By Dave Roberts

The $89 million annual fire prevention fee imposed on rural Californians for the first time last year could, ironically, increase the chance that their houses will burn down in the event of a fire. The $135-$150 per home annual assessment, which critics believe is a tax, is having the perverse effect of making it more difficult for local fire districts to increase revenue in order to provide adequate fire protection.

That’s what has happened in the Placer Hills Fire Protection District, which covers 35 square miles in rural Placer County in the Auburn area. Ten years ago, the district placed a tax hike on the ballot, which passed easily with 73 percent of the vote. But when the district went back to the voters last November seeking an additional $83 per home annually to keep both of its fire stations open, it garnered only 53 percent of the vote, well short of the two-thirds needed to pass.

The voters who rejected it gave two reasons: 1) They had already paid $135 to the California Department of Forestry and Fire Protection, not realizing that Cal Fire is a separate entity from the Placer Hills fire department and that it’s possible that none of that money would directly result in increased safety for their home. 2) They felt they couldn’t afford to pay the total of $218 for two fire tax hikes in the same year.

That was the bad news from Placer Hills Fire Chief Ian Gow, speaking to the Senate Natural Resources and Water Committee on Tuesday in support of SB 17 by Sen. Ted Gaines, R-Rocklin, which seeks to repeal the fire fee.

Fire fee ‘decimates’ local protection

“All of us [California fire districts] are struggling financially,” said Gow. “That’s not a secret. My department has lost 12 to 15 percent of its budget over the last five years. That equates to two full-time fire positions. I only staff two fire stations. The likelihood of closing a station is very high. The problem there is that it could double our response times. As you may imagine, for fire departments the quicker we can get there is everything. If I have to close a station due to budget losses, I’m in deep trouble and my constituents are. So the inadvertent effect of this fire fee is to decimate local government’s ability to protect itself.

“The other two problems with the fee is that it doesn’t improve fire protection at all in my fire district. It does nothing to help us. Our citizens see it as double taxation. And, frankly, maybe a smaller effect, but I think it damages all of our reputations. It looks like we don’t know what we are doing from my level, with respect, up to yours. So we have real problems with this fee and we’d love to see it go away.”

Despite Gow’s testimony, SB 17 failed, gaining only three aye votes from the nine-member committee.

“I am extremely disappointed that the committee failed to pass this bill,” said Gaines in a press release. “It was an opportunity to make things right with the 825,000 Californians stuck paying the illegal tax. I would like to thank all of the constituents who came from across the state to testify in support of the bill. Their messages and testimony were impactful and made a difference. I vow to continue fighting this in every way possible and encourage those who have gotten stuck paying this phony fee to get in the arena and fight it too.”

The California Fire Chiefs Association has endorsed SB 17. Also on hand to support SB 17 were a half-dozen fire chiefs and officials from Camp Pendleton, Laytonville, Vacaville, and San Diego and Sacramento counties, along with scores of taxpayers wearing t-shirts with the slogan “Burned by the Fire Tax!”

The Howard Jarvis Taxpayers Association has filed a lawsuit seeking to overturn the fire assessment. HJTA representative David Wolfe told the committee that the fee is actually a tax because it does not provide a direct benefit to those paying it. If the court decides it is in fact a tax, then it would have required two-thirds to pass in the Legislature, which the enabling legislation, AB X1 29, did not receive due to strong Republican opposition.

Desert, condo examples show unfairness of tax

“We believe it can’t possibly be a legitimate fee because there is no direct benefit,” said Wolfe. “Just a couple of examples of plaintiffs in our lawsuit. There’s one individual who lives in a mobile home park in the middle of the desert with no landscaping around the mobile home park. And yet he has to pay the tax. There’s another individual, a property owner who lives next door to a casino. The homeowner has to pay the tax, but the casino does not. How is that fair?”

Also decrying the unfairness of the fee was Skip Daum, representing the Community Associations Institute, which represents homeowners associations throughout the state. He said that condominium owners are being hit with the $150 fee (the $135 fee is for those who are also paying a local fire tax), but that fee is only supposed to be assessed against the owner of a habitable structure.

