Prescott-Area Fire Districts Feel The Squeeze

4-20-2015  Scott Orr  The Daily Courier


Arizona’s fire districts are in financial trouble.

The problem, in a nutshell, is that a new state law caps the amount of tax revenue a fire district can receive, and it’s taking effect at the same time as the state’s retirement system is charging fire services unprecedented high rates.

That squeeze is hurting even the best-managed fire districts.

A “fire district” is different from a “fire department.” Fire departments, as the name suggests, are part of a city government, like the Prescott Fire Department, and are funded by the city using whatever means the city prefers. Some may enact a sales tax, some may use property tax revenues.

Fire districts, in contrast, are separate entities and, as their name suggests, are “taxing districts” that survive on property tax revenues, with some help from subscription fees. Prescott Valley is served by the Central Yavapai Fire District, which also covers parts of unincorporated Yavapai County.

Some, like the Chino Valley Fire District, primarily cover a town, but may also charge a fee to serve “out of district” customers and may not put out fires for non-subscribers.

The landscape for fire districts can make fiscal solvency tough:

• Proposition 117 took effect this year, limiting how much they can make from property taxes. (See related story.)

• State law caps the amount of property tax a fire district can charge at $3.25 per hundred dollars of a property’s net assessed value.

• The Public Safety Personnel Retirement System, a state fund that pays firefighter pensions, has had a tough time in the last few years, and is taking an ever-larger mandatory – and, officials said, unpredictable – bite out of fire district budgets. (See related story.)

Firefighting is an expensive proposition, CYFD Assistant Chief of Support Services Scott Bliss said, and while people see the large, admittedly expensive fire trucks as a major cost, they’re overlooking another big expense.

“It’s just labor intensive,” Bliss said. “If your expectation is that we are going to get to fires fast enough to put them out while they’re still where they started, and before they spread to the rest of the house, you have to have people spaced out the right way to get there fast enough.”

Bliss said it takes 13 people to fight a typical house fire safely and efficiently.

The Arizona Tax Research Association (ATRA), a taxpayer watchdog organization, strongly favored Proposition 117, and said in a recent position paper, “Arizona has 156 (fire districts) and the skyrocketing tax rates for many of them demonstrates that they should be looking aggressively at options other than to simply continue increasing tax rates.”

Bliss said that the proposition passed because voters believed some fire districts were throwing money around, and “unfortunately, I believe there were some taxing groups that did things to reinforce that belief.”

ATRA went so far as to suggest that some smaller agencies “are no longer sustainable” if they use PSPRS.

Mayer’s budget woes

There’s a dogfight going on in this town of 1,400, with an 11-year veteran fire chief fighting to keep his $93,000 a year job and the fire board trying to let him go.

“The budget’s not in a good place,” Chief Glenn Brown said. “We’ve been dealing with reductions in property tax.

“We’re 45 percent down in property tax revenues since 2009,” he said, and they’re at the $3.25 cap.

But, Brown said, laying him off wouldn’t make economic sense. “I think I bring more to the organization than I cost,” he said, noting that he’s helped to bring in more than $1.8 million in grant funds.

Board member Russ Dodge said the board was looking at “taking whatever steps we can” to balance the budget, and “I am waiting for studies on (other) districts our size” before deciding on Glenn’s future.

But the board is looking at several other cuts. “Reducing manpower, closing stations, pay cuts across the board, and even furloughs for employees-so there’s a lot of options that are being looked at,” he said.

Dodge, new to the board in December, added that some bad fiscal decisions in the recent past added to the budget problems.

The budget was balanced for 2015, at just over $2.8 million.

Chino Valley faces tough times

Chino Valley Fire District operates under a joint management agreement with Central Yavapai Fire District, signed last summer. CVFD, which had hired Chief Scott Freitag in August 2013, agreed to share him with CYFD; Chino Valley pays most of his $111,000 salary (CYFD kicks in $10,000). In return, Central shares its management staff, including CYFD’s in-house “budget guru,” Scott Bliss, with Chino Valley.

The CVFD proposed FY 2015-16 budget is $4 million, which is down about $300,000 from the last year. PSPRS will take almost $500,000 from CVFD over the next fiscal year, which is a $90,000 increase.

Freitag is looking at laying off two new firefighters and leaving a third slot unfilled when that man retires. He’s already let a part-time office worker go.

The layoffs will mean he will have to close one of Chino’s three fire stations from time to time when they run short on manpower due to vacations or lack of ability to pay overtime. “When people say, ‘You just have to cut the fat’-there is no more fat,” Bliss said.

“Our hope is that property values increase, because we need increased revenue to be able to cover increased expense,” Freitag said, “and (already) being at the $3.25 cap, we have no other opportunity to generate revenue.”

One seemingly simple idea would have nasty results, he said: he won’t cut salaries, because that would lead to a de facto “training factory,” where new firefighters might come to Chino Valley to learn – and be trained to the tune of thousands of dollars – but would then leave for a better-paying city or town.

Another suggestion, from a Chino resident, to make the CVFD a volunteer force, received a chilly reception from LifeLine Ambulance, which would have to supply paramedics to make up for the loss of paramedic-firefighters, as well as law enforcement, which, according to Chino Valley Police Chief Chuck Wynn, would be unable to deal with medical emergencies.

Central Yavapai Fire District: concern, but no panic

Those two districts’ budget woes make the numbers at CYFD look positively rosy. The tentative budget for fiscal year 2015-16 is $16.8 million, a 4.24 percent increase over the last year.

The district will absorb at 6-percent increase in its PSPRS contribution ($380,000), a 7-percent increase in health care costs ($49,000), and a 10-percent increase in worker’s compensation contributions ($16,000).

But, Assistant Chief of Administration Dave Tharp said, due to the effects of Prop. 117, “our overall revenue increases only equated to 2.53 percent this year.”

Yet, officials don’t seem to be unduly worried. Make no mistake – cuts will be made for the fiscal year 2015-16 budget, but they aren’t deep cuts of the type Chino Valley faces.

One idea being kicked around is to cut annual pay increases from 5 percent to 2.5 percent. Also on the chopping block: some of the money now allocated for fuel.

CYFD is not yet bumping up against the $3.25 maximum tax rate, and that is by design. The district expects the rate to be $2.37 for 2015 and projects a peak of $2.64 in 2020. The rate is projected to drop a couple of pennies in 2023.

“It’s like turning a battleship,” CYFD Fire Board Chairman Steve Rutherford said. “It takes years” to get a tax rate down once it’s been raised.

“Because of good planning and fiscal responsibility” the district stands a good chance of being able to start decreasing taxes by 2023, he said.

“Going forward, we want to make sure we have a plan so we don’t get up to that $3.25,” Bliss said. “It’s a lot better” to stay below the cap, so CYFD can avoid a “crisis situation,” he added.

Possible solutions

Freitag wants to see Prop. 117 reformed and said that the firefighters’ union has worked with professionals to develop a plan, but the legislature will have to enact it, or it will have to go to a ballot referendum.

“There are other avenues (for fire districts to raise revenue), but they’re never going to succeed here,” Rutherford said. “Fire districts can do overrides, just like school districts can, but that’s a non-starter. Is that going to pass in Chino Valley? No way.”


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