CITY OF CARMEL-BY-THE-SEA

Council Report
September 9, 2014
To: Honorable Mayor and Members of the City Council
From: Jason Stilwell, City Administrator
Submitted by: Gaudenz Panholzer, Fire Chief
Subject: REPORT ON COSTING METHODOLOGY FOR FIRE SERVICES
CONTRACT WITH THE CITY OF MONTEREY AND AUTHORIZE
THE CITY ADMINISTRATOR TO SIGN A LETTER FROM
MONTEREY'S CITY MANAGER TO EXTEND THE AMBULANCE
AGREEMENT.

RECOMMENDATION(S):
Accept report on costing methodology for Fire Services Contract with the City of
Monterey and provide direction as appropriate and Authorize the City Administrator to
sign a letter from Montereys City Manager to extend the Ambulance Agreement.
EXECUTIVE SUMMARY:
In a March 4, 2014, report to Council, the Monterey Fire Department introduced the idea
of changing the methodology of determining the annual fee of the Fire Services
Contract. Council asked that a comparison be done to show the effects of the proposed
changes. The new methodology uses an average cost for each position. The
projection using the average methodology was done for the 2012-13 fiscal year and
came in $9,731 (0.55%) below the trued-up cost under the old methodology. Monterey
recommends that future years use this revised methodology for calculating the
projection and that a mid-year true-up be done to determine if the projection was high or
low. An adjustment would be incorporated into the following years projection to make it
more accurate based on that true-up. Adjustments will be limited by the CPI-U for the
San Jose-Sunnyvale-Santa Clara area.

ANALYSIS/DISCUSSION: (including why Council is considering the item and justification for
recommendation)
History
The current contract uses a complex method of tracking the actual cost of the individual
employees assigned to the Carmel Station. This is an excessive amount of work for
administrative staff and does not fairly share the cost of staffing of the fire station among
all the agencies that Monterey Fire serves.

Agenda Item: 8.A
City Council Agenda Sept 9, 2014
Page 94


Current Costing Methodology
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 fire station. Carmel also
pays for 10.75% of the cost of Fire Headquarters and 1 part-time Fire Inspector. 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 of the contract, Monterey provides Carmel with a projection of the
cost for the fiscal year by March 15
th
of each year. After the close of the fiscal year,
Monterey completes a true-up for the previous year to adjust the projection to reflect
the actual costs incurred. The true-up is due to Carmel by November 1
st
and includes
either an invoice for any amount due or reimbursement for any amounts overpaid.
Because the assignment of personnel is an employee 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. 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.
Proposed Methodology
Monterey is proposing to change the methodology by which projections are made and
how/when true-ups are completed and used. These items are all addressed in Article
VI of the contract and, per contract provisions, may be changed by agreement between
the City Administrator of Carmel and the City Manager of Monterey.
In order to more truly share equally in the cost of staffing stations, the revised
methodology proposes to use an average cost of employees within each rank for the
positions staffed at the Carmel station. The Carmel station is staffed on a daily basis
with one (1) Captain, one (1) Fire Engineer, and one (1) Firefighter. Monterey provides
24-hour staffing by utilizing three (3) shifts that work on a rotating basis, thus three (3)
Full Time Equivalents (FTEs) are needed in each rank to provide coverage. The need to
cover normal leave use by employees can be achieved by the use of overtime or by
hiring relief personnel. To account for this cost, an additional 0.5 FTE is needed in each
rank. This is based on industry standards as well as historical experience by the City of
Monterey.
Personnel related costs that are fixed amounts for all positions (safety clothing, medical
exams, etc.) will be projected on a pro-rata share based on deployed staffing. Monterey
Fire deploys a total of 22 positions daily, system-wide; of these 3 are in Carmel. Carmel
will be allocated 13.64% (3/22) of these fixed costs.
Agenda Item: 8.A
City Council Agenda Sept 9, 2014
Page 95

