Budget and Audit Committee
September 16, 2025

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type equipment appear to be replaced prematurely when compared to other government organizations. For example, rollers have a planned replacement interval of seven years. These are typically replaced at between 12- and 15-year intervals in most government agencies. As a result, Sacramento may be replacing certain fleet units prior to or past their optimal life cycle.

Table 21 compares current and recommended replacement intervals based on life cycle, where applicable, for each class of vehicle and equipment (groups of vehicles that share a common use). Recommended replacement life cycle intervals were developed using best practice data applied to the City’s current fleet.

Table 21. Current and Recommended Vehicle and Equipment Replacement Intervals Vehicle Type
Current Life
Expectancy
(years)
Current Replacement
Interval (miles)
Recommended Life
Expectancy
(years)
Recommended
Replacement Interval
Sedans 5-10 100,000-120,000 10 100,000 miles
Light-Duty
Trucks 10 100,000 10 100,000 miles
Medium-Duty
Trucks 10-15 100,000-150,000 10 100,000 miles
Police Patrol
Units 5 100,000 4-5 100,000 miles
Heavy-Duty
Trucks 10-15 100,000-120,000 12-15 100,000-150,000 miles Construction
Equipment 5-15 n/a 12-15 5,000 to 6,000 hours
Adjust life cycle intervals to align
with more common government fleet cycles.

The City has developed a 30-year replacement plan that identifies future fleet replacement costs. This is a best practice. However, surplus values, auction fees and make-ready fees are not included as part of the future replacement costs. These costs should be included in order to determine a more realistic net cost of acquisition.

Incorporate salvage value, auction
fees, and make-ready costs into future fleet replacement costs.
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Replacement Funding
Sacramento does not have an internal service fund dedicated to replacing vehicles and equipment. Instead, departments must budget each year for acquiring fleet units.

Agencies that elect to budget annually for fleet replacement rather than use a replacement fund find that utilizing cash from ad-hoc budget appropriations can be risky. Often vehicles and equipment must compete with other requests for equipment and/or capital projects during the budget process. Consequently, organizations using this method to finance fleet replacement programs may find themselves with older and less reliable fleets if the money is not appropriated as planned.

Sacramento is attempting to catch up on replacing fleet units that were ignored during and after the recession of 2008. We identified 1,060 units whose maintenance costs (labor, parts and commercial work) exceeded their original purchase price. These may be among the reasons the department is transitioning away from the current point system to a software-based approach.

We identified a total of 163 fleet units that, according to Fleet Management’s point system, are due or are overdue for replacement in FY 2020. A review of these vehicles should be undertaken to determine whether their replacement is justified. However, replacing all 163 units is estimated to cost about $16.5 million. It seems unlikely that the City will be capable of using pay-as-you-go funding to replace all 163 units in one year. Consequently, it might be advantageous to explore some other means of financing such as leasing or acquiring a municipal loan.

City leaders should consider establishing a dedicated internal service fund that accumulates funds for future replacements. Fleet customers should be responsible for contributing to the future replacement cost over time. In this way, city departments are made aware of the ownership costs associated with their respective vehicles and equipment in addition to their operational costs.

Develop a dedicated internal
service fund that supports future fleet replacements.

Develop a comprehensive and
accountable chargeback system that supports the fleet
replacement fund.
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Optimum Surplus Point
Keeping units in the fleet beyond their optimum economic life puts a burden on the customers who must endure greater equipment downtime due to more extensive repairs, thereby impacting the ability to accomplish their goals. It also creates a drain on Fleet Management, forcing them to expend more labor hours and parts to keep the units on the road. “Surplusing” units prematurely leads to higher total life cycle costs associated with the purchase of replacement units.

As mentioned previously, Fleet Management is using an abbreviated “point” system to identify when vehicles and equipment should be replaced. Fleet units are assigned points on a scale of 1-10 for various factors relating to age, miles/hours and maintenance and repair costs.

There are plans to add other factors in the near future such as downtime, energy and reliability to the point system using the “CAM” system provided by Asset Works. Many public agencies use this point system today, which is typically referred to as the “Optimal Economic Life Point.” It is considered a best practice for fleet management.

