Can a Fire District Pre-Pay for a New Fire Truck?
This is a question that has come up quite a bit recently, and I’ve decided to explain the reasoning behind my answer here. Fire apparatus can be very expensive, ranging from several hundred thousand dollars to as much as a million dollars or more for the most sophisticated aerial ladder trucks. With the tax cap as low as it is, it is easy to see why it may be tempting to take advantage of the savings offered by a vendor who offers a pre-payment option. Sometimes the savings can be as much as 10% of the cost of the apparatus. Should you take advantage of this?
It is well settled that “[f]ire districts are established for the purpose of providing fire protection and responding to certain other types of emergencies . . . and have only those powers expressly granted by statute and necessarily implied therefrom.” 1992 Opn. St. Comp. No. 92-41. Is there a statute that expressly permits a fire district to make pre-payments?
Section 176(4-a) of the Town Law outlines the procedure for fire district commissioners to audit and authorize payment of claims. Although originally not permitted, payments in advance are now permitted in limited circumstances:
The board of fire commissioners may, further, by resolution authorize the payment in advance of audit of claims for light, telephone, postage, freight and express charges. All such claims shall be presented at the next regular meeting for audit, and the claimant and the officer incurring or approving the same shall be jointly and severally liable for any amount disallowed by the board of fire commissioners.
[N.Y. Town Law section 176(4-a)].
In 1996, fire district commissioners became authorized to make progress payments in connection with the purchase of motor vehicles used for fire-fighting purposes. But even this authorization was limited. Section 176(23-a) of the Town Law provides in pertinent part:
In any case of a purchase from a manufacturer of a motor vehicle used for fighting fires, whether or not including apparatus used in connection with such motor vehicle, having a period of probable usefulness of ten years as determined by section 11.00 of the local finance law, advertisement for sealed bids may be made and the purchase contract may be awarded for such motor vehicle and apparatus with the provision, if the board of fire commissioners shall so specify, that progress payments be made to the manufacturer as the motor vehicle or apparatus or both progresses, provided that evidence satisfactory to the board of fire commissioners as to the progress of such work be produced with each request by the manufacturer for a progress payment, and further provided that such progress payments shall not exceed four in number and that at least twenty-five per cent of the contract price of the motor vehicle or apparatus or both be withheld by the board of fire commissioners until such motor vehicle or apparatus or both are delivered to and accepted by the board of fire commissioners, and further provided that every such contract providing for progress payments shall be accompanied by a surety bond of a property/casualty insurance company, as defined in section one hundred seven of the insurance law, for the completion of the work, specified in the contract, within the amount stipulated therein, which bond shall be filed with the board of fire commissioners.
[N.Y. Town Law section 176(23-a)]. In other words, a fire district may use progress payments to purchase apparatus, provided the following requirements are met:
- The specifications for the purchase must include an option to make progress payments;
- There shall be no more than four payments;
- Each request for payment must include evidence satisfactory to the board of fire commissioners as to the progress of the work;
- At least 25% must be withheld by the board of fire commissioners (i.e., the last payment) until such motor vehicle or apparatus or both are delivered to and accepted by the board of fire commissioners; and
- The contract providing for progress payments shall be accompanied by a surety bond.
These requirements do not permit advance payments or any other type of pre-payment. However, if the foregoing criteria are met, progress payments are permitted. While the savings offered by vendors will not be as great as the pre-payment option, many vendors also offer progress payment options, and these options should be considered. At the very least, the bid specifications should include a request that the vendors include options for progress payments (and the specifications should also explain how the lowest responsible bidder will be determined if such options are requested).
Although it would seem to be in the best interest of the taxpayers to obtain the discount offered by the pre-payment option, taking advantage of this option would run counter to the public policy of the State of New York. This is similar to the rules that prohibit fire districts and other municipalities from investing their funds in something other than insured certificates of deposit or United States obligations. In a recent fire district audit involving the failure of a fire district to invest funds properly, the Comptroller explained that “[t]he law emphasizes safety, security and liquidity over yield, because improper investments could result in a risk of market fluctuation and the loss of principal.” [Orient Fire District Audit at 6 (March 2016)].
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