Despite starting last fiscal year with a deficit that spiraled toward a $1 million shortfall, the Northwest Fire and Rescue District came up with $1.3 million in excess cash by year's end, according to an independent audit approved unanimously by the Governing Board at its Oct. 23 meeting.
While some board members expressed gratitude to NWFD Fire Chief Jeff Piechura and his staff, others were unhappy they did not know of the surplus in July when they increased fiscal year 2001-2002's tax rate 23 cents per $100 of assessed value. The increase added $4 million to this year's revenue on top of the surplus.
"How come they didn't tell us we had all this money before we did the budget?" Boardmember Jane Madden asked. "If I have that kind of money, why would I vote to raise the taxes?"
And since the district committed itself to three annual payments of $950,000 to Bank One to pay off a debt consolidation loan and to hiring 27 more firefighters in three years, the board members have not discussed lowering the new rate of $2.42 per $100 of a property's assessed value.
The debt elimination and hiring of new fire fighters is planned to keep the tax rate set for the following two years as well, Board Chairman Patrick Quinn has said.
This year's budget is not expected to generate a surplus, Piechura said, but it is too early to know how Northwest Fire's tax collection will pan out since they do not begin receiving tax payments until November.
The board members were informed in June that fiscal year 2000-2001 would have a surplus of $850,000. That money was divided between July's payroll, a debt to Pima County and the Capital Projects Fund, which lowered the tax rate two cents.
Between June and August, the budget surplus grew nearly $500,000, according to the audit. That growth came from property taxes that "trickled" in at year's end, Piechura said.
Jim Schuh, a critic of Northwest Fire and member of the government watchdog group Pima Taxpayers Associa-tion, questioned whether the board was told how much money would be left over when the information became available.
The audit for fiscal year 1999-2000 cited a concern that board members were not receiving monthly reports about Northwest Fire's finances and other budget information needed to make decisions.
"Because if you were informed about it (when working on this year's budget) then it appears we have a different problem," Schuh said.
The extra surplus paid for half of June's payroll, about $300,000, and the remaining money cannot be spent this year because it was not included in the budget, Piechura said.
This year's tax increase comes on the heels of a nearly 30 cent hike, from $1.89, the year before that was intended to eliminate the district's $2.7 million debt in two years and purchase new equipment.
The surplus was created when Northwest Fire abandoned the debt elimination plan and placed a temporary freeze on hiring and promotions, Piechura said.
Board member Jim Kisner said he was disappointed the original debt elimination plan was not kept.
Kisner, a former chief of the Flowing Wells Fire District that merged with NWFD in 1996, and Madden were members of the Northwest Fire board that approved the 2000-2001 budget.
Three board members opted not to run for re-election in 2000 and were replaced by Quinn, Linda Christopherson and Jim Doyle. The three new board members have formed a solid voting block in favor of most of Piechura's proposals, with Madden normally opposing.
Kisner has missed several of the board meetings the past six months because of his ambulance company in Showlow.
"(The current and previous board) would have had to make changes, but there was more commitment to pay down the debt," Kisner said. "If we had kept that same board that's exactly what would've happened."
NWFD began fiscal year 2000-2001 with a $171,000 deficit in its account with Pima County and its financial woes were worsened when staff discovered the district's planned expenses would exceed the revenue received by about $1.1 million, Piechura said.
Much of the blame for the district's financial turmoil is being placed on former Chief Financial Officer Vito Tedeschi, Piechura said, because he budgeted Northwest Fire to receive 100 percent of its property tax money. NWFD has never collected all its tax revenue during the year.
Tedeschi could not be reached for comment.
By state law, a contingency fund must place a 5 percent gap between the total amount projected to be received and the amount budgeted for.
Tedeschi did not include a contingency fund last year, Piechura said.
District staff proceeded to scrap the board-approved budget in favor of a working one to keep Northwest Fire from sinking, he said. The working budget left off all capital projects, which includes debt payments, new equipment and buildings.
Northwest Fire's budget is divided into two categories, one for operational costs, like salaries and insurance payments, and the other for capital projects.
NWFD spent $751,594 less than that originally budgeted for salaries, and administrative costs were cut nearly 50 percent to about $100,000.
While these cuts were made to curb the shortfall, there was no deficit in the operations budget, according to the audit. In fact, property tax revenue for operations came out about $100,000 higher than budgeted for.
With the reductions in salary and maintenance costs, the operations budget alone created the $1.3 million surplus, the audit states.
