Denton County Emergency Services District No. 1 (formerly the Argyle Fire District) could run out of money to pay its firefighters and paramedics this summer, part of the fallout of former Fire Chief Mac Hohenberger’s financial malfeasance.
Hohenberger was arrested and indicted in November on federal embezzlement charges, after the FBI alleged he used nearly $500,000 of firefighter pension funds to pay his personal credit card bills. He pleaded guilty in May.
Separate from that firefighter pension issue, which the ESD says it will make all employees whole in due time, the ESD now has a major budget deficit issue. Due to further alleged financial mismanagement by Hohenberger and lack of oversight by former AFD and ESD board members, ESD leadership realized early this year that its fiscal year 23 budget is about $1.9 million short.
“We will run out of funds for payroll by late August or September if we get no assistance,” said Sam Johnson, president of the Argyle Professional Fire Fighters Association.
New Fire Chief Ricky Vaughan said several poor financial decisions added up to the huge deficit.
“There are a lot of reasons for it,” he said. “No inflation was built in to the budget. COVID impacted the budget, and on top of the mismanagement, it just snowballed. The AFD had just been getting by.”
The ESD is also having to pay about $200,000 in attorney and auditing fees, as a result of the Hohenberger scandal, making a bad financial situation worse.
Sheldon Gilbert, the new ESD board president, said the district had been running a deficit for years, surviving by moving money around, but money problems were bound to catch up to it.
“The AVFD had been propping up the budget with lines of credit and booked revenue in the wrong year to prop up the deficit, in addition to one-time PPP (Paycheck Protection Program) and COVID payments,” Gilbert said. “As far as structural operational deficit, that was a byproduct of building a fire department they could not fund based on taxing authority.”
In the short-term, the ESD is asking the communities it serves (Argyle, Bartonville, Copper Canyon, Lantana and Northlake), the county and the state to help it make ends meet.
The Lantana Education/Charitable Foundation recently approved a $300,000 grant, the Northlake Town Council approved a $100,000 grant and the Argyle Town Council approved $56,000 for the ESD to help cover the shortfall, but that still leaves more than $1.4 million left to make up.
Vaughan said the ESD is applying for a $1 million line extension, and if approved, ESD leadership is optimistic that it and the district’s cash reserves may be able to cover this year’s deficit, but it will still face a major deficit next fiscal year.
“We’ll want to pay that loan off as quickly as possible, and we expect a $700,000 deficit in FY 24,” Vaughan said. “We’re working with neighboring communities and the county to see how they can help offset that. By FY 25, we should be in a better place, but we’re going to need some long-term solutions.”
The ESD has identified two solutions that will require a vote by residents. One is pretty simple, it’s to annex the large unincorporated community of Lantana into its boundaries.
“We are currently contracted out [through the Lantana Community Association] to provide fire and EMS service to Lantana, and we think the timing is great to bring them in,” Vaughan said.
The new arrangement would mean Lantana residents would fund the ESD through their property tax bills instead of paying an annual assessment levied by the homeowner’s association.
The other petition will be to create a new emergency medical services overlay to properly fund the district, which now provides more service than it can afford.
“Think of the ESD as being set up for fire protection,” Vaughan said. “That was the intent when it was set up, a governmental funding source for fire protection. The challenge is, we also provide ambulance services. That’s an additional cost, and the ESD isn’t set up for both.”
Vaughan and Gilbert explained that the district is not allowed to tax more than 10 cents per $100 valuation, but that’s not enough to cover the budget.
“We’re trying to run a 13- to 15-cent department on a 9-cent tax,” Gilbert said.
“We can’t continue to operate on a 9-cent budget,” Vaughan added. “We can’t afford to do both … so we have got to look at a separate taxing entity.”
Vaughan referenced the closest ESD to Argyle, in Parker County, which only handles fire service while a separate entity handles ambulance service.
“This election is about the future, to create a fire department that is successful,” Vaughan said.
The ESD will be petitioning to get both items on the November ballot.
These aren’t the only efforts the ESD will make to address its finances. It also plans to refinance and restructure some debt, and to sell some of the AFD’s assets to help address the situation it finds itself in. ESD leaders said they are grateful for how all of its personnel have remained committed providing service to the community despite the uncertain circumstances.
“I’m very proud of our firefighters, they’ve been very patient and it’s been a true team effort to find innovative ways to fill short-term gaps,” Vaughan said. “I’m proud of the board and the Association because we haven’t lost any firefighters and there’s been no impact on operations.
“I think it’s important to recognize that everyone stepped up. We still have challenges ahead, but we’re going to keep working toward a common goal.”