“Condominium owners only own the air space inside the wallpaper, they don’t own the structure,” said Daum. “The homeowners association owns that structure.”

Condo owners are among the 87,000 property owners who have filed appeals of the fire assessment since it went into effect last August. Most of the appeals are based on the contention that it is an illegal tax. Those appeals are being automatically rejected, according to a Cal Fire spokesman.

The illegality of the tax is also Gaines’ main justification for repealing the assessment.

“If it’s illegal, we shouldn’t be collecting it,” he told the committee. “That will be sorted out in the courts. All of us as taxpayers pay state taxes for Cal Fire. It has always been their responsibility in these state responsibility areas to pick up that obligation. Now if you have got communities that are stepping forward and wanting to pay for their own fire departments, we have put a huge damper on that opportunity now because people are paying a [Cal Fire] tax.”

Where are the benefits?

Gaines’ other justification for SB 17 is that rural residents are not seeing the benefits for their money.

“We’ve had no evidence that there’s been any increase in manpower or fire engines from Cal Fire,” he said. “The discussion and debate we are having would be very different if this was a fee and we knew exactly what we would be getting for the fee. It might be defensible. Clearly we need more manpower and equipment around Lake Tahoe. I’m very concerned about that. We are having another dry year. If we were clear on what we are getting for that fee, we might not be here. We would be having a different discussion on whether it was worthy or not. I have supported fees historically in this body.”

According to AB X1 29 and regulations adopted by the Cal Fire board, the fee will fund a variety of fire prevention services, including defensible space inspections around structures, fuel breaks for staging firefighting equipment, brush clearance around communities and improving forest health to improve resiliency to wildfires.

But, as previously reported by CalWatchdog.com, the funds can pretty much be used for any projects or activities that the board labels “fire prevention.” That leaves open the possibility of the money being abused, as occurred with a $3.66 million slush fund that the Los Angeles Times revealed earlier this year to Cal Fire’s embarrassment.

Cal Fire did not send a representative to the committee meeting to defend the fee or explain how it is spending the $73 million that has come in so far.

That concerned Sen. Hannah-Beth Jackson, D-Santa Barbara, who told Gaines, “You have raised some concerns, and I do think they need to be addressed. [There] are very legitimate questions and concerns that people have about how they are conducting and using these funds.”

But Jackson voted against SB 17, arguing that it’s premature to legislate the issue before the court has ruled on the legitimacy of the fire assessment. She’s also concerned about leaving Cal Fire short of funds to provide adequate fire suppression.

“I come from a district that tends to burn down pretty regularly, Santa Barbara, Ventura counties,” she said. “I’ve been evacuated [from my home] twice in the last six to eight years. Obviously this [fee] has some serious problems. People are paying all this money and not understanding what the tax is. I’m not sure I do either. But … how are we going to keep funding the services we so desperately need, clearing defensible space and making sure we are doing everything in advance of a fire to make sure we don’t have fires, or at least their impact is minimized?”

Her concerns were shared by several other senators, leading to the bill’s defeat.

Other legislation targets fire assessment

But two other bills seeking to kill the fire prevention assessment are due to be heard in committees this legislative session: AB 23 and AB 124. In addition, Gaines has two other bills limiting the assessment. SB 147 would exempt certain low-income residents from having to pay the assessment. SB 125 would exempt property owners who are also paying for local fire services, which includes more than 95 percent of the fee payers.

And AB 468 by Assemblyman Wesley Chesbro, D-North Coast, would replace the fire fee with a 4.8 percent surcharge on all property insurance in California that would be used by Cal Fire, the California Emergency Management Agency and the California Military Department.

By Dave Roberts

It hasn’t been a great year for the California Department of Forestry and Fire Protection. In January, the Los Angeles Times revealed that for seven years Cal Fire has been hoarding a slush fund that grew to $3.66 million. In February, the Sacramento Bee reported that Cal Fire fees that were supposed to be used for fire prevention measures had instead been used to investigate wildfires, according to the legislative counsel.

