Memo to Council - Update and Discussion (March 13, 2006)
City of San Carlos City Council Staff Report Council Meeting Date: March 13, 2006 Item Title: Update on and Discussion of City Council Action to Continue Fire Services Provision from South County Fire Authority and to extend the termination date for South County Fire Authority Joint Powers Agreement, to January 1, 2007
Recommendation
Staff recommends that the City Council discuss and provide comments and direction to the City Staff on this update on the continuation of Fire Services provision from South County Fire Authority and related revenue options.
Fiscal Implications The City’s 2005-06 General Fund budget for Fire Services includes $4.83 million for the City of San Carlos 50% share of funding the South County Fire Authority. In the coming 2006-07 budget preparation cycle, Fire Services (like all other General Fund budgets) will be initially assigned a 2% CPI increase (to $4.92 Million) and then potential reductions of 5% ($4.67 Million), 10% ($4.43 Million) and 15% ($4.17 Million) in an attempt to balance the General Fund Budget and address the City’s General Fund Structural Budget Deficit. At the last City Council Meeting on February 27, 2006, the City Council took action to continue receiving Fire Services from South County Fire Authority at the current level of expenses until the passage of a proposed revenue measure. If the revenue measure were to pass, the proposal would increase the South County Fire Authority budget to an estimated $13 Million in the first year (2006-07) and would increase the San Carlos cost of fire service from South County Fire from $4.83 Million to $6.87 Million in the first year (2006-07). If the proposed revenue measure did not pass, the South County Fire Authority costs to both agencies and the cost sharing formula would remain at current levels. The proposed revenue measure is currently estimated to include $1.92 Million in new revenues for San Carlos to pay for its share of Fire Services. Any difference between the City’s General Fund contribution to South County Fire ($4.17 Million - $4.92 Million) plus this potential new revenue amount ($1.92 Million) and the actual cost of South County Fire services ($6.87 Million in the first year and increasing each year thereafter) would be made up by additional General Fund program cuts (68% of the General Fund’s expenses are in the Police, Fire and Parks & Recreation budgets) or revenue measures in the City General Fund.
Background This is the 14th meeting that the City Council has held on the topic of Fire Services since December 2004 when notice was given by the Belmont Fire Protection District to dissolve the South County Fire Authority and a similar notice was adopted by San Carlos at the recommendation of the City Attorney to protect San Carlos’ position in this matter. The City Council last met on the topic of Fire Services in San Carlos on February 27, 2006.
Prior to that time, the Council held 4 meetings during the months of October 2005, November 2005, January 2006 and February 2006 to discuss Fire Service Options for San Carlos in the coming fiscal year which begins on July 1, 2006. Copies of the Council Staff Reports for these discussions and videos of these discussions and the 7 earlier reports to Council on the Fire Service Options for San Carlos process are available on the City Web Site. Action by the San Carlos City Council At the February 27, 2006 City Council meeting, the San Carlos City Council approved a motion by Council Member Tom Davids to adopt recommendations from the City’s 2x2 Committee representatives (Mayor Grocott and Council Member Grassilli) to continue Fire Services from South County Fire Authority and to extend the South County Fire Authority Joint Powers Authority (JPA) document from June 30, 2006 to January 1, 2007 if agreed to by the Belmont Fire Protection District. The motion also discussed funding fire services at a higher level than today (estimated at $13 Million in 2006-07 and increasing each year thereafter from that level) and increasing the San Carlos share of costs of the services of South County Fire Authority from a 50% /50% split to a 53% San Carlos/47% Belmont Fire Protection District split if a proposed revenue measure was adopted by property owners in both agencies (estimated at increasing the San Carlos cost of South County Fire from $4.83 Million today to $6.87 Million if the revenue measure passes). If the revenue measure was not adopted, the budget would revert to current levels and the cost sharing formula would revert to the current 50%/50% split. The motion adopted by the San Carlos City Council included these provisions: - Request Belmont to continue to join with San Carlos to reorganize South County Fire Authority.
- Recognize the work of the 2x2 Committee.
- San Carlos agrees to the 25/25/50 formula recommended by the 2x2 Committee.
- San Carlos has no objection to the 11 operational issues – assuming details will be worked out with either the 2x2 Committee or the two City Councils working together.
