Agenda Report
Fullerton City Council
MEETING DATE: SEPTEMBER 6, 2022
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: MANAGEMENT PARTNERS
PREPARED BY: MANAGEMENT PARTNERS
SUBJECT: ORANGE COUNTY FIRE AUTHORITY PROPOSAL EVALUATION
SUMMARY
Management Partners evaluation of Orange County Fire Authority (OCFA) emergency fire and paramedic services proposal.
RECOMMENDATION
Receive and file Management Partners evaluation report and presentation.
Provide direction regarding bringing this item back to City Council for consideration, including any questions City Council would like researched prior to final action at a future meeting.
CITY MANAGER REMARKS
This item provides City Council with a presentation from Management Partners on their analysis. In addition, Orange County Fire Authority officials will attend the meeting to answer any questions from City Council. The City initially started this process in Spring 2021, authorizing the City Manager to request a proposal from OCFA.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statements:
Public Safety
Fiscal and Organizational Stability
Infrastructure and City Assets.
FISCAL IMPACT
No fiscal impact to receive and file Management Partners’ report and presentation.
DISCUSSION
City Council authorized the City Manager to request a Fire Services Proposal from the Orange County Fire Authority on March 2, 2021. The City requested a proposal from OCFA to compare the costs of providing emergency fire and paramedic services. The OCFA proposal offers to contract emergency services including all-hazard emergency response, fire prevention, public education and fire dispatch services. The City’s receipt of OCFA’s proposal does not bind City Council as to future provision of fire and emergency medical services.
OCFA presented its emergency fire and paramedic services proposal to the City of Fullerton on January 18, 2022. City Council directed staff to retain an external firm to compare and cost providing emergency fire and paramedic services in-house or contracting with OCFA.
The City retained Management Partners on March 15, 2022 to complete a review of the OCFA proposal. Staff has attached Management Partners’ final report dated August 11, 2022 to this staff report. It concludes that OCFA contract costs will not cost less than costs associated with a sustainable City of Fullerton independent city fire department.
Management Partners developed a fiscal model to test various scenarios for OCFA and sustainable independent city fire department costs. Under the conditions most favorable to a contracting approach over the next ten years, high costs for the city independent department and relatively low-cost increases for the OCFA contract, the OCFA contract costs will exceed City costs by $5.6 million to $3.3 million per year. Under the conditions Management Partners thinks will most likely prevail over the same time period, reasonably-high-cost increases for both the City and OCFA, the OCFA costs will be higher by $4.2 million to $6.0 million per year.
This result is at variance from the OCFA proposal as presented to City Council. It showed that an OCFA contract would save the City approximately $5.7 million annually to start. This variance, which the OCFA proposal disclosed in footnotes, occurs because it did not account for all the costs the City would continue paying in connection with the Fullerton City Fire Department. These costs include the unfunded actuarial accrued liability (UAAL) on pensions owed to current fire employees, ambulance transport and billing costs, workers’ compensation costs for existing cases, retiree healthcare, property insurance and the one-time costs to transition to OCFA (amortized over eight years). Several of these non-OCFA contract costs are significant. For example, the UAAL costs about $5.4 million per year. (UAAL is the accrued liability of a defined benefit plan for the pensions it owes relative to the actuarial value of its assets.) Management Partners estimates that the City will pay the UAAL costs for at least the next 20 years, while it would pay off the workers compensation costs over a shorter time frame. The ambulance costs will continue indefinitely.
The analysis needs to include all these costs to get a true picture of the actual costs of delivering fire services even though they do not all stem from OCFA operations.
Management Partners also assumed that Fullerton would need to invest more going forward to have a sustainable independent City fire department. The City has not kept up with other comparable employers in terms of compensation to department employees over the last several years which has resulted in significant problems with employee retention, particularly at the firefighter level position. For many reasons this is not compatible with long-run sustainable operations. The City Council took initial steps this year to address this situation. Management Partners’ fiscal model assumes a continued heightened investment in fire operations to maintain sustainability.
The Management Partners report also considers service level issues with a City fire department and OCFA contract services, but there are not many differences to discuss. Service levels would remain the same overall, although OCFA would upgrade all Fullerton response units to full advanced life support. Station 6 is not able to offer this level of service currently. The City would probably face pressure to upgrade stations under a contract with OCFA as it hires more female firefighters, but presumably this will also occur for an independent City fire department.
Finally, the report discusses that the City may wish to consider the contract with OCFA even though it would cost somewhat more than an independent fire department. The cost differential is significant, but not substantial, given the basic costs of City fire. Contracting would also relieve the City of responsibility for fire service delivery, freeing time and energy for other priorities. It is also worth noting that Fullerton support staff (Finance, Human Resources, etc.) is already stretched thin. 25 of 34 Orange County cities choose to contract with OCFA and many do not point to cost savings as the primary motivation for this service delivery arrangement. In many cases it may not be the least costly approach possible.
The report concludes that contracting with OCFA or committing to funding a sustainable City fire department are both solid public policy options.
Attachments:
Attachment 1 – Management Partners Presentation
Attachment 2 – Management Partners Report
cc: City Manager Eric J. Levitt
OCFA Evaluation Proposal
September 6, 2022 - Page 2