City of San Carlos - Report on Proposed Fire Assessment (July 10, 2006)

Item Title: Report on Proposed Fire Services Assessment and Direction to Staff

Recommendation
The San Carlos Fire Board Members (Mayor Grocott and Council Member Grassilli) recommend that the City Council discuss their recommendation that the proposed Fire Services Assessment in San Carlos be set at the level of $99/year for single family residential units. Once Council discussion and direction is received, Staff will work with Muni Financial Services and Special Legal Counsel to bring the enabling Resolution of Intent and Fire Assessment Report to the July 24th City Council Meeting for consideration and action.

Fiscal Implications
There are no fiscal implications to tonight�s action on review and direction on the Proposed Fire Services Assessment. However, if this revenue measure is approved by the property owners in San Carlos it will provide an additional $1.15 Million per year in revenues to cover additional funding for the Belmont-San Carlos Fire Department as detailed in this Council Staff Report.

Approval of the Fire Services Assessment by both agencies (City of San Carlos and Belmont Fire Protection District) will also trigger a new funding formula for the joint fire department (moving from a 50%/50% contribution in each agency to 53% San Carlos and 47% Belmont Fire Protection District). A portion of this increased cost to San Carlos will be covered by the proposed Fire Services Assessment. The balance will need to come from the City General Fund through a mid-year budget adjustment.

Background
In March, the City Managers of San Carlos and Belmont authorized the firm of Muni Financial Services to begin work on a Fire Services Assessment Engineer�s Report as the first step in a Proposed Fire Services Assessment in both communities. Their action was ratified by the Fire Board later that month. The Engineer�s report was presented to the Fire Board at their meeting held on May 31, 2006. The Fire Board discussed the report at a special meeting on Friday, June 30th and established recommended Fire Services Assessment levels for both agencies. The proposed assessment, the amount proposed to be raised in San Carlos and the potential use of those funds is under discussion at tonight�s Council meeting.

The Workings of a Fire Services Assessment
A Fire Services Assessment is levied on property owners in a community; in this case the property owners of the City of San Carlos for eligible Fire Suppression service costs. The amount of the assessment is based on the amount of revenue the City desires to raise each year, the number of parcels in each land use category and the relative �special benefit� that each property type would receive. This calculation is done by an Assessment Engineer. In recent years, the cities of Pacifica and Millbrae have proposed and adopted Fire Services Assessment measures using this process.

Once the amount of the assessment has been calculated and approved by the Governing Body, the City Council can then adopt a resolution of intent (scheduled for the July 24th City Council Meeting) to bring the question of the proposed assessment to the property owners. This is done through a mail ballot (scheduled to be mailed on August 10th) and a protest hearing process (scheduled for the September 24th City Council Meeting), much as San Carlos has done in the past through projects such as the Pulgas Creek Drainage Improvement project, two Downtown Beautification Projects and the recent Industrial Road Improvement Project.

In the ballot and protest hearing process, property owners receive ballots and can cast votes that are weighted in the amount of the proposed assessment (i.e. the higher the potential assessment amount, the more votes the property owner is given). On the date of the protest vote hearing, the City Clerk will tally the votes. If there is a majority vote in favor of the assessment proceeding, it moves to Step 2 in the process. If there is a majority opposed to the proposed assessment, it fails at that point. In Step 2 of the process, the governing body (in this case the San Carlos City Council) must also vote to hand bill the property owners for the amount of the assessment (year 1) and then place the assessment on the property tax rolls (years 2 through 10). The hand billing in this proposed assessment is due to the timing of the proposed measure which would be potentially adopted after the property tax billing deadline for 2006-07.

Review of Muni Financial Services Engineer�s Report
The Engineer�s report is a required first step in setting the amounts of a Proposed Fire Services Assessment that could be considered in each community. The report is based on national fire statistics from the National Fire Protection Association (NFPA) as well as service call and fire loss data from South County Fire Authority. (A copy of the Engineer�s Report for San Carlos is attached to this staff report).

Using these statistics, the Assessment Engineer calculates the average property loss by property use category on a national basis (Table 3), the average loss per structure fire per category on a national basis (Table 4), the possible San Carlos property loss by category using these averages (Table 5), the average property loss in San Carlos per structure fire (Table 6), San Carlos fire service call data from 2002-05 (Table 7), a weighting of the Assessment Factors (Table 8). A Fire Suppression Assessment Budget (Table 9), assignment of the budget to the seven land use categories in San Carlos (Table 10) and a list of proposed Fire Assessment Rates to raise the budget figure (Table 11).