- The two agencies will negotiate the split of the Unfunded Liabilities of South County Fire Authority; so that 50/50 split remains in effect until the time of restructure is complete and effective; the allocation process does not change until after the restructure - assuming passage of assessment.
- The restructure of South County Fire Authority is effective 30 days after passage of the proposed Fire Services assessment.
- The Fire Services Assessment is based on the $13 Million budget amount, or a better number if all parties agree.
- The ongoing costs of South County Fire Authority are split 50/50 until 30 days after the passage of the proposed Fire Services assessment.
- If the proposed Fire Services assessment fails, the current South County Fire Authority agreement would not change.
- Extension of the termination agreement: the South County Fire Authority Joint Powers Authority agreement remains in effect until January 1, 2007, pending Belmont’s approval.
Action of the Belmont Fire Protection District On the following day, February 28, 2006, the Belmont Fire Protection District, followed suit and also adopted a motion that would continue Fire Services from the South County Fire Authority for residents and businesses served by that agency. The action taken by the Belmont Fire Protection District included these provisions: Acknowledged the City of San Carlos action. Belmont also agrees to the funding formula. Belmont believes that the funding formula should be applied to the full budget of $ 13 mil (or whatever number is finally developed by the 2x2. Belmont sees no obstacles to final agreement on the JPA Policy issues (9-11 issues). Belmont believes there is minor "tweaking" to be done by the "2x2". Belmont recommends continuation of the "2x2" to negotiate a final memorandum of understanding between the two cities that would be voted on by both City Councils within 30 days. Terms of a new JPA agreement will be negotiated by July 1, 2006. No extension of the existing JPA beyond June 30, 2006. New JPA to contain the funding formula. New JPA to contain a contingency plan if the assessment fails. "2x2" to negotiate a written memorandum of understanding (MOU) that would go back to the two City Councils for adoption. This MOU would be in place by July 1, 2006. Fire department would be renamed to include the names of the two cities. Two cities agree on a "drop dead date and timeline" for the assessment. Development of a specific and detailed budget that both City Councils approve (two fiscal years). An operational audit would be conducted of South County Fire prior to the assessment election. The existing "2x2" would be used to work out the details/"tweaking" of the MOU, something akin to a conference committee at the Federal level. Belmont agrees to stop talking about the HIA history.
Letter of Agreement and Revised South County Fire JPA In many respects the actions of the two City Councils on the continuation of South County Fire Authority are similar. However, there are some key differences in the area of timing as it relates to the effective date of a revised South County Fire Authority and the effective date of the proposed cost sharing formula. Staffs from both agencies have held several meetings since the adoption of the two motions that detail how South County Fire Authority would continue to provide fire services. Staff recommends that we work with the Special Legal Counsels of each agency to develop both a “Letter Agreement” (described as an “MOU” in item # 11 of the Belmont Fire Protection District motion) and a revised South County Fire Authority Joint Powers Agreement document. Staff also suggests that the naming of the new Fire Department (described in item # 12 of the Belmont motion) be handled by labeling the fire equipment serving each City as “San Carlos Fire Department, service provided by South County Fire Authority” and “Belmont Fire Department, service provided by South County Fire Authority”. This would address the issue of lack of familiarity with South County Fire Authority as the group that provides Fire Services in both communities that was raised at the Belmont Fire Protection Authority meeting. The Letter Agreement is envisioned as setting out a set of mutually agreed upon terms to move the process forward. It would also form the basis of a subsequent action by both agencies (San Carlos City Council and Belmont Fire Protection District Board) at a future meeting. Turning to the Joint Powers Authority time extension and proposed revisions, Staff believes that both agencies will need to act soon to continue the operational term of South County Fire Authority. This will require a discussion of whether that continuation takes the form of an extension or a revision of the South County Fire JPA document prior to the current June 30, 2006 ending date set by the termination notices filed by both agencies. As to the manner that both agencies work out the remaining issues between the two actions, there are several options available including work at the Staff level, the 2x2 Committee and one or meetings of both City Councils. Staff is looking for direction from the Council in this area at tonight’s meeting. Update on Proposed Fire Services Assessment As noted earlier, increasing the South County Fire Authority budget to $13 Million in the coming year and the ability of San Carlos to shoulder