District Volunteer

Herald Fire Protection District Volunteer Fire Chief James Hendricks (left) presents Alex Lawton with a plaque in recognition of Lawton’s promotion from firefighter to engineer at the district’s monthly meeting on Thursday, June 21.

Herald Fire Protection District (HFPD) directors voted unanimously Thursday, June 21 to enter into a loan agreement with Five Star Bank in order to fully pay off their unfunded liability to CalPERS.

“The district has been diligently looking for a way to resolve this unfunded liability with CalPERS, looking at it in a multitude of different ways,” Chairperson Lindsey Liebig said at the meeting. Liebig said that they engaged with CalPERS multiple times on payment schedules and what that would look like. But, according to Liebig, relying on CalPERS to finance the balance would “cripple the district”.

“The best option that CalPERS gave us was a five-year payment schedule that still will cripple the district because we were going to have to pay upwards of $80,000 to $100,000 a year,” Liebig said.

HFPD withdrew from CalPERS officially January 2017 and didn’t receive the final bill until the end of November that year. That bill, a lofty $404,535 – nearly three-quarters of the district’s annual budget, demanded payment in full by Jan. 20, 2018, or suffer penalties.

With no meeting scheduled for December and a budget already set for the current fiscal year, the district’s board of directors did not have an opportunity to discuss the bill until their January meeting.

After multiple discussions with CalPERS, the district sought funding elsewhere.

“With some sheer luck and genuine belief in the future of this district, Five Star Bank has issued a letter of engagement to loan Herald Fire the amount needed to pay off PERS in one lump sum,” Liebig said.

The loan amount will be $460,000 to cover the now near $440,000 CalPERS bill, due to late penalties and interest, and $20,000 in closing costs and legal fees.

Similar to residential or commercial loans, the bank is using the district’s land holdings as collateral.

The 15-year loan will require an annual payment of approximately $47,000, which will be split into two installments due in March and September.

“(The payment) is a much more manageable amount for the district to be able to do,” Liebig said. “Paying that in two installments in March and September coincides with the times that we get tax revenue in. Five Star has been extremely gracious in working with our payment schedule, when we get paid, also working within our budget parameters. And we are really, really grateful to them for this opportunity.”

The starting interest rate will be approximately 5.81 percent, nearly 4 percent less than what CalPERS was going to charge, according to Liebig.

The interest rate will be fixed for five-year intervals, and will reprice on the fifth and tenth anniversary dates based on the bank’s five-year Index Rate as of those anniversary dates.

The district will have the option to prepay at any time without limitation or penalty.

After the unanimous vote, the four attending directors (Director Heidi Braziel was absent) voiced a sigh of relief.

“I think I finally see a light at the end of the tunnel,” Liebig said.

Liebig did stress that taking this avenue protects those people that were enrolled with CalPERS, and ends the relationship permanently between the district and the retirement system.

“This protects everyone,” Liebig said. “What this will do is completely finalize everything with CalPERS, and there will be nothing additionally owed. We will not be on the hook with them at all. It will be reported to their board that we are done, so no one set to receive benefits will have any funding cut, restricted or what have you. Everyone will get what is said to be coming to them, as per CalPERS.”

After completing the transaction with the bank, directors hope to have the CalPERS bill paid in full by the end of July.

“We are very happy to be closing this chapter for the district,” Liebig said after notifying CalPERS of the board’s decision. “This new partnership with Five Star Bank provides the opportunity for us to close our contract with CalPERS, without decreasing benefits for any participating member, and provides us the ability to begin long-term planning for future district facilities and apparatus needs. We are very thankful that Five Star Bank is choosing to invest in the district and our community, and look forward to a long partnership with them.”

In other business at the meeting, firefighter Alex Lawton was promoted to engineer and Volunteer Fire Chief James Hendricks provided monthly statistics, including reporting that HFPD has been requested for more mutual aid requests this season over previous seasons.

“This is a source of pride to be able to give back to agencies who help and have helped us,” Hendricks said.

Directors will hold a special meeting this Thursday, June 28 at 5:30 p.m. at Hendrickson Training Facility to officially adopt the next fiscal year budget.