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Charleston expects ’08 budget to be unaffected by fire
By Kathleen Dayton
Staff Writer
The tragic fire that killed nine Charleston firefighters at the Sofa Super Store on June 18 has affected the bottom line of the city’s emergency funds, but officials don’t expect it to cause problems for the 2008 budget.
Steve Bedard, the city’s chief financial officer, said the city tries to keep emergency funds—money not designated for any specific purpose—at 15% of the general fund budget that pays for services such as police and fire protection.
The city would have had more than $19 million in undesignated funds for the year ending Dec. 31 2006, but ended that year with about $18.3 million after setting aside $1.2 million for anticipated Workers’ Compensation claims. The Sofa Super Store fire occurred at about the time the city was closing out its books for 2006.
“We are still within our goal of where we want to be,” Bedard said. “The $18.3 million is the highest undesignated fund balance in the history of the city of Charleston.”
Substantial undesignated funds are important for the city to have in its treasury, particularly in case of weather-related events, Bedard said.
“If we had a weather-related event and disruption in our revenue we would not have to cut back our services for a significant period of time,” Bedard said. “It’s particularly important to have a robust undesignated fund balance in an area that can potentially have some weather-related or other type situations that might disrupt some of your revenues. Having that allows you the capability to absorb these emergencies.”
The city will ultimately owe more than $2 million in worker’s compensation to the families of the nine firefighters killed in the furniture store fire. So far, five of the nine cases have been processed and paid to the families through the Worker’s Compensation system, Bedard said.
While the total costs will be more than $2 million, Bedard said the city has a secondary insurance policy that covers the city for any costs above $750,000.
“We have secondary insurance to cover us in case of a loss of this magnitude,” Bedard said. “We’ve been paying for it forever, and now it’s paying off in this one instance.”
The city’s actual costs will be close to $1.2 million, because the mayor and city council have decided to pay an additional $450,000 to the families of the fallen firefighters. The extra money is needed because city officials decided to pay the families with a lump sum payment rather than have the payments staggered over 500 weeks.
Workers’ Compensation allows for a maximum amount of 500 weeks’ salary in the case of an employee death. But if the payments are made in lump sum, beneficiaries actually get about 408 weeks’ salary.
“The mayor and the city council said they wanted to pay all the people up front the full amount,” Bedard said.
The city also faces more than $9,000 in fines against the fire department related to the fire. The Occupational Safety and Health Administration in September cited the fire department for four violations, including one “willful” violation for having an inadequate command structure that is supposed to ensure firefighter safety in dangerous situations.
Susan Herdina, assistant corporation counsel for the city, said the city has filed a formal petition appealing the citations and fines.
On Oct. 24, Charleston Mayor Joseph P. Riley Jr. lifted a temporary suspension on hiring and travel expenses which he had implemented in August. During the suspension period, some travel was cut back but there were no critical positions affected by the hiring freeze and there was no affect on city services, Bedard said.
“All we were trying to do was get a handle on what was happening this year as a result of 6/18 and make sure we were going to be able to handle it within the confines of the budget adopted last year,” he said. “It just gave us the opportunity to slow everything down, look at where we were and set a kind of conservative tone as we went forward with the 2008
budget.”
The city’s challenge, as far as the 2008 budget is concerned, will be to absorb the increases in public safety that are going to be required as a result of recommendations made by the Fire Review Task Force, a group of six individuals the city hired as consultants after the fire.
“The mayor accepted their recommendations,” Bedard said. “Some of those will be implemented next year, so they need to be reflected in the budget. We’re talking about adding firemen and that’s not just a one-year impact.”
Kathleen Dayton is a staff writer for the Business Journal. E-mail her at kdayton@setcommedia.com.
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