Putting a price on fire protection

The Arizona Daily Star
Sunday, March 1, 2015
Emery Cowan

Over the past five years, Summit Fire District has slashed its employees from 48 to 37, temporarily closed one of its stations and bought decades-old fire engines rather than new ones, all in an effort to adapt to property tax declines still rippling out from the Great Recession.

The way the financial picture is looking now, the situation will get worse before it gets better because unavoidable costs are rising faster than what districts can collect in tax revenue, said Don Howard, chief of Summit Fire District, in a presentation to Coconino County supervisors last month. Over the next several years, Howard predicted his district will implement hiring and salary freezes, more temporary station closures and a decline in firefighter training.

"Our ability to provide the current level of service is going to change unless we get some kind of relief from the state of Arizona," he said.

Howard and other fire chiefs appealed to the county supervisors for political support, saying they are being financially suffocated by state laws that limit the amount of property tax revenue they can collect from within their district and how much their tax revenues can increase from year to year. Falling property values, and the corresponding drop in tax money, have already forced them to dig into their savings, cut staff, training and education programming and temporarily close some stations, fire chiefs said.

But other groups say fire districts took advantage of high, pre-recession property values to grow or even double their revenues and expenditures and, post-recession, should be looking to tighten their belts rather than seek more tax dollars from taxpayers.

"During the real estate boom between 2004 and 2009 many (fire districts) rode soaring property values to record increases in levies by leaving the tax the rate the same," wrote the Arizona Tax Research Association in a recent position paper. "Arizona has 156 (fire districts) and the skyrocketing property tax rates for many of them demonstrates that they should be looking aggressively at options other than to simply increase tax rates."

Economic highs and lows

As the economy climbed in the years leading up to the recession, fire districts saw tax revenues climb as property values crept skyward. Fire districts' total property tax collections statewide more than doubled from 2004 to 2009, according to the Arizona Tax Research Association.

"Probably more than any other jurisdiction, fire districts led the way in growth in (tax) levies," said Kevin McCarthy, the association's president, in an interview with the Daily Sun.
Locally as well, fire district financial documents show tax revenues swelled between 2004 and 2010, with spending following close behind. Highlands Fire District, which serves Kachina Village and Mountainaire saw its tax revenues increase from $1.6 million to $3.2 million between 2005 and 2010. Over the same time, the district's expenses almost doubled from $2.2 million to $4.3 million, though the number of residences served increased by only about 10 percent.

The budgeted expenses of Summit Fire District, which spans an area northeast and northwest of Flagstaff, jumped almost 150 percent from $3.1 million in 2005 to a peak of $7.6 million in 2011. Meanwhile, since 2005, the number of residences in the district has increased from about 4,100 to about 5,200, or 27 percent.

"A lot of people thought fire districts and other local governments probably should have exercised more caution as they were hiring new people, expanding operations and the like," McCarthy said.

Unlike other entities like cities and counties, up until 2010, fire districts didn't have limits on their tax rates to offset growth in property values.

But local districts defended their financial decisions. Several fire chiefs said they decided to use a rise in tax revenues to pay off debt and expand the level of service in their communities, improving or rebuilding stations and hiring more firefighters to better staff engines and emergency vehicles.

Pinewood Fire District in Munds Park hired three firefighters to bring its staff levels from four to five people per shift, which is closer to the National Fire Protection Association's recommended number, Chief John Welsch said.

Summit Fire District built a new fire station and put more of its firefighters through paramedic school while Highlands Fire District bought a new fire engine and built two new fire stations to replace aging structures.

"What we chose to do was collect enough tax revenue to bring our stations up to a good standard," Highlands Chief Dirch Foreman said.

Then the recession hit. Local districts reported that since 2008, their total assessed value dropped 25 percent, 30 percent or more. Property taxes are the main source of revenue for fire districts, so when assessed values fall, the fire departments take a direct hit. For Highlands Fire District, total property tax revenue dropped from $3.2 million in 2010 to an estimated $2.8 million now. Over the past seven years, Tusayan Fire District saw a $43,000 annual decline, which is about 6 percent of its budget.

Rising costs

Fire districts would have seen even steeper declines, but many decided to increase property tax rates to try to buffer their budgets from falling too far. The Arizona Tax Research Association criticized that move as well, saying the districts' solution to the recession was to ask more of taxpayers. While property values fell 33 percent statewide, district property tax collections decreased only 8 percent from 2009 to 2014, according to the association.

But fire chiefs said that even keeping expenditures stable has been harder than many might expect, considering the rising cost of everything from public retirement system payments to health insurance to diesel fuel. Welsch of Pinewood Fire District, said his employees' health insurance plan already barely meets the minimum requirements of the Affordable Care Act, leaving him little room to cut.

Over the past several years, districts have pursued a variety of strategies to keep spending down, some that have the potential to affect service more than others.

Most have dug into savings meant for equipment purchases or capital improvements, tried to refurbish and repair aging trucks and other infrastructure, and cut back employee numbers. In addition to Summit's staffing cuts, Highlands is down one firefighter from a high of six and Pinewood Fire District eliminated one administrative position.

The drop in staff has forced Summit Fire District to "brown out" or temporarily close one station on U.S. Highway 180 near Wing Mountain. Closing that station, which received between two and 16 calls per month last year, increases the firefighters' response time by up to four minutes, Summit Chief Don Howard said. The district also is being more selective about responding to out-of-district calls.

Farther north, Tusayan Fire District has had to rely on the Town of Tusayan to fund two of its positions and still has had to get loans from board members so that it doesn't end the year in the red, said Chrystal Schoppmann, the district's administrative assistant. If it can't get more assistance from the town to cover payroll expenses, residents could see an all-volunteer fire department in the next few years, Tusayan Fire Chief Robert Evans said.

Other department chiefs said education programs, forest fire prevention work and compensation for volunteer firefighters could all be cut if current financial conditions hold.

What it means for wallets

County property owners, on the whole, are paying less in property tax for fire protection than they were in 2008, local fire districts said. Even so, residents outside the city still pay hundreds of dollars more for fire protection than those inside city limits. A resident living in a $220,000 home in the Summit fire district, for example, would pay about $720 in property taxes toward the district. A Flagstaff resident who owns a house of about the same value pays a total of $377 in city property taxes, which cover everything from public safety to city roads.

Of course, there are important caveats. The city of Flagstaff, including the fire department, also receives sales tax dollars, while special districts like fire districts do not. Additionally, county fire districts have to hire people to deal with everything from legal issues to contracts to payroll, while the city provides those services for Flagstaff Fire Department, said Jerry Bills, Flagstaff's deputy fire chief of operations.
To compare, Flagstaff Fire Department, which received 11,971 calls in 2014, has a $10 million budget, while Summit Fire District, which responded to less than one-tenth that number of calls in 2012, had a projected budget of $7.4 million that year.

"I know we're not inexpensive," said Howard, of Summit Fire District. But the fire chief said he tries to put that number in perspective, saying his district is charging people about $2 per day for fire protection. The relatively small number of homes spread over such a wide area -- Summit's coverage area spans more than 90 square miles -- is another factor that makes it more costly for rural departments to provide emergency services, he said.

"People don't realize our capacity until they need us," Howard said. "The fire service is weird. We're paid to be prepared. But we make differences in people's lives every day.