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 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 $13,282,495 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 $7.04 Million in the first year (2006-07).  If the proposed revenue measure did not pass, the South County Fire Authority cost sharing formula would remain the same and base service levels maintained.

Any difference between the City’s General Fund contribution to South County Fire ($4.17 Million to $4.92 Million in 2006-07) plus this potential new revenue amount (estimated at $1.92 Million) and the actual cost of South County Fire services ($7.04 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 new revenue measures in the City General Fund.

Background

This is the 15th 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 March 13, 2006.

Update of Activities Since Last City Council Meeting
Since the last meeting of the San Carlos City Council, several items related to the continuation of South County Fire Authority have occurred.  Staff as well as San Carlos representatives to the South County Fire Authority Board (Mayor Grocott and Council Member Grassilli) will be ready to discuss these items in more detail at the Council Meeting of March 27th.  The highlights of these activities include:

1. Draft Letter of Agreement – The first draft of the Letter of Agreement to continue South County Fire Authority (dated March 11, 2006) was discussed at last week’s Fire Board Meeting.  The seven areas of agreement were discussed and three of these items (Funding Formula, Fire Department Name and Fire Authority Budget) were amended.  A copy of the second draft of the Letter of Agreement is attached.

2. Agreement for Fire Services Assessment Calculations – Last week the City Managers of San Carlos and Belmont executed an agreement with Muni Financial Services to begin work on the calculation of the amount of the proposed Fire Services Assessment.  This work will take 4 to 8 weeks and will result in a calculation of the residential, commercial and non-residential assessment amounts and the revenue estimates in each agency (“zone”) from the proposed revenue measure.  An amended version of the Muni Financial Services agreement is being prepared for review by the city’s Special Counsel (Joan Cassman) to address some of her suggested changes to the document.

3. Legal Review of Assessment Revenues and Method – The City’s Special Counsel in this matter (Joan Cassman) has met with the Special Counsel in Belmont and the South County Fire Authority regarding the questions raised by the San Carlos City Council regarding accounting for and segregating the proceeds from the proposed Fire Services Assessment.  Staff expects to receive further guidance from the Special Counsel in this matter shortly.

4. South County Fire Authority Budget – A South County Fire Authority budget for the next two fiscal years (2006-07 and 2007-08) is being developed.  This document would include projected revenues at South County Fire that are available to offset Fire Service costs as well as funds from each agency to pay for Fire Services – both with and without the proposed Fire Services Assessment revenue measure.  The budget work will also include a 10 year projection of revenues and expenses in the near future.

5. Fire Services Time Line – The City Manager is developing a Fire Services time line that would show the major activities between now and January 1, 2007 relating to the continuation off the South County Fire Authority.

6. Hazardous Materials Unit Cost Reimbursement – A presentation on this topic by Battalion Chief Dan Belville, Bill Lent from the County Environmental Health Department and the Fire Chief of North County Fire Authority was made at last Friday’s  meeting of the City Managers Association.  At that meeting, interest was expressed in funding the training of 12 more Fire Fighters for Hazardous Materials Unit duty in the current fiscal year.  There was also interest in amending the Haz Mat Unit agreement with South County Fire to provide for reimbursement of Administrative Costs at South County Fire and San Mateo County along with extending the notice period in the agreement from 30 days to 6 months effective July 1, 2006.  This would enable South County Fire to receive full reimbursement for this unit starting in the new budget year.  (The recommendation now goes to the Administrative Committee and then the full membership of the Emergency Services Council in April.)

7. Cost of Current Liabilities – Work continues on calculating the amount of current liabilities at South County Fire Authority.  This involves a contract with Bartel & Associates on PERS Retirement and Retiree Medical costs as well as refining Workers Compensation and other costs.

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 22, 2006. 

Respectfully submitted by:

Brian Moura
Assistant City Manager   

Approved for submission by:

Mark Weiss
City Manager

Attachments:
1. Draft 2 – Proposed Letter of Agreement Regarding Continuation of South County Fire Authority

DRAFT 2 – March 21, 2006

Letter of Agreement
Continuation of South County Fire Authority

The City of San Carlos (“San Carlos”) and the Belmont Fire Protection District (“Belmont”) have agreed to continue to work towards continuing to receive their Fire Services from the South County Fire Authority after the agency’s current dissolution date of June 30, 2006.  In light of that agreement, the two agencies will execute this Letter of Agreement as a starting point in their discussions in this matter. 

