At a meeting on Wednesday, leadership for Jackson County Fire District 5 announced that they had recently learned the district took out a $1.4 million FEMA Community Disaster Loan in 2021, in the aftermath of the Almeda Fire.
The money must be repaid in full in 9 months, and the district currently has no plans on how to do that. The fire district also has an additional $8.2 million in debt, which it has consolidated to pay back over the next 10 years.
This all comes after more than a year of turmoil, including board resignations and the termination of the chief.
The current chief and board took over after this loan was authorized and said they had no idea it existed.
District Chief Mike Hussey said the previous administration failed to maintain the required records for the loan.
He said the loan was received and spent appropriately, on personnel and salaries.
Hussey said that documents from that time period "proposed that over the three-year period, Fire District 5 would suffer a reduction of $4,337,920" due to decreased assessed valuation because of the Almeda Fire.
However, Chief Financial Officer Stacy Maxwell said that, for the most part, that didn't happen.
"In November of 21, AV [assessed value] came in at a negative 2.2%," she said. "But it was only reduced by $143,000 when you do the math."
The board nevertheless authorized loan disbursements of $333,333 in October 2021, $666,666 in December 2021 and $402,000 in April 2023.
According to a memo from Wednesday's meeting, there is a process for the loan to potentially be forgiven, depending on the district’s audits for the past few years. However, JCFD5 is still working to complete its audits.
Hussey said he only learned about this loan recently due to the auditors’ work.
"The chances of FEMA forgiving this are reduced because our tax revenue decrease never happened," Director John Karns said. "I think if FEMA holds tight, this district is incapable of paying that back in June."
Hussey said there is no option for deferring payments to FEMA.
"There may be opportunities with other lenders or other avenues that we have yet to discover," he said. "One of the challenges is we don't have the collateral to put up, and without audits, the district's kind of a credit risk."
The board will discuss possible next steps at its October meeting. They might include declaring insolvency or reducing services.
"The board would be faced with some really tough decisions on where they prioritize the remaining funds because the debt's got to be paid back," Hussey said.
The district is hoping to complete its audits in the coming months to submit to FEMA for review. Hussey said they expect an answer from FEMA in the spring.
