Full Text
City of Marysville Fire and EMS Organization Alternatives Staff Report Presented to City Council July 2016 ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 1 CHAPTER I: INTRODUCTION The Marysville City Council requested a review of fire and emergency medical service (EMS) options by City staff to assist them in their decision making process. In 2014 the City commissioned a study by Financial Consulting Services Group (FCS) regarding fire service options. In 2015, the Council and Fire District 12 convened a Regional Fire Committee (RFC) to begin negotiations on creation of a Regional Fire Authority (RFA) between the two entities. The negotiations reached a stalemate in July 2015, at which time the Marysville City Council ended discussions to begin further analysis of fire service options available to the City. The current operation by interlocal agreement was formed in January 1992. Since that time, there have been numerous starts to renegotiating the ILA or to identifying an alternative to the current arrangement. The city’s growth, the governance structure, and budgetary concerns have been at the forefront of the discussion to alter the current structure. The options under consideration by the City at this time are the following: 1) Revision to current ILA 2) Annexation to FPD12 3) City Fire Department 4) Regional Fire Authority ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 2 CHAPTER II: MARYSVILLE FIRE DISTRICT BACKGROUND The Marysville Fire District (MFD) was formed through an interlocal agreement between Snohomish County Fire District 12 and the City of Marysville in January 1992. The MFD is not a separate agency, it is a contract that provides for cooperative governance of the fire operation between City of Marysville and Fire District 12. The agreement was initiated as a means of reducing duplication of efforts and expanding services to the community. At the commencement of the interlocal agreement, the city of Marysville was 5.4 square miles representing a population of 13,030 and Fire District 12 was 32.2 square miles representing a population of 28,000. In 1998, Fire District 20 was consolidated into FPD12, formerly merging in 2002. This added 18.3 square miles with a population of approximately 7,000 to FPD12. The Marysville Fire District is governed by a six-member Board of Directors, the three Fire District 12 Commissioners and three City Council members from the City of Marysville. The MFD protects approximately 56 square miles. The total population served in 2016 is estimated at 79,310 citizens, with approximately 64,940 (82%) living in the City’s 21 sq. miles and 14,370 (18%) living in District 12’s unincorporated areas comprising 35 square miles. Exhibit 1 shows a map of the District and location of fire stations. The MFD operation employs 101 full-time personnel that staff MFD’s five fire stations (Station 61, 62, 63, 65 and 66). Their personnel support four Engine Companies, one Ladder Company, three Aid Cars and two Medic Units on a 24/7 basis. According to MFD, full-time personnel are supplemented by 27- 35 part-time firefighters. There are four emergency response shifts that each operate under the command of a Battalion Chief. The MFD participates in two countywide special operations response groups for hazardous materials and technical rescue. The administrative staff includes the Fire Chief, three Division Chiefs (Operations, Fire Marshal, Support Services), Assistant Fire Marshal, Human Resources Manager, Finance Manager and two office employees. The MFD’s 2016 budget is about $17.9 million in expenditures and $15.0 million in revenues, and as a result, fund balance is being used to cover the gap ($2.9 million) between its estimated 2016 revenues and expenditures. MFD estimated 2016 beginning unreserved fund balance is approximately $12.7 million. MFD major revenue sources are the City’s contribution and District 12’s contribution which represent about 83% of MFD’s revenues. Ambulance fees represent 13% of the revenues, and two other smaller revenue sources are for contracted services to the Tulalip Tribe and District 15. Fire suppression and EMS services represent 71% of MFD’s costs. Exhibit 2 shows the 2016 budgeted revenues and expenditures. MFD responds to approximately 12,586 calls annually. In 2015, 86% of the incidents were EMS related, 9% were fire related incidents, and 5% were other types of incidents. Exhibit 10 shows incident responses for each station. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 3 MFD Organization Chart ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 4 Exhibit 1 District Station and Map ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 5 Exhibit 2 MFD Budget 2006-2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Budget 8,756 10,000 12,865 14,336 14,609 14,298 13,954 14,969 16,153 17,488 17,857 ‐ 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Axis Title MFD Expense Fund ‐ Budget History (in thousands) ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 6 Exhibit 3 Marysville Fire District Budget Comparison REVENUE 2014 (Actual) 2015 2016 Beginning Net Cash and Investments $14,739,085.6 $14,372,292.3 $12,678,283.4 City of Marysville Contract 9,224,313.2 9,381,126.9 9,734,442.0 Fire District #12 Contract 2,900,447.6 2,704,948.5 2,748,898.8 Quilceda Village (Casino, MBR, Bingo, Retail Center, Hotel) 504,635.8 379,625.5 427,000.0 Tulalip Tribes Contract Store 2,444.47 16,950.0 10,411.3 District 15 ALS Service Contract 27,065.0 29,230.0 25,000.0 Public Schools (Marysville, Lakewood) 4,043.65 4,000.00 4,000.00 Sno-Isle Library 1,939.52 2,000.00 2,000.00 Grants - Federal & Local 16,897.5 31,200.0 1,200.00 Grants - SAFER Only 238,760.2 - - Rental Income (St. 65 House, Medic Apt) 16,972.0 15,400.0 15,400.0 Service Fees (Add. Signs, Standby, Trng Reg, Trng Room, ESCA) 123,667.9 10,100.0 3,500.00 Private Donations 955.00 300.00 300.00 Miscellaneous 17,622.3 15,200.0 10,000.0 Investment Interest Income 100,209.6 104,000.0 92,000.0 Ambulance Revenues 1,834,980.6 1,900,000.0 1,900,000.0 TOTAL REVENUES 15,014,954. 14,594,081. 14,974,152. EXPENDITURE 2014 (Actual) 2015 2016 Government Services 123,951.9 192,950.0 177,950.0 Administration 1,312,767.8 1,640,450.0 1,800,000.0 Fire Suppression 7,936,189.7 8,618,550.0 8,986,450.0 Emergency Medical Services 3,370,128.5 3,816,610.0 3,777,730.0 Special Operations 9,259.22 11,530.0 16,950.0 Fire Prevention/Public Relations 431,000.3 495,000.0 520,100.0 Training 180,491.8 293,500.0 304,000.0 Health/Safety 13,796.3 27,250.0 19,080.0 Support Services - Fleet & Facilities/Communications 1,412,259.6 1,676,550.0 1,783,664.0 General Capital Outlay / One-Time Purchase 43,419.0 315,700.0 71,100.0 Federal Grant Expenditures (Non-SAFER) 3,155.53 - - Tribal Gaming Impact 45,328.0 - - Transfers Out 500,000.0 400,000.0 400,000.0 TOTAL EXPENDITURES 15,381,748. 17,488,090. 17,857,024. 2015 Adjustment for Estimated Unspent Appropriations 1,200,000.00 ENDING CASH AND INVESTMENTS 14,372,292. 12,678,283. 9,795,411.6 ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 7 Exhibit 4 Marysville Fire District 2016 Major Revenue Sources The primary funding sources are the City of Marysville FPD12 (18%) and Ambulance fees Other sources comprise less than 4% of overall budget. Exhibit 5 Historical Assessed Valuation of MFD, City and FPD#12 The assessed value of the Fire District has fluctuated over the past decade. 2016 overall assessed valuation is continuing to recover, although it is still not at the levels of 2008-9. City of Marysville 65% Fire Dist. 12 18% Tulalip Tribes 3% Fire Dist. 15 0% Ambulance Fees 13% Miscellaneous 1% MFD 2016 Budgeted Revenues 0 2,000,000,000 4,000,000,000 6,000,000,000 8,000,000,000 10,000,000,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Assessed Value History City & Fire District 12 City MFD Total ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 8 Exhibit 6 Fund Balance MFD ENDING FUND BALANCE & CITY ANNEXATIONS In a very short period, between 2006 and 2012, the MFD amassed a large fund balance going from a $333,295 ending fund balance in 2006 to $14,686,965 by 2012. This was a product of the contract formula and the effect of annexation on the formula. The formula enabled the shift of valuation from FPD12 to City (properties in FPD12 became city through annexation) to result in an increase to the levy rate and ultimately tax collections, although the annexation did not in reality change the amount of overall valuation in the District. This resulted in a higher rate to be levied to FPD 12 property owners, and ultimately to the city through its general fund charge as a byproduct of valuation changing hands from district to city as an unintended effect of the formula. That this occurred is an example of a nontransparent process and/or a lack of understanding by all parties involved. In 2011, City officials recognized that the contract formula, as opposed to any actual growth in service area or assessed values, was propelling revenue growth and requested that the formula be modified. Amendment #1 to the contract was approved for the 2012 budget. In 2013- 2015 we also adjusted the formula due to these concerns. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 9 Exhibit 7 Assessed Value and Tax Collections ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 10 Exhibit 8 District 12’s 2006-2014 Operating Levy Rates Between 2006 and 2011 the City was experiencing budget reductions in all of its city departments. The City drew down its own general fund reserve to zero by 2010. The formula resulted in the City expending a greater share of its budget on fire for a reserve fund at a time when there was no actual growth in service demand to justify this transfer. This is a good example of the value of understanding the finances of an organization and its relationship to operations. There has been much discussion concerning the MFD’s lack of financial resources and uncertain financial condition over the past several years. The current condition of MFD is fine. They have an enormous reserve fund that the parties (and ultimately the citizen taxpayers) have jointly created. This is and was available for operations for the past ten years and should be utilized to meet current and future fire service needs. However, there is a future funding concern following depletion of fund balance with revenue concepts wholly dependent on property taxes. The district (whether FPD or RFA) will essentially need to operate at or above (with levy lid lifts or other measures) maximum levy rates allowed by state law in order to cover operating expenses unless there are significant reductions to level of service and/or expenditures. The District conducted layoffs and expense reductions in 2009, while simultaneously accumulating and growing their fund balance, current operations appear to have reestablished virtually all positions with similar organization and numbers to pre- layoff so it is unclear if any new direction was established from the exercise. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 11 Exhibit 9 Incidents by Year Exhibit 8 shows the overall incident growth from 2006-2015. Between 2008 and 2013 overall incidents remained generally stable. The period of decline between 2009-2011 is likely related to Arlington taking over service in the Smokey Point area in October 2009 and the pattern of increase from 2012 to present a result of the Smokey Point Everett Clinic opening, the Tulalip Outlet Mall expansion opening in June 2013 and current development growth increasing from 2012 to present. The busiest stations are station 61, 62 and 63 in downtown, Shoultes and Smokey Point. Exhibit 10 Station Responses 2015 Station Responses First Due % of First Due Station Response % of Response Station 61 4,867 43% 6,293 47% Station 62 2,555 23% 2,356 17% Station 63 2,214 20% 3,173 23% Station 65 646 6% 637 5% Station 66 988 9% 1,061 8% Total 11,270 100% 13,520 100% Fire Due means a call for service was generated from that station area and that station would be “first” to respond if there was sufficient staffing available. Station Response notates the total number of incidents that station responded to; multiple stations could potentially respond to a single incent. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Incidents 8,848 9,863 10,588 10,434 9,714 9,643 10,052 10,417 11,369 12,586 8,000 8,500 9,000 9,500 10,000 10,500 11,000 11,500 12,000 12,500 13,000 Comparison of Incidents by Year ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 12 Exhibit 11 Grid Response Map ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 13 Exhibit 12 Table of Staffing 2006-2016 Staffing levels were reduced between 2009-2013. The current staffing levels are consistent with the 2008 staffing levels which was the District’s peak staffing over the past ten years. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Part Time 33 31 32 19 24 32 37 31 31 27 25 Fulltime 69 77 91 101 94 94 88 90 99 99 101 0 20 40 60 80 100 120 140 Axis Title Marysville Fire Staffing History ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 14 Exhibit 13 Forecast Population Growth Future growth forecast for the area will be primarily within the city limits. The city’ population is projected to grow to 87,798 by 2035. Relatively little growth is forecast to rural areas such as FPD12. Additional growth in FPD12 will probably be in the Tulalip Reservation in Grid 1914 or in the Tribes’ contract area Quilceda Village in Grid 2114. As a result, it will be important to anticipate future needs that emerge with increased service demand at the central stations. Response times for grids 1914 and 2114 on the Tulalip reservation are amongst the longer response times for MFD. These were two of the top ten active grids in both 2014 and 2015 (as well as prior years). This may indicate need for a station to service Tulalip growth needs in the future. At last month’s State of the Tribes, Chair Sheldon announced the Tribes’ intention to create a tribal fire service in future. As a result, it will be important to follow the Tribes’ plans closely so as not to duplicate facility decisions for areas west of Interstate 5. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 15 CHAPTER III: ORGANIZATIONAL ALTERNATIVES TO BE STUDIED Exhibit 14 summarizes the characteristics of each alternative. Exhibit 14 Summary of Alternatives Model Current Contract Fire District Annexation City Fire Department Regional Fire Authority Formation City and District 12 Approval Public vote City Approval Public Vote Governance City/District Board with equal representation Elected commissioners, City residents could be elected after formation Mayor & City Council Subject to RFA Plan Financing method Property tax levies, city portion from general fund Property tax levies, contracts, ambulance Property tax levies, multiple general fund sources, bonds Property tax levies, contracts, ambulance Taxing District FPD12-Junior FPD12 – Junior City-Senior RFA-Junior Levy Limit $1.50/$1,000 AV $1.50/$1,000 AV $3.10/$1,000 AV $1.50/$1,000 AV EMS Levy Limit $0.50/$1,000 AV $0.50/$1,000 AV $0.50/$1,000 AV $0.50/$1,000 AV Debt Capacity Each entity has its own limit Total AV Total AV Total AV Stakeholder Issues Throughout the past three years, multiple issues have emerged as important to the City Council regarding future planning for Marysville fire operations: o Provide high quality level of service and establish actual standards for that level of service, o Increase transparency, o Have a governance model based on population and/or assessed valuation within the service boundary, o Improve strategic planning for personnel, service and facility needs, o Understand revenues sources and options to provide for current and future fire operation needs, o Provide greater financial sustainability for future operations, o Manage financial impact and total cost to Marysville citizens, o Specify asset ownership. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 16 CHAPTER IV: ALTERNATIVES ANALYSIS Exhibit 14 identifies the organizational alternatives, with a summary of advantages and disadvantages of each process. More thorough analysis and model runs of each proposal are detailed in the chapter. Exhibit 15 Alternatives Analysis Current Agreement (Alternative 1) Annexation to District 12 (Alternative 2) City Fire Department (Alternative 3) Regional Fire Authority (Alternative 4) Advantages: Continues consolidated operations Maintains City involvement with Fire & EMS services Does not affect general property tax limit Advantages: Continues consolidated operations Established by public vote in both jurisdictions Dedicated funding source that is subject to public vote for future increases Advantages: Established by Mayor and Council Maintains City involvement with Fire and EMS services Provides City governance over fire & EMS services and budget Does not affect general property tax limit Provides more varied funding sources City ability to coordinate strategic planning for all of its facilities and operations Advantages: Depending on agencies involved would either continue or establish new consolidated operations Established by public vote Provides for agreed upon governance structure, including proportional representation Maintains City involvement with Fire & EMS services if Board includes elected officials Dedicated funding source that can be increased through public vote Disadvantages: Representation is not proportional to population Financial formula must be recalculated MFD is not a legal entity which complicates decision making, levy increases, asset and auditing compliance Disadvantages: Current District representatives made up of unincorporated area Mayor and Council would be excluded from governance structure May require that the City pay for fire prevention and fire code enforcement activities separately Reduces general property tax limit Disadvantages: Consolidated operations dependent on contract decisions of FPD12 City has full responsibility of funding City assumes responsibility for personnel management Requires dissolution of current agreement and disposition on assets Disadvantages: May require that the City assume costs for fire prevention and fire code enforcement activities separately Requires dissolution of current agreement and disposition on assets Will impact City’s general property tax limit ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 17 ALTERNATIVE 1 – MODIFY CURRENT INTERLOCAL AGREEMENT 1. Summary of Alternative The Marysville Fire District currently operates under an interlocal agreement. The agreement was recently revised by the City and FPD12 to terminate on December 31, 2016. The ILA provides for notification by September 30, 2016 of its decision regarding alternative structure. Further revisions to the ILA could enable the City and FPD12 to continue operations in a similar fashion to the current arrangement. Proposed revisions could include proportional stakeholder representation. The funding formula could also be revised with both parties consent. 