Olympia’s worst idea: the proposed Regional Fire Authority

Jim Lazar

Related

Proposed Regional Fire Authority’s property tax shift and fee would not occur until 2024

Related

Community members want uniform Fire Benefit Charge

Proposed regional fire authority

Olympia, Tumwater discuss the proposed RFA in a joint session

PROPOSED REGIONAL FIRE AUTHORITY

How much would you pay if a Fire Benefit Charge is approved? Calculate it here

The proposed Regional Fire Authority (RFA) plan would eliminate both Olympia and Tumwater Fire Departments.  Olympians and Tumwaterites would, in the future, rely upon a new governmental organization composed of the blending of the City of Tumwater and Olympia fire departments into an RFA. 

The RFA would be a separate taxing district with a separate governing board, providing fire and basic life support response in the Olympia/Tumwater area.  Advanced life support services will continue to be provided by Medic One, yet another separate taxing authority.

The RFA would be funded by a combination of property taxes and a new fire benefit charge (FBC) to be collected from property owners.  The proposed plan calls for the RFA to receive authority to impose a property tax of $1.00/ $1,000 of value, which would be subtracted from each city’s taxing authority.  The amount of funding from the FBC would not exceed 60% of the RFA’s operating budget.

Here is a list of problems with the proposed RFA:

1. It would put fire response at risk if future voters do not approve the renewal of funding.
2. The initial proposed FBC would be the largest single tax increase in Olympia’s and Tumwater’s history, with no demonstrated equivalent benefits.
3. It would eliminate the coordination between emergency responses in cases of natural disasters, like major earthquakes.
4. The structure of the proposed FBC has a Reverse-Robin Hood form: a higher charge per square foot on smaller homes than larger homes, and a higher charge per square foot on smaller apartments than large apartments.
5. In Olympia, the change would also strip about $1.3 million / year from funding for Parks, disrespecting Olympians who voted for two separate increases to fund Parks. This would not apply to Tumwater.
6. The proposed funding structure would put most of the cost on Olympia, but Tumwater receives a disproportionate share of the benefit.
7. The Fire Benefit Charge would make our housing less affordable, adding to our housing challenges.

There is no funding crisis. 

Olympia’s fire department currently has the highest rating in the state for a small city.  (Tumwater’s is ranked lower.) There are much better alternatives to assure quality fire service for our cities.   A simple levy lid lift, restoring the property tax to the rate of a few years ago, would bring in the same amount of money and would require only a 50% vote.  And, the city councils have numerous “councilmanic” revenue options which would not require a public vote.  And there is no need for a new level of government which adds to overall costs and complexity.

What is the argument in favor of the creation of the RFA?

The impetus for forming the RFA is two-fold.  First, it provides an additional funding source – the FBC – to support fire response.  Second, it provides a net benefit to cities’ general funds, because by abandoning the Fire Departments, the reduced expense to the cities is somewhat more than the lost tax revenue in the short run.  But that benefit falls unevenly – Olympia Parks sees a net decrease in funding, while that available to other departments is increased.

In addition, by creating a larger Olympia/Tumwater fire response agency, claims have been made that there will be economies of scale in staffing and equipment.  But the RFA estimates approximately a $1 million/year additional cost for accounting, HR, and other support services now provided by the cities, while promised efficiencies are not detailed in dollars and cents. 

While statements have been made about a crisis in response times, there is no commitment or analysis of how a 45% increase in the budget for fire services will result in reaching the proffered benchmarks.

1. The RFA would put fire response at risk

The RFA would have only three primary sources of revenue: a limited property tax, fire inspection charges on commercial properties, and the FBC.  The RFA would need to seek and obtain periodic approval of the FBC.  The law is somewhat complex, but initially, a 60% voter approval would be required in 2023, followed by subsequent 50% approvals at intervals of 6-10 years or 60% approval for a longer term. 

If the voters do not approve the FBC, the RFA would lose about half of its funding. 

