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HomeMy WebLinkAboutCC AG PKT 2011-07-11 #OAGENDA STAFF REPORT DATE: July 11, 2011 TO: Honorable Mayor and City Council FROM: Jill R. Ingram, City Manager SUBJECT: ORANGE COUNTY FIRE AUTHORITY (OCFA) FINAL CASH CONTRACT CHARGES & ONE -TIME FY 2011 -12 ADJUSTMENT OPTION SUMMARY OF REQUEST: It is requested that the City Council provide direction to staff regarding the offer by the Orange County Fire Authority to reduce the final contract charge for Fiscal Year 2011/12 by $30,542. Should the City Council choose the reduction option, the total contract cost for Fiscal Year 2011/12 would be $4,097,610. BACKGROUND AND ANALYSIS: Effective July 1, 2010, the first amendment to the OFCA Amended JPA was approved by the OCFA and its member agencies. The purpose of the amendment was to include language in the Amended JPA to: 1) increase the cap on annual cost adjustment not to exceed 4.5 %; 2) amortize any cash contract shortfalls above the annual 4.5% increase for operational services provided over the first 10 years of the amendment to the Amended JPA; 3) stipulate how the annual $15,000 payment for maintenance and repairs will be expended; and 4) designate membership in the OCFA for a 20 -year contract term beginning on July 1, 2010, with an option to withdraw at each 10 -year interval. The City is a "cash contract" city whereby as part of its annual budget process, the OCFA determines contract amounts owed for operational services. The final cash contract charge to the City of Seal Beach for fire services provided by the OCFA is $4,128,152. Total charges include a base service charge, a shortfall catch -up payment, vehicle replacement costs, and station maintenance costs. The base service charge is based on the OCFA FY 2011/12 budget, which was adopted by the OCFA Board of Directors on May 26, 2011. Due to the current economic conditions facing many cities, and in particular, cash contract cities, the OCFA convened the Joint City Manager's Technical Advisory Committee to review the current situation. The discussions focused on service Agenda Item 0 Page 2 levels, standards of cover, financial equity issues, and the financial provisions of the Joint Powers Agreement. As a result of these discussions, OCFA staff developed several alternatives to assist cash contract cities. On May 26, 2011, the OCFA Board of Directors authorized a one -time option for cash contract cities to provide one -time savings to cash contract cities, recognizing that the OCFA budget was impacted extraordinarily by a premium pay error by the Orange County Employees Retirement System ( OCERS). The action provides an optional one -time adjustment to cash contract cities, eliminating the impact of the $3 million that OCFA must pay to OCERS in FY 2011/12, Contract cities that take advantage of the option will pay a reduced charge for FY 2011/12, and the OCFA/Structural Fire Fund budget will initially absorb the cost for the reduced charges. OCFA will then monitor future actuarial impacts from the $3 million payment in FY 2011/12 to OCERS to ensure that any subsequent retirement rate reduction resulting from the payment is not passed on to cash contract cities. Each cash contract city has the option to take advantage of this one -time savings, or opt -out from the proposed adjustment. The final "unadjusted" charge for Seal Beach is comprised of the following components: DESCRIPTION CHARGE FY 2010/11 Base Service Charge $3,766,361 "2010 Shortfall" Installment Payment $59,479 FY 2011/12 Final 4.50% Increase $193,575 FY 2011/12 Service Charge $4,019,415 Facilities Maintenance $20,000 Vehicle Replacement $88,737 Total FY 2011/12 Charge $4,128,152 The final "adjusted" charge for Seal Beach is as follows: DESCRIPTION CHARGE FY 2010/11 Base Service Charge $3,766,361 "2010 Shortfall" Installment Payment $59,479 FY 2011/12 Final 3.79% Increase $163,033 FY 2011/12 Service Charge $3,988,873 Facilities Maintenance $20,000 Vehicle Replacement $88,737 Total FY 2011/12 Charge $4,097,610 Page 3 If all cash contract cities take advantage of the one -time adjustment option, the OCFA general fund would absorb approximately $270,000. OCFA is requesting a final decision