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Bankruptcy, tax grab on fire commission’s plate

by Meg Olson

In November Point Roberts will be asked to agree to pay twice as much in taxes for fire and emergency medical protection, which two out of the Point’s three fire commissioners argue is needed to provide round-the-clock response and smooth the road to merging with North Whatcom Fire and Rescue Services (NWFRS) partners.

Meanwhile, NWFRS is staring down a financial debacle that could cost the partners thousands and could spell the organization’s demise. Commissioner Bill Meur-sing thinks it would be cheaper for Point Roberts to get out. “It’s a financial mess and we should step out ASAP, preferably yesterday,” he said

Financial woes at NWFRS were not mentioned when fire district 5 commissioners reconvened their monthly meeting September 19, adjourned a week earlier because NWFRS staff couldn’t make it, to approve a resolution putting the tax increase on the ballot. “The essence of the resolution is raising your rate to $1.44 per thousand dollars of assessed valuation,” Crossen said. The current fire district levy rate in Point Roberts is 0.787, the lowest in the county except for fire district 9 near Lake Samish at 0.70, but that district also has a 0.35 EMS levy. If the proposed increase is approved by voters Point Roberts will be in the top five highest taxes districts out of all 19 in the county.

The new rate would represent an 82 percent increase in the district’s levy rate and raise department tax revenues from $198,214 in 2003 to $362,000 next year if the Point’s total property valuation stays the same. The county’s proposed EMS levy, also on the ballot for November, would add another 38.5 cents per 1,000 dollars of assessed valuation to the tax bill for six consecutive years and would generate another $104,000 for the fire department. That will mean a potential for fire district revenues to increase by almost $270,000, reaching almost half a million dollars.

During their August meeting commissioners had discussed three speculative budget scenarios and chose $1.47 as the rate they would ask voters to approve based on the most extravagant of the three. That budget scenario, based on both the proposed countywide EMS and the new levy rate being approved, includes salary and benefits for two full-time firefighter positions, at $52,800 in salary and benefits, in addition to division chief Nick Kiniski at $68,000. It also includes $77,000 per year going into equipment reserves.

A budget based on only the adoption of the EMS levy does not fund the additional firefighters, which commissioners say are necessary for 24/7 coverage of medical emergencies. It does include $20,000 to pay for 20 ambulance trips per year staffed by volunteer EMTs and puts $21,000 into reserves. According to district 5 battalion chief Bill Skinner, in 2002 local EMTs transported 55 patients in the ambulance, presumably paid for out of the current budget. It is not clear what the extra funds would pay for. A third budget, predicated on voter approval of the $1.44 levy rate for Point Roberts but rejection of the EMS levy, funds one of the firefighter positions but no ambulance trips, and puts $26,000 into reserves.

As they approved the resolution putting the increase to $1.44 on the ballot they did not discuss budget scenarios or why the additional funds were needed, other than citing the need to be at the same levy rate to merge with district 13, which now levies $1.43 per thousand dollars of assessed valuation.

“This is of course to address the obligation of being at an equal levy rate,” said Jesse Lofquist. “If we’re going to meet the merger requirements they need to be at the same rate by next year,” Crossen confirmed. Lofquist and Don Frantz voted for the resolution with Meursing opposed. When the NWFRS interlocal agreement terminates in December 2004, a merger is not a requirement but one of several options partners can consider, including dissolving the organization, merging or continuing under a new interlocal agreement.

While Lofquist and Frantz appear to consider the NWFRS merger a foregone conclusion, Meursing and some members of the audience at the September 11 meeting think that district 5 would be hitching itself to a sinking ship by doing so.

Martin Mansfield wanted to know why the district accepted liability for an $150,000 unsecured line of credit to run a NWFRS mechanical shop in Lynden. “You passed a resolution in April making the taxpayers of Point Roberts the security for a private repair facility. You can’t do that,” he said. “Now $85,000 is drawn down and the people of Point Roberts are on the hook for it.”

Through an April letter of agreement commissioners of all three NWFRS partners, fire districts 3, 5 and 13, agreed to share liability for a line of credit that would provide expansion capital for the NWFRS repair shop. The letter obligates the Point Roberts fire district to pay 14 percent of debt incurred if the line of credit is in default, based on the Point’s relative valuation compared with the other districts. As of September 22 Crossen said approximately $120,000 was owed on the line of credit.