Staff also requested that the Assessment Engineer provide the Fire Assessment Rates in San Carlos for additional budget figures ranging from $1 Million to $2.25 Million. This information is shown in the report on the pages that follow Table 11.

Budget Estimates & Multi-Year Budget Model
As you will note from Table 11 and the tables that follow, the main variable that determines the level of the Proposed Fire Services Assessment for each type of property is the Fire Agency�s budget for the 10 year period that this proposed assessment is to cover. To address that question, Staff worked with the Fire Department finance staff on a 10 Year Budget Model Excel spreadsheet which is attached.

The budget model asks for an assumption about annual revenue growth (set at 3%), optional items the two cities and the Fire Board may wish to fund from the proposed assessment (described here as �shopping cart� items) and an option for San Carlos to cover the difference between paying today�s 50/50 formula and the new 53/47 formula in the new JPA from assessment proceeds. Once these assumptions and optional items are entered into the spreadsheet, the �F9� calculate key is used to recalculate the budget model and the needed assessment level in each City is determined.

The Fire Board has a copy of these materials and the spreadsheet multi-year budget model and it has now been provided to the City Council as well. Staff believes that this will be a key tool in facilitating the discussion going forward as the Fire Board and both cities consider and ultimately approve a 10 year budget spending plan. Once that has been done, we will have the amount needed to raise for the proposed fire assessment.

Recommendations from the San Carlos Fire Board Members
As noted earlier, the Proposed Fire Assessment Reports and the 10 Year Budget Model were discussed at the Fire Board Meeting of Friday, June 30th At that time, the Fire Board Members in both cities decided to recommend a Fire Services Assessment with a length of 15 Years to each governing body. The 15 Year length was selected to enable the retirement of the 13 Year PERS Retirement �Side Fund� costs through the proposed assessment as well as building up Fire Department reserves.

In terms of the Fire Services Assessment for San Carlos, the Fire Board Members recommended an annual assessment amount of $99 per year for single family residential units which generate an amount of $1,152,238 per year - slightly below the $1.25 Million table in the attached report. The Fire Board members also recommended that these funds be used to pay for the following items from the options list � or �shopping cart� mentioned earlier:

*Item Funded*	*Annual Cost*
Cross Staffed Truck Service	$511,608
�OPEB� Retiree Medical Program Costs (Pay Over 20 Years)	$204,050
Replacement Fund for 4 Fire Engines	$138,123
Building Replacement Fund	$106,678
10% Operating Reserves for Fire Department	$81,493
Light Vehicle Replacement Fund	$13,867
Subtotal	$1,055,819
JPA Revenue Adjustment ($385,680)	$96,419
TOTAL	$1,152,238

As noted above, the proposed $1.15 Million Fire Services Assessment proceeds would cover the six Fire Department items noted above. It would also cover $96,419 of the $385,680 cost to San Carlos when the Fire Department cost sharing formula changes from 50%/50% to 53% San Carlos/47% Belmont if the Fire Services Assessment were to pass. The difference of $289,261 per year would have to be covered from the San Carlos General Fund Budget � presumably either through new revenues, budget reductions or some combination of budget balancing strategies during the mid year budget process this fiscal year.

The key discussion and action needed at tonight�s City Council meeting is for the Council to review the proposed level of the Fire Services Assessment and to provide the Staff with direction on a) the amount of Fire Services Assessment you would like to see and b) on the items to be funded and the amounts to be funded by the proposed assessment. Once we have that direction, Staff will work with the Special Legal Counsel and Muni Financial Services to bring a Resolution of Intent and Final Assessment Report to Council at your July 24th meeting that reflects your decisions and direction.

Key Dates for the Proposed Fire Services Assessment
In the months ahead, there are several key dates to keep in mind as we move through the Fire Services Assessment process. They are:

Distribution of the Report to the Public
Consistent with past practice, copies of this Council Staff Report and the attachments were made available on the City�s Web Site, eMailed via the eNotify system to subscribers of the City Council Agendas and Minutes and Fire Services in San Carlos eMail lists, made available for public review at the City Clerk�s Office and the San Carlos Library and available to local reporters covering the City of San Carlos.