CITY OF CARMEL-BY-THE-SEA

Council Report

September 9, 2014

To: Honorable Mayor and Members of the City Council

From: Jason Stilwell, City Administrator

Submitted by: Gaudenz Panholzer, Fire Chief

Subject: REPORT ON COSTING METHODOLOGY FOR FIRE SERVICES CONTRACT WITH THE CITY OF MONTEREY AND AUTHORIZE THE CITY ADMINISTRATOR TO SIGN A LETTER FROM MONTEREY'S CITY MANAGER TO EXTEND THE AMBULANCE AGREEMENT.

RECOMMENDATION(S): Accept report on costing methodology for Fire Services Contract with the City of

Monterey and provide direction as appropriate and Authorize the City Administrator to

sign a letter from Monterey’s City Manager to extend the Ambulance Agreement.

EXECUTIVE SUMMARY: In a March 4, 2014, report to Council, the Monterey Fire Department introduced the idea

of changing the methodology of determining the annual fee of the Fire Services

Contract. Council asked that a comparison be done to show the effects of the proposed

changes. The new methodology uses an “average” cost for each position. The

projection using the average methodology was done for the 2012-13 fiscal year and

came in $9,731 (0.55%) below the trued-up cost under the old methodology. Monterey

recommends that future years use this revised methodology for calculating the

projection and that a mid-year true-up be done to determine if the projection was high or

low. An adjustment would be incorporated into the following year’s projection to make it

more accurate based on that true-up. Adjustments will be limited by the CPI-U for the

San Jose-Sunnyvale-Santa Clara area.

ANALYSIS/DISCUSSION: (including why Council is considering the item and justification for

recommendation)

History

The current contract uses a complex method of tracking the actual cost of the individual

employees assigned to the Carmel Station. This is an excessive amount of work for

administrative staff and does not fairly share the cost of staffing of the fire station among

all the agencies that Monterey Fire serves.

Agenda Item: 8.ACity Council Agenda Sept 9, 2014 Page 94

Current Costing Methodology

The contract specifies a costing methodology that calls for Carmel to pay the actual cost

of the Monterey employees that are assigned to the Carmel fire station. Carmel also

pays for 10.75% of the cost of “Fire Headquarters” and 1 part-time Fire Inspector. An

administrative fee of 4.94% is added to the total cost to cover the expenses of Human

Resources, Finance, Payroll, etc.

Under the provisions of the contract, Monterey provides Carmel with a projection of the

cost for the fiscal year by March 15th of each year. After the close of the fiscal year,

Monterey completes a “true-up” for the previous year to adjust the projection to reflect

the actual costs incurred. The “true-up” is due to Carmel by November 1st and includes

either an invoice for any amount due or reimbursement for any amounts overpaid.

Because the assignment of personnel is an employee driven process, the costs to

Carmel can be increased or decreased based on the seniority of (and therefore cost

associated with) the personnel that choose to bid that station. Long term vacancies

such as extended sick leave or disability may be disproportionately assigned to Carmel

if an employee assigned to that station is affected.

Proposed Methodology

Monterey is proposing to change the methodology by which projections are made and

how/when “true-ups” are completed and used. These items are all addressed in Article

VI of the contract and, per contract provisions, may be changed by agreement between

the City Administrator of Carmel and the City Manager of Monterey.

In order to more truly share equally in the cost of staffing stations, the revised

methodology proposes to use an average cost of employees within each rank for the

positions staffed at the Carmel station. The Carmel station is staffed on a daily basis

with one (1) Captain, one (1) Fire Engineer, and one (1) Firefighter. Monterey provides

24-hour staffing by utilizing three (3) shifts that work on a rotating basis, thus three (3)

Full Time Equivalents (FTEs) are needed in each rank to provide coverage. The need to

cover normal leave use by employees can be achieved by the use of overtime or by

hiring relief personnel. To account for this cost, an additional 0.5 FTE is needed in each

rank. This is based on industry standards as well as historical experience by the City of

Monterey.

Personnel related costs that are fixed amounts for all positions (safety clothing, medical

exams, etc.) will be projected on a pro-rata share based on deployed staffing. Monterey

Fire deploys a total of 22 positions daily, system-wide; of these 3 are in Carmel. Carmel

will be allocated 13.64% (3/22) of these fixed costs.

Agenda Item: 8.ACity Council Agenda Sept 9, 2014 Page 95

Other provisions for cost allocation will be done as currently provided for in the contract.

