Bankruptcy question clouded in Groton
Groton - Despite talk that the financially troubled Poquonnock Bridge Fire District may file for bankruptcy, this may not be a simple solution - or an option at all.
Under state law, municipalities including fire districts may not declare bankruptcy without the written consent of the governor, said Bill Plummer, a manager of municipal finance services for the state Office of Policy and Management.
Earlier this week, Poquonnock Bridge firefighter Michael Lowell spoke to the Groton Town Council about what he believes is "intentional mismanagement of Poquonnock Bridge by past, current and future board members in what looks to be an attempt to bankrupt the fire district."
At the fire district's annual meeting on May 16, the board sought approval of a $6.29 million budget - a 34.6 percent increase - to cover its liabilities. District board member Allyn Ackley offered an amended budget of $3.5 million. It passed.
The audience at the meeting was divided roughly into two camps: taxpayers on the verge of revolt and the firefighters and others fearing a decline in public safety. Voters re-elected six members of the current board, including Ackley, who becomes board president July 1.
Poquonnock Bridge is one of nine independent fire districts in Groton and has the highest tax rate of the nine, at 5.9 mills.
Under the budget just approved, the tax rate would fall to about 5 mills, board members said. But the budget also would not totally cover salaries and benefits.
"My question to the council is this," Lowell said. "What happens if the Poquonnock Bridge Fire District continues to be mismanaged and goes bankrupt?"
"Bankruptcy is certainly not something that we're looking to do," Ackley said. "The public has said, 'We'll give you $3 million and try to do the best with what you've got.'"
One of the stated reasons for Poquonnock Bridge's financial troubles is an item called "other post-retirement benefits."
In March, auditor Brian Rolfe, of the New London accounting firm Baude & Rolfe P.C., told the board that the district's balance sheet showed $1.3 million in assets, $400,000 in liabilities and about $423,000 left over for the future, as of June 30, 2012.
The balance represented about 10 percent of the total budget, and was probably a bit low, Rolfe said.
He said Poquonnock Bridge should have been putting away $1 million a year to cover retiree health and life insurance. Rolfe said the district had zero in a fund where it needed $3 million and the figure would continue to rise about $1 million a year.
Total post-employment liabilities as of June 2012 were estimated as underfunded by $11.6 million.
Fire district board member Ron Yuhas said the board had to tell taxpayers what they owed and submit a budget that covered its liabilities.
But he said if he were an outsider, he wouldn't have supported it either, because it would have driven the tax rate up 39 percent.
Plummer, of OPM, said that based on the audit, Poquonnock Bridge is operating on a "pay as you go" basis, meaning it budgets the amount it needs for benefits in a given year, then pays that amount. He said this is commonly done.
"We do encourage local governments to develop a plan to fund their liabilities, but we see this all the time and it doesn't necessarily mean somebody is going bankrupt or is in dire financial straits," he said.
Town Manager Mark Oefinger said the town has been watching the fire district "self-destruct" for about two years.
"This is all a self-created situation, from my vantage point," Oefinger said. "You can't approve a budget knowing you can't pay bills. If they wanted to fix the problem, they could fix the problem. The problem is, they don't want to fix the problem."
He said the district could modify the budget it just approved, issue a supplemental tax bill or spend less. But he said it just approved a budget knowing it can't meet payroll.
"They've talked about volunteers, but this is a department that hasn't had volunteers in some time. I don't know how you just turn the tap on. They have to get trained," he said.
In 2012, the cash-poor Allingtown Fire District asked West Haven to make it into a city department. The district believed it did not have enough money to pay for its services and pensions. But the city had to accept it.
Plummer said a fire district can ask to be absorbed into a town only if the town's legislative body approves it. The district must pay off its debt first, unless the town agrees to take it on. Terminating the district requires a two-thirds vote of its members. The district could then turn over its assets and debts.
Ackley said he went to the council about a year ago thinking consolidation would be a good idea but has since reconsidered.
Ackley said "onerous provisions of the union contract" are a crux of the problem.
Firefighters in Poquonnock Bridge at the top of the salary earn $59,682, not including overtime, Fire Chief Todd Paige said. The pay rate is $27.33 per hour.
They must serve a minimum of 25 years and be 50 years old to retire with full benefits. Firefighters aren't eligible for Social Security and pay 6.5 percent of their pay into the retirement fund.
Retirees and their spouses receive health insurance at no cost. Active firefighters receive a life insurance policy valued at $200,000, which drops to $50,000 when they retire.
At 65, firefighters are offered the Medicare supplement plan.
Poquonnock Bridge has about 30 career firefighters, including Paige and the deputy chief.
Frank Socha, chairman of the Noank Fire District, said if the district agreed to the benefits, it's responsible.
"There's a tendency to want to blame the firefighters for this stuff," Socha said. "But there was somebody on the other side of the table, and they agreed to it. The administrators signed the contract and they're the ones that have the fiduciary responsibility. That's being left out of the story."
Kenneth Richards Jr., chief of the Old Mystic Fire Department, said decisions about staffing at Poquonnock Bridge could impact surrounding districts.
"If they close a station or lay people off, it would absolutely affect other fire districts, because they'd be calling other stations more for mutual aid," Richards said. His son, Kenneth Richards III, was one of three new members elected at the Poquonnock Bridge annual meeting.
The Old Mystic fire chief said it's time for a truce.
"The main concern is the community," Richards said. "The district and the fire department need to do that. They need to put the community first."
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