Judge Grants Town Loan to Central Coventry Fire District

At Tuesday night's emotionally-charged emergency Special Meeting, four of the five Coventry Town Council members voted in favor of putting forth a motion in court requesting authorization for the Town to loan the Central Coventry Fire District a maximum of $300,000 to continue the delivery of emergency services for several more weeks.

Following the motion being filed in Kent County Superior Court, Judge Brian P. Stern held a hearing on Wednesday afternoon during which testimony from various legal counsel was heard in respect to the proposed loan.

Atty. Nick Gorham, representing Rep. Patricia Morgan, Sen. Nick Kettle and Councilwoman Karen Carlson (the opposing Council vote), spoke against the loan, saying that the Coventry Town Charter does not allow for the Town to offer a loan of this nature and that the Council had no authority to propose doing so. He also stated that the Council's decision to not allow public comment on Tuesday night suggested that the taxpayers of Coventry do not have a say in what happens with their tax dollars.

"The Council had time to convene a Special Financial Town Meeting to discuss this proposal and they chose not to, deciding to do it themselves," he said. "The fact is, we as taxpayers object to loaning money to the fire district and I'm asking you, your honor, to be the final authority and to stop this madness."

"The Town Council of the Town of Coventry was elected to do what is best for the entire tax base of the town and that's what we attempted to do last night," said Council President Gary Cote to Judge Stern. "If the Central Coventry Fire District is liquidated tomorrow night, it will not reopen on the twelfth or any day after that. We would have to start at Ground Zero, which is not a good place to start when it comes to emergency and fire services. Our vote last night was also to try and put the power back into the hands of CCFD taxpayers. If liquidation is allowed to go forward, the power is taken away from the taxpayers and put into yours and Mr. Land's hands. I mean no offense, but that's not where it belongs. I stand behind last night's vote, I applaud last night's vote and I know in my heart that the Town Council did the right thing to protect the citizens of Coventry."

Town Solicitor Fred Tobin also stood by his statement made Tuesday night that the Town Charter did not prohibit such a loan. He addressed Gorham's assertion that Town funds could not be used for a loan of this nature by explaining that it will be coming from Coventry's General Fund, which is money in the Town's budget, separate from any department, appropriated for use in an emergency or unexpected situation, such as the one facing the Central Coventry Fire District.

Judge Stern also heard testimony from Atty. Mike Robinson, counsel for the Municipal Employee Retirement System (MERS), who expressed a willingness for the district to remain operational, as long as regular contributions continue to be made to retirement plans. Atty. Mark Gursky, representing the firefighters' union also spoke in favor of the loan, providing that Special Master Rick Land continue to work with the union in regards to firefighter compensation during the ongoing Special Mastership process.

"When the taxpayers voted, the one thing they intended was to not approve the budget. Nobody voted to liquidate the fire district in Central Coventry, nobody voted to combine districts or to put the town in charge. Nobody made a vote like that," Gursky said. "The question is, where we are right now on the verge of catastrophe, why no one has actually looked at what is in the best long-term interest of the district. It seems to me that the Town Council of Coventry has stepped up at least partway to deal with the short-term situation and we'll work with them on that." 

Sen. Lou Raptakis spoke of two bills currently headed to the Senate Finance Committee that would allow for a legal multi-tiered taxation system and in the event of liquidation, the Town's ability to redraw district lines for taxation purposes. The bills were introduced today but will likely be heard by legislators during the week of April 23.

Rep. Scott Guthrie and Special Master Land also addressed Judge Stern and requested that he authorize the loan to allow all involved parties several more weeks to pass legislation and devise a solution to the district's financial troubles which will ultimately affect all Coventry residents if a liquidation is officially ordered.

"Today I can tell you that we're closer to trying to get something done in the General Assembly than we were yesterday and we'll be back in hammering something out this afternoon," said Guthrie. "I clearly saw your concern, your honor, as I stood before you this past Monday, I can see it in your eyes.  Please Judge Stern, rule favorably on the hard work of the Coventry leaders and please allow us more time."

Following a short recess during which Judge Stern reviewed the Coventry Town Charter, he admitted that its language is unclear regarding allowing the Town to offer a loan to the CCFD. Due to this fact and the emergency nature of the motion, he declared that he would authorize the loan under the following conditions, most of which were requested by the Town within its proposal:

• The loan will be authorized without charging interest to the fire district.

• The loan retains certain rights for the Town of Coventry, specifically to allow the Town Manager to suspend payments if no progress is being made, however the Town must commit to providing payments for the first two weeks and must give advance notice to the Special Master if payments will no longer be made to allow sufficient time for Land to announce and enter into liquidation mode.

• Special Master Land will be asked to work with the Town and other involved parties to put language into place giving the Town of Coventry repayment protection/priority while taking into consideration other creditors who are owed money by the district and have legal repayment priority.

• The Town of Coventry is requesting that the court make it clear that it is acting only as a lender to CCFD and not assuming fire and emergency responsibilities by doing so.

• The Town is requesting that its loan does not make it liable for any past debts and/or expenses of the fire district.

• The Special Master and other parties need to immediately discuss any changes than can be made to stretch the loan out for as long as possible, due to the district's current spend rate of approximately $100-130K per week.

• Rejecting the Town's request for the court to immediately order the issuance and payment of fourth quarter fire tax bills, Judge Stern did reiterate that at a Feb. 15 hearing, the court ordered the issuance and payment of CCFD tax bills for quarters 1-3, and that any resident who has not made their payments should do so immediately.

In addition, a motion filed by MERS suggests that retirement system contributions may have been held from employee paychecks, but used by the Central Coventry Fire District to fund day-to-day operations. Because of this, Special Master Land is also required to formally notify, within 48 hours, the RI State Police and Attorney General of this issue as it may have criminal elements that should be investigated.

Apart from the above loan conditions, Judge Stern ordered Land to prepare an order for submission to the court allowing the loan to move forward and also seek answers to the following questions:

• What liability will taxpayers have to other taxing authorities (such as utility companies) and the Municipal Employee Retirement System if CCFD is dissolved?

• Will there be a liability to firefighters and other CCFD employees covered under a Collective Bargaining Agreement not to expire until 2015 if a liquidation is ordered?

• Will any liability be present towards the state and the RI Dept. of Labor and Training with regards to unemployment contributions in the event of a liquidation?

• Who, if anyone, would be liable if there is still remaining debt following the sale of all CCFD assets if the district is liquidated?

• Who, if anyone, would be liable to unsecured creditors if debts owed to them are not fully satisfied in the event of a liquidation?

Before adjournment, Judge Stern scheduled a briefing date of April 23 for any interested parties to file briefs in respect to their positions on whether or not any remaining debts following a liquidation would be discharged or if taxpayers would still be liable for them. Prior to this date, Land must also file with the court a report explaining the effect, if any, on homeowner's insurance rates in the event of a liquidation.

Pending Land's filing of the above order, Judge Stern is prepared to grant the loan from the Town of Coventry to keep fire and emergency services in operation and provide additional time for officials to find a long-term solution.