CITY OF CARMEL-BY-THE-SEA Council Report March 4, 2014

To:
From: Submitted by: Subject:

Honorable Mayor and Members of the City Council Jason Stilwell, City Administrator Gaudenz Panholzer, Fire Chief Report on status of Fire Services Contract with the City of Monterey and Consider a Resolution Authorizing a Budget Adjustment Request to True Up for Fiscal Year 2012/2013

Recommendation(s): Accept report on status of Fire Services Contract with the City of Monterey
and approve budget adjustment request to True Up for Fiscal Year 2012/2013.

Executive Summary: Carmel-By-The-Sea and Monterey have been in a contractual partnership

for fire services for 2 years. During that time, while service to Carmel residents and visitors has been good, experience has identified som e areas where improvements can be made. In order to create a better partnership relationship between the City of Carmel-By-The-Sea and the City of Monterey in the provision of Fire Services changes in the costing model are being implemented to more fairly share in joint costs and to improve the ability to budget accurately by eliminating the need to comp lete an annual "true-up."

Analysis/Discussion: History
Effective January 1, 2012, the City of Carmel-By-The-Sea and the City of M onterey entered into an agreement whereby Monterey would provide fire services to Carmel. The intent of contracting for services was primarily focused on enabling both agencies to realize cost savings by sharing services and administrative functions that would otherwise be duplicated. A less quantifiable benefit that is realized is the increased depth of resources that is immediately available to participating agencies to handle larger emergencies or multiple calls for service occurring simultaneously. The contracted services model is not the only method to achieve these outcomes. A plan that has been considered from the beginning involves the formation of a JPA by the participating agencies that would result in a truly regionalized approach to fire service delivery. The current contract expires on June 30, 2016.

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Cost Issues The contract specifies a costing methodology that calls for Carmel to pay the actual cost of the Monterey employees that are assigned to the Carmel fi re station. Carmel also pays for 10.75% of the cost of "Fire Headquarters" and 1 parttime Fire Inspector. Camel retains ownership of the station and the two engines assigned to Carmel, and pays the cost of maintaining and operating them . An administrative fee of 4.94% is added to the total cost to cover the expenses of Human Resources, Finance, Payroll, etc. Under the provisions ofthe contract, Monterey provides Carmel with a projection of the cost for the fiscal year by March 15th of each year. After the close of the fiscal year, Monterey comp letes a "true-up" for the previous yea r to adjust the projection to reflect the actual costs incurred. The "true-up" is due to Carmel by October 315t and includes either an invoice for any amount due or a credit for any amounts overpaid. Because the assignment of personnel is an emp loyee driven process, the costs to Carmel can be increased or decreased based on the seniority of (and therefore cost associated with) the personnel that choose to bid that station. If an employee that has enough seniority {20 year or more) with Monterey, there is a longevity pay cost passed though to Carmel for that employee . Former Carmel employees are not eligible to receive this benefit until January 2032, thus Carmel may be paying the cost of a benefit that none of their former employees are eligible to receive. Long term vacancies such as extended sick leave or disability may be disproportionately assigned to Carmel if an employee assigned to that station is affected. The "true-up" cost can be further impacted by significant separation leave payoffs to personnel {which Carmel shares at the Headquarter pro-rata rate) and other unanticipated cost changes incurred throughout the year {PER$ rate increases, benefit cost changes, negotiated MOU cost changes, etc.). The impact of this costing model results in the following concerns:

Carmel pays for a benefit that their forme r employees are not eligible to receive Agencies participating in the Monterey Fire Department system pay for di sproportion at e shares of some employee costs

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Neither Carmel nor Monterey can properly budget for the cost of the contract Considerable time is spent daily to ensure the proper allocation of personnel expenses Significant time is spent by administrative staff completing the annual "true-up"

