Background

At the City Council Meeting of February 10, 2006, the City Council heard a report on two meetings of the 2x2 Committee. At that meeting, the San Carlos Council voted to request a meeting of both full City Councils with a professional facilitator in a “5x5” format . The City Council also agreed that the existing 2x2 Committee could continue to talk to the Belmont 2x2 Committee representatives.

Request for a Facilitated Meeting of the Two City Councils

At the 2x2 Committee meeting held on Friday, February 17, 2006, a letter from Belmont Mayor Phil Mathewson was received and read into the record. It indicated that the Belmont City Council did not have time to meet in a 5x5 Committee with a professional facilitator during the week of February 22, 2006. The Belmont City Council has scheduled second round interviews with candidates for Belmont City Manager that week as well as interviews with Commission applicants.

During the Friday meeting, Belmont Council Member Bill Dickenson said that he would propose a 5x5 meeting between the two full City Councils if South County Fire Authority stayed together. The topic of that meeting would be his proposal for an operational and financial audit of South County Fire Authority.

Discussion of the South County Fire Funding Formula
The primary focus of the 2x2 Committee meetings on Thursday, February 16, 2006 and Friday, February 17, 2006 was alternatives to the current 50/50 funding formula for South County Fire Authority. Under the current funding formula, each City pays half of the agency’s costs each year.

On Thursday, Belmont made an initial proposal from their City Council which changed the formula from 50/50 to a formula that involved three factors – Population (weighted 25%), Assessed Valuation (weighted 25%) and 50/50 (weighted 50%). On Friday, Council Member Warden proposed a revised formula that kept the first two factors (Population and Assessed Valuation) and changed the third component from 50/50 to a combination of four factors weighted equally (Number of Fire Stations by City, Number of Fire Companies by City, Number of Fire Employees by City and Service Calls). During the Friday discussion, there was discussion of the Service Calls factor – whether it should be based on annual figures or a 3 year average and at the end of the session it was unclear whether the factor was still in the formula or not and whether the factor would be a one year figure or a 3 year average.

Features of a Proposed Fire Services Assessment
The 2x2 Committee also had a significant amount of discussion on both days about a proposed Fire Services Assessment. The Assessment as proposed would have the following features:

• The amount of the assessment would cover the difference between each agency’s “minimum contribution” which would either be the current funding level ($4.83 Million per year) or an increased amount ($5 Million per year) and a new target figure of $13 Million per year.
• The length of the proposed assessment would be 10 years.
• The assessment would be structured in two “zones” so that each agency would receive an annual accounting of the amount paid for the Fire Assessment by their property owners.
• The amount in each zone would be available for each agency to pay the difference in cost between the annual South County Fire Authority budget and the minimum contribution.
• An estimate of the assessment amounts would be $75 per residential dwelling unit and 12 cents per square foot for commercial and non-residential properties
• According to figures used by the 2x2 Committee, the proposed funding formula and Fire Services Assessment would change the annual contribution towards South County Fire costs from $4.83 Million per year to $6.84 Million per year for San Carlos (an annual increase of $2 Million per year) and $6.16 Million per year for Belmont (an annual increase of $1.33 Million per year).
  

Discussion of Structural and Operational Features of South County Fire
During the Friday meeting of the 2x2 Committee, there was also a proposal by Belmont Council Member Warden to change a couple of the 10 Structural and Operational items discussed at the prior 2x2 Committee meetings in January. The initial set of 10 items from the 2x2 Committee is as follows:

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

The two proposed changes to this list involve item # 6 (South County Fire Authority Finance and Human Resources services) and a new item (Rent of South County Fire Office Space at San Carlos City Hall).

The proposed change to item # 6 is rather than move Finance and Human Resources services to South County Fire Authority, both services would continue to be provided by the City of Belmont. Under this proposal, Belmont would continue to receive the current rate of payment (over $200,000 per year, paid by each agency according to the South County Fire funding formula).

The suggested change on Rent of Office Space (this would become point #11) would be to either a) keep South County Fire’s administrative offices at San Carlos City Hall but eliminate the office space rental amount charged by San Carlos each year (stated to be $60,000 per year at the 2x2 Committee meeting) or b) to move the South County Fire administrative offices to Belmont City Hall and Belmont would agree not to charge office space rental at that location.

The 2x2 Committee indicated that they felt these were relatively minor items. The committee members indicated that they could be discussed further at a later date once the larger questions of funding formula and proposed Fire Services Assessment were addressed.

