Spearfish and fire fighters’ association reach settlement agreement

The City of Spearfish and the Spearfish Firefighters’ Association reached a settlement agreement on Tuesday, which effectively dismissed all pending litigation between the two. Pioneer file photo

SPEARFISH – A near two-years long legal battle between the City of Spearfish and the Spearfish Firefighters’ Association came to an end Tuesday evening. Mayor Dana Boke and association president Glen Lewis signed a settlement agreement during a special council meeting at City Hall.

“… the concept that has been resolved here to be presented for the council for approval is a very positive, futuristic approach to the fire protection services of the Spearfish Fire District, the city of Spearfish, and what’s to come,” said Tom Brady, serving as chief legal council for the city of Spearfish, who presented the agreement at City Hall.

Brady outlined the three main tiers to the agreement as the central agreement between the city of Spearfish and the Spearfish Firefighters’ Association, the secondary agreement between the city, the Spearfish Firefighter’s Association, and the South Dakota Community Foundation, and then a final agreement settling the issues of personal claims that had been asserted.

Highlights of this agreement are:

  • Artifacts: Historic artifacts will be transferred to the ownership of the association to be held in trust for the public.

“In a collaborative effort (the artifacts will) be placed on display in various areas and buildings of the city or other appropriate locations,” Brady said.

  • Vehicles, apparatus, and equipment: All vehicles, apparatus, and equipment will be owned by the city, with the exception of a grill trailer, fire education trailer, Engine 9, and the historic artifacts.
  • South Dakota Community Foundation endowment: The association will be the beneficiary of the endowment as long as it is eligible to receive it.

“The proceeds from that will be distributed to the association when they acquire the (501(c)(3)) status that they need to acquire to be an appropriate recipient of that,” Brady explained. “The city of Spearfish will be the default payee if for some reason the association can’t acquire that, or would ever loose that status. In either event, the endowment proceeds are going to be used for the benefit of fire prevention, fire protection within the Spearfish Fire District and the City of Spearfish so that the … (funds are) now going to come back to the benefit of the community.”

Brady also said a scholarship fund of $50,000 would be formed out of the endowment, which will be awarded to a member of the fire protection district for “public safety purposes.”

In addition to the agreement between the city and the association, both parties announced the beginning stages of a planned fire training facility, which the association will contribute $337,000 towards.

“In the meantime, and over a period of seven years, the city in conjunction with the association will be seeking other fund sources with the intent of one day hopefully have a … fire fighting training facility here where other departments may come and utilize for their purposes,” Brady explained.

The signing of the agreement effectively dismisses all pending litigation that began in January 2018.

“It’s been a pleasure to be able to represent you guys,” said Glen Lewis, president of the Spearfish Firefighters’ Association addressing the crowd of volunteer firefighters who gathered for the occasion. “I’m really proud of what you guys do, and you guys never, never give up, never have, and just continue to do what you do, which is be so excellent in helping the public and serving them.”

Mayor Dana Boke also thanked the volunteer firefighters.

“This has weighed heavily on all of us for a very, very long time,” said Boke. “I truly believe that we had the same intent-to do what was right for Spearfish-and came at it from different directions, but we are all here to serve our community and serve it well and I thank you for doing that and continuing to do that.”

The lawsuits stemmed from January, 2018, when the city learned that the Spearfish Volunteer Firefighters’ Association created two endowments totaling $1,050,000 through the South Dakota Community Foundation.

The city filed a lawsuit shortly afterward to prevent further funds from being transferred from the association until the courts could determine the source of funds.

The city asked the court to provide a determination of the legal relationship between the parties, as well as the rights as to the assets involved, after the association created two endowments totaling $1,050,000 through the South Dakota Community Foundation. The city contended that it has a duty to ensure the funds are used in a manner permitted by law, and to prevent the association from making any other transfers before the court decided the legal rights of the parties, the city also filed a temporary restraining order and injunction, which were granted.

The association denied the claims and cause of action in the city’s suit, describing that the association is a separate, legally-recognized entity from the city, compliant with state law, with its own property and the freedom to make decisions on how to manage its assets.

The South Dakota Community Foundation asked the court to dismiss the suit in regards to the foundation, as it should not be subject to the litigation since it doesn’t involve the foundation.

The city argues that the endowments created through the foundation by the association could include funds unlawfully transferred, so therefore, the foundation is a party to the declaratory action sought by the city.

The association countersued the city in February 2018, claiming that assets currently in possession of the Spearfish Fire Department were taken without just compensation or due process, arguing that the city has deprived the association of its interest in the property, and it is seeking damages.

Before 2016, the city’s fire protection was provided by an all volunteer fire department. However in September 2015 the volunteer department announced its intent to dissolve its organization citing issues including the inability to fill leadership positions, declining volunteer participation over the years, and “degraded personal feelings toward and departmental relations with the city,” following negotiations beginning in May 2015 after the indefinite tabling of ordinance 1212, which attempted to define the relationship between the city and volunteer fire department and included the creation of a paid fire chief.

In December 2015, the volunteer department members voted to rescind its prior decision to dissolve, and a taskforce, made up of fire protection and emergency management professionals as well as current and retired volunteer firefighters, recommended a fire protection model to include the creation of a distinct city fire department.

The city formed that distinct department on Jan. 4, 2016, with now three paid employees. The Spearfish Volunteer Fire Department changed its name to the Spearfish Volunteer Firefighters’ Association, Inc., and according to the complaint for declaratory judgment, “in October 2017, the Association was in possession of roughly $3 million donated or earned for the purposes of providing fire protection services to the Spearfish community and its adjacent rural surroundings. … unbeknownst to the city, the association transferred $1 million of cash in its possession to Defendant the South Dakota Community Foundation.”

The city asked for documentation of the association’s tax-exempt status, which the association in the large part denied stating it was not required to file Form 990s since it was an “affiliate of a governmental unit.” The letter was dated Oct. 31, 2013.

Following an adverse opinion on the 2016 audit of the city’s finances due to incomplete information about the fire association, the city warned of and ultimately commenced with litigation.

The city contends that said assets, including fire trucks and equipment, were paid for jointly by the city and association through funds provided by the public – whether through donations or taxes – and that the apparatus are being used for the same purpose – fire protection, housed in the same places – the city’s fire stations, by the same volunteer firefighters, as it always has been. The city is asking the court to rule that the association has no basis for the countersuit, arguing that the association reports itself as a tax-exempt organization so is either an affiliate or supporting organization of the city and that the money donated must be used for the specific purposes for which the donations were sought.

In turn, the association filed a similar motion asking the court to rule that the funds that have always been held by the association are private funds and that the city had no claim to them.

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(1) comment

FanB

Did you read the settlement posted on the city's website? Interesting that it clarifies that the SVFA is NOT a 501c3, like it kept claiming through this whole deal. Too bad citizens have lost so much $.

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