And earlier this month, the Howard Jarvis Taxpayers Association served Cal Fire and the state Board of Equalization with a lawsuit seeking to nullify Cal Fire’s $150 annual fee (or tax) on homeowners in mostly rural California for fire prevention. In addition, three bills have been introduced by Republicans in the Legislature seeking to do likewise.

The slush fund was a major black eye for Cal Fire. Instead of following the law by depositing money from legal settlements into the state General Fund, fire officials put it into the care of the California District Attorneys Association. In addition to paying CDAA a fee to hold the money, fire officials spent it on digital cameras, evidence sheds, GPS equipment, metal detectors and a conference at a Pismo Beach resort, among other expenditures.

Cal Fire faces bipartisan fire over slush fund

Coming on the heels of the revelation of the state Department of Parks and Recreation’s secret $54 million slush fund, Cal Fire was pilloried on editorial pages up and down the state:

— “Once again, California residents have been asked to pay higher taxes to help revenue-challenged state agencies fund important services — only to learn that those agencies had hidden large sums of money in secret accounts to keep it away from public scrutiny,” editorialized the Orange County Register.

— “Its arrogance underscores the larger issue: The money doesn’t belong to some bureaucrat with a badge. It belongs to the people,” lectured the Sacramento Bee.

Gov. Jerry Brown was quoted in the Bee calling the slush fund “a relatively boring story, to tell you the truth.” But the governor added that he would look into it. Senate Republican Leader Bob Huff, R-Diamond Bar, responded that “’boring’ is the last word I would use to describe these very disturbing revelations of hidden funds.”

Cal Fire spokesman Dennis Mathisen said in an interview that there was no effort to conceal the fund.

“The reality is that the fund had been publicly known,” he said. “We initiated our own audit of the fund a few years ago. The audit tried to determine the appropriate way of administering the fund. We are going through the process of re-evaluating it and determining the correct method of administering the fund.”

Scathing audit was three years old

Apparently that re-evaluation process has been going on for more than three years. The 26-page audit report, which was issued in November 2009, contains numerous criticisms of the way Cal Fire was handling the money:

— The funds collected from legal settlements were not reported to the Cal Fire Departmental Accounting Office or the Law Enforcement Program, and did not become part of the state’s accounting system.

— The money was dubbed a “Fire Investigation Trust Fund” — but was never placed in a trust account — in order to ensure it wouldn’t go into the state’s General Fund. “It is not clear what authority Cal Fire has to separate the Fund money from State money,” the audit states.

— There was no documentation of how the fund committee made its decisions on spending the money.

— State purchasing guidelines were not followed for hundreds of thousands of dollars spent on equipment.

— Travel expenses for training conferences were improperly documented, including numerous overcharges for lodging and unapproved travel to conferences in other states.

Slush fund depicted in benign light

Mathisen defended the expenditures, saying, “The sole purpose of that fund is to help support fire investigation-related things such as equipment and training. That involves Cal Fire investigators, local agency investigators, district attorneys.” The Pismo Beach conference focused on fire investigation training, he said, adding that “the hotel charged the typical government rate, which is lower than the standard rate.”

Mathisen also disputed the Bee’s report that fire prevention fees were not supposed to be spent on wildfire investigations.

“One of the fire prevention activities that’s mentioned in the law, it’s very clear that it includes the activities involved in fire investigations,” he said. “We look at the act of investigating fires and determining the cause, whether negligence or a crime such as arson. [If arson is suspected] we go through case development and district attorneys to prosecute. In the case of accidents, [investigation] helps us educate the public on how to prevent those things from happening in the future.”

The enabling legislation for the fire prevention fee, ABX1 29, does not specifically cite wildfire investigation as one of the uses for the funds. Money can be spent on public education, fire prevention projects and activities as well as fire severity and hazard mapping.

But there is no definition for what constitutes a “fire prevention project.” The legislation leaves it up to the Cal Fire board to determine that. In essence, the fire prevention fee, which was projected to total as much as $89 million annually, is potentially another slush fund for Cal Fire officials to use as they see fit as long as they can call it a fire prevention project or activity.