The terms of the Letter of Agreement are as follows:

1. Recognize Work of Two City Councils and 2x2 Committee: San Carlos and Belmont recognize the work of the two City Councils and the 2x2 Committee in developing a framework to continue receiving fire services from South County Fire Authority.  (SC-1, SC-2, B-1)

2. Funding Formula: San Carlos and Belmont agree to a new funding formula for South County Fire Authority (25% Population, 25% Assessed Valuation, 50% Number of Fire Stations by City, Number of Fire Companies by City, Number of Fire Employees by City and Service Calls which will be calculated on an annual or three year average basis for each of these four factors.  (53% San Carlos, 47% Belmont).  (SC-3, B-2, B-9)

3. Fire Assessment Budget: San Carlos and Belmont agree that the figure of $13 Million will be used to create the budget of the proposed Fire Assessment in the coming fiscal year (2006-07) unless both parties agree upon a better number.  (SC-7, B-3)

4. Letter of Agreement: San Carlos and Belmont will develop a Letter of Agreement which will be brought back to both City Councils for adoption.  (B-5, B-6, B-11, B-16)

5. Fire Department Name: San Carlos and Belmont agree the name of the Fire Department shall be changed from South County Fire to Belmont-San Carlos Fire Department.  South County Fire Authority vehicles and equipment based in San Carlos shall say “San Carlos Fire Department, Service Provided by South County Fire Authority” with the City of San Carlos seal on the door of each vehicle or piece of equipment while fire equipment based in Belmont shall say “Belmont Fire Protection District, Service Provided by South County Fire Authority” with the Belmont Fire Protection District seal on the door of each vehicle or piece of equipment. (B-12)

6. Revenue Measure Timing: San Carlos and Belmont will develop and agree on a timeline to bring a revenue measure to the voters to fund the continuation of South County Fire. (B-13)

7. 2 Year South County Fire Authority Budget:  South County Fire will develop a specific and detailed budget that the Fire Board and both City Councils will approve (2 fiscal years).  It will include revenue and expenses in detail and a 10 year projection.  (B-14)

Major Items to Be Worked Out are as follows:
1. Payment of Unfunded Liabilities:  The 50/50 split remains in effect until the time the restructure is complete and effective.  The allocation process does not change until after the restructure – assuming passage of the assessment.  The 50/50 split will apply to all accrued benefits and accumulated liabilities in existence at the time of restructure with any future additions subject to any new allocation agreed upon by the parties. (SC-5)

2. Payment of Ongoing Costs & Effective Date of New Funding Formula:  The ongoing costs of South County Fire Authority are split 50/50 until 30 days after the passage of the proposed Fire Services assessment. (SC-8)

3. Effective Date of South County Fire Restructuring: The restructuring of South County Fire Authority is effective 30 days after passage of the proposed Fire Services Assessment and if the proposed Fire Services Assessment fails, the current South County Fire Authority agreement would not change (SC-6, SC-9) or the terms of a new JPA agreement will be negotiated by July 1, 2006. (B-7)
 

4. Extension of the South County Fire JPA:  The South County Fire Authority JPA agreement remains in effect until January 1, 2007 (SC-10) or there will be no extension of the existing JPA beyond June 30, 2006.  (B-8)

Minor Items to Be Worked Out are as follows:

1. Operational Issues and Changes to JPA:  San Carlos and Belmont see no major obstacles to the final agreement presented by the 10 or 11 operational issues and proposed changes to the South County JPA agreement.  (SC-4, B-4)

2. Contingency Plan:  The new South County Fire JPA will contain a contingency plan if the proposed Fire Services Assessment fails.  (B-10)

3. Operational Audit Prior to Election:  An operational audit of South County Fire would be conducted prior to the assessment election.  (B-15)

Action by the San Carlos City Council – February 27, 2006

The motion adopted by the San Carlos City Council included these provisions:

1. Request Belmont to continue to join with San Carlos to reorganize South County Fire Authority.
2. Recognize the work of the 2x2 Committee.
3. San Carlos agrees to the 25/25/50 formula recommended by the 2x2 Committee.
4. 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.
5. 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.
6. The restructure of South County Fire Authority is effective 30 days after passage of the proposed Fire Services assessment.
7. The Fire Services Assessment is based on the $13 Million budget amount, or a better number if all parties agree.
8. The ongoing costs of South County Fire Authority are split 50/50 until 30 days after the passage of the proposed Fire Services assessment.
9. If the proposed Fire Services assessment fails, the current South County Fire Authority agreement would not change.
10. 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 – February 28, 2006

The action taken by the Belmont Fire Protection District included these provisions:

1. Acknowledged the City of San Carlos action.
2. Belmont also agrees to the funding formula.
3. 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.
4. Belmont sees no obstacles to final agreement on the JPA Policy issues (9-11 issues).
5. Belmont believes there is minor "tweaking" to be done by the "2x2".
6. 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.
7. Terms of a new JPA agreement will be negotiated by July 1, 2006.
8. No extension of the existing JPA beyond June 30, 2006.
9. New JPA to contain the funding formula.
10. New JPA to contain a contingency plan if the assessment fails.
11. "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.
12. Fire department would be renamed to include the names of the two cities.
13. Two cities agree on a "drop dead date and timeline" for the assessment.
14. Development of a specific and detailed budget that both City Councils approve (two fiscal years).
15. An operational audit would be conducted of South County Fire prior to the assessment election.
16. 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.
17. Belmont agrees to stop talking about the HIA history.