Oakley Responds With New 8-Page Letter to East Contra Costa Fire Over Fire Fees and Station 55 Agreement

On Tuesday, the City of Oakley continued a chain of back and forth letters between the city and the East Contra Costa Fire Protection regarding fire funding and the Fire Station 55 agreement.

The 8-page letter was issued by City Attorney Derek P. Cole to ECCFPD President Brian Oftedal in response to two previous letters issued.

A few of the letter highlights:

• Oakley says it took on the burdens and expenses of litigation to secure funding to construction Station 55. They claim the purpose of the Station 55 agreement was to address the fire districts change in position following litigation to have a bigger station built.
• City says in past 9-years, Oakley has built two fire stations while Brentwood and the County have built 0.
• The City says it did not “waive” the logistics center developer fees, but the fees paid were under the amount of impact fees that existed at the time of project approval. The City also acknowledges that because the lifetime of the development agreement is 15 years, the locked-in rates will preclude the Logistics Center developer from paying higher fire-facility fee rates when approved by the City.
• City says the Fire District has an open invitation each week to the department head meeting and rejections notion that they are not responsive to the District on any matter.
• City says it has been at the forefront of providing CFD’s—such as Summer Lake Subdivision in 2006.
• Fire District believes the Logistics Center funding to Fire District is $420k, Oakley says police services estimated at $250k – questions why fire service would be higher than police service.
• City attorney has indicated general acceptance that Oakley to mimic City of Brentwood fee study which was previously approved.

Here is a look at previous letters issued by the City of Oakley and East Contra Costa Fire Protection District:

• October 8: the East Contra Costa Fire Protection District has sent a 10-page letter to the Oakley City Council requesting they Cease and Desist City Development Practices Detrimental to the District. — Full Story
• October 12: Oakley Mayor Kevin Romick issued a response to the fire district outlining their stance on the issue. — Full Story
• October 13: East Contra Costa Fire responds to Oakley Mayors comments – Full Story

UPDATE
In speaking with Chief Brian Helmick Wednesday, he said the district is in receipt of the letter and we will have to agree to disagree on many components of the letter. The District is not going to continue to go back-and-forth. To move forward the district is going to focus on resolving the Districts issues as defined in our initial letter with the city of Oakley. We will report out once we resolve our challenges or if we cannot resolve our challenges.

Here is a copy of the letter:

Re: Response to Your October 8 and 13, 2020 Letters to the Mayor and Members of the Oakley City Council

Dear Board President Oftedal:

This letter responds to your October 8 and 13, 2020 letters on behalf of the East Contra Costa Fire Protection District (“District”) to the City Council of the City of Oakley (“City”). As I explain within, your letters make several incorrect statements related to the Cooperative Funding Agreement Regarding the Construction of Fire Station 55 (“Station 55 Agreement”). You also make a number of inaccurate representations about other matters, especially concerning the City’s implementation of community facilities districts for District operations. The City Council has directed me to write this letter to make sure the factual record regarding the matters you have raised is corrected.

At the outset, I express disappointment that I must write this letter. For the past several weeks, City staff and I have been working with District staff and counsel to address all outstanding issues related to the Station 55 Agreement, adoption of updated fire-facility impact fees, and implementation of community facilities districts for your district’s operations. While our discussions with your staff and counsel have disclosed some clear differences of opinion, we have never felt that our agencies would be unable to reach resolution on all outstanding issues. While we do not begrudge the District for putting its positions in writing, we struggle to understand why the District chose to so broadly publicize these positions at a time when both staffs and counsel were diligently working toward resolution. The District’s actions do not help maintain an effective working relationship between our agencies.

Having expressed these preliminary thoughts, I now provide detailed responses to the issues your letters raise.

Station 55 Agreement and Approval of the Oakley Logistics Center

I first address the District’s contentions that the City breached the Station 55 Agreement in approving the Oakley Logistics Center. The District raises many issues concerning this agreement; but in short, it argues the City improperly waived portions of the fire-facility impact fees applicable for the Logistics Center project. The District’s letters are misleading.

For historical context, I note that the Station 55 Agreement is an outgrowth of the City’s success in pursuing litigation against the developer of the Summer Lakes South Project. As a testament to the City’s commitment to public safety, the City took on the burdens and expenses of that litigation to secure the funding necessary to construct Station 55. The City was surprised and disappointed that midway through the litigation, the District abruptly changed its position relative to the size of fire station to be built. From the beginning, the City and District insisted that the developer construct a station that was similar in size to Station 53. This continued to be the City’s stance during the court ordered mediation until we learned that a side conversation had taken place between District staff and the developer. The result was the District declaring that a smaller station “would meet the needs of the District.” This position undercut the City’s claims and resulted in a settlement with the developer, approved by the District Board of Directors, that would only provide funding for a smaller fire station.