Headquarters and operating costs will be allocated at a rate of 10.75% and direct costs

for Carmel related expenses (IT, Fire Inspector, etc.) will be allocated at 100%.

True-Up

Under the current system, a “true-up” is done in October that results in a credit or cost

to Carmel for the difference of the projected and actual costs. The proposed change

would no longer include a billing associated with a “true-up.” A “true-up” would be

completed at mid-year to determine if the projection was high or low and an adjustment

would be made to the following year’s projection to correct for the difference. In order to

help control cost increases, a proposed cap based on the CPI-U for the San Jose-

Sunnyvale-Santa Clara region will be applied to all costs except those associated with

direct PERS costs.

Comparison

Attached is a comparison of the current methodology and the proposed methodology for

the 2012-2013 Fiscal Year. Under the current methodology, the projection for that year

was $1,768,166 and the “true-up” was $1,898,404. This resulted in an invoice to Carmel

for the difference of $130,238. Under the proposed methodology the projection would

have been $1,888,673. This is $9,731 (0.55%) below the “true-up” total.

FISCAL IMPACT:

Under the proposed methodology, the cost of the Fire Services contract will be more

accurately projected. Both Carmel-by-the-Sea and Monterey will be better able to

manage their budgets as there won’t be any true-up from the previous fiscal year that

has historically had a significant financial impact. By limiting cost increases with the

CPI-U, further year-to-year stability in the pricing of the contract will be achieved.

Budgeted (yes/no) Funding Source( general fund, grant, state)

No

PREVIOUS COUNCIL ACTION/DECISION HISTORY: In November 2011, Council authorized the Agreement to Provide Fire Services Between

the Cities of Monterey and Carmel-by-the-Sea, which became effective January 1,

2012, through June 30, 2016. Council subsequently authorized the Agreement to

Provide Interim Ambulance Administration Services Between the Cities of Monterey and

Carmel-by-the-Sea, which became effective January 1, 2012, through June 30, 2014.

Recommended actions for Council consideration on September 9, 2014, include the

following:

Agenda Item: 8.ACity Council Agenda Sept 9, 2014 Page 96

1. Receive this report and consider authorization of the proposed revised True-Up

Methodology for the Fire Services Agreement beginning with Fiscal Year 2013-2014.

2. Authorize the City Administrator to sign a letter from Monterey’s City Manager

extending the Interim Ambulance Administration Services Agreement from July 1,

2014 through June 30, 2016. Such extension would concurrently match the

term of the Fire Services Agreement.

ATTACHMENTS: 1. Letter

REVIEWED BY: City Administrator Administrative Services

Director of CPB Director of Public Services

Public Safety Director Library Director

Other: ___________ City Attorney

Agenda Item: 8.ACity Council Agenda Sept 9, 2014 Page 97

Agenda Item: 8.ACity Council Agenda Sept 9, 2014 Page 98

MONTEREY FIRE DEPARTMENT

June 23, 2014

Jason Stilwell, City Administrator City of Carmel-by-the-Sea P.O. Box CC Carmel-by-the-Sea, CA 93921

Dear Mr. Stilwell:

The Agreement to Provide Interim Ambulance Administ~atian Services Between the Cities of Monterey and Carmel-by-the-Sea expires on June 30, 2014. Per Section 2.2, "This Agreement may be extended by mutual written agreement of the parties prior to the date of expiration." It Is the City of Monterey's intention to extend this Agreement for an additional two-year term of July 1, 2014, through June 30, 2016. This extension will align it with our cities' related fire services agreement. "'

The annual cost of this Agreement beginning July 1, 2014, will be $86,575 per fiscal year. This cost represents an increase of $15,155 (+17.5%) over the former flat rate of $71,420 per fiscal year, which was originally projected in 2011. The updated annual cost is based on the attached Fiscal Year 2014-2015 projected costs and will remain the same through Fiscal Year 2015-2016.

Please indicate your acceptance of this extension and the related cost Increase by returning a signed original of this letter to Fire Chief Gaudenz Panholzer at 610 Pacific Street, Monterey, CA 93940. You are welcome to contact me (646-3760) or Chief Panholzer (646-3900) should you1lave any questions.

Thank you for your support of our cities' continued partnership in public safety services.

Sincerely, ACCEPTED:

Jason Stilwell

City Manager City Administrator

Attachment

c: G. Panholzer, Fire Chief J. Forbis, Finance Director

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