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Thursday, April 18, 2013 01:59 pm

Citizens’ Efficiency group questions state fire tax

Little oversight of insurance charge

If you bought fire insurance from an out-of-state company, you indirectly helped pay for health club dues, parking fees and shoes for the Springfield Fire Department.

That’s because an obscure state tax routes millions of dollars directly to fire departments around the state each year. The Citizens’ Efficiency Commission for Sangamon County issued recommendations last week to reform how fire departments in the county utilize the tax.

The Illinois Foreign Fire Insurance Tax is a two-percent charge paid by consumers who purchase fire insurance from companies based outside of Illinois. It’s collected by the Illinois Municipal League and isn’t subject to control by city councils or county boards. In Springfield and many other municipalities, decisions on how to spend the money are made by a board elected by the firefighters themselves.

“I believe it’s unbelievably poor public policy, even by Illinois standards,” said Robert Gray, a member of the Citizens’ Efficiency Commission. “It seems to be a state tax that is really an optional local tax, includes no means for collection, and the funds are distributed directly to a handful of local fire department employees with no oversight or accountability by public officials.”

The tax was created to help pay for firefighting costs, likely sometime in the 1890s, according to Larry Frang, executive director of the Springfield-based Illinois Municipal League. IML, which represents local governments across the state, collects the fire tax and sends proceeds to local governments which have levied the tax.

Frang says a similar tax exists in every state nationwide, but it’s hard to tell when Illinois’ version was created.

“To find out any information about it, you have to go to the basement of the Illinois Supreme Court,” Frang said. “We know it was created long before 1920.”    

From 2010 to 2012, the Springfield Fire Department received a combined total of $824,445 from the foreign fire tax. During those three years, the department spent $132,000 on gym memberships and exercise equipment, $285,000 on appliances and furnishings, $63,000 on work shoes, and $11,700 on parking fees paid to the City of Springfield, according to public records.

For 2012 alone, the Springfield Fire Department received $315,066, adding to the fire department’s normal $32 million budget allocation from the City of Springfield for the same year.

Fustin says about 95 percent of the department’s regular budget goes toward payroll and benefits. That still leaves fixed costs like equipment payments, fuel and utilities, Fustin says, adding that the fire department has only $833,000 left after fixed expenses to purchase protective gear, maintain equipment and facilities, and more.

“I honestly don’t know where this department would be without the foreign fire money,” Fustin said.

The foreign fire money that the Springfield Fire Department receives isn’t subject to control by the Springfield City Council, a setup reinforced by past court cases in which other municipalities attempted to take over the funds. In those cases, courts said the state law protects the foreign fire insurance funds from municipal oversight.

“You wouldn’t create a system like that if you were designing it today,” says Kent Redfield, professor emeritus of political science at the University of Illinois Springfield and a member of the Citizens’ Efficiency Commission.

Instead of allowing city administration to decide how to spend the tax money, fire departments and fire protection districts that meet certain criteria must create a board of trustees. The trustees are elected from the fire department or protection district, with the chief acting as board chairman. The seven trustees on the board serve two-year, uncompensated terms. The Foreign Fire Insurance Board of the Springfield Fire Department holds public meetings and abides by public records laws.

The Illinois Municipal League deducts a five-percent charge from the taxes it collects for municipalities, meaning IML netted $16,582 in 2012 from Springfield residents and businesses that purchased fire insurance from out-of-state companies. Frang says municipalities have the option of collecting the tax themselves, and the Citizens’ Efficiency Commission recommends that municipalities within Sangamon County do so.

Springfield Fire Chief Ken Fustin said he disagrees with the Citizens’ Efficiency Commission regarding the foreign fire fund.

“I respectfully disagree with some opinions of the Citizens’ Efficiency Commission,” Fustin said. “They have painted this as a slush fund. It couldn’t be further from that. The board is elected by statute; we follow all of the rules and regulations. This fund as indeed benefitted the city as a whole.”

Robert Gray says the commission doesn’t have an issue with the tax existing, but rather with how it’s implemented.

“We have no trouble with the money being directed to help fire departments,” Gray said. “We’re much more concerned about the process and the structure than we are about anything else. What has happened is that now you’ve got a small group of firemen who control money that has a direct impact on the way the fire department operates.” 
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