Facing a likely cash flow shortfall in April, the El Dorado County Fire Protection District has decided to head it off by browning out a station and applying for a line of credit.
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Making that decision at a special board meeting held Jan. 22, Board President Dennis Thomas opened the meeting by saying the district had a cash flow, not a budget problem, and despite what they were proposing to do, he expected the district to end the fiscal year $300,000 under budget as long as nothing unexpected happened. Thomas went on to note that the district had already cut its budget by $1.2 million from the previous fiscal year as a result of new contracts struck with the firefighters, retirees and chief officers as well as internal cuts that had been made.
However despite all these measures, Thomas said additional actions were needed because the district wouldn’t receive all its revenue until mid to late June.
“It has been this way for several years now,” he said, “but I don’t anticipate this problem next year or the years that follow.”
Blaming the district’s fiscal problems on the recession and the budget process during the past four fiscal years, Thomas predicted the district will come in $500,000 to $800,000 under budget by the end of the next fiscal year with the surplus going toward rebuilding the agency’s reserves.
Chief Mike Hardy added, “A year ago we were $1.5 million in the red. A fiscal crisis was looming, layoffs and possibly bankruptcy … However, as the newly appointed fire chief, I asked the board to give me some time because I was pretty confident we could make it. I promised the board we could cut $1.2 million from our budget and we’ve actually cut out $1.5 million … We are on track to be a very successful, dynamic fire agency and I’m very proud of everybody for doing it. The problem now is we have a cash flow issue.”
Ticking off all the things they had done to date to reduce expenses, Hardy said the district has gone from seven chief officers to four, laid off a full-time maintenance and IT person, and reduced a full-time receptionist to part-time. The union gave up two full-time firefighter positions and the district has gone from 17 to 15 firefighters. All employees are now paying 10 percent of their PERs (retirement). All active and retiree medical benefits have been modified and capped, said Hardy, and we modified accruals for vacation and sick leave to cut down on overtime. But after all that, he said the district may still be a little short because of when the remainder of its revenue arrives.
CPA Michael Ocenosak, who handles many of the fiscal duties for the fire district, then gave the board a detailed cash flow analysis, saying the county can’t loan the district any money past the end of April when they receive the remainder of their property tax revenue. Property taxes provide slightly more than $7 million of the district’s $9.4 million revenue with the remainder coming from other sources. Adding that it is only prudent to take steps now to prevent any shortfall, he advised the board to approve Hardy’s recommendations in addition to seeking a line of credit, even if it’s never needed.
“We’re solvent and will end the year with an overage,” he said, “but I’m concerned about the timing of cash flows.”
El Dorado County Auditor-Controller Joe Harn, who was present at the meeting along with Supervisor Brian Veerkamp, also advised the district to set up a credit line saying the district operates on a “razor-thin margin.”
Hardy said in order to gain the additional $300,000 to $350,000 in savings needed by the end of June, they would have to reduce service levels by one engine, which means six employees. We’re already down by two positions, and there’s a good chance we’ll be down by two more in the next few weeks, he said. We could reduce the service level by one engine and not impact our employees, adding that the remaining two employees assigned to that engine could be used to fill in for staff who go on vacation or leave, thus reducing overtime costs.
Getting down to specifics, Hardy recommended the cuts be made to Station 74, the one serving the Coloma/Lotus area. He said it handled the lowest percentage of calls last year and is surrounded by other fire districts that can assist. Currently Station 74 has two apprentice firefighters, Hardy said. To cut costs, he recommended using apprentice firefighters to staff a different station, possibly the one in Camino, while transferring firefighters and captains elsewhere. He estimated doing so would generate savings of $343,000 if they started the brownout Feb. 1.
With discussion among the directors ranging from going to rolling brownouts to using volunteers as part of the solution, in the end the board left it up to Hardy to decide the best way to staff the stations. Included in the motion was sunsetting the brownout so it expires at the beginning of the new fiscal year that starts July 1. They also voted in support of pursuing a line of credit for the district.
Contact Dawn Hodson at 530-344-5071 or [email protected] Follow @DHodsonMtDemo on Twitter.