This is a very real risk: the West Thurston RFA (Littlerock and Rochester) has had its vote denied twice this year and is in the process of closing half of its fire stations and laying off many of its firefighters. 

Olympia and Tumwater, on the other hand, have a wide range of taxes used to support their general funds, including not only Property Tax, but also Sales Tax, Business and Occupations Tax, Utility Tax, Gambling Tax, and others.  The cities also have substantial borrowing authority and very large reserve account funds that could be used to get through a funding crisis. 

2. The largest tax increase in city history

The proposed FBC, as expressed in the plan before the city councils, would represent the largest tax increase in history.  Yes, technically, it is a “fee,” but it shows up in the property tax bill.  The proposal is a $10.5 million increase, with about two-thirds paid by Olympia property owners, the other third by Tumwater property owners. 

By contrast, the previously voted tax increases for Police, Fire, Arts, Housing, Parks, and Sidewalks were all in the $1 million to $3 million range.  And, what’s worse, while a property tax increase would be tax-deductible, a fee like the FBC must be paid with after-tax income, so the net cost to the public is much higher than with a traditional levy lid lift to restore the property tax rate to where it would be without Tim Eyman’s Initiative 747. 

Additional fire response funding would be cost-effective if better fire response would reduce fire insurance rates.  There is no analysis showing that this will happen.

3. The RFA would eliminate coordination in emergency response

Currently, the Fire Departments are a part of city governments.  They report to the City Councils through the City Manager.  In a flood, they can be directed to assist the public works department.  In an earthquake, they can be directed to assist the police, public works, and other departments.  If the RFA becomes a separate governmental entity with its own elected board, that direct authority is lost.  Yes, we believe the fire and rescue teams employed by the RFA would still help.  But the RFA would have no obligation to do so, and we would no longer have the level of integrated coordination we now have.

The proposal is clear:  the RFA would provide Fire Protection, Emergency Medical Services, Fire Marshall services, and Public Education.  What the city councils are being asked to approve to send to voters says absolutely nothing about responding in case of a flood, earthquake, or another non-fire disaster.

The RFA proposal explicitly leaves emergency management duties with the two cities.  The current Olympia Emergency Management Center is at the downtown Fire Department building, which would be transferred to the RFA, leaving Olympia without the personnel or the facilities to perform this function.  The cost of providing this function has not been factored into the cities’ consideration of the RFA.

4. The funding structure is Reverse Robin-Hood

The proposed structure of the FBC is, frankly, based on a false premise and serves to increase income inequality.  It is based on the “square root of the square feet” of each structure.  The effect is that the FBC is exponentially lower for larger buildings.  A small homeowner would pay $.13/square foot, while a mansion owner would pay only $.08/square foot.  And the measurement of “square foot” includes garages and other enclosed areas, so it’s about twice as big as it would be if it were based on the living area of the home. 

It is particularly egregious for apartments.  For example, the proposed FBC on a small apartment building would be $.23/square foot per year, while on a large apartment building, it would be only $.03/square foot per year.  This means that small local apartment buildings, mostly owned by local investors, would get hit seven times as hard as the large corporate-owned apartment buildings. 

In single-family residential, small homes would pay 50% more per square foot than large homes.  This proposal charges excessively high fees to the poor and lets the rich off easy.  I will note that the rate calculations by the consultant for apartments do not appear to be consistent with the language proposed. 

5. The RFA would strip $1.3 million/year from Olympia Parks.

In 2015, Olympia voters created a Metropolitan Parks District.  To ensure that the newly voted money would indeed be in addition to existing funding, the governing documents for the Metropolitan Parks District require that the City of Olympia appropriate 11% of property tax revenue to Parks.  If the RFA is approved, that property tax revenue would drop by 60%, with a net “hit” to Parks of $1.3 million per year. 

Other Olympia departments would not be adversely affected, because they would get a larger share of non-property tax revenues, while Parks would continue to receive 11% of those.  In fact, the other departments are made better off, because their “bigger share of a smaller pie” adds up to more money than they get now. 