The purpose of the Station 55 Agreement was to address the District’s change in position following the conclusion of the Summer Lakes South litigation. Rather than have built the smaller station provided for in the settlement, the District reversed its position, again preferring the construction of a larger fire station. In an effort to implement the fire station contemplated by the settlement agreement, the City had bid the project at the smaller size; but a supplemental bid was obtained to address the District’s renewed request for a larger station. While approximately $300,000 of fire facilities fee revenues were available to help fund the larger station, additional funds were needed, and the District agreed to contribute $1.9 million to pay for the larger station and an additional vehicle storage for the District. (The City was told that this additional funding came from District funds that had been recently “discovered” as available for one-time uses).

In spite of these difficulties and the need for the City to rework the project because of the District’s changing demands, Station 55 was completed. The City has now built two fire stations for the District in the last nine years. Neither the City of Brentwood nor the County have built any station during this time frame.

As to the legal merits of the District’s assertions relative to the Station 55 Agreement, the District misreads the agreement’s relevant language. The operative text is Paragraph 5(B), which states:

“Following execution of this Agreement, City will not take any action that has the effect of (i) repealing, suspending, or reducing its Fire Facilities Impact Fee below the amount of such fee as established in Resolution No. 09-01, as adjusted for Inflation; (ii) continuing any existing suspension or reduction thereof; or (iii) waiving payments of any Fire Facilities Impact Fees; without consulting with the District and making findings regarding the effects of such actions on the fire protection within the City. Nothing herein limits the City’s ability to modify its Fire Facilities Impact Fees in reliance upon a fee study approved by the District.”

The District appears to agree that the clauses (i) and (ii) do not furnish the basis for the alleged breach. As the City understands, the District relies on clause (iii) in asserting that the City effectively waived portions of the fire-facilities the Logistics Center developer should pay. The District misrepresents the meaning of this clause.

The City did not “waive” the Logistics Center developer’s obligation to pay fire facility impact fees. Rather, the developer was required to pay the full amount of impact fees that existed as of the time of project approval, in late December of last year—well before the fee study supporting the new proposed fees had been completed. I note that more than 15 months elapsed between the execution of the Station 55 Agreement and approval of the Logistics Center project. The City does not understand why the District took so long to complete the fee study. But we trust the District agrees that because the study was not complete at the time of project approval, the City could not charge the Logistics Center developer anything other than the then-existing fee.

The City recognizes that, as a condition for securing the Logistics Center developer’s agreement to the terms of a comprehensive development agreement, all impact fees—including City fees as well as the fire-facilities fee—were locked in at December 2019 rates. This is a common contract term in development agreements for large-scale commercial developments. The Logistics Center will provide substantial and long-term local and regional economic and job-creation benefits, and a significant stream of annual tax revenue to the District—more than any single project within the District’s boundaries.

The City also acknowledges that because the lifetime of the development agreement is 15 years, the locked-in rates will preclude the Logistics Center developer from paying higher fire-facility fee rates when approved by the City. But this does not constitute a “waiver” of the fees. Clause (iii) of Section 5(B) of the Station 55 Agreement precludes the City from waiving “payments” of fire-facilities fees, which the City has not done. When the Logistics Center developer pulls future building permits for additional buildings, it will still make payments, but at 2019 rates. The amounts of the payments are a function of timing: if the District had an approved impact fee study in place before project approval, the payments made by the developer would have been at the new fee rate.

Incorrectly, the District argues the City cannot suspend rate increases by locking in rate amounts when it approves development projects. But this is not what the City and District agreed to in the Station 55 Agreement. Nor is this something the parties contemplated or discussed as that agreement was being drafted.

Moreover, even if this were something the parties could have intended, the law would have forbade such a provision from having been included. Public agencies cannot legally bargain away their contracting power. Any interpretation of the Station 55 Agreement that would prevent the City from negotiating with developers over fee amounts would inherently strip the City of discretion it cannot by law relinquish. Thus, even if section 5(B) of that agreement could be read as the District advocates—which we strongly believe it cannot—such a reading would render the agreement unenforceable.

In addition to these substantive defects, the District’s argument also fails for its untimeliness. In California civil procedure, courts apply a “gravamen of injury” test in determining the applicable statute of limitations. As we understand from the letters, the District asserts that it commented regarding the adequacy of the Draft Environmental Impact Report for the Logistic Center Project in September 2019. The District claims the City failed to respond to this comment as required by the California Environmental Quality Act (“CEQA”). Although the City disagrees it violated CEQA in this regard, I note that a claim challenging the sufficiency of an EIR must be brought within 30 days of the posting of a project’s notice of determination (“NOD”). The Logistics Center NOD was posted on December 18, 2019. The time to challenge the City’s alleged omission concerning the District’s comment was thus January 17, 2020. Under the “gravamen of injury” test, because a CEQA violation is the underpinning of any potential claim the District could assert, this shorter statute of limitation would prevail over the longer statute of limitations provided for breaches of written contracts.