2. Analysis This model is not one typically used by other cities; instead we identified a couple instances where it was used as a transition model to a more permanent restructuring such as an RFA or annexation. The MFD is not a separate legal entity which makes financial decisions difficult as there is no credit rating for MFD, requiring that all large capital purchases and buildings be financed on a cash basis. Each entity must act on its own EMS and levies, complicating already difficult decisions. The Washington State Auditor has recently determined that the lack of a separately created agency or entity for MFD entails that City and FPD12 determine each agency’s assets to report and depreciate. The historic ILA did not provide for any administrative oversight by the City’s executive office or staff. The structure seemed to act like a vendor relationship where the city contributed funds and in exchange received fire service but had limited influence on budget or strategic planning for future operations. While the City held three positions on the Board, it was extremely rare that direction, options and decisions on fire service were discussed, debated or shared with the Council as a whole throughout the 25 year partnership. This is divergent from how normal business is conducted between Councilmembers and staff. As a result, transparency of administration, decision- making and finance was limited by the lack of open debate and discussion with the full City governing body. This is how the ILA was structured and initially when the city was a minor party to the overall operation and funding, it was probably appropriate. As the City’s share of budget and service area increased, this structure has led to disengagement and concern due to lack of information and knowledge about the operation. In addition, as is typical in an ongoing operation, the issues that would become known to the Council tended to be issues of strife or unease, such as labor- management disputes and, budgetary concerns. This has not been balanced by the information on daily successes and achievements of the operation, of which there are many. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 18 The City Council had identified proportional representation as a stakeholder issue during initial discussion of fire service alternatives. The current MFD Board ILA provides for 50% Board representation by the City Council who account for 82% of the population. In turn, FPD12 representatives have 50% Board representation despite making up only 12% of the MFD. A proposal for proportional representation was already rejected by FPD12 through the RFA planning committee, so it is unknown whether it would be accepted in an ILA concept. The fire operation is also at a point in its finances where future direction is unclear. While there is a significant reserve balance, there is a need to establish new revenue streams or establish new levels of service and direction for operations. There is a concurrent need to establish capital priorities for Station 61 relocation and also planning for future growth needs, all of which requires more money. 3. Conclusions The City and FPD12 have repeatedly sought changes to the agreement or the overall ILA model over the past ten years. MFD staff (through Chief Corn) articulated the need to seek a more permanent restructuring by either annexation to FPD 12 or creation of an RFA throughout this time. The subject of restructuring the model has been actively pursued at least four times in the past ten years. As a result, maintaining the current ILA structure does not seem to address future growth of the District to have a more sustainable financial model and to plan strategically for fire service needs. It would seem that the MFD has outgrown this model of governance. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 19 ALTERNATIVE 2 – CITY ANNEXATION TO FPD#12 1. Summary of Alternative. Annexation to FPD12 would entail the City limits being absorbed into FPD12 and the City permanently dissolving its interest in fire operations. This would enable future fire service and operations to be determined through the fire protection district. The city would have no role or responsibility for this service. To annex into District 12, the City Council needs to initiate the annexation by adopting an ordinance stating its intent to join District 12 and a finding that the public interest will be served as a result. If the board of fire commissioners for District 12 concurs with the annexation, the Snohomish County Council would then be notified. Once the County Council is notified, it then calls for an election by resolution, and if a majority of both the City residents and the District 12 residents vote for the annexation, it is approved. 2. Analysis In 2010-2011 the City did consider and begin pursuit of this option. The proposal was later abandoned, due in large part to concerns regarding future funding caused by the recession, increasing labor-management issues within MFD, and further evaluation by the City Council. The option does not meet stakeholder concerns relating to governance as it provides for no oversight by Mayor and Council, and initially provides for a severe deficiency to representation by the incorporated residents which currently comprise 82% of the service area. While the representation may work itself out over time as Marysville residents are appointed and later elected as commissioners, the lack of taxpayer representation during the initial formative stages of the governance structure is in direct conflict with current stakeholder concerns. A review of forecast growth within the MFD service area demonstrates that the city’s decisions relating to growth and development will be the primary issues for fire operations in future. 3. Conclusion This alternative does not address Council concerns relating to governance, finances or strategic planning. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 20 ALTERNATIVE 3 – CITY FIRE DEPARTMENT 1. Summary of Alternative. Establishing a City Fire Department would entail the City being solely responsible for the financing and oversight of the fire operation. Given the historic consolidation of services, termination of the longstanding agreement will result in a series of negotiations and decisions. The City would notify the District by September 30, 2016 of its intent to begin fire service in 2017 with a city department. FPD12 would need to determine whether they would contract with the city for fire and EMS services for all or part of the District. The City would propose a contract for services to assist them in making their decision and begin negotiations if appropriate. The City would also negotiate terms for hiring and transfer of FPD12 employees and current asset distribution. There are many related decisions and details that this would involve. 2. Governance. The governance model of the city fire department is the same as for any other city service function which is the Mayor and City Council as the elected decision- makers. The elected representatives for the corporate limits of Maryville would be directly responsible for overseeing the operation. This is a model that has been employed by many other communities. In Snohomish County alone, the cities of Everett, Arlington, Bothell, and Mukilteo operate fire operations as part of their municipal function. Some of these cities are currently exploring regional solutions in order to alleviate funding pressures on municipal operations. The city of Marysville too had a city fire department at one time. Almost any operation of a city can be run internally or contracted out to the satisfaction of the customers. The decision-makers need to consider whether an internal operation will achieve their goals and either positively or negatively address the stakeholder concerns. The stakeholder issues included a goal of greater transparency and oversight by City Council. This would provide the same review as other departments within the City. 3. Strategic Planning. Under the Growth Management Act, future growth is primarily contained within urban growth areas. Consequently, much of the demand growth will occur within cities in future years. Very little future growth is planned for rural areas so the focus for future service planning will need to be on urban areas to maintain level of service. As a result, future fire operations should be closely aligned with city plans and decisions. The City of Marysville has annexed almost its entire UGA, so should ensure the fire operation is coordinating its facility, service and personnel plans with city population and employment growth. Comprehensive planning and ensuring that city decision making is supportive of fire operations (from building & fire codes, streets, water, etc.) will facilitate efficiency in the operations. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 21 Coordination of Fire facility planning with City facilities would be beneficial to the City’s operations. The City is evaluating the jail/police administration facilities and has identified needed reconstruction/expansion of both jail and police building areas. In order to accomplish the expansion, Station 61 must be relocated. Despite this being under discussion for at least two years, there has been no coordinated effort by MFD to plan for relocation. This is in large part due to uncertainty as to its future (City fire, RFA, Annexation). In addition, the fact that MFD is not a separately established government entity makes it infeasible for fire to bond for a new station. If the City department option is approved at the end of 2016, it will enable the City to move forward immediately with plans for its public safety facilities, which would then include police (jail and offices) and a fire station. The city’s budget modelling for a City department has incorporated a proposed new station into the model forecast, along with revenue source. 4. Financial Assumptions. Evaluating the budget impact for a city department alternative requires incorporation of assumptions for the analysis. Since City administration is not directly responsible for the current budget we worked closely with Fire District staff to compile information for this study. We relied on current budget allocations of the District, as well as information that had been produced for future year model runs. Fortunately, Fire District staff is utilizing the same model as the City for their forecasting, so City Finance was able to transfer the information for use in our impact analysis. The current MFD fire operation exceeds revenues by $2.9 million/year (2016 budget). However, a large fund balance was accumulated by MFD between 2007 and 2012 through the budgetary process so this has not been an issue for fire operations. In the event the operation were to be assumed by Marysville, a proportional share of the fund balance would be returned to the city and could in the interim be used to fund the imbalance in revenues and expenditures for fire services until the city has time to pursue additional revenue sources. Staff believes the following revenue sources should be pursued and could generate additional revenues to support a city fire department option: ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 22 Exhibit 16 Revenue Sources Potential Revenue Sources Amount to be Generated Annually EMS levy established by public vote (increase from .40 to .50)* $780,000 Public Safety Measure Voted Bond for New Public Safety Building $15 million(30 year)* $868,000/year AV of $250,000 - $32.75/year 1% General Fund Property Tax* $135,892 AV of $250,000 - $5.50/year Contract Revenues from FPD12 (for retention of service to the District boundary)** $2,700,000/year if full service is provided Contract Revenues from FPD12, Tulalip Tribes, QVC (for retention of service to portions of FPD12 and/or QVC if desired by the District or Tribes)*** $500-1,500,000/year (this assumes negotiation of a specific amount for ALS and service to FPD areas that are difficult to serve from Station 65) Ambulance Utility Unknown – subject to RCW 35.21.766 General Fund Allocation To Be Determined *assumed for Options 1 and 2; **assumed for Option 1, ***mid-range assumed for Option 2 City staff has run two city department options (Option 1 and 2) for Council review. We have made certain assumptions, which will be outlined below. Endless iterations of model runs and assumptions can be run on a city department. We have selected runs that we feel are likely, or feasible. We have also incorporated recommended assumptions for financing the option that we believe feasible. The overall model shown is for the City’s general fund budget as a whole. The reason for this approach is that the City must finance the entire city operation, not a single department. The analysis on whether to create a city department should evaluate the needs and goals of the entire city operation. Our interest is not in whether the City can afford to finance a fire operation. The answer to this is clearly yes. The overall General Fund has more than adequate resources to fully fund the needs of any single department. The concern is whether the City has the capacity to fund the needs of future needs of multiple departments including a fire department, while also advancing key priorities and capital projects already identified by the City. We also ran the forecast model without a City fire department operation for comparison as part of the RFA analysis. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 23 Option 1. City Fire Department with FPD12 Contract for Consolidated Operations. Description If the City assumes a city fire department, the goal should be to continue running a consolidated operation with FPD#12. Option 1 assumes this scenario. However, this is contingent upon whether FPD#12 wishes to contract back with the City. A contract arrangement would enable the operation to continue operations of all stations and personnel without alteration. It would reduce impacts to the transition. The City should be prepared to offer a contract to the District that offers equitable terms to the current ILA and ensures service at or above current levels. The model assumptions for Option 1 are: a. Property Assessed Valuation 4% increase per year 2017-2021 b. 1% Annual property tax increase c. Annual increase of 3.8% wages and benefits d. Model assumed 4 additional General Fund employees per year. We did not allocate this by department, instead assuming that the needs of the City would determine placement. 100% of MFD estimated personnel and budget unless otherwise stated in assumptions. e. This option assumed contract by FPD12 for continued consolidation of fire service. f. This option assumes resolution of MFD ending fund balance transfer at 82% of 2016 estimated EFB. g. Assumes revenue equal to FPD12 (assumes all contracts retained) h. Assumes all of the following projects move forward with assumptions made for financing through debt and/or capital reserve: Police/Jail – public safety building-$20M over 30 years Fire Station 61/Admin relocation/construction-$15M over 30 years (voted) Waterfront Park and Trail-$12M bond; $7M from capital reserves First Street Bypass-$12M Manufacturing/Industrial Center Road Network (156th/160th/51st Ave)- $10M General Fund Lakewood Road Grid-$2.5M i. EMS Levy increase (voted) from $0.40 to $0.50 effective in 2018. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 24 j. Additional sales tax revenue increases from new construction in 2019. k. Increased project construction sales tax from various funded projects anticipated in future years. Financial Modelling of Alternative. Property Tax Impact with the Alternative (Option 1) It is important to be mindful of the impact to taxpayers with each option. All options assume increased revenue and taxes, levies or contracts to build a financially sustainable fire operation. Staff has calculated the net impact proposed with each option for Council review and discussion. The City department proposal with EMS levy going from $0.40/$1,000 AV to $0.50/$1,000 AV and a voted bond levy to address the public safety needs at an estimated $32.75 per year per $250,000 AV would result in an increase to households of $62.07 a year or $5.17 per month. The following table provides additional tax detail. CITY OF MARYSVILLE, WA - OUTLOOK- DRAFT - OPTION 1 Fire Svcs as a dept. in 2017 7/10/2016 13:00 2010 2011 2012 2013 2014 2015 Actual Budget Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Beginning Fund Balance 5,279,740 6,408,696 18,723,991 19,715,586 20,095,192 20,054,063 18,818,278 16,375,528 13,711,163 10,753,938 8,531,345 Annual Revenues 43,937,721 45,231,605 52,416,481 55,673,146 58,088,788 59,073,037 60,275,312 62,565,774 64,892,274 67,358,180 69,917,791 Labor Costs 20,935,282 22,095,691 23,873,558 25,195,953 26,584,377 28,041,938 29,571,886 31,177,617 32,862,682 34,630,792 36,485,824 Additional FTE 400,000 415,200 430,978 447,355 464,354 482,000 500,316 519,328 539,062 Departmental Exp 18,641,189 20,092,921 12,020,514 12,200,821 12,383,834 12,569,591 12,758,135 12,949,507 13,143,750 13,340,906 13,541,020 Operating Exp 3,232,294 2,910,541 15,130,815 17,481,565 18,730,729 19,249,939 19,923,686 20,621,015 21,342,751 21,089,747 21,827,888 Ending Fund Balance 6,408,696 6,541,148 19,715,586 20,095,192 20,054,063 18,818,278 16,375,528 13,711,163 10,753,938 8,531,345 6,055,342 Annexation Sales Tax Credit Expiring 2020 ($1,000,000) 2021 ($1,000,000) PRIMARY MODEL ASSUMPTIONS - FIRE AS A CITY DEPT Property Taxes ( w1% 2017 4% AV Increase 2017 - 2021 Wage & Benefits 3.8% Increase in Wages & Benefits Additional Staffing 4/per yr beginning in 2017 Cash Tsf from Fire 2017 - $12,182,843 Fire Revenue Equal to Fire 12 Fire Expenses -100% Personnel Equal to Fire 12 (Apparatus $100,000) Debt Public Safety $20 M/30 yrs Beg. 2018 $893,000M/yr @ 2% Public Safety $15M/30 yrs Beg. 2018 Voted Bond-$250,00AV=$32.75/yr Waterfront $13 M/20 yrs Beg. 2018 $800,000/yr @ 2% M from Cap Reserves) 1st ST Bypass $12 M/20 yrs Beg. 2019 $665,000/yr @ 1% 156th/51st $20M ($10M UT) Beg 2020 $612,000/yr @ 2% 20 yr Lakewood $2.5M Beg 2020 $139,000/yr @ 2% 20 yr EMS Levy $0.40 to $0.50 2017 Voted - 2018 $780,000/yr-AV$250,000=$25/yr Add'l Fire Revenue 2017 - $0 Fire OT & P/T Reduction 2017 - $0 Retail Sales Tax -Permitted 2019 - $350,000 Project Const. Sales Tax 2017 to 2022 Various One-Time Amounts Levy Options: 2018 - $0 Levy Lid Lift Public Safety Maint. Levy Ambulance Levy 0.00 5,000,000.00 10,000,000.00 15,000,000.00 20,000,000.00 25,000,000.00 30,000,000.00 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 General Fund Ending Fund Balance Reserve Goal Ending Fund Balance ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 25 Analysis of City Fire Department, Option 1. For City management, the primary questions and concerns are: 1) Will assumption of fire as a city department impact financial sustainability of the overall city operation by bringing another higher cost department into the city’s general fund? 2) Will personnel and labor relations issues impact overall management operations of the city? 3) Will the City be able to more effectively plan and provide for financial sustainability of the operation? 4) Will the elected officials be willing to make choices that provide for the financial sustainability of the operation and overall city? Key concerns expressed by the current MFD Board are the lack of a financially sustainable funding plan for future operations. Therefore, any new model must address these concerns through the ability to manage expenses and provide additional revenue options. The City can anticipate additional cost impact to the general fund from assumption of the operation. This is consistent with the financial modelling completed by MFD staff that demonstrates the impact of expenditures beyond revenues. In the first few years, the proportional reserve carryover from MFD can be used to fund the overages. The City does have multiple income sources available to us, as opposed to property tax. City revenues are forecast to increase, so with the revenue assumptions made annual property tax, EMS levy, Station 61 voted bond), we believe that the operation can be absorbed if contracts are retained. While the General Fund is shown to be declining over time, it does not run under the goal of 10% cash reserve. In general the city overall revenues are forecast to increase, so the longer time frame shown in the city’s budget decline with city fire department (than MFD modelling) depicts the City Property Tax Rate Current Property Tax Rate w/1% & EMS @ $0.50 Property Tax 2016 2017 Regular 2.28 $ 2.19 $ EMS 0.40 $ 0.50 $ Total 2.68 $ 2.69 $ $250,000 AV 670.34 $ 699.66 $ Voted Levy 32.75 $ Total 670.34 $ 732.41 $ Difference 62.07 $ 2016 AV of $250,000 increases by an estimated 4% to $260,000 in 2017 City Property Tax Impact City Fire ‐ Option 1 ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 26 availability of other revenue sources funding the expenditure line. An additional portion of current general fund revenues would be directed to the fire operation, as well as additional revenues needed through the assumptions. Conclusions for City Fire Department, Option 1. If FPD#12 elects to maintain the contract for Station 65 through a contract similar to current contract costs, the City will be able provide fire service operations at or above current levels of service. This model assumes that City is bearing an increasing proportion of costs since the General Fund is absorbing the forecast expenditure imbalance shown in MFD modeling. Over time we hope that there will be areas identified by city staff to reduce cost or achieve greater revenue or fee recovery. The addition of a fire department does cause an overall decline in fund balance over time, but by maintaining all contracts the City can continue to meet its reserve goal to 2025. Because of the relatively long lead time, staff believes that adjustments could be made during the forecast period to address future deficiencies potentially occurring after 2025. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 27 Option 2. City Fire Department without FPD12 Contract for Consolidated Operations. Description In the event that FPD#12 does not contract back, and opts instead to run Station 65 to service their boundary, the city operation would be limited to Stations 61, 62, 63, and 66. From a service standpoint, this is unlikely to disrupt the City operation and will enable full fire and EMS (ALS/BLS) service at current levels. This results in the loss of contract revenue in the range of $2.7 million (2015 FPD12 contribution). Part of this amount could probably be recaptured in service back to FPD#12 and Tulalip Tribes for ALS and special operations as it is assumed they will wish to retain these services for their constituents. We have made some assumptions for revenue recovery through contracts, but this is all subject to negotiation. The staff numbers associated with Station 65 have been assumed to be retained by the City for personnel at the city stations (61, 62 63, 66). This could reduce impact from a labor relations standpoint. The retention of all staff positions in the City’s budget, without the benefit of contract revenues for Station 62 is a higher cost option. It should be noted that the operations personnel needed today will be the minimum needed even if separately operated by FPD#12 and City, so there will be no reduction of firefighter positions even if the City did not absorb all personnel. It is also assumed that FPD #12 would need to retain some level of administrative staff for finance and personnel needs. As a result, it is likely that the office jobs could also be retained at current or higher levels with separate operations. The model assumptions for Option 2 are: a. Property Assessed Valuation 4% increase per year 2017-2021 b. 1% Annual property tax increase c. Annual increase of 3.8% wages and benefits d. Model assumed 4 additional General Fund employees per year from 2017- 2019, and 2 per year from 2020. We did not allocate this by department, instead assuming that the needs of the City would determine placement. 100% of MFD estimated personnel and budget unless otherwise stated in assumptions. e. This option assumed loss of $2.7M contract revenue from FPD 12. f. This option assumes resolution of MFD ending fund balance transfer at 82% of 2016 estimated EFB. g. Assumes revenue equal to MFD (assumes all fees and contracts retained) h. Assumes expenditures equal to MFD (apparatus fund at $100k/year) including all personnel transferred to City. i. Assumes all of the following projects move forward with assumptions made ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 28 for financing through debt and/or capital reserve: Police/Jail – public safety building-$20M over 30 years (voted) Fire Station 61/Admin relocation/construction-$15M over 30 years (voted) Waterfront Park and Trail-$12M bond; $7M from capital reserves First Street Bypass-$12M Manufacturing/Industrial Center Road Network (156th/160th/51st Ave)- $10M General Fund Lakewood Road Grid-$2.5M j. EMS Levy increase (voted) from $0.40 to $0.50 effective in 2018. k. Additional sales tax revenue increases from new construction in 2019. l. Increased project construction sales tax from various funded projects anticipated in future years. m. Due to additional full-time Fire employees (9 from Station 65) being available for City stations, this option assumes a $750k reduction in overtime and part-time staffing costs. n. Assumes $750k contract revenue from FPD12 for ALS, special operations, and service to parts of the district that Station 65 cannot serve effectively (actual amount to be negotiated) ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 29 Financial Modelling of City Fire Department, Option 2. Property Tax Impact with City Fire Department, Option 2 It is important to be mindful of the impact to taxpayers with each option. All options assume increased revenue and taxes, levies or contracts to build a financially sustainable fire operation. Staff has calculated the net impact proposed with each option for Council review and discussion. The City department proposal with EMS levy going from $0.40/$1,000 AV to $0.50/$1,000 AV and a voted bond levy to address the public safety needs at an estimated $73.41 per year per $250,000 AV would result in an increase to households of $102.73 a year or $8.56 per month. The following table provides additional tax detail. CITY OF MARYSVILLE, WA - OUTLOOK- DRAFT - OPTION 2 Fire Svcs as a dept. in 2017 7/10/2016 13:00 2010 2011 2012 2013 2014 2015 Actual Budget Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Beginning Fund Balance 5,279,740 6,408,696 18,723,991 18,115,586 16,984,642 15,372,883 