The Benefit Charge is fundamentally UNsound

I want to address Mr. Kmet’s editorial that tries to explain away the inherent problems that are baked into the RFA proposal.  My response will use real evidence and data from independent sources, including statements by the RFA members and their consultants.

 The best place to start is to say I understand where Mr. Kmet comes from.  Like others, he has been sold a bill of goods by a group of consultants who have been marketing their cookie-cutter proprietary FBC formula like a modern-day Harold Hill going from city to city (30 by one of the RFA member’s count) saying they have the solution to a financial problem that doesn’t exist.  Fortunately, this regressive contribution to income inequality has only been bought by four of the 17 RFAs…so far. 

 Throughout the meetings of the RFA Planning Committee, the consultants scared off Olympia and Tumwater councilmembers from trying to avoid inflicting another regressive tax on the public.  They warned the city officials to not stray far from their elixir’s formulation lest they be challenged in court (note an FBC has never been reviewed for its legality).  There is no better example of this interaction than this video.  The result was a rush job influenced by the desire of the consultants to avoid a legal challenge to their “fire flow” fire benefit formula that has been adopted by four other RFAs.

 The fact is that fire flow has zero relationship with what the legislature intended when it created the RFA law (video evidence from RFA Consultant). 

 Fighting about all the faulty and pernicious FBC details is a distraction from the bigger picture.  The FBC formula to be voted on in Prop 1 is premised on the idea that we need an FBC to adequately fund our fire departments.  That is not true in three ways:

 1.  We are spending enough on fire to achieve a second to only Seattle Class 2 rating for Olympia and Tumwater and Olympia are second to none in the county in terms of response times.  Click here to see the data from an independent source, Medic One.

2.  If the case is made for more money to be provided to our fire departments, the very same voters being asked to provide a 60% approval for an FBC can be asked to provide it with a levy lid lift which needs only a 50% plus one vote.

3.  If voters really want an RFA, they can do so without an FBC and impose the $1.50 of property tax allowed under state law.  The overwhelming share of RFAs do not use the FBC method.  It would yield the same $10 million as the FBC. 

The reason why the Yes side has a hard time defending the FBC is because what they adopted is not what consultants have told them it is.  The consultants would have you believe the FBC is rooted in fire science and fire flow but they also want you to be able to shape who pays based on policy choices of who wins and who loses.  Even the consultant’s explanation is contradictory when one says you must design a formula that matches the percentage of dollars to your total square footage by class of buildings, i.e., commercial, residential, etc.  This principle is not in an ISO or in any fire risk-based framework.   Watch this video where the astute Councilmember Cooper figures this out. 

 

It's about the community

Please put aside the details and distraction of fire flow and square roots. Besides being a losing argument for the pro side, it goes down the rabbit hole designed by the consultants to confuse and intimidate policymakers.  Councilmember Gilman hit the nail on the head in this video: https://youtu.be/2eD_8c9sizE . The question, Councilmember Clark says, is “how to best create the benefit for the community”.

Fire risk and emergency services are the premier community-wide service.  It should and does have a legitimate claim on city budgets because it is so essential that it must be prioritized above other “nice to do’s” on the Council’s wish lists. 

City-wide fire services have their roots in America beginning in 1736 when Benjamin Franklin created a Union Fire Company that, unlike other entities that only protected its members, protected the entire community.  Fires spread from building to building and a community approach was needed to keep whole blocks of the city from catching fire.  You don’t do this one building at a time, to protect one structure you need to protect all.  http://www.benjamin-franklin-history.org/union-fire-company/

The RFA funding approach being proposed is riskier than today’s city-based budgeting.  Again, listen to the RFAs own consultant refer to the shakier reliance on a “much more narrow pile of revenues” that comes from an RFA.  Cities have a broader revenue base than the RFA, in addition to the property tax they have sales taxes, B&O taxes and utility and permit fee revenue sources.

The shared benefit of having great fire and emergency services should be paid proportional to the benefit it provides to the whole community.  It should not be based on how much it costs the fire department to respond to a particular house or building; we’ve moved on from 1736.  The question before the community then is how best to fund these shared services in a way consistent with our values and aspirations as a community. 