Moreover, it is incorrect to assert the City ignored the District’s September 2019 comment. This comment was provided in response to an administrative draft of the EIR. Precisely because of the City’s and District’s partner relationship, the City provided the District an advance, pre-public draft of the EIR for the very purpose of eliciting the District’s early input. And, when the District’s letter was received, it was not ignored. In response to that letter, our City Manager spoke with your Fire Chief to discuss the financial study the City had obtained documenting the significant tax revenue the Logistic Center Project would generate for both the District and City. The City’s understanding is that this conversation satisfied the District regarding its concerns about the project’s financial impacts. This understanding was further confirmed when the District discontinued any further discussions regarding the matter.

I note that the District’s letter was received three months before the Logistics Center project was approved in late December 2019. After the City Manager and Fire Chief’s discussion, the City received no further correspondence or inquiries concerning the Logistics Center’s financial impacts. The District did not submit any letter during the draft EIR comment period. It did not submit any letter before the public hearing concerning project approval and no representative of the District spoke at the December 2019 hearing. (The District was emailed notice on December 5, 2019 of the public hearing). In addition, no informal contacts occurred about the subject of financial impacts between the District and City before project approval.

All of this raises the question: if the District believed the City had neglected to respond to the concerns expressed in its September 2019 letter, why did it make no effort to follow up on those concerns? Surely the District was aware of the date and time of the hearing in which the Logistics Center project was to be considered. The District equally had the opportunity to review the Final EIR prepared for the project as well as the City’s staff report and the final version of the project development agreement. If the District felt its concerns about financial impacts had not been addressed, why did it fail to further raise these concerns before project approval? Indeed, how is it that the District is finally getting around to raising its concerns now, nearly ten months later?

As for the City’s communication and interactions with the District, District staff has long had an invitation to attend the City’s weekly department head and project review meetings. District staff has chosen not to attend. City administration and staff have also regularly sought the District’s input on a wide variety of issues and have always been available to District requests for information and inquiries. The City rejects any notion that it has not been responsive to the District on any matter, including approval of the Logistics Center.

In sum, the District has no legal basis for raising issues concerning the City’s December 2019 approval of the Logistics Center project. The Station 55 Agreement did not require the City to obtain the District’s consent to the lock-in of rates the City negotiated with the project developer. The City, nonetheless, heard and addressed the District’s concerns about the project’s cost-of-service impacts. Had the District remained concerned about those impacts, it was the District’s obligation to timely raise those concerns before project approval—which the District did not do.

Further, if the District desired that the Logistics Center Project or any other development in the City pay a higher impact fee, it was incumbent upon the District to present an updated impact fee study and have that study approved for implementation. The District claims the City has long had a fire facilities impact fee that was too low; but Resolution 09-01, adopted by the City Council in 2001, requires the District to provide an updated study, which it failed to do so until March of this year.

Implementation of Community Facilities Districts

Next, I address issues concerning the City’s implementation of community facilities districts (“CFD”) to fund ongoing fire department operations.

Contrary to the District’s suggestion otherwise, the City has been at the forefront of providing a mechanism to fund the District’s operational expenses. It was the first of the agencies within the District’s service area to establish a CFD for fire services. A CFD has been in place at the Summer Lake Subdivision since at least 2006, when the City annexed that area. Since 2018, the City has required formation or annexation of CFDs 16 times. The City has never questioned the need for, nor expressed any opposition to, the implementation of fire-service CFDs for all residential and non-residential discretionary projects. The District is incorrect in asserting the City does not require developments to annex to the CFD, but that such annexation is voluntary. The District is well aware that projects already entitled cannot be compelled to annex to the fire service CFD. Notwithstanding this situation, all but one entitled development agreed to be annexed.

Meanwhile, the City understands the only other CFD within the District’s service area is a small CFD in the unincorporated town of Bethel Island. The District itself has yet to develop the required studies for a District-wide CFD. The City of Brentwood has not implemented CFDs to date despite having already developed a significant percentage of its commercially developable area. In light of these facts, it has been the City alone that has acted to implement fire-service CFDs.

The City understands that the District contends a CFD should have been required for the Logistics Center project. But as explained above, the City believes that it had resolved the concerns about financial impacts the District expressed about that project in its September 2019 letter. As noted, after our City Manager and your Fire Chief spoke on more than one occasion, we believed the District had become satisfied the substantial annual tax revenues the Logistics Center would generate would more than cover the District’s costs to provide project fire services. Having received no further concerns from the District before project approval, the City believes it was justified in this understanding.