12,727,688 9,051,280 5,344,405 1,552,140 (1,280,743) Annual Revenues 43,937,721 45,231,605 50,416,481 52,854,396 55,162,925 56,035,992 57,122,859 59,293,528 61,495,682 63,832,518 66,258,154 Labor Costs 20,935,282 22,095,691 23,473,558 24,780,753 26,153,399 27,594,583 28,875,354 30,213,618 31,611,893 33,072,809 34,599,107 Additional FTE 400,000 415,200 430,978 223,677 232,177 241,000 250,158 259,664 269,531 Departmental Exp 18,641,189 20,092,921 12,020,514 12,200,821 12,383,834 12,569,591 12,758,135 12,949,507 13,143,750 13,340,906 13,541,020 Operating Exp 3,232,294 2,910,541 15,130,815 16,588,565 17,806,474 18,293,335 18,933,601 19,596,277 20,282,147 19,992,022 20,691,743 Ending Fund Balance 6,408,696 6,541,148 18,115,586 16,984,642 15,372,883 12,727,688 9,051,280 5,344,405 1,552,140 (1,280,743) (4,123,990) Annexation Sales Tax Credit Expiring 2020 ($1,000,000) 2021 ($1,000,000) PRIMARY MODEL ASSUMPTIONS - FIRE AS A CITY DEPT Property Taxes ( w1% 2017 4% AV Increase 2017 - 2021 Wage & Benefits 3.8% Increase in Wages & Benefits Additional Staffing 4/per yr beginning in 2017; 2/per yr in 2020 Cash Tsf from Fire 2017 - $12,182,843 Fire Revenue Equal to Fire 12 less Dist. Rev $2.75M Fire Expenses -100% Personnel Equal to Fire 12 (Apparatus $100,000) Debt Public Safety $0 M/30 yrs Beg. 2018 $0 Public Safety $35M/30 yrs Beg. 2018 Voted Bond-$250,00AV=$67.37/yr Waterfront $13 M/20 yrs Beg. 2018 $800,000/yr @ 2% M from Cap Reserves) 1st ST Bypass $12 M/20 yrs Beg. 2019 $665,000/yr @ 1% 156th/51st $20M ($10M UT) Beg 2020 $612,000/yr @ 2% 20 yr Lakewood $2.5M Beg 2020 $139,000/yr @ 2% 20 yr EMS Levy $0.40 to $0.50 2017 Voted - 2018 $780,000/yr-AV$250,000=$25/yr Add'l Fire Revenue 2017 - $750,000 Fire OT & P/T Reduction 2017 - ($750,000) Retail Sales Tax -Permitted 2019 - $350,000 Project Const. Sales Tax 2017 to 2022 Various One-Time Amounts Levy Options: 2018 - $0 Levy Lid Lift Public Safety Maint. Levy Ambulance Levy 0.00 5,000,000.00 10,000,000.00 15,000,000.00 20,000,000.00 25,000,000.00 30,000,000.00 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 General Fund Ending Fund Balance Reserve Goal Ending Fund Balance ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 30 Analysis of City Fire Department, Option 2. This option is challenging to the City’s general fund. Only with the additional revenue assumptions for voted levies would the City be able to maintain operations and meet our minimum reserve goals through 2025. However, there will clearly need to be overall adjustments made in strategizing the budget to ensure that the operation can respond to the forecast decline. As this model assumes a higher employee number, with the City absorbing personnel previously assigned to Station 65, at the same time it is losing the contract revenue from FPD12, it is a costlier option. The basis for absorbing the employees is to reduce labor issues resulting from the transition. On the positive side, this would allow staffing of the ladder truck and eliminate the concerns currently voiced by employees and fire management regarding the difficulty of maintaining the part-time program. Over time, the City would intend to replace some of these temporarily created full time personnel with part-time staffing through attrition or vacancies. In the event, FPD12 personnel opted to remain to staff Station 65 then these positions would not be created. This is a worst case (highest cost) model run. The additional cost causes a much more severe decline to the General Fund model. It is quite possible that once negotiations are initiated, station personnel may choose to remain at Station 65 which would alleviate the cost assumptions in this option. Labor. The additional of a city fire department requires the consideration of staffing and associated costs as well as labor unions. Section 23 of the inter-local agreement provides for the employment on termination stated as follows: “In the event, as a result of the notice of termination or expiration of this agreement, District 12 must terminate any of its employees, the City agrees that it will, if positions are available, hire the qualified employees terminated by District 12 before it employs additional personnel. Subject to the provisions of any collective bargaining agreement to which District 12 or the Board of Directors may be a party, the determination of City Property Tax Rate Current Property Tax Rate w/1% & EMS @ $0.50 Property Tax 2016 2017 Regular 2.28 $ 2.19 $ EMS 0.40 $ 0.50 $ Total 2.68 $ 2.69 $ $250,000 AV 670.34 $ 699.66 $ Voted Levy ‐ $ Voted Bond 73.41 $ Total 670.34 $ 773.07 $ Difference 102.73 $ 2016 AV of $250,000 increases by an estimated 4% to $260,000 in 2017 City Property Tax Impact City Fire ‐ Option 2 ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 31 which District 12 employees will be terminated and employed by the City shall be negotiated by the parties. The negotiations shall take into consideration a fair and equal apportionment of the employees based on the length of service, experience, qualifications and rank of the employees.” The mechanics of the staff transfers have not been discussed. It is assumed that the City will bear all contract costs for represented employees who choose to be employed by the city of Marysville in a city fire department. Costs associated with negotiations have not been determined at this time. With the assumption that the City has made to use the MFD budget as a basis for the City budget it is assumed that current contract items have been accounted for. Conclusions for City Fire Department, Option 2 If FPD#12 does not elect to contract for Station 65 through an ILA, this model assumes that the City would be willing to maintain all FPD12 employees at the existing city stations. It assumes that most employees would prefer to stay with the larger operation due to promotional and other opportunities. This option with concurrent contract revenue loss, and increased personnel costs will be challenging. The Council should only choose this option if it is willing to provide funding in line with the proposed assumptions. Without the ability to provide additional funding to the City operation, this could jeopardize other city services and priorities. The model depicts the reserve depleted around 2023 absent other financial measures being taken by the City (levy lid lift, other levies, expenditure reductions, etc.) ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 32 Alternative 4, Regional Fire Authority (RFA). Summary of Alternative. The RFA alternative is another viable model of fire service for communities. RCW 52.26 provides for the formation and operation of RFA’s. The RFA operates like a fire district and has been codified under the majority of laws applicable to fire districts. To create a regional fire authority, the City and District 12 would need to do the following: Establish a planning committee consisting of three elected officials from each jurisdiction Develop and adopt a regional fire authority fire protection plan that covers governance, design, financing, facilities and operations, and recommended revenue sources (e.g. property taxes and/or a fire benefit charge). The process also requires public input. Obtain approval of the plan from each jurisdiction before sending it to the ballot, Requires a majority vote if the revenue source is only property tax, but requires a 60% approval vote if a benefit charge is included as part of the revenue package. The Council and FPD12 initiated a planning committee to study the formation of a regional fire authority for FPD12 and the City of Marysville. Ultimately the Council and FPD 12 were unable to reach agreement over governance and requested further review of other options. The Marysville City Council had proposed a proportional representation based on City population. At current time, this is approximately 82% City and 18% FPD12. 1. Governance Regional fire authorities have a governance structure established through the planning process prescribed by RCW 52.26. It can be designed in any format or in any representation method of the project partners. RFA PARTNER – Fire Protection District #12. With respect to FPD 12 as a potential partner, the Board of Commissioners sent a letter to the Marysville City Council with a “Last, Best and Final Offer” of governance. The proposal included three options, summarized below: OPTION 1:4 Year Transitional Governance Model For calendar years 2018 and 2019 there would be 4 City Council and 3 District 12 RFA Board members. In calendar years 2020 and 2021 there would be 4 City Council members and 2 District 12 members and 1 member elected at large from within the boundaries of the RFA. In Calendar year 2022 and thereafter there would be 3 City Council members, 2 District 12 members and 2 members elected at large from within the ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 33 boundaries of the RFA. The at large members would run for election in the odd numbered years preceding the years in which they serve. It would also be the intent of District 12 to ask the City to commit at the inception of the RFA to have the City's RFA representation be comprised at least partially of current Marysville Fire District Board appointees. Year City Council Positions FD 12 Positions RFA Boundary 2018 4 3 0 2020 4 2 1 2022 3 2 2 OPTION 2: Tie Breaker Model From the inception of the RFA the Board would be comprised of 3 City Council members, 3 District 12 Commissioners, and 1additional City Council member or the Mayor who could vote only in the case of a tie of the other 6 governing board members. City Council Positions FD 12 Positions Mayor or Council Tie Breaker 3 3 1 OPTION 3: Advisory Position Model From the inception of the RFA the Board would be comprised of 3 City Council members, 2 District 12 Commissioners and 1Fire District 12 Commissioner who is a non-voting advisory member. City Council Positions FD 12 Positions FD 12 Commissioner 3 2 1 RFA PARTNER – City of Arlington. Another potential RFA partner is the City of Arlington. The city of Arlington had previously identified the potential partnership in a study of fire alternatives they completed in 2015. One advantage of a city-city RFA is that governance would likely be composed of members of each city’s governing body. The cities could agree to proportional representation based on population. This concept is well accepted in city funding and governance concepts so will likely be acceptable to both parties. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 34 2. Strategic Planning As noted in the discussion of City department, areas of growth will be in urban growth area and cities. Another area of FPD12 that is experiencing growth pressures and higher response times are the Tulalip contract area and areas of the Tulalip reservation around Marine View Drive. Future planning for the RFA should focus on addressing service needs of these growing areas. Additional revenue sources must be developed to address infrastructure demands in these areas. City priorities to address police station and jail needs also require the relocation of Station 61 in the immediate future. The RFA needs to immediately address this issue by beginning planning for a new station and identifying revenues sources and timeline to address this need. 3. Finances The Finance discussion relates specifically to an RFA with FPD 12. If the City were to initiate planning processes with a separate project partner, different scenarios may arise. Staff utilized the documents prepared through the RFA planning committee process with FPD 12 and made adjustments for staffing and station construction so it was comparable to the City’s assumptions. The maximum property tax rate for an RFA is $1.50 plus $.50 for EMS if the authority and District do not have a benefit charge. If there is a benefit charge, the maximum property tax rate can only be $1.00. A levy rate change can be approved by a majority of the voters while a benefit charge must be approved by the 60% of the voters. In contrast to the current agreement, any rate change as part of a regional fire authority will be voted on by all registered voters within the RFA boundary. Because there is a maximum property tax that can be levied for operations and because any changes beyond the allowed authorized increase in the levy rate must be authorized by a public vote, costs are restricted by the revenue generated unless a majority of the residents vote for an increase. Based on 2016 assessed values, every 5 cent increase in the property tax rate generates about $299,000 in additional revenue. Depending on the RFA agreement the City may need to provide separately for fire code and fire prevention services currently covered through the ILA and provided through the office of the Fire Marshal. This service is critical to development services review and ultimately to economic development as a result. Retaining the ability to have some level of influence over these services is important to ensure that the office remains timely and responsive to the city’s permit review process. As a result, the city should ensure that it has the financial resources to cover these services if necessary. 2016 MFD budget for the Fire Prevention and Public Relations Division is $546,000, and any associated City fees or revenues for Fire Marshal activities are given to MFD. MFD staff prepared financial scenarios for the RFA planning committee’s review. In the scenario of a FPD12/City RFA, MFD staff and the FPD12 Commissioners assumed that RFA creation would occur with the maximum levy rate of $2.00 ($1.50 property tax and 0.50 EMS levy). Those assumptions and scenarios will be used for this study. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 35 If the City opts to pursue various RFA options, it is likely the construction of a new station 61 will be delayed another two years as the parties continue negotiations on future organization, await public votes on creation of the RFA, RFA funding levels, and establish credit ratings for bonding a new facility. 4. Model Assumptions: The City has used the model run by MFD staff for the RFA planning committee. MFD base budget was incorporated into this analysis. The City made the following changes to make the model more comparable to the City’s department analysis: a. MFD staff ran proposed levy at max rate of 2.00 ($1.50 regular levy, $0.50 EMS). This was assumed necessary to cover operations. b. City incorporated 1.5 additional staff/year. (MFD analysis remained at current staffing level throughout forecast period) City incorporated station 62 relocation/reconstruction cost of $15M. Two options were run, Option A with $10M cash (EFB) and $5M financed over 10 years, and Option B with $15M bond financing for project. 10-year term was used because the RFA would likely use state financing due to lack of credit rating due at RFA initiation. 5. Model Run of RFA Option A with FPD12 with Station Cost Paid by Reserve ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 36 6. Property Tax Impact of RFA Option A with FPD12 with Station Cost Paid by Reserve This calculation considers the cumulative impact of the resulting City and RFA property tax rates based on model assumptions. The property tax impact of RFA Option 1 is $109.66 to an average household. 7. Analysis of RFA Option A with FPD12 with Station Cost Paid by Reserve The operating expenditures of the MFD RFA model exceed incoming revenues even at maximum levy rates. The ending fund balance is essential to allowing the RFA to function for the forecast period. If the reserve is utilized to assist in funding capital costs, the operation will deplete new revenues even if raised to maximum levy. The operation has no exceedance to enable planning for capital operations and additional staffing. This model is reliant on future levy lid lift and bonds to provide for operations and capital needs. 8. Conclusions RFA Option A with FPD12 with Station Cost Paid by Reserve The RFA must operate at maximum levies and immediately pursue levy lid lift within the first 3 years of RFA creation in order to maintain the current level of service with some minimum staffing additions over the next few years. This analysis shows depletion of the reserve by 2021, even if the maximum levy was to be approved for 2018 with the assumptions for proceeding with Station 61 relocation plans. This is a concerning future for the RFA. City Property Tax Rate Current Property Tax Rate Proposed City Tax Rate w/RFA Combined City & RFA Property Tax Rate Current City Property Tax Rate Proposed City & RFA Tax Rate Property Tax 2016 2017 Property Tax 2016 2017 Regular 2.28 $ 1.00 $ Regular 2.28 $ 2.50 $ EMS 0.40 $ ‐ $ EMS 0.40 $ 0.50 $ Total 2.68 $ 1.00 $ Total 2.68 $ 3.00 $ $250,000 AV 670.34 $ 260.00 $ $250,000 AV 670.34 $ 780.00 $ Voted Levy Voted Levy Total 670.34 $ 260.00 $ Total 670.34 $ 780.00 $ Difference (410.34) $ Difference 109.66 $ City Property Tax Impact RFA ‐ Option A ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 37 9. Model Run of RFA Option B with FPD12 with Station Cost Paid by Voted Bond 10. Property Tax Impact of RFA Option B with FPD12 with Station Cost Paid by Voted Bond This calculation considers the cumulative impact of the resulting City and RFA property tax rates based on model assumptions. The net impact to the property owner is approximately $133.66 per household for this option. City Property Tax Rate Current Property Tax Rate Proposed City Tax Rate w/RFA Combined City & RFA Property Tax Rate Current City Property Tax Rate Proposed City & RFA Tax Rate Property Tax 2016 2017 Property Tax 2016 2017 Regular 2.28 $ 1.00 $ Regular 2.28 $ 2.50 $ EMS 0.40 $ ‐ $ EMS 0.40 $ 0.50 $ Total 2.68 $ 1.00 $ Total 2.68 $ 3.00 $ $250,000 AV 670.34 $ 260.00 $ $250,000 AV 670.34 $ 780.00 $ Voted Levy Voted Levy 24.00 $ Total 670.34 $ 260.00 $ Total 670.34 $ 804.00 $ Difference (410.34) $ Difference 133.66 $ City Property Tax Impact RFA ‐ Option B ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 38 11. Analysis of Model Run of RFA Option B with FPD12 with Station Cost Paid by Voted Bond This model run maintains the reserve. It transfers the capital cost of station 61 relocation to debt. This analysis enables property tax revenues to cover operating expenses on an annual basis. This option does increase the property tax cost with the voted bond, which acts as a similar mechanism to the levy lid lift by generating additional property tax revenues. 