Big Philadelphia law firm sends financial “SWAT Team” to Reading

Cities across Pennsylvania are in financial crisis. One powerful Philadelphia law firm has developed a SWAT team to rescue cities in distress. Their tactics are effective and controversial. 

 

You could say that Reading’s fire department was the city’s cost-cutting guinea pig. I’m about to talk with firefighter Mike Shoumlisky about this year’s union negotiations when a call comes in. We hop in the fire engine.

 

“There’s no jobs,” said Shoumlisky on board the engine. “There’s nothing in this city for people to even aspire to. So most of the people you’re seeing around here are on unemployment.

This is the heart of Reading’s problem. The tax base has shrunk. In 2009, the city filed for Act 47, the equivalent of a fiscal panic button. That meant a financial management firm was appointed to draw up a rescue plan. It gave Reading a list of proposed cuts. At the top, one of any city’s biggest costs: pensions and salaries for police. To renegotiate this contract, the city brought in the big guns. Which is how Shoumlisky, the union’s president, ended up facing off with an attorney from Philadelphia law firm Ballard Spahr. It was the first time Reading ever brought outside counsel to a labor arbitration.

“To somebody who admittedly, the first time we sat down, admittedly said he knows absolutely nothing about the fire service, or how to run a fire department, throw ideas out there that infuriates you because they’re so ridiculous,” he said. “I need to cut this much money to meet a budget. You get irritated very fast. It got to the point where people had to be separated. I made mention more than once that I am not above coming across this table and beating the hell out of you.”

Shoumlisky says his guys were expecting a three year salary freeze, getting rid of some paid holidays, vacation, sick time; eliminating post-retirement health care benefits for new employees. But going from 22 to 18 fighters per shift bothers him the most. He says the crew is overextended.

“We have 18 guys covering the city of, according to what the census says, 90,000 people, but we know there’s more that that,” he said. “That’s unheard of. I said it when it initially came out and I’ll say it every day. It’s criminal. They are going to kill somebody.”

All told, Reading has 76 firefighters. Camden, New Jersey, which has a slightly smaller population than Reading, has 189. Reading is blanketed in abandoned homes, factories and warehouses. The department handles the third highest number of fire-related calls in Pennsylvania.

“The poorer a city gets, the greater the need for fire, EMS and police,” he said. “And It’s kinda funny when you think of it that way because they poorer they get they less they can afford us, but they also need us more. This Act 47 thing is a giant s— sandwich and everybody is going to have to take a bite.”

Many struggling cities are concluding they need a firm like Ballard Spahr to chop their budgets. One example of what Ballard did for Reading? The firm successfully made the case that a long-standing state law protecting bargaining rights for firefighters didn’t apply when a city was in distress. Tactics like these are controversial and currently under a court’s review. But Reading’s Managing Director Carl Geffken says they’re effective. He sat across from Shoumlisky at the negotiating table, and says Ballard’s approach will save the city almost $2 million.

“It may cost 10, 20, $50,000 dollars,” said Gefken. “It’s money well spent because you’re being provided with excellent direction, wonderful legal knowledge and you’re drawing on their expertise and experience. It’s almost like having your own legal suit.”

It isn’t cheap. Ballard’s bills for the firefighter arbitration total about $58,000 over five months. For Ballard, broke cities spell opportunity. It created a Municipal Recovery Unit that bundles lawyers from across divisions: regulatory affairs, public finance, real estate. A one stop shop.

Ballard Attorney John McLaughlin represented Reading during the fire union negotiations. He’s the guy firefighter Shoumlisky briefly considered beating up.

“I think we’re very valuable,” said McLaughlin.  “If you look at what an arbitration costs and also how much you save, there’s really no comparison. It’s really a no brainer. For a lot of elected officials it’s a different approach. They say ‘Why are we taking this aggressive approach?’ Then they review the numbers, they look at the numbers then say, ‘I can see why, it’s the only way we’re going to get out of this mess.'”

Ballard is courting more and more new clients facing this mess. Meanwhile, back in Reading, managing director Geffken is negotiating a contract with another city union with the firm’s help.

Shoumlisky just finished a 34 hour shift, and about 15 firefighters have been injured in the last couples of months. And that emergency was from the local Bar Association. A faulty alarm, proving lawyers need firefighters too.