While Staff presented the list of 10 structural and operational items to the City Council at the February 10, 2006 meeting, the full San Carlos City Council has not thoroughly discussed or provided input on these proposals to date. This was noted during the 2x2 Committee meeting. Since there continues to be interest in this area and changes to the South County Fire Authority JPA agreement requires a vote of the entire City Council in both cities, Staff suggests that the Council set aside some time to discuss and provide their thoughts on these proposals.

Follow-Up Items from Meeting
At the end of the 2x2 Committee Meeting held on Friday, February 17, 2006, the 2x2 Committee members gave several assignments to the staff members from San Carlos and Belmont. These items included:

1. The City Managers and Staff of both cities will jointly prepare a Fire Assessment Timeline and an agreed upon table of the funding formula factors and amounts to present at these meetings.
2. Belmont will provide San Carlos with the detail of the $13 Million budget figure for South County Fire developed by Belmont Council Member Warden and Belmont Finance Director Fil.
3. Belmont and San Carlos staff will provide information on Unfunded Liabilities of South County Fire when the Bartel & Associates actuarial work is complete (Mid to Late March).
4. Belmont and San Carlos staff will provide information on the need for reserves going forward for South County Fire.
5. Belmont and San Carlos staff will provide a recommended level of equipment funding for South County Fire.
6. Fire Board Legal Counsel Jean Savaree will research what items can be paid for from the proceeds of the Proposed Fire Assessment.

After the meeting, staff members from San Carlos and Belmont met briefly to discuss the items and determine what materials could be prepared in time for the City Council meetings of February 27 (San Carlos) and February 28 (Belmont) when this matter would be discussed. It was agreed that the first of these items would be do-able by that time with the remaining items being addressed later on.

Sample Time Line for Proposed Fire Services Assessment
A sample timeline of the assessment process has been provided by Muni Financial Services (see attachment). Muni Financial Services provided some initial advice to the South County Fire Board in 2004 on a potential Fire Service Assessment at that time and was subsequently retained by Belmont when the Fire Board elected not to proceed with a Fire Services Assessment at that time.

The sample timeline shows that an assessment of this type takes roughly 4 to 6 months to process. This includes time for parcel and assessment methodology analysis, Assessment Engineer’s Report, preparation of notices and ballots, intent meeting, ballot period, public hearing and tabulation. During the 2x2 Committee meeting on February 17th, the 2x2 Committee Members stressed the need to conduct public education and outreach efforts as well as polling on such a measure. These tasks typically add 1 to 3 months to the assessment district election timeline according to the consultants at Muni Financial Services.

Updated Spreadsheet on Funding Formula Options & Proposed Assessment
To determine the impact of the funding formula developed by the 2x2 Committee at their meetings in February, a meeting by phone conference was held on Wednesday, February 22, 2006 between the City Managers of San Carlos and Belmont, San Carlos Assistant City Manager Brian Moura, Fire Chief Chuc Lowden and Belmont Finance Director Thomas Fil.

This group reviewed and revised an updated spreadsheet on the funding formula and assessment proposed by the 2x2 Committee. This involves a formula of 25% Population, 25% Assessed Valuation and 50% using four factors – Call Volume, Number of Stations, Number of Companies and Number of Fire Employees. For purposes of this analysis, all four of these factors are assumed to be equal in both cities. The group also used the $12.5 Million to $13.5 Million amount recommended by the 2x2 Committee as well as amounts of $9.66 Million (current) and $20 Million (future) suggested by the City Manager.

A copy of the resulting spreadsheets is attached for your review.

Service Charges by JPA Partner (sheet 1) summarizes the annual revenue requirement of the authority at levels of $9.66 Million to $20 Million per year as described above. It also shows the results of the annual contribution from the City of San Carlos General Fund and the Belmont Fire Protection District property tax proceeds assuming a constant $3.2 Million annual assessment.

The “Assessment Matrix” (sheet 2) shows a hypothetical Fire Services Assessment of $84 per dwelling unit and 12 cents per square foot of Commercial Property. Note that the Dwelling Unit and Commercial Square footage data comes from a number of sources and is up to 6 years old. It would need to be updated during any assessment process. Also note that since the Proposed Assessment would involve a Benefit Assessment, the amounts and ratios shown here might not apply once that Benefit Assessment process is performed by the Benefit Engineer.

The “Allocation Matrix” (sheet 3) shows that this combination of factors changes the funding formula overall from a 50/50 formula to one that is allocated 53% to San Carlos and 47% to Belmont.

Attachments:
1. Sample Assessment Formation Timeline (PDF or FlashPaper , 65K)
2. Updated Spreadsheet to Calculate Potential Fire Services Assessment Amounts (PDF or FlashPaper , 51K)