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HomeMy WebLinkAboutItem N MEMORANDUM April 12, 1999 TO: MAYOR YOST AND MEMBERS OF THE CITY COUNCIL FROM: KEITH TILL, CITY MANAGER SUBJECT: Fire Authority Equity Study SUMMARY OF RECOMMENDATION: Council to approve a motion recommending the Orange County Fire Authority receive and file(table)the equity study, and approve submittal of the attached letter. BACKGROUND: Seal Beach joined the Orange County Fire Authority when it was formed in 1995. Seal Beach was among seven cities that pay for their membership in the Authority by writing an annual check($2.5 million this year)from the general fund. The remaining 12 members are called structural firefund cities because their fees are paid directly out of property taxes paid by their residents. The issue of equity was raised because certain cities, Irvine the most notable,were determined to be providing significantly more property tax income to the Authority than it cost to service the community. The original joint powers agreement therefore provided that an equity study would be performed within three years of the authority's formation. The analysis of equity attempted to quantify the cost of services provided to each community. Because no universally accepted model exists,the consultant developed a formula evaluating calls for service, assessed value and population. Because of the very high volume of paramedic calls to Leisure World, cost for service in Seal Beach was determined to be as high as cities almost twice the population. The model of measurement recommended by the Orange County city managers and the consultant indicates Seal Beach underpays by approximately 5%. However,by general consensus, it was agreed that any City within 10%+/-of the determined cost would be deemed to be at equity. As such,no increase is proposed for Seal Beach. Details of this equity formula are shown on page 40 of the report. Six cities are deemed to be overpaying and are said to be due an equity adjustment. However, it is unclear and subject to considerable debate whether and how such refunds can legally be provided. Six cities are also deemed to be underpaying. For those cities deemed to be underpaying,the alternatives would be to impose assessments or make payments from the general fund(although it is unclear if payments can or should be made Agenda Iters 47 from one city to another, or if such payment would be held in trust by the Authority). Irvine,the largest donor of all member cities, has indicated a willingness to table the equity plan. Meanwhile, several cities have indicated they would withdraw from the Authority if they were forced to make equity payments. As such, it appears the most viable means of preserving the Authority in its present configuration would be to table the equity plan and find some other means of providing all members sufficient value for their communities. The Authority board of directors in January received the equity report and appointed a committee to review further options. That committee is accepting comments from City Councils in all member cities up to April 15. The committee will make a recommendation to the board in May-June, with the board to consider the matter in June. Implementation of any financial changes would not occur until fiscal year 2000/2001. FISCAL IMPACT: There should be no impact to the City of Seal Beach in tabling the equity plan because of the 10%+/- allowance. However, it has been suggested that failure to implement the plan would result in imposition of a$13% capital improvements and overhead cost fee, which the Council is recommended to vigorously oppose. Also likely is a financial impact if the plan were implemented as proposed because of a reported shortfall in "overhead expenses"that would be passed on to contract cities. The report states the shortfall is about 9.5%, but it is unclear how much of this would be passed on to Seal Beach. In any case, the recently approved salary and benefits package for firefighters and other OCFA employees has already resulted in an estimated 3.5% increase in costs for Seal Beach in FY 1999-00. That is a$90,000 increase for next year. RECOMMENDATION: City Council to approve a motion to forward the attached letter recommending the OCFA board of directors table the equity plan, and direct the City's representative on the board to represent this position at future board meetings.