Crystal Lake foreign fire insurance board, firefighters union sue city officials

CRYSTAL LAKE – The firefighters union is taking the city to court for nixing a tax fund firefighters tried to use to buy items ranging from Fitbits to coffee beans.

The lawsuit could add to tensions between the union and city officials. Nine Crystal Lake firefighters, including two who were arrested, face discipline in connection with an off-duty incident in March at a local bar.

The Crystal Lake Foreign Fire Insurance Tax Board and the city’s firefighters labor union filed a lawsuit Aug. 2 against the city and numerous city officials, alleging that they violated state laws when they zeroed out the foreign fire insurance tax imposed on out-of-state insurance companies. The tax collects more than $60,000 a year.

The lawsuit further alleged that the City Council violated state laws when it decided to dissolve the tax board, to withhold foreign fire tax fees collected from insurance companies and to return the money collected to the companies that paid the fees.

However, the City Council never did any of those things. Instead, the council approved a watered-down version of the ordinance. An earlier draft ordinance had called for dissolving the board, but the City Council never considered or voted on the draft ordinance.

Mayor Aaron Shepley said the tax board gave council members a draft of the lawsuit before the Aug. 1 meeting “in an effort to intimidate” council members.

He said the tax board did not amend its lawsuit to accurately reflect actions taken by council members, which solely included setting the tax rate at zero and agreeing to use the remaining $150,000 in the tax fund until it is depleted, according to city documents.

“It’s frivolous,” Shepley said. “It is not an accurate document. The things that they allege did not occur. We voted to set the foreign fire tax rate at zero. We had every right to set the tax at the rate we did, and their lawsuit doesn’t have a chance of prevailing.”

The dispute stems from the board requesting City Council approval to use foreign fire tax funds for expenses that would personally benefit firefighters, including Fitbits, duffel bags, health club memberships and day care services for children while members use the health club. Funds also were requested to buy coffee beans, which the city already provides for its departments.

The foreign fire tax is imposed for the purpose of providing “maintenance, use and benefit” of the Crystal Lake Fire Rescue Department, including buying and maintaining equipment for firefighting, training and conditioning; and covering training or certification fees authorized by the fire rescue chief, according to city code.

Fire Rescue Chief Paul DeRaedt, who by virtue of rank serves as a trustee on the tax board, said the board’s recent requests raised some “red flags” because funds are meant to be used for the benefit of the entire department rather than the personal benefit of individual firefighters.

“I felt those expenditures – such as the Fitbits, the gym memberships and the coffee beans – were not acceptable because it was more of personal use,” DeRaedt said. “It’s almost like we’re spending additional dollars on things we’ve already provided for them.”

In previous years, the city’s foreign fire tax funds have gone toward buying exercise equipment and a new firehouse alert system in all three of the city’s fire stations. Funds also have helped buy additional equipment to re-outfit a reserve fire engine, new hydraulic equipment for extrication, carbon monoxide monitors and backup firefighting suits.

But beginning in January 2015, the board began approving expenditures the city considered to be for personal use, finance director George Koczwara said in an email in response to questions from the Northwest Herald.

On Jan. 7, 2015, the board approved spending $44,000 annually to reimburse gym membership fees for firefighters, according to foreign fire insurance board meeting minutes. It was unclear whether the money approved also included on-site day care services while members used the gym.

In 2016, the board also approved $14,000 for 70 Fitbit devices and $2,600 a year to supply firefighters with 36 pounds of whole coffee beans each month from PI Coffee Roasters, documents show. The city already spends about $1,270 a year to buy coffee and filters for all of its departments. PI Coffee Roasters runs Rockford-based Fire Department Coffee, a firefighter-owned and operated company that gives a portion of every sale to military and firefighter charities. It encourages customers to "kick the 'Big Can' companies and serve up some better coffee for the working class," according to its website.

The latest expense the tax board approved was about $57,000 for legal services.

The details of what the legal services entail are unclear from the board’s meeting minutes, but the fees would use up nearly all of the estimated $61,000 the tax board collects each year, Koczwara said.

Richard Kreher, chairman of the Foreign Fire Insurance Tax Board, did not respond to a request for comment.

Since 2003, the Illinois Municipal League has collected and turned over more than $780,000 in foreign fire tax fees to the city, according to the lawsuit filed by the firefighters union.

The tax will collect about $61,000 once more in the fall before indefinitely halting future collections, unless the city and board can reach an agreement about how to spend the money.

“The current foreign fire insurance tax board has done an exact about face on their predecessors over a period of at least 20 years,” Shepley said. “For now, as long as they’ve made the decision and continue on the path that they insist they have a right, it’s better off that taxpayers not have to bear these expenses.”

DeRaedt said changes to the leadership of the board, which elects six trustees in December of even-numbered years, has led to differences in opinion between trustees and city officials in recent years on what expenses are deemed beneficial to the department.

The tax board voted in July to retain legal counsel to update its bylaws and to assist in efforts to obtain monies from the city being “unlawfully withheld” from the board, according to court documents.

A tax board meeting in January included several tense exchanges between union members and city officials.

Shepley said that the Crystal Lake Professional Firefighters Local 3926 union, one of two plaintiffs on the lawsuit, has no business being involved in discussions that have nothing to do with the city’s collective bargaining agreement.

“Frankly, they don’t have a proper standing to be party plaintiffs,” the mayor said. “The foreign fire insurance tax and foreign fire insurance board are not subjects included in the four corners of the collective bargaining agreement.”

Attorneys from Asher Gittley & D'Alba Ltd., the law firm that represents Local 3926, declined to comment beyond what was filed in the lawsuit. The union's president, Timothy Kerley, recently was arrested on aggravated assault and disorderly conduct charges.

The union’s contract with the city is set to expire April 30. Negotiations are expected to begin in the spring, DeRaedt said.

The lawsuit named Shepley, Koczwara, City Manager Gary Mayerhofer and all six City Council members: Ellen Brady, Ralph Dawson, Cathy Ferguson, Haig Haleblian, Brett Hopkins and Cameron Hubbard.

Mayerhofer did not return phone calls seeking comment on whether insurance would cover the city’s legal fees pertaining to the lawsuit.

As far as discussing the future of the foreign fire insurance tax, DeRaedt said he is unaware of any meetings scheduled between trustees and city officials, but he remains optimistic.

“Based upon the actions the council took, I think there is certainly an opportunity to be able to move forward,” DeRaedt said.