A source of new revenue for city government is poised to be approved, but a last-minute proposal discussed for the first time this week means that it likely won’t directly improve the outlook for the city’s operating budget.
Hiring a third-party vendor to bill insurance companies when policy holders receive fire department services was near the top of the list of moves being considered by City Council in anticipation of a budget deficit for next year expected to exceed $600,000. Third-party billing was never likely to put a huge dent in that deficit, since it is expected to generate about $24,000 annually, but it offered the advantage of quick and easy implementation.
Council will vote on preliminary approval of a fire and rescue services fees ordinance at its March 3 meeting. Since all five members have spoken in favor of the measure, final approval will likely come at the March 17 meeting.
Council also expressed unanimous support for a change proposed by Councilman Jim Roha in the days before the discussion at Wednesday’s meeting: Instead of using the funds expected to be generated by billing for fire department services to help balance the budget, why not restrict them to a capital reserve account dedicated to replacing the department’s aging fleet of vehicles?
“If we do not dedicate these funds, the sad fact is that they will be frittered away, with nothing to show for it,” Roha wrote in an email to council that was shared during the meeting. “Or worse yet, we could have a major equipment breakdown and be forced to borrow funds with no resources dedicated to at least partial repayment of a capital obligation.”
The cost of a new pumper truck to replace the 1991 model that is currently the department’s No. 2 engine is likely to cost about $500,000 — nearly as much as the deficit expected for next year’s budget. While $24,000 is not enough to buy a new engine, Roha pointed out in his email, it is enough to make repaying a loan to buy the apparatus “nearly painless.”
City Manager Andy Walker said that since revenue generated by fire services fees would likely vary widely from year to year, the funds would not be a great tool for balancing the city’s operating budget.
“I think it would be very smart of council,” Walker said, “to establish this reserve fund.”
Councilwoman Autumn Vogel noted that operating budget concerns had been the original motivation for considering third-party billing, which a previous council had considered and rejected in 2016.
“I think it’s good that we create a reserve with these funds,” Vogel said, “but we just need to be doing the kind of thinking that we had proposed at the end of last year when we said we need to start thinking early about how we balance the (operating) budget. We’ll just need to figure out something else.”
The draft ordinance considered Wednesday diverged from previous council discussions of third-party billing in another way. A primary concern for several members has been to avoid the possibility that city residents would become the target of collection agencies as the result of unpaid fire department bills. Mayor LeRoy Stearns cited such a concern in explaining why he voted against third-party billing five years ago.
The draft ordinance targets insurance companies for payment, and includes a section that emphasizes fire services cannot be denied due to a lack of insurance. It also enables the department to pursue payment from individuals under certain circumstances, such as when a response results from the commission of a crime such as arson or a DUI-related motor vehicle crash, or a false alarm. .
Under the proposed version of the ordinance, the city would not be obligated to pursue payment if successful collection was deemed unlikely.
A preliminary schedule of fees that will be set after passage of the ordinance listed the department’s aerial truck as its most expensive at $400 per hour. The primary engine was close behind at $350 per hour. Hose use would be charged on top of the cost of an apparatus at the rate of $25 per 50-foot hose and each use of a fire extinguisher would go for $50. Hydraulic rescue tools would run $200 for each use and debris clean-up would be $250.
The proposed schedule of fees replaces what in most cases would have been a single flat fee and would lead to much larger bills, according to Walker.
Councilman Sean Donahue said it was important to note that the fire department already bills for its services. The most significant change would not come in billing but in payments received, he added.
“We’re already billing for these fees,” Donahue said, “we’re just not collecting.”
A third-party vendor would do more billing and collecting, a presentation to council earlier this month suggested.
Meadville Central Fire Department billed for and collected nearly $15,000 in fees for departmental services from 2018 to 2020, Walker told council. Had the department been using a third party vendor over that time, it could have billed for $174,000 in services over that time and likely would have collected $72,000.
Mike Crowley can be reached at 724-6370 or by email at firstname.lastname@example.org.