by July 14, 2011 from all cash contract cities. FISCAL IMPACT: The FY 2011/12 Adopted Budget for contract services with the OCFA is budgeted as follows: Account No. 001 - 026 -44000 $4,150,000 (Maintenance and Operations - Contract Professional Services) The FY 2011/12 "adjusted" contract charge is $4,097,610, which would result in a $52,390 surplus in this account. LEGAL REVIEW No legal review is required for this item. RECOMMENDATION: It is requested that the City Council provide direction to staff regarding the offer by the Orange County Fire Authority to reduce the final contract charge for Fiscal Year 2011 -12 by $30,542. Should the City Council choose the reduction option, the total contract cost for Fiscal Year 2011 -12 would be $4,097,610. Attachment: A. OCFA Letter, Subject: Final Cash Contract Charges & Options FY 2011/12 ORANGE COUNTY FIRE AUTHORITY P. O. Box 57115, Irvine, CA 92619 -7115 • 1 Fire Authority Road, Irvine, CA 92602 Keith Richter, Fire Chief (714) 573 -6000 www.ocfa.org RECEIVED May 31, 2011 Jill Ingram, City Manager City of Seal Beach 211 8 th Street Seal Beach, CA 90740 -6379 Dear Jill: Subject: Final Cash Contract Charges & Options — FY 2011/12 JUN - 6 2011 City Manager's Office As required by the First Amendment to the Amended JPA Agreement, which was effective July 1, 2010, with this letter we are providing your final charge for FY 2011/12, along with information about a one- time adjustment option to lower your city's charge for FY 2011/12 only. Unadjusted 2011/12 Charge (for cities opting -out from the one -time adjustment option) The final cash contract charge to the City of Seal Beach for fire services provided by the Orange County Fire Authority is $4,128,152. Total charges include a base service charge, a shortfall catch -up payment, vehicle replacement costs, and station maintenance costs. The base service charge is based on the FY 2011/12 budget, which was adopted by our Board on May 26, 2011. Costs applicable to cash contract base service charges increased 5.04% as shown in Attachments 1 and 2. However, the increase to your contract has been limited to the 4.50% maximum per the Amended JPA Agreement. The remaining 0.54% will be banked and carried forward to the next year(s) in which there is an increase of less than 4.50 %. This net increase resulted from salary increases authorized in Memorandums of Understanding (MOUs) with all bargaining units, increased retirement and group medical insurance benefit rates. These increases have been offset by concessions made by all bargaining units and unrepresented management during recent negotiations in order to stabilize OCFA's budget. This percentage increase is applied to the base service charge as well as the entire shortfall amount calculated for Seal Beach per the new JPA agreement. The amount needed to restore the Facilities Maintenance account to $15,000 per station in FY 2011/12 is estimated at $20,000. This amount will be included on your quarterly service charge invoices, and we will send you quarterly reports on the facilities maintenance expenditures. The facilities maintenance charge is based on estimates of total year -end expenditures. A reconciliation of actual expenditures will be completed after the close of the 2010/11 fiscal year, and we will advise you of the final facilities maintenance charge and adjust your quarterly billing if necessary. The final "unadjusted" charge is comprised of the following components: Serving the Cities of Aliso Viejo • Buena Park • Cypress • Dana Point • Irvine • Laguna Hills • Laguna Niguel • Laguna Woods • Lake Forest • La Palma Los Alamitos • Mission Viejo • Placentia • Rancho Santa Margarita -San Clemente • San Juan Capistrano • Seal Beach • Stanton • Tustin • Villa Park Westminster • Yorba Linda • and Unincorporated Areas of Orange County RESIDENTIAL SPRINKLERS AND SMOKE DETECTORS SAVE LIVES May 31, 2011 Page 2 of 2 Description Charge FY 2010/11 Base Service Charge "2010 Shortfall" Installment Payment FY 2011/12 Final 4.50% Increase 3,766,361 59,479 193,575 FY 2011/12 Service Charge 4,019,415 Facilities Maintenance Vehicle Replacement 20,000 88,737 Total FY 2011/12 Charge 4,128,152 Adiusted 2011/12 Charee — Eliminated Premium