Is Central Yavapai Fire subsidizing Chino Valley Fire?

Fire boards hear final recap of audit reports

Stephen Crandall of SC Audit & Accounting Solutions, LLC, presented to the Chino Valley Fire District, Central Yavapai Fire District and Central Arizona Fire and Medical Authority fire boards on Monday, Feb. 27, about the auditing process for the boards in fiscal year 2016-17. (Max Efrein/Review)

Stephen Crandall of SC Audit & Accounting Solutions, LLC, presented to the Chino Valley Fire District, Central Yavapai Fire District and Central Arizona Fire and Medical Authority fire boards on Monday, Feb. 27, about the auditing process for the boards in fiscal year 2016-17. (Max Efrein/Review)

When the Central Yavapai Fire District (CYFD) and the Chino Valley Fire District (CVFD) were audited for the first time last year under the joint powers agreement (JPA) that formed the Central Arizona Fire and Medical Authority (CAFMA), every single expense and source of revenue from each district was credited to the district it came from.

In other words, while both districts operate under the shared administration of CAFMA, each can clearly show how much it is costing and/or contributing to CAFMA’s overall financial position.

To help the public and the fire board members of the two districts better understand this relationship, CAFMA staff had an independent auditor present on the topic during their regular monthly board meetings on Monday, Feb. 27.

A large part of the presentation was to show how in-depth the process was to track each and every line item in the CAFMA budget.

“The detail that we go into is down to literally assigning uniforms’ expenses for individuals and station expenses for utilities,” said Dave Tharp, Chief of Administration for CAFMA.

For instance, it is outlined in CAFMA’s first auditing report that of the more than $686,000 in first-year costs avoided by the two fire districts by entering the JPA, about $111,000 is directly attributed to CVFD, while the remaining $575,000 in realized savings are attributed to CYFD.

Similarly, both organizations have an equity interest in CAFMA that is also continuously measured. As of July 1, 2017, the total equity for CAFMA was $49,632,229. Of that, CYFD’s portion was $39,013,994 (78.61 percent), and CVFD’s was $10,618,235 (21.39 percent).

By tracking the finances this closely for each district separately, it holds both accountable for the authority’s overall performance, said Stephen Crandall of SC Audit & Accounting Solutions, LLC – the certified public accountant chosen to present the information Feb. 27.

“The idea being that if one entity in a given year was to put in more money than they actually cost, then their equity would go up,” Crandall said. “If one of the organizations were to put in less than what they cost, then their equity would go down.”

When presented this piece of information, CYFD board member Jeff Wasowicz questioned what would happen if one of the districts continuously underperformed.

“Is it possible if one entity consistently costs more than it brought in it could keep adjusting that equity down so that it could hit zero?” Wasowicz said.

The answer is yes, Crandall said. “You would want to watch out for that. You’ll be able to measure that if that starts to happen.”

In line with this discussion, the attorney for all three fire boards posed a question that has been brought up multiple times by CAFMA critics in an effort to get a definitive answer.

“Mr. Crandall, there have been a lot of discussions I’ve read or heard, or allegations that have been made related to subsidies from one entity to another; that is from the CYFD to Chino Valley,” the attorney, Nicolas Cornelius, said. “Based on your analysis and based on this process that you’ve gone through, is there any evidence of that at all?”

“I don’t know really if I would say evidence of this or that, but I think the main point was that we structured this to avoid any type of subsidy between two fire districts,” Crandall said. “That was one of the objectives upfront. We said ‘look, you can’t just put two organizations together and have one organization footing the bill for the other one; that’s against state statutes.”

To abide by this limitation, the formula in place restricts one district from subsidizing the other, Crandall said. “They’re not going to borrow money from the other organization.”

CYFD considering bond refinancing

Michael LaVallee, Managing Director for Stifel, a financial services holding company, presented to the Central Yavapai Fire District an opportunity to refinance nearly $3.75 million in bonds.

The current 10-year interest rate being paid on the bond is 4 percent and gradually hikes to 4.5 percent over the 10 years.

Stifel estimates it could bring that percentage down to about 3.1 percent (including the cost of its services).

“I’ve worked with Michael before, so this is not foreign to me,” said Dave Tharp, Chief of Administration for CAFMA. “This is an easy way for the board to save taxpayer money.”

The board agreed to put the matter on the next meeting’s agenda.