12. Conclusions of Model Run of RFA Option B with FPD12 with Station Cost Paid by Voted Bond This alternative would appear a valid alternative to address fire operations. If an RFA is formed, we believe this is a likely scenario as it addresses the operating needs of the fire service organization and enables the department to continue operations at or above current levels of service while making necessary capital improvements that correspond with the City’s needs to reconstruct or remodel the City Public Safety Building for police and jail operations. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 39 CITY FINANCES WITH RFA ASSUMED (GENERAL FUND ALL DEPARTMENTS WITHOUT FIRE DEPARTMENT) The City’s finances would be improved without a fire department. All identified city projects could move forward. Assuming the economic environment continues to show strength, the City budget forecast indicates continued growth in our economic outlook. CITY OF MARYSVILLE, WA - OUTLOOK- DRAFT - RFA OPTION 7/6/2016 16:37 2010 2011 2012 2013 2014 2015 Actual Budget Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Beginning Fund Balance 5,279,740 6,408,696 6,541,148 11,025,483 12,312,038 13,863,998 14,472,129 14,148,894 13,906,888 13,689,406 14,493,220 Annual Revenues 43,937,721 45,231,605 38,889,076 40,393,965 42,228,998 42,623,325 43,200,511 44,842,131 46,546,132 48,314,885 50,150,850 Labor Costs 20,935,282 22,095,691 23,043,558 24,319,213 25,658,543 27,064,545 28,316,675 29,624,886 30,982,809 32,401,156 33,882,557 Additional FTE 400,000 415,200 430,978 223,677 232,177 232,177 241,000 250,158 259,664 Departmental Exp 18,641,189 20,092,921 8,916,307 9,050,051 9,185,802 9,323,589 9,463,443 9,605,395 9,749,475 9,895,718 10,044,153 Operating Exp 3,232,294 2,910,541 2,044,877 5,322,946 5,401,714 5,403,383 5,511,450 5,621,679 5,790,330 4,964,039 5,112,961 Ending Fund Balance 6,408,696 6,541,148 11,025,483 12,312,038 13,863,998 14,472,129 14,148,894 13,906,888 13,689,406 14,493,220 15,344,735 Annexation Sales Tax Credit Expiring 2020 ($1,000,000) 2021 ($1,000,000) PRIMARY MODEL ASSUMPTIONS Property Taxes (w0% 2017 4% AV Increase 2017 - 2021 Wage & Benefits 3.8% Increase in Wages & Benefits Additional Staffing 4 FTE/yr 2017-2021 2FTE/yr 2022+ Debt Public Safety $20 M/30 yrs Beg. 2018 $893,000/yr @ 2% Public Safety $0 M/30yrs Waterfront $13 M/20 yrs Beg. 2018 $800,000/yr M from Cap Reserves) 1st ST Bypass $12 M/20yrs Beg. 2018 $665,000/yr 156th/51st $20M ($10M UT) Beg. 2018 $612,000/yr @ 2% 20yr Lakewood $2.5M Beg 2018 $139,000/yr @ 2% 20yr Retaining $0.10/$1,000 AV $250,0000 = $25/yr EMS Levy $0.40 to $0.50 2017 Voted - 2018 $0 Add'l Fire Revenue 2017 - $0 Fire OT & P/T Reduction 2017 - $0 Retail Sales Tax - Permitted 2019 - $350,000 Project Const. Sales Tax 2017 to 2022 Various One-Time Amounts Levy Options: 2017 Voted - 2018 $0 Levy Lid Lift Public Safety Maint. Levy Ambulance Utility Fire Marshal Services 2017 - $546,000 0.00 5,000,000.00 10,000,000.00 15,000,000.00 20,000,000.00 25,000,000.00 30,000,000.00 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 General Fund Ending Fund Balance Reserve Goal Ending Fund Balance ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 40 CHAPTER IV – CONCLUSIONS FROM ALL ALTERNATIVES Both Alternatives 3 and 4 are viable alternatives that can meet the concerns expressed by the Council through this effort. Both options are anticipated to have a taxpayer cost in order to support a financially sustainable fire operation. The total impact to taxpayers varies with each alternative and option. The least cost impact to taxpayers is City Department with Fire District 12 contract for Station 65. This alternative and option has a net annual impact to taxpayers of $62.07. The highest impact is the RFA with voted bond for capital improvements (station 61 relocation) at $133.66 additional cost per year. Both of these scenarios entail public votes to approve the assumed levies and/or bonds. If the Council opts to pursue an RFA, there are two potential partners in this endeavor. MFD has provided the Council with a governance offer for consideration enabling the consolidation of fire district and city. Another potential RFA partner is the city of Arlington who would provide a different consolidation potential for city- centered fire service departments. The choice of RFA partner(s) is dependent on what the City Council believes will be most consistent with future vision of the City. Potential Next Steps and Council direction Following consideration of the options, Council should provide direction to move forward on one of the options. The next steps for each option are laid out below: Option 3, City Fire Department 1) City would notify MFD of the City’s intent to pursue a City fire department. 2) City would offer a contract (example Attachment) for service to continue consolidated operations for 2017. 3) City would also begin discussions to resolve asset distribution with MFD. This step is necessary in any option because the State Auditor has notified us that this must be complete for 2016 financial reporting. 4) City would discuss intentions of MFD with respect to Station 65 and whether they will be retaining staff to operate a stand-alone department or if they will continue consolidated operations under the contract terms above. City would discuss with MFD and labor union their preferences for either City absorption of employees and reassignment to City stations, or whether it would be preferable and beneficial to all parties to retain staff at Station 65. Option 1 $62.07 Option A $109.66 Option 2 $102.73 Option B $133.66 City Fire Department Regional Fire Authority (RFA) Property Tax Impact Summary ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 41 Option 4, Regional Fire Authority The next steps on a regional fire authority are dependent on the Council’s vision of future operations. RFA with FPD#12. If the Council opts to accept the offer from FPD12, we believe such an endeavor could be planned and potentially effective by 2018. 1) City would notify MFD of its intent to accept one of the options in their “Last, Best, Final” offer of 2015. 2) City would negotiate a contract extension for an additional year. 3) RFA committee would reconvene. Budget scenarios and levy recommendations have already been prepared by MFD staff as part of the prior work group so we could work through the RFA work plan with relative efficiency. This would continue the urban/rural partnership that has existed for the past twenty-five years between FPD12 and City. Obviously the organizational structure and management direction for the district has been established already so this would continue operations status quo. MFD staff has already prepared documentation and financial guidance for the RFA work group based on current budget and the City would not need to expend much in the way of time or resources directing or guiding this option. RFA with Arlington. If Council wishes to explore a potential RFA partnership with Arlington, following the transition to City fire department, we could initiate those discussions immediately. Based on initial exploration of this concept we believe such an endeavor could be planned and potentially effective by 2019. Both cities have compact boundaries and both have already annexed almost the entirety of their respective UGA’s. We have adjoining service areas and could with relative ease reestablish a joint station at Smokey Point to serve the current city/city area. We have similar population characteristics and urban densities. Future population and employment growth for north Snohomish County will be within our respective city limits. We already service Arlington for water service in the Smokey Point area, and have historically provided fire service to the Smokey Point area which could easily be jointly serviced through a single station. We also have established partnerships on other areas, such as joint economic development planning in the north end. The city of Arlington has been in discussions with their contract districts- Districts 19, 21 and 22. Those districts are currently exploring formation of a rural fire district and have given notice to Arlington of their intent to terminate their contracts by end of 2017. From their discussions, they have identified some distinctions between level of service expectations and financial capability of rural and urban districts. 1) City would notify Arlington of our proposal to initiate RFA discussions. A draft Resolution of Intent is attached for consideration by Council. City department transition on January 2017 would be an interim step to enable the City to reestablish financial and strategic planning of the operation and to resolve asset distribution with FPD 12 which is a necessary step going forward in any scenario and would assist in establishing terms for a city/city partnership with Arlington who already runs a city fire operation. The City would be able to closely monitor revenues, expenditures and budget. ---PAGE BREAK--- Fire and EMS Organization Alternatives P a g e I 42