ECCFPD: Preliminary Budget Approved, Two Stations to Close by Dec. 1

During Monday night’s East Contra Costa Fire Protection District Board Meeting, the Board unanimously approved its 2014-15 Operating Budget. The proposed budget includes two station closures for December 1, 2014 with an operating budget of $12,322,428.

The ECCFPD is currently operating on a five-station model thanks to a $7.8 million FEMA Grant which allowed the District to re-open the Downtown Brentwood Station and Knightsen Station for 24-months, With the grant set to expire in November, the District has little choice but to shutter the stations unless additional revenue is generated.

Proposed Preliminary Operating Budget

Staff proposes and the Finance Committee recommends an Operating Budget for FY 2014-15 in the amount of $12,322,428

The proposed FY 2014-15 Operating Budget identifies anticipated expenses under the following staffing model:

• 48 full-time operational personnel through November 30, 2014
• 30 full-time operational personnel December 1, 2014 through June 30, 2015
• 5 stations staffed by a minimum of three personnel through November 30, 2014
• 3 stations staffed by a minimum of three personnel December 1, 2014 through June 30, 2015
• 2 administrative positions

The budget continues to include expenses required to fund the Cal-Fire Amador Contract at the Marsh Creek Road station.

“The reason you see the reduction in the timeline for this budget is because the SAFER Grant ending at the end of this year,” said Chief Hugh Henderson.

The Chief did explain the Finance Committee looked at alternative models, the recommendation was they not move forward with the budget until they see what future revenue decisions are made—it would require multiple board policy changes.

Director Steve Smith shared that based on the budget projections, some difficult decision will occur in the near future.

“This is not a fun process. We asked the chief to go through and see what would hold things together over the next five years. It wasn’t pretty,” said Smith. “We still have some serious questions to answer. Without any revenue augmentation, this Board will be facing some pretty difficult choices and difficult tradeoffs.”

Smith also shared that people make comments without looking into the details that the Board has looked at. Despite public comments on social media, they have nothing left to cut.

“I will just chalk it off to people who really do not look. You know we still get comments on the blogs, etc. that we must have some fat somewhere, not in this district. We are down to the bone and absent any kind of new revenue we are going to have to break out the bow and saws. We will have to revisit some board policies that I would prefer not revisit,” said Smith.

Smith further explained that having gone through the unpleasant budget process, that without any sort of revenue, the District will be reduced to serving the community with three stations.

Board President Joel Bryant asked Director Smith are you saying we need more money to be able to maintain our level of service of five stations?

Director Smith responded we are going to have a struggle to maintain three stations—let alone five stations.

Director Joe Young further explained that the Finance Committee looked at where we would be five years out under a three station model.

“We concluded that we could make that work, but that required using up all of our reserve accounts that we have accumulated over the years and we end up with no reserves. If you look at the budget sheet before you are looking at a downward spiral,” said Young.

He explained that the District can make that three station model work for five years, but further out its just projects at this time.

“It is a balanced budget, but based on closing of two stations,” said Young.

The Board unanimously approved the preliminary budget and by law they will hold a budget hearing and be asked to adopt Final budgets for Fiscal Year 2014-15 no later than October 1, 2014.

Additional Information Per Staff Report

• Revenue: The majority (96%) of the District’s revenue is from property taxes. As a result of recent economic conditions, this District’s property tax revenue has declined 24.4% from five years ago. Although local jurisdictions have begun to see signs that property values are stabilizing, all indications are that it will take many years before the District’s property tax revenues can be expected to return to prerecession levels. The District estimates that FY 2014-15 property tax revenues will increase 5% ($430,000) over FY 2013-14. Property tax receipts in the District are projected to increase in the upcoming years as follows: 3% in FY 2015-16, 2.5% in FY 2016-17, and 2% per year in Fiscal Years 2017-18 through 2023-24.
• Retirement Expenses: After receiving revised pension cost estimates from the County Retirement system, the District’s pension contribution rates for FY 2014-15 and future years have increased significantly in response to the County’s latest actuarial study, accepted August 6, 2013. The increases are due to a combination of factors, including the investment earnings rate decreasing from 7.75% to 7.25%, historical contribution rates, and the de-pooling of all the agencies in the retirement system. The preliminary budget included an expected contribution increase of 40.47%, which impacts the budget by $1,284,426 based on current staffing levels. The latest actuarial study assumes District staffing levels in place as of 12/31/2012, with 42 (rather than the current 50) employees. As any agency’s employee count grows, payments toward unfunded pension liabilities are spread across a larger headcount; the opposite is true in case of headcount decreases. Looking ahead, if the District is required to cut staff, relative contributions towards retirement expenses will necessarily rise. It should be noted that the new labor agreement with Local 1230 saved the District 4.5% in contributions as the employees are picking up the full burden of the employees’ share of retirement costs.
• Capital Improvement/Vehicle Replacement/Reserve Funds: Each of these funds represents a fixed 1% of the operating budget and, as the funds accumulate over the years, they will be available for station upgrades/repairs and replacement of equipment.
• SAFER grant: The grant term started in November 2012 and will end in November of 2014. Personnel costs associated with grant-funded services will end in FY 2014-15 when the grant term ends.
• East Bay Regional Communications System Authority: Starting in FY 2014-15 the District will start paying a monthly system fee for the regional radio system. The system fee is estimated to be $48,000 per year and has been included in the current service model.