Meursing admitted that he had voted in April, as a new commissioner, to approve the letter of agreement but now he wished he hadn’t.

“At one time I was in favor but having done some research I believe it’s illegal and wrong,” he said, proposing a motion to take steps to withdraw from the agreement. “When you think about it, it’s taxation without representation,” he said later. The only other commissioner at the meeting, Frantz, declined to consider the motion. “I’m not sure either way,” he said. “Thank you for your participation,” he added to Mansfield, suggesting he take his questions to the NWFRS board.

When the NWFRS repair shop expanded last year the intention was, through contracts to maintain and repair fire equipment from across the state, to quickly pay off any amount drawn down as well as the $51,000 rent on the district 3 facility in Lynden it now occupies. “Those were projections,” said Crossen. “The reality is the cost of business exceeded revenues.” The rent on the Lynden building, owned by fire district 3 and rented by NWFRS, was due in November 2002 and remains unpaid.

In a September 9 memo NWFRS attorneys Frank Chmelik and Scott Maresh reviewed who would be responsible if NWFRS were to be forced to default on the line of credit or the lease. “Where NWFRS is obligated to pay the rent for the facility (as well as the other expenses), we understand that the NWFRS budget does not address this obligation because NWFRS, the districts and the board of directors assumed that the facility would “pay for itself” through revenues and that the districts would not have to contribute funds,” they wrote. “Apparently the facility is in poor financial condition, and there is disagreement among the individual fire protection districts making up NWFRS as to who should bear the losses stemming from the facility’s operation. The board of directors must resolve the issue of which districts will pay how much. It is conceivable that the districts decide that they will not fund the rental payment, in which event district 3 could decide to pursue legal action against its tenant for breach of lease. If NWFRS’s obligations exceed its funding, and if the districts do not fund NWFRS, it is possible that NWFRS could be faced with voluntary or involuntary bankruptcy.” They did not speculate on the financial impact this could have on the districts.

Crossen said NWFRS staff are working on options to present to the NWFRS board, made up of two commissioners from each of the three districts, to turn the tide. “The idea of default, I’m working hard to see that doesn’t happen,” he said. One of the first steps was to eliminate the position of NWFRS technical division chief Ryan Oord, the mastermind of the repair shop expansion who was dismissed last month. “His work is split up now. I took a lot of his duties,” Crossen said. “The shop needed to reduce overhead.” Crossen will now ask NWFRS board members to consider selling the Lynden shop and leasing back a small portion, or moving back to a smaller facility owned by district 13 where Oord first started the repair shop to cut back on the cost of maintaining that district’s apparatus.

Pulling the shop, and with it NWFRS and its partners, back from the brink of bankruptcy appears to hinge on district 3 selling the Lynden facility and releasing NWFRS from its rental obligations. “If we can’t sell the building we’ve got a problem,” Crossen admitted. While NWFRS lawyers said in their recent memo that they had no executed copy of a lease, a February 2002 unsigned lease agreement would terminate December 2004, when the NWFRS interlocal agreement expires.

If the building can’t be sold there may be further legal wranglings regarding who is fiscally responsible for the lease payments. “The building was purchased by district 3, the shop was started by district 13 and district 5 got involved because of the NWFRS interlocal agreement,” he said. “Assuming we didn’t sell this building and the meter just keeps running, how would district 5 fit into that? It’s a pretty convoluted scenario.”

At an open house scheduled for October 16, 7 p.m. at the community center, NWFRS staff members will explain the numbers and commissioners will try to sell voters on the need for the levy increase. “We’re about 12 years behind the curve when it comes to taxes,” Lofquist said in August. “So far the taxpayers have been getting a free ride. For $100 a year you don’t get what you get when you get it, you get a modern response. Modern fire and EMS is expensive and this is what it costs.”

In Meursing’s case, he’ll tell them why he’s against it. “We’re a small department with a small population and a small demand. We have to increase the levy, yes, but we need to do it gradually, and 30 or 40 cents is enough now,” he said. “A large increase is a big impact for the golf course, the marina, the restaurants, not just the homeowners. It’s the cost of doing business and it comes back to us again and we’re all paying more for taxes but also for a hamburger or to park a boat.”

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