October 9, 2012
MONTECITO, CA - It has been brought to our attention that there are misstatements being disseminated throughout the community relating to the District's financial and budget status.
First, it has been stated that Montecito Fire District is operating under a $2 million dollar deficit.
This is false. The District is not currently, nor has it ever operated under a $2 million dollar deficit.
Keep in mind, a deficit is how much more one spends, than one collects in revenue (taxes, etc.). Not to be confused with a debt, which is how much one owes. These are not the same thing.
Government accounting standards are somewhat different than what one might be accustomed to in regular private business, and if one is not familiar with these practices, the District's annual financial reports might easily be misconstrued or misread.
As explained by Heather Fletcher, CPA, Audit Manager of the Santa Barbara County Auditor's office, the District's annual financial report for Fiscal year 2011 shows "a deficiency of revenues under expenditures amounting to $2,177,983".
The deficiency occurred solely during this fiscal year because MFPD refinanced its CALPERS side fund. To do so, the District used a pension obligation bond which resulted in a net savings to the District of $162,779.
The proceeds related to this bond were documented on the financial statement as an 'other financing source' as opposed to a "regular" revenue. To the untrained reader, this would make it appear as a deficit, when in fact, there was none.
Another misunderstanding relates to the District's accounting practice of borrowing funds; this specifically relates to cash flow issues.
Government entities employ a number of techniques to meet cash flow needs that arise prior to the receipt of semi-annual property tax revenues in order to cover normal operating expenses. The District routinely borrows from its Land and Building Fund (Station 3 Fund) to cover General Fund expenditures until tax revenues are received.
Because the District has enough funds in its own accounts, it has been financially prudent to borrow from its own funds, instead of from the County Treasurer or through issuance of other debt instruments, resulting in zero interest. According to Ms. Fletcher, borrowings, including tax and revenue anticipation notes, are common financing instruments used by governments to provide for cash flow needs.
And finally, the funding for Station 3.
This is a topic of much discussion. But as it relates to finances, the District has been setting aside funds since 2006 for the purchase of land and construction costs. In April of 2011, the District entered into an Option to Purchase Agreement with the Petan Company to purchase the identified property on East Valley for $1,273,862. The District received construction estimates from the architects of approximately $7,428,475 to build the station as it was conceptually drawn for a total estimated cost to purchase and build of $8,702,337.
Since 2006, the Board of Directors has set aside $8,548,261 for Station 3. There are several years before the project is scheduled to break ground, enabling the District to set aside additional funds to complete the project.
It is also important to note that the District also has the necessary funds set aside to purchase a Structure Fire Protection Engine and a Wildland Fire Engine for the new station.
The District has made every effort to be fiscally responsible, and not deficient in the balancing of its budget, or in its planning for the addition of a third fire station.
If you should have any questions relating to any of these issues, there will be a presentation on the District's finances at our October 25, 2012 Board Meeting. The meeting will be held at 8:30 am. at Station 1.