in addition to grants and fund raisers is a responsible method of meeting the costs of ever increasing non-fire related emergency responses.

How Are Cost Recovery Fees Determined?

The Fire Department and elected officials determine the amount they wish to bill.  Most fees are based on actual costs of responding to an incident. Average rates have been determined by itemizing costs for a typical run (from the time a fire apparatus leaves the station until it returns to the station and is re-serviced). Rates are based on actual costs, using widely accepted depreciation schedules for apparatus (including useful life equipment, repairs and maintenance, and fuel), and labor rates (an average department’s “actual personnel expense” and not just a fire fighters basic wage. The actual personnel expense includes costs of wages, retirement, benefits, worker’s comp and insurance.

 

Will Cost Recovery Cause Insurance Rates to Rise?

The answer is “NO”, despite insurance industry claims to the contrary. The fact is that if a driver is negligent and causes an accident, the driver’s premium will go up based on pre-set actuarial tables whether or not the fire department generates an invoice. This is understandable in light of the fact that a typical cost recovery payment ($450-650) is less than 3% of the total claims for a given multi-vehicle incident, ($16,000 according to the National Highway Traffic Administration System).

Is Cost Recovery A Form Of Double Taxation?

NO. Cost Recovery is not double taxation. It decidedly is not a “crash tax” as the insurance industry likes to label cost recovery. Cost recovery is not a tax, it is a user fee. The at-fault, negligent driver used the municipality or special purpose district fire response services. Thus, all costs recovered are a direct benefit to the tax payer and community serviced by the local fire department.

If a municipality were to hold a referendum on cost recovery from at fault drivers versus raising taxes, the out come is very predictable. Opponents of cost recovery also claim that insured drivers are being discriminated against because uninsured drivers generally will not have to pay for first responder services. However, uninsured drivers run the risk of great financial exposure and, in most states, are at risk of having their car impounded, losing their license or both.

Why is it Necessary?

Population is increasing, motor vehicle accidents are increasing, and fire department costs are increasing. Since there is little appetite among elected officials to increase taxes, cost recovery is one of the best methods to help keep fire departments trained and equipped to properly serve their communities.

What is Fire Service Cost Recovery?

Fire cost recovery appropriately shifts the financial burden, incurred by fire departments responding to a motor vehicle accident, from all innocent taxpayers to only the negligent, at fault driver and their insurance.

Fire service cost recovery allows a fire department to seek reimbursement for the actual costs incurred responding to motor vehicle, hazmat and commercial fire incidents.

Tax dollars pay for the infrastructure and ability of the fire department to respond, not the actual cost of the response. The rationale for cost recovery is analogous to a municipal water authority, in which residents pay ad valoreum taxes for the ability to receive water, but also pay a usage fee for the amount of water used.