We know we want to avoid adding another regressive tax. That is self-inflicted harm we don’t need.  The first video where Councilmember Cooper says “everyone on this committee is asking for a progressive formula” speaks to that.  The No on Proposition 1 knows that the best way to do that with or without an RFA is to use the existing property tax assessed valuation method.  If you would like another voice added to that, here is a quote from Olympia Climate Director Dr. Pamela Braff in her report to the Finance Committee on the most equitable way to raise additional revenue,

“Braff said the property tax option increases costs to property owners, but it is the least regressive model in terms of burdening low-income households. She said higher property values often correlate with a higher ability to pay. There are also programs that low-income households can use to reduce their tax burden.” – The Olympian https://www.theolympian.com/news/local/article273250320.html

And you can add the weight of the state statute that suggests that assessed values be used as the basis for the FBC. 

The formula is hard to understand because you were not meant to understand it, just to accept it.  But assessed value is something we all understand.  It reflects the BENEFIT to the taxpayer based on the benefit they receive, not the fire flow method which reflects what the fire department wants to spend.  Mr. Kmet's own 2019 ESCI (Emergency Services Consulting International) study said,

“Usually, higher valued structures and complexes carry a greater risk to the community from loss by fire; consequently, assessed value also tends to approximate the property at risk within an area”.

And in discussing its advantages, ESCI who Mr. Kmet hired, wrote, “AV is updated regularly, helping to assure that adjustments for changes relative to new construction, annexation, and inflation are included. Because a third party (the assessor) establishes AV in accordance with state law, it is generally viewed as an impartial and fair measurement for cost apportionment. Fire protection is typically considered a property-related service; thus, allocation tied to property value has merit.”

The writers of the RFA law and Mr. Kmet's ESCI consultant believe that the property value approach is the way to go.  By the way, there is no mention of fire flow, costs per gallon, square roots in either the legislation, the legislative history nor in Mr. Kmet's ESCI study. 

A key point missed by the RFA FBC advocates is that that fire flow was invented not to set the insurance charge on an individual home or building but to establish a community assessment of the water flow needed from fire hydrants and hoses and to set community building standards. Here is a study of all the known fire flow formulas that speaks to that. 

For these reasons and more we disagree “with the fundamental principle behind the formula”.


2% Problem with a 60% Solution

A simple fact exists.  Two to four percent of the fire response are actually about fire.  It makes no sense and is inherently fraught with unfairness to base up to 60% of the fire department’s revenue on fire flow formula, especially when it is erroneously applied and leaves out the key hazard and occupancy factors that might make it useful.

That is the big picture and the bottom line.  I want to save the readers from going down the rabbit hole on the many head slapping ways the FBC formula fails in design and operation (see JOLT article). I assure the readers that you will see the facts support that it is not worthy of your vote. Here are a few samples of what could be noted of why Mr. Kmet’s statements are unsupportable.


Cost per Gallon

When Mr. Kmet says, “It [the RFA FBC] does not calculate the cost of water to put out a fire, as some have implied.” You may wonder who would be so deceptive to imply that the cost per gallon is connected to putting water on a fire?  I found the culprit, and it turns out: 

The call is coming from inside the house!  

This is the actual language on page 27 of the RFA Plan that is before the voters: 

“The primary factors of the [FBC] formula are the amount of required “fire flow” or water needed to extinguish a fire, and the type and size of structure being assessed”. 

 

But of course, the description in the Plan is also bogus.  The Cost per Gallon is intended to sound like an important objective measure.  Rather it is just a budgetary device to set the FBC to match whatever amount the RFA wants to spend.  Again, don’t believe me, believe the other RFAs with an FBC.

As the Renton Regional Fire Authority writes: “Fire Flow Factor/Cost per Gallon (CPG). The relative cost of providing the required fire flow per gallon during a fire incident. CPG is a balancing factor used as an adjustable multiplier to finely tune the FBC calculation across all properties to reach the desired target FBC amount.” 

 

Here is the NorthShore Fire District, “The “Cost per gallon” is the multiplication factor that when used with the modified fire flow calculations will produce a value equal to the desired benefit charge collection”.  https://shorelinefire.com/wp-content/uploads/2020/01/FBC-FAQ.pdf

The RFA Pro Side intends the FBC to be increased

When Mr. Kmet writes that the first year FBC of $10.5 million is equal to $0.50 of a property tax levy he fails to mention is that the FBC can go up to $50 million in the second year of operation by a simple majority vote by an unelected RFA Board.  If you “do the math” you can see that amount the FBC can be raised without a vote is equal to a property tax of $2.25. 

