City of San Carlos

City Council Staff Report

Council Meeting Date: February 15, 2006

Item Title: Consideration of Report from 2x2 Committee on Options to Continue South County Fire Authority and Provide Direction to 2x2 Committee and Staff

Recommendation

Staff recommends that the City Council hear a report from the San Carlos “2x2” Committee representatives (Mayor Grocott and Council Member Grassilli) on Options to Continue the South County Fire Authority. Staff recommends that the City Council provide direction to the San Carlos 2x2 Committee representatives and the City Staff on the operational concepts and the various financing options for a newly constituted South County Fire Authority after considering the choices outlined in this report. The Council should also indicate whether they remain interested in having the full Council membership participate in the 2x2 discussions as they continue.

Fiscal Implications

There is no financial impact on the City Budget to participate in the “2x2”committee meetings. The City’s 2005-06 budget for Fire Services includes over $4.8 million for the City of San Carlos 50% share of funding the South County Fire Authority.

Adopting the options discussed in the 2x2 committee could result in a lowering of these costs to San Carlos to $4.63 million per year (if South County Fire is retained and total fire service calls is used as a method of sharing South County Fire Authority costs) to an increase to San Carlos of $5.79 million per year (if South County Fire Authority is retained and the agency’s costs are shared based on Assessed Valuation).

The City Council’s ultimate decision and action on a method of providing Fire Services in San Carlos will be a key part of the City’s budget discussions this year due to the ongoing budget shortfall in the City General Fund. To the extent that the Council elects to spend more money for Fire Services, they will need to either:
a) make that up through additional General Fund program cuts (68% of the General Fund’s expenses are in the Police, Fire and Parks & Recreation budgets) or
b) obtain property owner approval of a new revenue source for Fire Services such as a parcel tax (2/3 vote required for passage) or a property based fire service assessment (majority vote required for passage, based on Assessed Valuation).

Background

The City of Belmont submitted a notice of its intent to withdraw from South County Fire in December, 2004. The San Carlos City Council subsequently held a meeting on that matter and filed a similar letter later that month. Since that time, each City has been independently pursuing proposals for the provision of fire protection services.

In January, the Belmont Fire Protection District and the San Carlos City Council agreed to hold a series of meetings to discuss scenarios under which the South County Fire Authority might continue to provide Fire Services in the two agencies. The San Carlos City Council also asked for a report on the progress of these discussions at their Special Council Meeting on February 15, 2006 and indicated that if the talks proved fruitful, the format of the discussions would then involve all 5 members of the San Carlos City Council.

Report on the 2x2 Committee Process

Both cities appointed their South County Fire Board Members to these discussions (Mayor Grocott and Council Member Grassilli in San Carlos and Council Members Coralin Feierbach and Dave Warden in Belmont) so that these discussions could be held as Special Meetings of the South County Fire Board.

To date, two of the 2x2 Committee Meetings have been held (Wednesday, January 25th from 10am to Noon and Thursday, February 2nd from 10am to 11:15am). A third meeting of the 2x2 Committee has been tentatively scheduled for Thursday, February 16th from 10am to Noon, if needed.

During the initial meeting on January 25th, the 2x2 Committee reviewed and discussed a list of agenda items prepared by Fire Chief Chuc Lowden who served as the facilitator for the 2x2 meetings. The items discussed at the first meeting covered the 10 areas of potential discussion that we highlighted for the Council at your last meeting on this topic (see Attachment 1).

The latter part of the January 25th 2x2 meeting and most of the 2x2 meeting on February 2nd focused on funding the South County Fire Authority and how the current 50/50 funding formula might be changed. Here is a bit more detail in each of these areas.

Operational and Structural Concepts for Consideration

On January 25th, the 2x2 Committee spent most of their meeting discussing the list of 10 areas of concern that was developed in December by Belmont Council Member Warden and San Carlos Mayor Grocott. The result of these discussions was a decision to refer these concepts back to the full City Council in San Carlos and the full Fire Protection District in Belmont.