It is important to note the operating budget scenario incorporates only the necessary minimum expenses required to operate under the current service model in an attempt to lower the revenue gap. This leaves very little room for contingencies. Reserve and replacement funds are in place, though they are in their infancy and not intended for routine operations. Unexpected events that may negatively affect the budget will be brought to the Board’s attention, as will the final budgets, any required budget adjustments and a mid-year budget review.

Other Post-Employment Benefits (OPEB)

The OPEB Fund provides a funding source for post-employment retirement health benefits for the District to meet its future financial obligations identified in existing employment contracts. With approval of the proposed Operating Budget, the Board will be able to fund 42% of OPEB liabilities, taking another step toward the Board-approved goal of funding 85% of the District’s OPEB liability by FY 2018-19.

Other Funds

Separate from the General Fund, which funds on-going operations and maintenance, the District has various other funds that have been formed pursuant to State Codes or District policies. Subject to State law and District policies, these funds are earmarked for specific uses; therefore their revenues and expenditures are restricted and are limited. The following summarizes the various funds:

Development Facility (Impact) Fees: These fees are collected under Government Code Section 66000 to mitigate the impacts of new development on fire facilities. Funds may only be used for facilities, not operations, and are to provide necessary facilities and equipment as a result of growth. Therefore these funds cannot be used to maintain existing facilities. The following fees were imposed prior to the District’s merger in 2002 and the fees were supported by facilities specific to the individual Districts; therefore, by law, separate accounting, investment and expenditure is mandatory. Fees are collected from new development as residential and nonresidential building permits are issued.

• Bethel Island Fire Protection District Facility Fee
• East Diablo Fire Protection District Facility Fee (applicable to Brentwood, Byron, Discovery Bay)
• Oakley Fire Protection District Facility Fee (applicable to Oakley and Knightsen)

Development activity is unknown as a result of the current economy; therefore revenue from new development is not anticipated in this fiscal year.

Community Facilities District: This is a special tax applicable to the boundaries of the Cypress Lakes (now Summer Lakes) development in the City of Oakley for the purpose of operations and maintenance. The tax is applicable to 629 parcels, of which 55% are built out. The budget includes a contribution to the General Fund for services and costs associated with the tax levy to be collected on the property tax roll. Revenue is transferred to the General (operating) Fund to help support services in this area.

• Cypress Lakes

Capital Improvement: Formed by the Board in April 2010, the Capital Improvement Fund is intended to be used for improvement to District assets valued at $25,000 or greater. This fund could be used for fire station remodels, refurbishment or replacement and District-wide needs for critical infrastructure. The Capital Improvement Fund budget includes a transfer from the General Fund of 1% of the operating budget.

Equipment Replacement: The Equipment Replacement Fund would be used for capital equipment and replacement of equipment with a useful life of 5 years or more or a replacement cost of $10,000 or greater. This fund was also formed by the Board in April 2010. The Equipment Replacement Fund includes a transfer from the General Fund of 1% of the operating budget.

During its review of the preliminary budgets, the Finance Committee considered an alternative set of budgets that allowed for balanced revenues and costs in fiscal year 2018-19. This alternative model would require changes to several Board policies concerning reserves, contributions to the Capital Improvement and Equipment Replacement Funds, and pre-funding of retiree health (OPEB) obligations. If additional revenue is not attained through a benefit assessment or special parcel tax, the Finance Committee recommends a Board workshop to discuss the alternative model.