The Mehlville Fire Protection District is continuing a “planned spend down” of its reserves to fund new firehouses and equipment, according to Board of Directors Chairman Aaron Hilmer.

In separate unanimous votes last week, the Board of Directors approved an amended 2010 budget and a final 2011 budget.

The revised 2010 budget projects $19,056,742 in expenditures with projected revenues of $17,431,083 — a deficit of $1,625,659. Hilmer attributed the deficit spending to the construction of the district’s new No. 4 firehouse at 13117 Tesson Ferry Road in Concord.

The cost of the new firehouse, including the purchase of property, is budgeted at more than $2.75 million and nearly $1.63 million has been spent to date.

Regarding the original 2010 budget, Hilmer said at the Dec. 30 board meeting, “… Nothing’s really changed materially throughout the year. As we can see in the second to right column, we’re dipping into our savings roughly $1.6 million and you could sum that up in two words … House 4.”

Hilmer and board Treasurer Bonnie Stegman first took office in April 2005 after running a reform campaign in which they pledged to eliminate fiscal waste and roll back Proposition S, a 33-cent tax-rate increase approved in November 2004.

Since their election, Hilmer said, “We literally put millions of dollars away in reserve. Reserve was an unknown word at the time we got here. They claimed they were broke. That’s why they needed a tax increase that we never levied. But at that time we built some reserves up and about three years ago I talked about that it would make sense that we do a planned spend down.”

Noting the district is not a bank, Hilmer said, “We don’t need to sit on years’ worth of revenue that we don’t need. So we talked about a planned spend down and it so happened that these properties came up. We were able to buy them at a good price and build a new House 4. And now we’re going to build House 3, and according to our architect, at lower prices than we would have built them three years ago.

“And so that’s basically what we’ve done. We saved this money up five, six years ago and now we’re spending it down to build these capital projects …”

District officials plan to relocate Mehlville’s existing No. 3 firehouse at 11625 Sappington Barracks Road with a new facility at 4811 S. Lindbergh Blvd.

The Board of Directors voted unanimously in July to spend $571,000 to purchase the 1.1-acre property from the Dominic and Margaret E. Intag Trust. The district has deposited $50,000 as a down payment for the property with the remainder of $521,000 due at closing, which is scheduled for this week. Under the terms of the agreement, the seller may maintain possession of the property until March 1.

The 2011 budget approved by the board projects $21,117,000 in expenditures with anticipated revenues of $18,947,446 — a deficit of $2,169,554. Once again, the district will not go into the red, but will dip into its reserves. With a projected beginning balance of $12,647,201 on Jan. 1, the district will have an estimated ending balance of $10,477,647 on Dec. 31 — enough to operate the district for six months.

“We’re going to dip into our reserves about roughly $2 million and that’s paying for the land, which we’re going to close on next week, and then the building …,” Hilmer said of the new No. 3 firehouse, noting the district soon will seek bids for its construction.

In a memo to the board, Chief Financial Officer Brian Bond outlined how the final 2011 budget had changed from the preliminary budget presented in September:

• $136,000 combined increase in personnel expenses resulting from resignations, new hires, promotions and additional staffing to operate a new ambulance.

• $9,000 decrease in employee health insurance based on insurance renewals.

• $35,000 increase in workers’ compensation premiums — “This expense may be less if there is a distribution of previous years’ excess premiums,” Bond wrote.

• $10,000 reduction in payroll processing expenses.

• $100,000 increase in capital for building and building improvements.

• $474,000 increase in capital for fire apparatus and equipment due to the purchase of a 2010 Pierce rescue truck.

In his memo, Bond wrote, “As a result of these changes, the budget reflects a $2.17 million excess of expenditures over revenue due primarily to $2.33 million of non-recurring capital expenditures related to the construction of No. 3 House and will reduce the reserves of the district by this amount.

“Excluding the non-recurring capital expenditures, related to the construction of No. 3 House, the budget would reflect a $160,000 excess of revenue over expenditures,” the CFO added.

Regarding the purchase of the rescue truck, Hilmer said, “… As we talked about at the time, we had planned on anticipating replacing the rescue squad in 2012. An opportunity came up where the U.S. Navy had designed and bid out the rescue squad and we were able to pick up a piece of equipment that when we kind of looked around they told us that the same piece of equipment would cost us $709,000 and we’re picking it up for $509,000 — basically saving $200,000 by buying something a year early.

“So then the question becomes: Would we be better off leaving that money sitting in our checking account? Well since we make almost negative interest, obviously not … What we’re really doing is a bringing a capital expenditure that would have happened in 2012, pulling it to 2011. Now come 2012, what we had budgeted in our long-term budget for that half-million dollars will now just show up as a surplus, which we’ll put back in our capital equipment …”

In a related matter, the board also discussed the district’s capital/equipment fund with Bond, who said, “… In 2012, we have identified an ambulance as well as an additional fire truck, a pumper, and I believe replacing the SCBAs (Self-Contained Breathing Apparatus), which will be the most significant capital expenditure that we have related to equipment in 2012.

“That’s one of the things we’re going to ask the board to consider later on in the meeting is to go ahead and designate some of the excess reserves we currently have in the capital fund to preserve them for those specific purchases in 2011 and 2012.”

Hilmer said, “We might as well (just) talk about that discussion while we’re here. One thing I talked to Brian about is now that we’ve had these large building projects out of the way — some of them you really don’t know what they’re going to cost until you’re further into them. Once we get past House 3 being finished at the end of this year, we’re pretty much laying down the next three years as far as capital expenditures — you have pumper trucks, some ambulances and what I told him I thought would be a good idea is obviously the tax levy that we’re taking this year would be a little high to fund those things.

“So what I talked about is perhaps we can come to something — not tonight — but I have a feeling that we’ll be able to roll our tax rate down in August and perhaps do like a flat three-year rate where we think: Hey, we know what our pay schedule’s going to be for three years. We know the capital equipment. Let’s get where we want to be with that. So I think that’s something to look forward to, too, which would be nice if we could roll that down a little bit …”

The board voted unanimously to designate $750,000 in the capital/equipment fund for the purchase of two ambulances and one fire truck that will take place “within 2011 and/or 2012.”