more of the cost of Fire Services going forward (increasing from 50% to 53%) is dependent on the passage of a revenue measure. During the discussions of the 2x2 Committee in January and February, there was much discussion about the merits of going to the voters with either a parcel tax along the lines of Measure “I” (calculated at $84 per residential unit and 12 cents per square foot for non-residential properties; generating $1.92 Million in revenue in San Carlos per year, 2/3 vote required for passage) or a Fire Services Assessment (calculated on the amount of “Special Benefit” received by each parcel or unit, generating $1.92 Million in revenue in San Carlos per year, less than majority protest plus agency board action required for passage). In February, the 2x2 Committee recommended using a Fire Services Assessment approach rather a Parcel Tax approach to obtain this additional revenue. The next step in the assessment process is to hire a firm to calculate the amounts of the Fire Services Assessment and to assist with the assessment election and collection process. At the South County Fire Board Meeting of Wednesday, March 8, 2006 (held after the preparation of this Council Staff Report), the Fire Board is scheduled to consider a proposal from Muni Financial Services of Temecula, California to do this work for the two agencies (see copy of proposal attached). In preparation for the Fire Services Assessment, Staff has reviewed the successful ones that were recently adopted in both Pacifica and Millbrae. We noted that the process and formulas used to calculate these assessments are very different than what would be used for a parcel tax. More specifically, the benefit assessment formulas used in Pacifica and Millbrae assign more of the Fire Services costs to residential units (78% in Pacifica and 86% in Millbrae) than the 2x2 Committee’s Parcel Tax proposal does (59%). As a result, if the two agencies elect to move forward with a Fire Services Assessment revenue measure rather than a Parcel Tax revenue measure, Staff believes that the residential and non-residential costs per year may change (from $84 per parcel per year and from 12 cents per square foot per year). The actual figures will be available from the Fire Assessment Engineer in a period of 4 to 8 weeks after approval of their agreement according to the staff at Muni Financial Services. Another area to watch is the amount of proceeds that flow to each agency. Under the original 2x2 Committee proposal, the proceeds would be collected by “Zone” and would net $1.2 Million to Belmont Fire Protection District and $1.92 Million to the City of San Carlos. By moving to a benefit assessment, Staff believes that the per Zone amounts may shift somewhat so that the Belmont proceeds increase and the San Carlos proceeds decrease. If that proves to be the case, that will require San Carlos to come up with more non-Assessment (General Fund budget) funds to cover its cost of Fire Services each year under the new formula. We have asked Muni Financial Services to include an estimate of the per Zone revenues in their work on the proposed Fire Services Assessment study. At the last City Council Meeting, the Council asked several questions about the City’s ability to reassign funds from the Fire Services Assessment to another agency if one or both of the agencies elected to broaden the South County Fire JPA or use another method of Fire Services delivery during the 10 year term of the proposed assessment. Staff is still working with the attorneys and Muni Financial Services to explore this area. However, it appears at this point that each agency may need to hold a separate assessment election and proceeds collection process for it to retain control of the funds. Staff also received a question about what would happen if a proposed Fire Services Assessment were to receive a favorable vote in one City and fail in the other City. The attorneys tell us that the answer also depends on whether the assessment is conducted by South County Fire Authority for the entire area or by agency. If it is done by South County Fire Authority for the entire area, the vote in both Zones is combined. Whether it loses in one area or not does not matter, if the overall vote is in favor the Fire Board could vote to impose the assessment. However, if the assessment is done by each agency then a negative vote in one agency would end the proposal in that community even if the assessment in the neighboring community received a favorable vote and was adopted by that Governing Board. This is another consideration to think about when each agency ultimately decides which revenue generating method they would select and how the matter would be resolved. Next Steps Staff will continue to work with South County Fire Authority and the Belmont Fire Protection District on the continuation of South County Fire Authority. Additional information on this item will also be available later this week after the South County Fire Board holds its next meeting on Wednesday, March 8, 2006. If needed, Staff will send out a supplemental Council Staff Report at that time.
Submitted by:
Brian Moura
Assistant City Manager
Approved by:
Mark Weiss
City Manager
Attachments:
1. Proposal for Fire Assessment District Services from Muni Financial Services (PDF  or FlashPaper  , 1.84Mb)
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