Corrigan on Fire District Merger: Well Intentioned But Flawed

by | Feb 28, 2018

Gayle Corrigan holds an audit from the EG Fire District during a presentation before the Town Council Feb. 26.

By Elizabeth F. McNamara

Town Manager Gayle Corrigan told the Town Council Monday night that the town’s decision in 2013 to make the independent EG Fire District into a town department was not well considered and may well hurt fire department services in the long run.

“It’s not meant to point fingers,” she said. “Let me say that the decisions made at the time were well intentioned.”

Her presentation (found here: EG Fire District Analysis) came nearly two weeks after she emailed a letter to residents in which she said one of the reasons the town needed an extension to March 31 for its Fiscal Year 2017 audit was the failure of the town to do its due diligence when taking over the fire district. Specifically, she wrote:

When the Town took over the former East Greenwich Fire District in 2013, it also took on potential liabilities for the district’s illegally collected impact fees, which could ultimately cost the Town more than a million dollars. This information was not disclosed to the Town or its residents, as little due diligence was done at the time. There is no evidence that the Town conducted any fiscal analysis or risk assessment on the economic ramifications of taking over the former Fire District as a Town department.

On Monday, Corrigan did not explain why the takeover of the EG Fire District led to the need to request more time for the audit. Rather, she presented what she called a fiscal analysis of the fire service before and after the merger. She praised the intricacies of the Fire District’s bookkeeping, noting that what had been explained over several pages in Fire District days was reduced to a few lines once the town took over.

In general, she said, the former Fire District – which was its own municipal taxing entity run by a board of five commissioners elected at a fire district town meeting (quorum of 30) – ran a relatively tight ship. In 2002, the district passed a resolution imposing impact fees on all new commercial development, with the idea that it would generate money for a fund to be used for large purchases, such as a new fire truck. But the district could also raise the tax rate if it needed to make a big purchase – a good thing, Corrigan said.

Starting in 2006, that particular attribute (limitless taxing ability) was no longer shared by the town. That year, the state General Assembly passed S-3050, which capped the amount cities and towns could increase taxes each year to 4 percent of the previous year. That law has never applied to fire districts.

They could tax their way out of any situation,” she said, referring to the fire district (you can see the variance in tax rates year to year on page 16 of Corrigan’s report, linked above.)

For many years, the fire district also had around $300,000 in annual revenue from the City of Warwick, which paid the district to cover Potowomut (which is not contiguous with the rest of Warwick). Warwick built a small fire station in Potowomut and discontinued that arrangement in 2015.

Corrigan also noted state payments of around $1 million between 2008 and 2012 to make up for car tax revenue it had discontinued, but that money would have been collected by the district had it not been discontinued by the state.

Those different revenue streams added up to a healthy fire district that could afford to buy new equipment without much strain, Corrigan said.

As luck would have it, the party ended around the same time the town took over the fire district. No more Warwick payments, no more state payments in lieu of car taxes. And no more commercial impact fees – the Town Council discontinued those with the merger.

Then things got worse. A lawsuit over those fire district commercial impact fees was resolved in 2016, against the town. In 2017, the town learned it would be on the hook for any commercial entity who paid Fire District impact fees, not just those that brought the lawsuit. The total amount, including fees and interest, could exceed $2 million.

Always, pension costs were rising, as they have been for all public employees.

The question hanging out there after Corrigan’s presentation was, should the town have taken over the fire district?

Council President Sue Cienki refused to weigh in on that, though she did echo Corrigan’s statements that it was a good thing that the former fire district was able to raise taxes above the town’s cap of 4 percent. That was a change from her usual line that taxes are too high. Cienki was the one behind the move to cut the tax rate for this fiscal year. 

The reality is that had the fire district remained independent, the judgment over those commercial impact fees would remain the same; pension costs would remain the same; the lack of money from Warwick would remain the same; the end of state reimbursements for car tax would stay the same. The only difference would be the collective bargaining agreements the town signed with the firefighters union in 2013 and 2016, which Corrigan has said are overly generous to the firefighters and over which the town is now suing the firefighters.

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