Sunday, August 28, 2011

Fairview Fire District Raids Reserve Funds — NOT

As I reported here on May 28, recent Fairview Fire District (FFD) budgets have not set aside sufficient funds for future maintenance and replacement of apparatus and equipment and other obligations.  The money that should have been reserved was used instead to decrease the fire tax levy.  As a result, Fairview is now faced with a long-term financial crisis.  These facts were publicized at the May 26 meeting of FFD's budget and long term planning committees, and are not in dispute.

However, a month ago I learned that this failure to add to the reserve funds may have understated the true problem.  It has been alleged that not only was no money set aside, but money that had previously been set aside in reserve funds was removed and used to lower the fire tax levy.  Such an action would constitute what I call raiding the reserve funds.  I learned of this allegation from what I consider a well-informed and reliable source.  If this allegation were true, then the actions of the Fairview Board of Fire Commissioners were even more ill-advised than previously assumed.  But this allegation is not true.

How Can One Determine Whether Reserve Funds Were Raided?

It would seem a simple matter to determine whether Fairview's reserve funds have been raided.  I found quite the contrary.  Satisfying myself that the reserve funds were not raided was actually a long painstaking process involving considerable analysis on my part, as well as back-and-forth with various officials of the fire district. 

My first step was to send a detailed written request to Fairview Fire Chief Chris Maeder, asking for annual data for each reserve fund for the last 5 years.  Within a few days, Chief Maeder forwarded to me a relatively complex spreadsheet he obtained from FFD Treasurer James C. Passikoff.  Upon examining this spreadsheet, containing a myriad of data and cryptic labels, it was by no means obvious to me what was happening with the reserve funds.  Fortunately, Passikoff was willing to spend over an hour on the phone explaining the meaning of the various entries.  Based on these conversations, I was able to develop, with some effort, a simple table showing the flow of money in each reserve fund for each of the last 5 years.  You can find this summary of Fairview's reserve funds here.  The column labeled “Amount Used for Other Purposes” is my polite label for the amount that was raided from each fund.  You can see that this amount is zero in every single case.  In other words, none of the reserve funds have been raided in the last 5 years.

Although this might seem to be the end of the matter, I knew that my work was not finished.  The clearest recent statements about Fairview's financial condition have come not from the Fairview Fire Commissioners or its Treasurer, but from the Fairview Firefighters Union.  The Union made the most professional and most understandable of the presentations at the May 26 meeting of the budget committee.  The Union even went so far as to hire a consultant CPA (Deborah Bailey Brown) to examine Fairview's financial data.  On the other hand, when I asked union president Tim Gilnack by email about the possibility that the reserve funds may have been raided, his initial written response was ambiguous.  Later, I met with Gilnack and other union officials, where it was quickly established that the union does not believe the reserve funds were raided.  Instead, funds unspent at the end of the budget year, which traditionally had been added to reserve funds, were instead diverted to lower the tax levy. 

Why was this question so difficult to answer?

So the question is resolved.  Fairview's reserve funds were not raided. 

But apart from this conclusion, how did the rumor arise that Fairview's reserve funds were raided, and why did it persist?  Why was the union's initial response to my query ambiguous?  Part of the answer, in my view, is that official information about the reserve funds was not readily available.  And the official information I received was not intelligible without considerable verbal explanation.  In other words, there is no straightforward way for an interested stakeholder to determine what was happening with the reserve funds.  In this situation, half-truths and ambiguous statements can easily morph into rumors that cannot easily be confirmed or denied.  If the Fairview Fire District had produced and made public a simple annual summary of its reserve fund activity like the one I developed, it would have avoided a lot of misinformation.  I'll have more to say about this in a subsequent post.