The City now understands the District believes the approximately $420,000 in new annual tax revenue will not fund all its operational expenses for servicing the Logistics Center. The City has not received documentation to support this contention. I note that the City has calculated the cost for annual police department services to the project site to be about $250,000. The City struggles to understand how the District’s cost of service to the Logistics Center could be greater than what is required to provide police services.

The District also references that the City requested that the Logistics Center developer to make a one-time “community benefit contribution” of $850,000 to the City. This is correct; but the purpose of this requirement was to fund local road impacts and maintenance expenses the City will incur over the lifetime of the project. These funds are not actually “unrestricted funds for [the City’s] own use,” as you suggest.

The District’s Impact Fee Study and the City’s Fee-Incentive Program

I also address issues you have raised about the District’s impact fee study and the City’s longstanding fee-incentive program.

As to the fee study, the City has made clear it supports the raising of impact fees for both residential and non-residential projects. City staff and I have been reviewing the fee study and the proposed administration agreement the District has proposed for administration of fee revenue. Working with your District Counsel, I have indicated the City’s general acceptance to the form of administration agreement the District has provided and the City of Brentwood has adopted. The draft resolution I have prepared to adopt the proposed fee increases will also generally mirror that which Brentwood has approved.

At this time, however, the City believes it still is necessary to review the adequacy of the District’s fee study in justifying the rate increases proposed. By this letter, I do not express any opinion on this subject. I note only that in light of the most recent correspondence received from Discovery Builders, including the October 12, 2020 report from DTA Finance it attaches, the City considers it prudent to carefully evaluate the District’s fee study in light of correspondence and reports that have been received. To this end, we welcome any further analysis or input the District wishes to offer in support of the proposed rate increases.

The City does recognize that in February of this year, it extended its fee-incentive program and, in doing so, extended the suspension of the fire-facilities fee (which applied only to non-residential projects). The City extended the program as to the fire-facilities fee inadvertently, and we have already indicated the City’s intention to rescind this approval. We also have provided documentation to your District Counsel that only one non-residential project was approved under the extended program and that the amount of fees that should have been collected was a mere $460. The City has already made arrangements to allocate this amount to the Fire Facilities Impact Fee Fund.

Other Issues

Finally, I address two other issues that were raised in your October 8, 2020 letter. As there was never any dispute about these issues, we struggle to understand why you raised them as purported grounds of disagreement between our agencies.

First, you reference the remittance of the fire-facility impact fees the City has been collecting from developers who have pulled building permits. Well before your letter, the City’s Finance Department had calculated the amount of fees collected and I forwarded the supporting documentation for that amount to your District Counsel. Because I confirmed the City would be shortly remitting that amount, I am unable to understand why this issue was raised as a point of dispute.

Second, and equally, I am puzzled by the District’s statements about the transfer of the documents, plans, and drawings evidencing ownership of the Station 55 property. The District had a well-qualified construction consultant working on the project and this consultant received and reviewed all relevant construction documents. If this documentation was not provided to the District, the District merely needed to ask for it. The City will forward all documents relating the Fire Station that the District desires. There never was any disagreement about the City’s obligations on this issue and the District has occupied Fire Station 55 since its completion.

Conclusion

In closing, I reiterate my regret that I have been required to respond to the inaccuracies in your October 8 and 13 letters. As I mentioned at the beginning of this letter, the City believes substantial progress was being made to work through the outstanding issues. For that reason, I apologize if any of the above is perceived to be overly critical, which is not my intention. But in light of the manner in which the District has publicized its disputes with the City, the City feels compelled to correct the factual record.

The City has not since incorporation provided fire services to its residents. That responsibility has always belong to the District. It is unfortunate the funding for fire service has always been inadequate; however, efforts to remedy this shortfall have also been lacking. Millions of square feet of commercial development have been built elsewhere within the District’s service area under the same fee structure that applies to the Logistics Center and City commercial projects. Only now does the District raise its concern—and only as to the City, not the other agencies in the District’s service area.

The City shares the District’s goal of providing financial sustainable fire service through its service area. The City has always supported the District’s efforts to implement the financial mechanisms needed to fund effective service levels. The City will continue to do everything it reasonably can to further this goal. To that end, the City Council, city staff, and I look forward to working with your Board, staff, and counsel to implement a new impact-fee structure for the District’s capital costs and to further implement CFD’s to fund District operations.

Sincerely,

Derek P. Cole
City Attorney

CC: Mayor Kevin Romick and Members of the Oakley City Council
Bryan H. Montgomery, City Manager, City of Oakley
Joshua McMurray, Community Development Director, City of Oakley
Brian Helmick, Fire Chief, East Contra Costa Fire Protection District
Shayna M. van Hoften, District Counsel, East Contra Costa Fire Protection District