Pav Spike (for cities opting -in for one -time adjustment) Upon adopting the 2011/12 budget, the Board of Directors also approved an action to provide one -time savings to cash contract cities, recognizing that the OCFA budget was impacted extraordinarily by the premium pay error at OCERS. The action provides an optional one -time adjustment to cash contract cities, eliminating the impact of the $3 million that OCFA must pay to OCERS in 2011/12. Cities that take advantage of the option will pay a reduced charge for 2011/12, and the OCFA/Structural Fire Fund budget will initially absorb the cost for the reduced charges. OCFA will then monitor future actuarial impacts from the $3 million payment in 2011/12 to ensure that any subsequent retirement rate reduction resulting from the payment is not passed on to cash contract cities. Each cash contract city has the option to take advantage of this one -time savings, or to opt -out from the proposed adjustment. For Seal Beach, the final "adjusted" charge is as follows: Description Charge FY 2010/11 Base Service Charge "2010 Shortfall" Installment Payment FY 2011/12 Final 3.79% Increase 3,766,361 59,479 163,033 FY 2011/12 Service Charge 3,988,873 Facilities Maintenance Vehicle Replacement 20,000 88,737 Total FY 2011/12 Charge 4,097,610 Calculation of the adjusted percentage increase to the service charge is shown on Attachments 3 and 4. Response Requested 11+1 a0l I We are requesting that you respond in writing by Jane , 1, indicating whether or not you wish to take advantage of this one -time adjustment option for 2011/12. Your quarterly billings will then reflect the appropriate charge, based on either the "unadjusted" or "adjusted" final charge as shown above. Detailed calculations are attached for your information. If you have any questions, please contact Tricia Jakubiak at (714) 573 -6301. Respectfully, Lori Zeller, Assistant Chief Business Services Attachments cc: Ed Fleming, Division Chief Stephan Hamilton, Budget Manager Attachment 1 ORANGE COUNTY FIRE AUTHORITY FINAL CASH CONTRACT BASE SERVICE CHARGE CALCULATION- UNADJUSTED FY 2011/12 PERCENTAGE CHANGE APPLIED TO CASH CONTRACTS (A) 2010/11 Budget for Salaries & Employee Benefits and Services & Supplies 2011/12 Budget Increases/Decreases from 2010/11 Salary Retirement Health, Workers Comp, and Other Insurance Medicare Services & Supplies TOTAL $232,207,884 $ CHANGE % CHANGE 4,953,821 2.13 % 4,586,918 1.98 % 2,434,837 1.05 % 100,188 0.04 % (371,427) (0.16) % $11,704,337 5.04 % Cap on increase per amended JPA Carry- forward % 4.50 % 0.54 % (A) Based on the Updated 2010111 Budget at 5126111 Attachment 2 ORANGE COUNTY FIRE AUTHORITY CASH CONTRACT CHARGE PERCENTAGE CHANGE CALCULATION- UNADJUSTED FINAL CHARGE FOR FY2011/12 A) Adjustment of grant/donation expenditures so the fiscal years are comparable B) Extraordinary overtime and related S &S costs have been excluded C) Hand crew costs have been excluded from the 2010/11 budget since they do not apply to CCC charges D) Mid -Year budget adjustment items for 2010111 that are not applicable to CCC charges E) Structural Fire Fund costs include: Property Tax Administration Charges, County Island Contracts, Annual Property Tax Projection Study, TRAN issuance cost, and interest expense for interfund borrowing FY2010 /11 FY2011/12 $ Budget Budget Change Salaries 143,407,429 146,854,092 Adjs: Grant/Donation Expenditures (A) (494,102) Extraordinary exp/ OT (B) (397,550) Exclude Hand Crew costs (C) (436,158) Mid -Year Items Not Affecting CCCs (D) (179,348) Salaries 141,900,271 146,854,092 4,953,821 Retirement 52,402,858 56,628,182 Adjs: Grant/Donation Expenditures (A) (112,089) Exclude Hand Crew costs (C) (221,463) Mid -Year Items Not Affecting CCCs (D) (28,042) Retirement 52,041,264 56,628,182 4,586,918 Health/Workers Comp Insurance 19,292,429 21,433,758 Adjs: Grant/Donation Expenditures (A) Exclude Hand Crew costs (C) (25,601) (235,211) Mid -Year Items Not Affecting CCCs (D) (32,696) Health, Workers Comp, and Other Insurance 18,998,921 21,433,758 2,434,837 Medicare and Other Benefits 1,710,010 1,800,644 Adjs: Grant/Donation Expenditures (A) (2,199) Exclude Hand Crew costs (C) (6,327) Mid -Year Items Not Affecting CCCs (D) (1,028) Medicare & Other Benefits 1,700,456 1,800,644 100,188 214,640,912 226,716,676 12,075,764 TOTAL S & EB Services & Supplies 20,639,041 19,555,593 Adjs: Grant/Donation services and supplies (A) (1,071,358) (182,953) Structural Fire Fund Costs (E) (1,954,611) (2,177,095) Mid -Year Items Not Affecting CCCs (D, B) (46,100) 17,566,972 17,195,545 371,427 TOTALS &S 232,207,884 243,912,221 11,704,337 TOTAL EXPENDITURES A) Adjustment of grant/donation expenditures so the fiscal years are comparable B) Extraordinary overtime and related S &S costs have been excluded C) Hand crew costs have been excluded from the 2010/11 budget since they do not apply to CCC charges D) Mid -Year budget adjustment items for 2010111 that are not applicable to CCC charges E) Structural Fire Fund costs include: Property Tax Administration Charges, County Island Contracts, Annual Property Tax Projection Study, TRAN issuance cost, and interest expense for interfund borrowing Attachment 3 ORANGE COUNTY FIRE AUTHORITY FINAL CASH CONTRACT BASE SERVICE CHARGE CALCULATION - ADJUSTED FY 2011/12 PERCENTAGE CHANGE APPLIED TO CASH CONTRACTS (A) 2010/11 Budget for Salaries & Employee Benefits and Services & Supplies 2011/12 Budget Increases/Decreases from 2010/11 Salary Retirement Health, Workers Comp, and Other Insurance Medicare Services & Supplies TOTAL $232,207,884 $CHANGE % CHANGE 4,953,821 2.14 % 1,675,425 0.72 % 2,434,837 1.05 % 100,188 0.04 % (371,427) (0.16) % $8,792,844 3.79 % (A) Based on the Updated 2010111 Budget at 5126111 Attachment 4 ORANGE COUNTY FIRE AUTHORITY CASH CONTRACT CHARGE PERCENTAGE CHANGE CALCULATION - ADJUSTED FINAL CHARGE FOR FY2011/12 A) Adjustment of grant/donation expenditures so the fiscal years are comparable B) Extraordinary overtime and related S &S costs have been excluded C) Hand crew costs have been excluded from the 2010/11 budget since they do not apply to CCC charges D) Mid -Year budget adjustment items for 2010/11 that are not applicable to CCC charges E) Structural Fire Fund costs include: Property Tax Administration Charges, County Island Contracts, Annual Property Tax Projection Study, TRAN issuance cost, and interest expense for interfund borrowing F) Adjustment to back out premium pay spike due to OCERS error. FY2010/11 FY2011 /12 S Budget Budget Change Salaries 143,407,429 146,854,092 Adjs: Grant/Donation Expenditures (A) (494,102) Extraordinary exp/ OT (B) (397,550) Exclude Hand Crew costs (C) (436,158) Mid -Year Items Not Affecting CCCs (D) (179,348) Salaries 141,900,271 146,854,092 4,953,821 Retirement 52,402,858 56,628,182 Adjs: Grant/Donation Expenditures (A) Exclude Hand Crew costs (C) (112,089) (221,463) Mid -Year Items Not Affecting CCCs (D) (28,042) OCERS error (F) (2,911,493) Retirement 52,041,264 53,716,689 1,675,425 Health/Workers Comp Insurance 19,292,429 21,433,758 Adjs: Grant/Donation Expenditures (A) Exclude Hand Crew costs (C) (25,601) (235,211) Mid -Year Items Not Affecting CCCs (D) (32,696) Health, Workers Comp, and Other Insurance 18,998,921 21,433,758 2,434,837 Medicare and Other Benefits 1,710,010 1,800,644 Adjs: Grant/Donation Expenditures (A) Exclude Hand Crew costs (C) (2,199) (6,327) Mid -Year Items Not Affecting CCCs (D) (1,028) Medicare & Other Benefits 1,700,456 1,800,644 100,188 214,640,912 223,805,183 9,164,271 TOTAL S & EB Services & Supplies Adjs: Grant/Donation services and supplies (A) Structural Fire Fund Costs (E) 20,639,041 (1,071,358) (1,954,611) 19,555,593 (182,953) (2,177,095) Mid -Year Items Not Affecting CCCs (D, B) (46,100) 17,566,972 17,195,545 371,427 TOTALS &S 232,207,884 241,000,728 8,792,844 TOTAL EXPENDITURES A) Adjustment of grant/donation expenditures so the fiscal years are comparable B) Extraordinary overtime and related S &S costs have been excluded C) Hand crew costs have been excluded from the 2010/11 budget since they do not apply to CCC charges D) Mid -Year budget adjustment items for 2010/11 that are not applicable to CCC charges E) Structural Fire Fund costs include: Property Tax Administration Charges, County Island Contracts, Annual Property Tax Projection Study, TRAN issuance cost, and interest expense for interfund borrowing F) Adjustment to back out premium pay spike due to OCERS error.