It is time to quit misleading the public about this.  The consultants have said it, the RFA members have said it, the real reason for the RFA is to gain access to the FBC.  They call it a “pathway” and a “platform” and “sustainable” funding for improving services in the future.  Yes, you are not going to get improved services in today’s plan (see Pat Cole article in JOLT).  The improved services the proponents speak about only come after they make large non-voter approved fee increases.  Unlike the property tax that can only grow at 1% a year without a vote, the FBC’s increase can be quadrupled by the RFA Board.  But cities don’t get to use the FBC under state law, so they are creating the RFA.

If they really intended the FBC to be funded at the $10.5 million level, equal to $0.50 on the property tax, they could have exercised the option of not doing the FBC at all and set the rate at $1.50, which is permitted in state law by simple majority vote.  In fact, the last financial plan showed how easy it would be to do.  As the chart from the RFA financial plan below shows from 10/1/2023 titled “Department Organization & Financial Planning Strategies”, the $1.50 levy would be sufficient to fund the planned budget throughout the 7-year period.  Ok, yes, the cities would need to add a small additional $300,000 to the $10 million loan in the first year, but there is more than enough capacity to pay that back.

And they could have done that without requiring the 60% majority that they need with an FBC.  Why did the legislature put that super majority requirement in?  Because the FBC is such a powerful revenue tool and they wanted to make triple sure that the voters knew what they were getting into before they entrusted their elected officials with that extraordinary taxing power.

But we all know the intent is not to leave the charge at $10.5 million.  The intent is to raise the FBC and by a lot. 

The RFA Committee created a “bare bones” budget in the words of Councilmember Cooper, providing just enough money to inflate the firefighters pay and cover the additional overhead to run the new level of government.

Here is a video of Tumwater Councilmember Althauser saying that to get the improvements not funded in the plan that were spelled out by IAFF Local 2409 Lieutenant James Osberg earlier in the meeting, the FBC would need to be at least $20 million. Althauser didn’t propose leveling with the voters about that reality and changing the plan.  Rather he assured the other RFA members that the plan creates the “mechanism” and a “pathway” to get there.  Not that is a but that is not a message he wants to share with voters.  There will be time after the RFA is approved for the FBC to be increased.  Watch it go down here:  https://youtu.be/I0NZDR3Hqfs

If I had time, I would address the specific problems with Mr. Kmet’s “it isn’t regressive” argument but his argument does not stand up to scrutiny.  You can go to the SaveOurFD.org website and click on the regressive page.  Or you can watch this and see the FBC expert say the formula is “by its nature, regressive” in response to the overwhelming desire by the committee to get rid of the regressive effect of the square rooting of square footages.

But beyond being regressive, the formula very likely violates the RFA law that calls for the formula to "...be reasonably proportioned to the measurable benefits to property resulting from the services afforded by the authority." - RCW 52.26.  There is no better case that the proposed formula is unreasonable as when the alleged foundation for it being based on the physics of "fire flow" is undermined by the type of ownership of the building.  Somehow the amount of fire fighting resources required is less when the same building is an apartment versus when the same building is converted into a condominium.  How the fire knows this, remains a mystery. 

Even worse is the inherent and more pervasive problem that the fire behaves differently depending upon how many buildings are on the parcel.  The FBC is a parcel based calculation.  Three buildings on a single parcel are calculated as a single entity.  With the square root function in the formula, that means that those three buildings' total square footage are added together before the square root is applied.  The result is that they are charged less, much less, than if each building was on its own parcel.  This absurdity would never pass the test of reasonable apportionment.  

Finally, we need to drill into the fiction of the the "Building Category Factor" in the formula.  The RFA says its "based on the building size and use".  Building Category Factor is the weighting that assigns a 1.5 multiplier to the charge for apartments, one of three multipliers for houses and one of six multipliers ranging from .6x to 5x for commercial buildings.  

Throughout the RFA's formula development process these multipliers were manipulated based on the desired outcome for revenues and on what group will be selected to bear the heaviest burden. Not even the slightest tip of the hat to fire science.  

For these reasons, the RFAs FBC formula is vulnerable to legal challenge that would bring delays and losses in the revenue needed to run the RFA.  That would make all of us vulnerable to losing the protection of our great fire departments.

Your No Vote is the most important vote you will make in terms of our community's public safety in a generation.