Other provisions for cost allocation will be done as currently provided for in the contract.
Headquarters and operating costs will be allocated at a rate of 10.75% and direct costs
for Carmel related expenses (IT, Fire Inspector, etc.) will be allocated at 100%.
True-Up
Under the current system, a true-up is done in October that results in a credit or cost
to Carmel for the difference of the projected and actual costs. The proposed change
would no longer include a billing associated with a true-up. A true-up would be
completed at mid-year to determine if the projection was high or low and an adjustment
would be made to the following years projection to correct for the difference. In order to
help control cost increases, a proposed cap based on the CPI-U for the San Jose-
Sunnyvale-Santa Clara region will be applied to all costs except those associated with
direct PERS costs.
Comparison
Attached is a comparison of the current methodology and the proposed methodology for
the 2012-2013 Fiscal Year. Under the current methodology, the projection for that year
was $1,768,166 and the true-up was $1,898,404. This resulted in an invoice to Carmel
for the difference of $130,238. Under the proposed methodology the projection would
have been $1,888,673. This is $9,731 (0.55%) below the true-up total.

FISCAL IMPACT:
Under the proposed methodology, the cost of the Fire Services contract will be more
accurately projected. Both Carmel-by-the-Sea and Monterey will be better able to
manage their budgets as there wont be any true-up from the previous fiscal year that
has historically had a significant financial impact. By limiting cost increases with the
CPI-U, further year-to-year stability in the pricing of the contract will be achieved.

Budgeted (yes/no) Funding Source( general fund, grant,
state)
No

PREVIOUS COUNCIL ACTION/DECISION HISTORY:
In November 2011, Council authorized the Agreement to Provide Fire Services Between
the Cities of Monterey and Carmel-by-the-Sea, which became effective January 1,
2012, through June 30, 2016. Council subsequently authorized the Agreement to
Provide Interim Ambulance Administration Services Between the Cities of Monterey and
Carmel-by-the-Sea, which became effective January 1, 2012, through June 30, 2014.
Recommended actions for Council consideration on September 9, 2014, include the
following:
Agenda Item: 8.A
City Council Agenda Sept 9, 2014
Page 96

1. Receive this report and consider authorization of the proposed revised True-Up
Methodology for the Fire Services Agreement beginning with Fiscal Year 2013-2014.
2. Authorize the City Administrator to sign a letter from Montereys City Manager
extending the Interim Ambulance Administration Services Agreement from July 1,
2014 through June 30, 2016. Such extension would concurrently match the
term of the Fire Services Agreement.
ATTACHMENTS:
1. Letter



REVIEWED BY:
City Administrator Administrative Services
Director of CPB Director of Public Services
Public Safety Director Library Director
Other: ___________ City Attorney

Agenda Item: 8.A
City Council Agenda Sept 9, 2014
Page 97
Agenda Item: 8.A
City Council Agenda Sept 9, 2014
Page 98
MONTEREY FIRE DEPARTMENT
June 23, 2014
Jason Stilwell, City Administrator
City of Carmel-by-the-Sea
P.O. Box CC
Carmel-by-the-Sea, CA 93921
Dear Mr. Stilwell:
The Agreement to Provide Interim Ambulance Services Between the Cities of Monterey
and Carmel-by-the-Sea expires on June 30, 2014. Per Section 2.2, "This Agreement may be extended by
mutual written agreement of the parties prior to the date of expiration." It Is the City of Monterey's
intention to extend this Agreement for an additional two-year term of July 1, 2014, through June 30,
2016. This extension will align it with our cities' related fire services agreement. "'
The annual cost of this Agreement beginning July 1, 2014, will be $86,575 per fiscal year. This cost
represents an increase of $15,155 (+17.5%) over the former flat rate of $71,420 per fiscal year, which
was originally projected in 2011. The updated annual cost is based on the attached Fiscal Year 2014-
2015 projected costs and will remain the same through Fiscal Year 2015-2016.
Please indicate your acceptance of this extension and the related cost Increase by returning a signed
original of this letter to Fire Chief Gaudenz Panholzer at 610 Pacific Street, Monterey, CA 93940. You are
welcome to contact me (646-3760) or Chief Panholzer (646-3900) should you1lave any questions.
Thank you for your support of our cities' continued partnership in public safety services.
Sincerely, ACCEPTED:
Jason Stilwell
City Manager
City Administrator
Attachment
c: G. Panholzer, Fire Chief
J. Forbis, Finance Director
f-JIOI'ACII'ICSTJ{EET MONI"EHEY CALIFOHNIA !.-J:..S!.-)40 .!=!.31.646.3900 Ft\X83J;Q46.3723
Web Site http://www.montcrcy.org/firc