FY 2012-13 True-Up The balance due for the FY12-13 "true-up" was originally calculated to be $130,238. This amount was reduced by $7,877.16 to account for the longevity pay not being charged to Carmel bringing the total due to $122,360.84 (actual invoice was $118,324.56 due to other credits owed to Carmel by Monterey). The balance due is a result of the following major factors: The benefit rate used in the creation of the projection was 3.4% lower than the actual cost experienced causing an increase in all personnel costs Through the station assignment bidding process former Carmel employees ended up at other stations and employees with higher sen iority ended up at the Carmel station; these employees were at higher pay steps and received longevity pay (removed in the adjusted true-up) As requested by Carmel staff, overtime was projected at 300 hours per position; this was lower than the advised 400 hours and the actual experience of 393 hours An unusually high separation leave payoff for retiring employees increased the share that Carmel pays to this expense; this does result in a larger than anticipated reduction in the leave bank costs that Carmel owes to Monterey Service Delivery Issues Carmel-By-The-Sea has a response time performance measure for fire se rvice delivery of arriving at all emergency (requiring red lights and siren response) requests for service within 5 minutes, 90% of the t ime. This is
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measured and reported on a monthly basis and, in the first 2 years of the contract, Monterey Fire has achieved this goal in 24 out of 24 months and over that entire period 98% of the time. The greater benefit in service delivery that Carmel resident receive under the contract is that Monterey Fire will ensure additional units are available to respond to emergencies in Carmel when needed. Emergencies requiring multiple units to respond (structure fires, rescues, etc.) will have units from other Monterey Fire system stations immediately assigned and dispatched If the engine assigned to the Carmel Fire Station is committed (unavailable for an extended time period) on an incident or for training, another unit is moved up to cover Carme l Specialized resources for certain types of incidents are available when needed : o o o o Ladder truck for structure fires, extrication situations, etc. Fire boat for in water emergencies Urban Search and Rescue unit for difficult rescue situations Incident Command vehicle for large or extended incidents (added with the addition of Monterey Regional Airport to the system in January 2014) A larger f leet of reserve apparatus is available to place into service: o o Routine maintenance or mechanical failure of primary apparatus Special circumstances requiring the deployment of extra resources Governance Issues Because the fire department is part of the City of Monterey and all fire personnel are employees of Monterey, Monterey retains control over many of the decisions related to operations and system management. Carmel does not have the same degree of input and control as it might have under a JPA model. While a JPA model may have further benefits and would allow for greater sha red governance, there are many obstacles that make the formation of a JPA difficult. Among these are questions regarding
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cost sharing allocations and governance balance amongst participating agencies. Employee MOU concerns (pay and benefits, PER$ retirement, etc.) have also proven to be a challenge. A JPA or some other service model may be worthy of pursuing again if additional agencies were interested in participating in the regional fire service delivery. Proposed Action Steps In order to improve the system for all participating agencies and to address some of the concerns and issue identified above, the following steps have been, or are being, implemented: 1. Eliminating the cost of longevity pay from the cost allocation to Carmel. This has been done retroactively for the FY12-13 "true-up" resulting in a savings of $7,877 and in a revised projection for FY1314 resulting in a savings of $17ASO. This will also be included in the cost projection for FY14-15. 2. Changing the costing model to charge Carmel the average cost of each position assigned to the Carmel Fire Station. The cost would be projected based on the average cost of all personnel in a given rank for the month of January adjusted for known changes (benefit and PER$ contribution rate, step raises, etc.). This would fix the cost of personnel for the following fiscal year and eliminate the need to calculate a "true-up" adjustment after the close of the fiscal year. The FY14-15 projection will include this change. 3. Change the costing model with respect to overtime charges to allocate an additional 0.4 FTE for each rank. To cover the 3 personnel needed in each rank, a total of 3.4 "average" personnel will be charged. This is based on an evaluation of actual experience in previous years and is close to an industry standard of 3.5 FTEs per position. This will fix the cost of overtime at the beginning of the year and eliminate the need to complete a "true-up" of overtime costs every year. The FY14-15 projection will include this change. 4. Schedule semi-annual joint meetings for all participating agencies. The meeting will include Fire Department command staff, managers/administrators of all agencies, and others as appropriate.

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The purpose of these meeting will be to review system performance, discuss significant operational changes, identify opportunities for enhancements, and gather input in future planning. The current Quarterly Update meetings will continue as before. Planned action steps 1-3 have already been discussed in joint meetings that included Acting Monterey City Manager Mike McCarthy, Carmel City Administrator Jason Stilwell, Carmel Director of Public Safety Mike Calhoun, Fire Chief Gaudenz Panholzer, and Assistant Fire Chief Jim Courtney. All agree that these changes will benefit both agencies . The changes are within the scope allowed by the contract that can be made by mutual agreement of the Monterey City Manager and the Carmel City Administrator, so no Council action is required . Fiscal Impact: There will be a fiscal impact that cannot be accurate ly determined because the costs under the current system are not known until after a "true-up" has been completed . The changes will serve to stabilize and accurately project costs prior to the beginn ing of each fiscal year to allow for better budget management. Budgeted (yes/no) Funding Source( general fund, grant, state) General Fund- Public Safety

No
Previous Council Action/Decision History:

N/A
Reviewed by:
City Administrator Asst. City Admin. Public Safety Dir City Engineer City Attorney Dir of CPB

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Adm inistrative Services Dir of Public Svcs Otherf\Lt..

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Library Dir

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CITY COUNCIL CITY OF CARMEL-BY-THE-SEA RESOLUTION 2014A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA ADOPTING REVISIONS TO THE FISCAL YEAR 2013-2014 BUDGET

WHEREAS, the City Council approved the Fiscal Year 2013 -20 14 Operating Plan and Budget by Resolution 2013-25 dated June 11 , 2013; and WHEREAS, adjustments are requested for the Fiscal Year 2013-2014 budget based on the actual and estimated sources and uses; and WHEREAS, the Fiscal Year 2013 -2014 Budget adjustments requests include adjustments totaling $120,000 per the attached schedule, Attachment A, NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA DOES: 1. Approve adjustments to revenues and expenditures for the Fiscal Year 2013-2014 Budget, per the attached schedule Attachment A. 2. Increase the total Fiscal Year 2013-2014 annual budget appropriation to $20,861,955. PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA this 4th day of March 2014, by the following roll call vote: AYES: NOES: ABSENT: COUNCIL MEMBERS: COUNCIL MEMBERS: COUNCIL MEMBERS:

ABSTAINT: COUNCIL MEMBERS: SIGNED,

ATTEST,

Jason Burnett, MAYOR

Daryl A. Betancur, CMC Deputy City Clerk

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ATTACHMENT "A"
Fiscal Year 2013-2014 Budget Adjustment Requests M arch, 2014 Adjust# 2014-08 Department Public Safety General Fund Account
01-24048

Account Description General Fund Reserves

Amount

Reason for Adjustment

Current Budget 1,857,531

01-72053-0006 Contractual Services - Monterey

120,000.00 Fire true-up 120,000.00

Proposed Adjusted Budget 1,977,531.00 120,000.00

Name

Date

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Content Approved by Admin Services _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Recommended by City Administrator

----------------------------------- Authorized by City Council

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