This is a simple problem to fix, by adjusting the percentages to generate the same revenue for Parks, still leaving a net benefit for other departments.  But the measure as proposed does not fix it, and despite insistence by Parks advocates, the City Council has not adopted the recommended language to keep Parks funding whole. 

6. The proposed funding structure would put too much of the cost on Olympia

The proposed RFA would collect the FBC in both Olympia and in Tumwater.  But for several reasons, Olympia bears an unfair share of the burden. 

• First, we have a fully equipped fire department, rated the very highest of any city our size in the state. This would be given to the RFA.  Tumwater has a much less well-equipped fire department and is rated lower, so a majority of the initial capital investments would be needed in Tumwater. 
• Second, the proposal exempts mobile homes from the FBC, and the vast majority of the mobile homes in the two-city area are in Tumwater.
• Third, the majority of the property subject to the FBC is in Olympia.

It appears that Olympia would wind up paying about two-thirds of the cost, but would get only about half of the benefit.

7.  The FBC would compound our housing challenge

The proposed FBC structure would impose an additional tax, of about $230/year per unit on a 1,000 s/f rental apartment in a small apartment building.  Property owners would raise rents to cover this.  Our already hard-pressed renters living in smaller apartment complexes would see about a $20/month increase per unit, assuming that landlords in smaller apartment buildings pass it through.

But, due to the square-root function in the FBC formula, the corporate owners of large apartment buildings would pay only about $20/year per unit.  If rents go up, local investor property owners and their tenants would be worse off, the tenants of larger apartment buildings would be worse off, but the corporate owners of large apartment buildings would be better off (they can raise rents by ~$20/month because the market will tolerate that, but their costs go up only about $2/month). 

This problem would be easy to fix, by eliminating the “square root of the square feet” FBC formula in favor of a uniform fee per square foot, but the RFA Committee has not recommended that to the city councils.

SUMMARY:  The RFA is a flawed proposal, and we have better options

The RFA proposal is fundamentally flawed.  It would put our emergency response at grave risk, it would harm Olympia Parks and disrespects our voters, it would harm the poor and violate the values of Olympians, it would enrichen large corporate apartment building owners, and it would compound our housing affordability problems.

We have better options if more funds are needed to support fire response. 

The city councils could raise councilmanic taxes to provide more revenue.  These include the B&O tax, utility tax, restoring fire impact fees on new buildings, and other options.  These actions would require only a majority vote of the city councils.  Olympia’s temporary Budget Advisory Committee identified about $16 million/year in council options for tax increases in 2012; most of those remain available.

Or, each city council could put a levy lid lift to the voters, to restore property taxes to the rate in effect a few years ago.  Olympia’s Finance Director estimated this could raise up to $19 million per year.  Less than half that amount would be needed to equal Olympia’s share of the proposed FBC.  Tumwater is in a similar situation.

Unlike the FBC, the property tax is applied to the value of property, so owners of larger, more expensive structures pay more, while the proposed FBC would discount the rates on large properties.  Unlike the FBC, a levy lid lift is tax-deductible for homeowners who itemize.  And, unlike the FBC, a levy lid lift requires only a 50% vote, and 100% of the money would remain in each city, under the control of each city council. 

There is a better way to assure quality fire response.  Putting fire response at risk, harming the poor, harming renters, damaging Parks funding, and discouraging investment in new housing is simply not desirable.

Jim Lazar is a retired economist, who moved to Olympia in 1977 to work for the State Senate evaluating state agency budgets.  In 1982, he launched an energy consulting practice and has advised utility regulators and policymakers around the world.  Jim is the author of four books on electricity regulation and pricing.  He has served on four different City of Olympia advisory committees and served as a Thurston Public Utility District Commissioner. 

The opinions expressed above are those of the writer and not necessarily those of The JOLT's staff or board of directors.  Got something to say about a topic of interest to Thurston County residents? Send it to us and we’ll most likely publish it. See the Contribute your news button at the top of every page.