Commissioners still pursuing bids on proposal
By Ann McCreary
An independent financial analysis of Okanogan County Fire District 6’s ability to borrow money for a new fire station found that the district could borrow up to $2.5 million, but would likely deplete half its reserves and have little money available for unexpected expenses or future purchases.
The analysis was conducted by Charles Ryan of Winthrop, who has a professional background in banking, business management and financial consulting. Ryan offered last month to review the district’s financial status to determine if it has the ability to finance construction of a proposed new fire hall in Winthrop.
Ryan explained his findings to fire district commissioners and community members at a district meeting on Monday (Jan. 12). He concluded that taking on $2.5 million in debt was feasible, but only if a loan could be obtained through a low-interest program offered by the Washington Treasurer’s Office.
Even if it got that low-interest loan, the district would have a negative cash flow, operating up to $74,000 in the red annually, between 2015 and 2019 if it borrowed money to build the $2.2 million fire station commissioners say is needed.
As it has at several recent meetings, discussion of the proposed fire station prompted some residents to suggest delaying or downsizing the project, and led to some emotional exchanges between citizens and district officials.
Ryan emphasized that he was not offering an opinion on the design or need for the fire station itself, but only on the district’s ability to take on the debt needed to fund the station as it is currently proposed.
“There’s a difference between feasibility and prudence,” Ryan responded when community member Bob Wagner of Twisp asked whether he thought taking on that amount of debt was wise.
“You asked me would I [borrow] that much? I wouldn’t. I’d do something smaller,” Ryan said.
Ryan said he reviewed the district’s projected revenues, expenses, debt service and cash flow for 2015-2024. His conclusions on the district’s debt capacity were based on several assumptions regarding revenue projections and anticipated operating and personnel costs.
He also said the district would need to refinance a $300,000 loan from Cashmere Valley Bank that the district took out to purchase the 5-acre property on Horizon Flats, where the district proposes building the new 12,000-square-foot fire hall.
Ryan said that bank loan, which carries a 4.9 percent interest rate, would need to be paid off, and the district would roll that debt in with the loan for the new fire hall, which is anticipated have an interest rate as low as 3.25 percent.
The earliest date to obtain financing through the state treasurer is believed to be September 2015, Ryan said. A commercial lender would have higher rates that the district could not afford, he said.
The financial assumptions, Ryan noted, don’t include purchase of additional vehicles or equipment, higher than anticipated costs associated with construction of the fire hall, or higher operating costs for the building, which would be about three times larger than the current fire hall leased from the town of Winthrop on Englar Street.
The district would operate in the red from 2015 to 2019, Ryan said, because it is repaying loans on two fire trucks. In 2019, when both of those loans are paid off, the district would once again have positive cash flow, but only about $9,000 per year, according to Ryan’s projections. That cash flow would diminish to only about $3,500 in 2024.
“Your world will change by having a large debt. You will probably need to be more careful with cash flow,” Ryan said.
No financial cushion
“This reminds me of when I was a young man buying my first house, and I started looking at houses that were too expensive. That’s what you guys are getting yourself into,” Wagner told the fire district commissioners after hearing Ryan’s projections.
“You won’t be able to buy a pickup truck. You guys are operating so close to the wire here. If you get a couple of flat tires on the trucks it sucks up all the [financial] cushion,” Wagner said.
He suggested the commissioners “kick this can down the road four years” until the existing debt on the fire engines is repaid to avoid a negative cash flow.
“The gentleman is pointing out the tightness of this amount of borrowing,” Ryan said. He noted that his review of district finances “indicates it’s well-managed from a business operations standpoint.”
As in previous meetings, commissioners showed no interest in delaying or revising their plans for a new fire station, and have asked the architect who designed the building to develop a bid package for the project. The bid package is expected to be completed this month.
“I’m not about to kick this can down the road,” said Commissioner Darold Brandenburg. “There’s a lot at stake here. These firemen need a building that’s safe.”
“There are firefighters who work in Winthrop who are at risk,” said Roy Reiber, chairman of the commission. Commissioner Jerry Palm was not at the meeting.
“No one is arguing that they shouldn’t have a safe place to work,” said Jim Schulz of Twisp River Road. “You’re always bringing that up.”
District officials say the fire station in Winthrop lacks adequate facilities for firefighters and is so small that firefighters must get ready for calls in cramped quarters next to moving fire engines, putting them at risk of injury.
Brandenburg said the financial analysis from Ryan “is good stuff. We’re listening to people to see what we can afford or can’t afford.”
Schulz asked why commissioners were “so reluctant to scale this thing down?”
“This was the scaled-down building,” Brandenburg said. “The first one was twice as much,” referring to a $5 million bond levy proposed by the district in 2008 to build a station on property across from the Winthrop post office.
That bond levy proposal was defeated, as was the district’s tax levy lid lift proposition on last November’s ballot to raise tax revenues for the currently proposed station.
After voters rejected the tax levy proposition, district commissioners said they would try to pay for the new station without the additional tax revenues.
Not advisory?
Ron Perrow of Twisp said the voters’ rejection of those measures was in fact a rejection of “the idea of building a new fire hall … you should go back to the people to get approval to build a fire station.”
“We didn’t see it as an advisory vote,” Reiber said. “I think the uproar [about the fire station] has poisoned the community so we wouldn’t stand a prayer of putting it on the ballot.”
Perrow told Reiber that for the district to restore better relations with the community, “the best way is for you to resign.”
Ross Darling of Twisp said that people attending the district meetings don’t oppose the idea of a new station, but “want to see if it can be done cheaper. Your mouth, Roy, has done more to churn this up … you shouldn’t take it out on the voter,” Darling said.
“My extreme disappointment in what happened [in the election] has led me to utter things I probably shouldn’t,” Reiber responded.
“You are all trying to do your job the best you can, but you’re making people angry when you just keep asking for the same thing,” said Chrystal Perrow of Winthrop. “It has nothing to do with the firefighters. Everyone knows they work incredibly hard.”
The cost of the building, estimated at about $185 per square foot, has been criticized by some people as excessive. Wagner said he recently constructed a hangar at the airport at a cost of $35 per square foot, and urged commissioners to consider a less costly design. Perrow said he thought a fire hall could be built for $80 per square foot.
“I feel like a block structure with a flat roof is going to stand the test of time,” said Brandenburg, who is a building contractor.
“We anticipate the building to last 50 years,” Reiber said.
John Owen, Winthrop station captain, urged commissioners “not to design a building that doesn’t serve the firefighters and community.”
District officials said they are waiting to see the response from bidders on the project to determine the actual cost of the building.
On another issue, Perrow said the district commissioners are failing to comply with state statutes requiring they publish rules of procedure for their meetings. Reiber said the board would provide rules by the next regular meeting, held on the second Monday of each month at the Twisp fire hall.
Duncan Bronson of Winthrop, a retired insurance executive, also provided the commissioners recommendations to improve the district’s insurance coverage and reduce costs and the risk of an uninsured event.