The goals of the Howard Jarvis lawsuit

And that’s what concerns the HJTA, which filed its class-action suit in Superior Court in Sacramento in October.

“This tax was dreamed up by politicians in Sacramento who are so desperate for revenue that they were willing to ram this through the Legislature without the proper two-thirds vote,” said HJTA President Jon Coupal in a press release. “The fire tax is a direct violation of Prop. 13. It is our goal to overturn this tax, prevent the politicians from taking more money from hardworking people for a program they were already paying for, and help taxpayers to get a refund from the government.”

The suit argues that the fire prevention assessment does not fall under the state constitutional definition of a “fee.” Therefore, it’s a tax requiring two-thirds approval in the Legislature, which it did not receive due to strong Republican opposition.

Article 13 A, section 3, subdivision (b) of the California Constitution defines a tax as “any levy, charge, or exaction of any kind imposed by the state” unless it’s imposed for a specific benefit, privilege, service or product provided directly to the payer that is not provided to those not charged, and which does not exceed the reasonable costs to the state of providing the benefit, privilege, service or product.

It’s likely that state attorneys will argue that fire prevention fits the definition of a fee instead of a tax, because it’s: 1) a specific service provided directly to people living in the mostly rural 31 million acres of California that are in Cal Fire’s State Responsibility Area, 2) that it is not provided to people outside of that area who are not charged a fee, and 3) it does not exceed the cost of providing that service.

A version of that argument was made by the author of ABX1 29, Assemblyman Bob Blumenfield, D-Los Angeles, on the Assembly floor just before the bill was approved on June 15, 2011.

“This approach has long been supported by the LAO [Legislative Analyst’s Office],” he said. “It reduces the financial exposure of the state to fight fires in the State Responsibility Areas, especially at a time when local governments continue to approve developments that increase fire risk. … We worked very closely when the Senate sent this over with leg[islative] counsel. And the key distinction here [making this a fee instead of a tax] is that it deals with prevention rather than protection. And so it’s not replacing existing services. But there’s a direct nexus. And that’s why this is an acceptable bill.”

Prediction of fire tax’s demise

Blumenfield was responding to then-Assemblyman Kevin Jeffries, R-Lake Elsinore, who predicted the fire assessment would soon be doused.

“We’ve seen this bill before,” he said. “At least I have over previous terms here. A funny thing happened: it failed in previous versions. When it was a $50 tax — you can call it a fee — but when it was a $50 tax it required a two-thirds vote. Now that it has moved to a $150 tax, somehow it’s been changed to a majority vote. I’m wondering if the leg[islative] counsel has issued a new opinion reversing their previous opinions that said this was a tax. It clearly violates Proposition 26 [requiring two-thirds support for tax hikes], and will last maybe a week at best until any number of interest groups, property rights proponents, any group out there who just happens to have a spare moment, and this bill will be dead. This tax will die a fast, quick death.”

Despite Jeffries’ assurance, the assessment is very much alive and well nearly two years later. The first billing for about 750,000 habitable structures was sent out from August through mid-December last year (in alphabetical order by county). A little over $73 million has been collected so far.

That’s short of the estimated revenue because 20 percent of respondents have declined to mail back their payments. More than 87,000 have filed an appeal. About 71 percent of the appeals, which were based on the fee being an illegally passed tax, were denied, according to Mathisen. More than 12,000 appeals were granted, however, as those assessments were based on misinformation from incorrect records.

“When this law was created there was no database in existence that identified all habitable structures in the SRA,” said Mathisen. “That was a significant task to put together that database. So we knew that there were going to be some inaccuracies. We are making those corrections as we move along.”

Fighting fire tax: The big picture and at individual level

The second round of billing for the current fiscal year was due to start in April. But it will be delayed, according to the Associated Press, to allow more time to sort through the thousands of complaints stemming from the initial billing.

In the meantime, three bills seeking to kill the fire prevention assessment are due to be heard in committees this legislative session: AB 23, AB 124 and SB 17. Click here for more information on the assessment from Cal Fire’s perspective. For the HJTA’s take, including instructions on filing an appeal, click here.