The El Dorado County Fire Protection District is teetering on the verge of insolvency after running deficits for years, according to documents obtained by The Bee.
The district's reserve fund is down to $130,000, from a peak of $1.4 million in 2008. The department serves 74,000 residents spread over 281 square miles, including the communities of Placerville and Shingle Springs.
"We've been using our reserves to balance our budget," said Michael Hardy, the fire chief who was appointed in June.
The budgetary problems began under the former chief, Bruce Lacher. Under his watch, the district ran deficits between $500,000 and $1 million annually for the last four years.
Critics, including the firefighters union, say Lacher failed to recognize the warning signs early on.
"The budget was handled at the administrative level," said Jason Lindberg, president of the El Dorado County Professional Firefighters Association. "There was never any open dialogue between the union and management."
Lacher did not respond to repeated requests for comment.
Hardy is now struggling to clean up the mess.
The new chief has pushed forward with what he described as "draconian changes." Firefighters are picking up their own 9 percent contribution to the California Public Employees' Retirement System, along with 20 percent of their current health care costs. Three chief officer positions were eliminated as a part of a reorganization.
The department's revenues come from property taxes that are pegged to home values. With home prices taking a hit during the recession, the money stream dried up.
Faced with a large deficit for the 2012-2013 fiscal year, the fire district transferred $829,000 from a fund earmarked for long-term and retiree health benefits, according to financial records.
El Dorado County Auditor-Controller Joe Harn called the move an "act of desperation."
"The act of taking money set aside for retirees' health insurance and using it to balance the budget will cause big problems in the future," Harn said.
Hardy defended the move, noting that it was done to prevent layoffs and the closure of fire stations. "This is no new revelation. We don't have cash," he said.
A proposed contract with the California Department of Forestry and Fire Protection is also on the table. Under the agreement, the district would operate under the umbrella of Cal Fire and follow state personnel guidelines.
Those requirements include a 72-hour workweek for firefighters, eliminating the need for a third platoon. Local firefighters across the state typically work 56 hours.
"One of the big costs of doing business is personnel," said Janet Upton, spokeswoman for Cal Fire. "We did see a spike in contracts because of the economic downturn."
The district spent nearly $4 million on employee salaries for 2012-2013. The Cal Fire proposal likely would reduce that figure by a third.
Hardy said he would try to minimize layoffs. He said that many positions, left empty by attrition and retirement, have been left unfilled.
Hardy said the district has cut $1.2 million from the operating budget for 2013-2014, which as projected would balance the books.
"We're walking a very fine line if we have an emergency or those revenues don't come in," Hardy said, "but I'm optimistic."
Call The Bee's Richard Chang, (916) 321-1018. Follow him on Twitter @RichardYChang.