The concepts that the 2x2 Committee envisions being incorporated into a future South County Fire Authority structure would include:

1. The South County Fire Board of Directors would remain at 4 members
2. Each City would have 2 Fire Stations with 2 Paramedic Engine Companies
3. The 5th Fire Company would not be reinstated at this time
4. The Fire Board would have limited authority – decisions on budget, major purchases and labor agreements would have to be ratified by the full City Council of each City as well the Fire Board before action could be taken
5. The Fire Chief would be report to the Fire Board rather than the City Managers
6. Finance and Human Resources services would be done by South County Fire Staff rather than a contract with the City of Belmont
7. A copy of the current South County Fire Authority JPA documents will be given to each of the Fire Board Members
8. The South County Fire JPA will have a mandatory review every 4 or 5 years
9. The current liabilities of South County Fire (Retiree Health, PERS retirement costs, Workers Compensation exposure, Vacation payouts, Fire Truck lease) would be reviewed before a final decision to retain the Authority is made.
10. The 50/50 South County Fire Authority funding formula should be reviewed

Staff notes that while a list of these items was mentioned to the City Council at your last meeting on Fire Services Options, there was no discussion of these matters. Staff recommends if agreement is reached on the funding question (see below), the Council should also discuss and provide direction to the 2x2 Committee members and City staff on your views on the 10 operational and structural matters as well.

Funding Options for South County Fire Authority

The other question that remains to be decided before a reconstituted South County Fire Authority could move forward is funding. The current Joint Powers Authority (JPA) states that South County Fire Authority is funded on a 50/50 basis with half of the funds coming from the Belmont Fire Protection District, a district with property tax authority in the City of Belmont and the unincorporated areas of Belmont and the Harbor Industrial Area and the remaining half coming from the City of San Carlos General Fund budget.

During the 2x2 Committee discussions and in the past year, there has much discussion about how it may be desirable to review this formula. In summary, there are really three options to consider:

1. Continue to fund South County Fire Authority on a 50/50 basis
This recognizes the current JPA formula and the fact that the proposals for Fire Services from the City of San Mateo and CDF also envision an equal cost for both agencies.

2. Shift more South County Fire costs to Belmont Fire Protection District
This recognizes that more of South County Fire’s service calls are to the Belmont Fire Protection District (44%) than to San Carlos (40%), Redwood Shores (4%) or neighboring cities and areas under mutual aid (12%).

3. Shift more South County Fire costs to San Carlos
The basis of such a shift would be factors such as Assessed Valuation and Population (higher in San Carlos vs. Belmont Fire Protection District) or the loss of property tax revenue (estimated by Belmont’s auditors at $150,000 per year) as a result of property owners in the Harbor Industrial Area annexing to San Carlos.

To provide some illustration of how some of these concepts would work in practice, if one takes the current net cost of South County Fire Authority to both agencies (after revenues for fire inspections, services and Hazardous Materials Unit reimbursements) and distributed them according to these formulas, you would see the following results and impact in San Carlos:

Method	Cost (Millions)	Current (Millions)	Difference
Service Calls	$4.63	$4.83	-$200,000
50/50 Split	$4.83	$4.83	0
HIA Offset	$4.98	$4.83	+$150,000
Population	$5.31	$4.83	+$480,000
Assessed Value	$5.79	$4.83	+$960,000

Staff would note that given the current structural budget problem in the City of San Carlos General Fund and revenue challenges at the Belmont Fire Protection, neither agency can afford to increase the amount spent for Fire Services without an increase in revenue and/or cuts in services elsewhere. So the decision in this area will prove quite challenging for both agencies as we move forward.

If a new revenue source is pursued, the most likely candidates would be a parcel tax for Fire Services requiring a 2/3 vote for approval (similar to Measure “I” that received a 61% yes vote in both cities but not the needed 2/3 vote) or an assessment for Fire Services which would require a majority approval based on the assessed value of the parcels covered. In recent years, both Pacifica and Millbrae have successfully passed a fire assessment of this type.

On added factor to consider is that since Assessed Values in San Carlos are higher than those in the Belmont Fire Protection District, an important factor to study is whether a potential assessment is calculated by agency or authority-wide. If the latter approach (authority wide) is used, the net effect will be to shift an additional $480,000 in costs to San Carlos residential and commercial property owners.

Alternatives

Options for the City Council to consider on this proposal include:

1. Discuss the operational and funding issues described above and provide direction to the San Carlos 2x2 Committee and the City Staff on how it wishes the 2x2 committee members to proceed in future 2x2 committee meetings; or

2. Request a joint meeting of the full City Councils of each City to discuss the options for a reconstituted South County Fire Authority; or

3. Opt not to continue to participate in the 2x2 Committee process and begin negotiations with one of the neighboring fire agencies on their contract proposal for Fire Services for San Carlos; or

4. Provide staff with alternative direction.