The capital projects budget was planned to receive $1.6 million from property taxes, of which $867,960 were collected. On that side there was a $1.9 million revenue shortfall, however some of that is offset since there were few expenses that did not total the property taxes collected.
Most of the capital budget's categories that dragged it into a deficit existed only "on paper," said Robert Schlichting, an accountant for Frizzell, Senkerik & Company, who conducted the audit.
These categories, including one named "miscellaneous," were budgeted to generate $801,000 from a development impact fee that does not exist and is illegal for the district to levy. (See story page 13)
To cover this shortfall, Northwest Fire diverted $980,000 from its operations budget into capital funds, a move Schlichting said was just an accounting procedure.
"It means nothing," Schlichting said.
Piechura was at a loss to explain some facets of last year's budget, but said the important thing is that Northwest Fire does not have a deficit and in three years will be out of debt.
"Overall we look at the bottom line," he said.
MISCELLANEOUS REVENUE A MYSTERY
by Ryan Gabrielson
During Northwest Fire and Rescue District's budget hearing July 2, Pima County Recorder F. Ann Rodriguez, attending as a district resident, asked Chief Jeff Piechura what a category titled "miscellaneous" was doing with $15,000 in it.
Piechura and his staff could not answer then and their explanations of the miscellaneous categories in last year's budget are no more detailed now, though the dollar amounts are considerably larger.
In the fiscal year 2000-2001 budget's capital projects fund, used for vehicles and construction expenses, there is a miscellaneous category expected to generate $801,000. None of those funds were collected since they were intended to come from a state-levied development impact fee that had not been implemented or even discussed during the year, Piechura said.
This miscellaneous fund was part of a plan orchestrated by former Chief Financial Officer Vito Tedeschi to mine new pockets of revenue for the district, Piechura said.
"He had all kinds of revenue pots, these are not realistic," Piechura said.
Tedeschi included the large miscellaneous revenue source in last year's budget because the state Senate was going to be discussing a piece of legislation during its next session that could have made it legal for school districts to levy impact fees against developers building in their districts, Board member Jim Kisner said.
Tedeschi resigned from Northwest Fire in September 2000 after a $1.1 million shortfall was discovered in the district's budget.
The impact fee legislation was killed in committee, but even if it had been passed by the Legislature and signed by the governor, it's unlikely the law would have applied to fire districts or that the board could have levied such a fee in time for it to generate new money last year.
There was little discussion about the miscellaneous fee last year when the budget and tax rate were being set, Kisner said, though he figures he was against its inclusion.
"I'm trying to remember my thoughts on it. I don't remember but it doesn't seem I was in favor of it," Kisner said at the NWFD board's Oct. 23 meeting when it approved an audit of last year's budget. (See story page 12)
In the maintenance and operations budget, miscellaneous revenue sources were expected to collect $457,000, of which $366,000 was to be spent.
Only about $23,000 was collected from the sale of a district vehicle and other small fees in that category and none was spent.
Northwest Fire board members and staff were unable to explain where that money was supposed to be collected from or what expenses would drain the fund.
"Exactly what that means I don't know," Robert Schlichting, NWFD's auditor from the firm Frizzel, Senkerik & Company, said.
"Maybe that's their line to balance if it's off a couple thousand dollars," Piechura guessed. "Only Vito (Tedeschi) knows."
At the Oct. 23 meeting, some community members said they were concerned that no one at Northwest Fire knew why this category was included. Even Board Chairman Patrick Quinn, who was not on the board when the budget was approved, expressed uneasiness with the miscellaneous figures.
"For miscellaneous, that even hits me as a big chunk," Quinn said.
Schlichting said these categories should not cause concern since they did not draw in any real money nor did they create any real expenses for NWFD.
However, the miscellaneous categories did create huge deficits on paper.
In the capital projects fund, the miscellaneous fund's $801,000 that were not collected built on to the deficit already created by a shortfall in property tax, the audit states.
When combined, all the deficits, both real and paper, placed the capital project's fund in a $1.9 million shortfall that did not exist.
In the operating budget there is about $100,000 more miscellaneous revenue projected than expenses planned, according to the audit. If these funds were real and were collected, that figure would have been surplus cash for NWFD.
Since none of it came in, it causes a shortfall even though they are nothing more than numbers on paper, according to the audit.
The reason why the audit shows revenue and expenses that never materialized is due in part to the financial turmoil the district experienced last year, Schlichting said. When district staff discovered there would be a $1.1 million shortfall, it created a working budget that only dealt with day-to-day expenses.
"You're looking at this financial statement when all year we have never been using it. That budget they threw out the window," he said.