In 2017 Automotive Fleet Magazine published an article related to increases in maintenance costs. As would be expected, their findings demonstrated increased maintenance costs by both odometer and months in service. Figures 33 and 34 present these findings.

Figure 33. Correlation between Odometer Mileage and Repair Costs

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Figure 34. Correlation Between Months in Service and Repair Costs

The study notes that the average cost of a preventative maintenance service is expected to rise by about 2% annually, and as vehicles get older there is a need for more enhanced preventative maintenance schedules to extend useful vehicle life. Taking this into account, the City can use individual vehicle data to create predictable outcomes for needed replacement by analyzing a number of factors, which can then be used to assist in building the chargeback system for departments. These factors include, for example, the likelihood of increased costs upon the vehicle reaching its recommended replacement criteria, avoidable costs vs. unavoidable costs, and the nature of the use of the vehicle. For many vehicles, it may make sense to keep the vehicle well past the expected useful life due to the way it is being utilized.

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I2. Establish a Capital Asset Management System
Strategy Type
Process Improvement
Impact Estimate
Establishing a comprehensive system for assessing capital assets to plan and budget for maintenance and replacement needs is a best management practice. Inadequate planning for the timely replacement of capital assets can negatively impact service delivery, service levels, and public health and safety and increase the risk of failure. Additionally, deferring infrastructure maintenance and replacement can increase long- term capital and operational costs.

City staff have developed a partial inventory of the City’s capital assets (an important component of a capital asset management system) and has identified through separate, siloed efforts approximately $484 million in deferred maintenance and replacement. These efforts should be coordinated as part of a broader effort to establish an asset management plan for the City’s entire infrastructure portfolio.

Achievability
While a partial inventory of capital assets has been completed, establishing a comprehensive asset management system is necessary. This is likely to require consultant support and/or limited term staff, which could implicate procurement, outsourcing and labor issues. We rate the achievability as high, especially since there are risks associated with not having adequately planned for infrastructure replacements.

Background/Analysis
The Government Finance Officers Association (GFOA) has developed best practice information for establishing a capital asset management system.17 Key system components include:
• Underlying policies to guide financial, operational and engineering capital asset management practices (inventorying, funding replacements, monitoring physical conditions, etc.);

17 “Capital Asset Management, Best Practice.” Government Finance Officers Association. March 2010. 145

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• Performance standards and measures for assessing conditions and prioritizing infrastructure replacement based on risk and consequence of failure; and
• Monitoring and reporting results.18
Infrastructure Inventory
Staff uniformly expressed a desire to accelerate the inventory development process, but also consistently noted a lack of funding as the primary barrier. The departments have, so far, completed inventories for parks, pools and about 150 City-owned properties. To cost-effectively manage and maintain the City’s assets, it is imperative that managers have a current and complete asset list. Managers need to understand the life expectancy, current condition, maintenance needs and preventative maintenance requirements of each asset to develop a long-term management strategy and to minimize costs and potential asset failures.

Complete a comprehensive
inventory of Citywide infrastructure assets that includes condition assessments and priority levels for
maintaining/replacing.

Capital Improvements and Preventative Maintenance Backlog Sacramento cannot effectively maintain its existing facilities footprint consistent with best-in-class industry standards using historical operating methods, staffing patterns and resources. The City will need to determine how to move forward – and the status quo will likely not suffice.

Although currently incomplete, the City has developed separate estimates of unmet or deferred maintenance needs for three infrastructure areas: facilities, parks, and pavement surfaces. Deferred maintenance needs in these areas total an estimated $484 million, as shown in Table 22, below.

18“Capital Asset Management, Best Practice.” Government Finance Officers Association. March 2010. 146

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Table 22. Summary of Deferred Maintenance Needs for Facilities, Parks, and Pavement (in Millions) Area Maintenance Needs1 Yearly Need2
FY 2019-20
Maintenance Budget
FY 2019-20
Unmet Need3
Pavement $278.0 $27.8 $9.4 $18.4
Facilities Evaluation $44.6 $4.5 $1.8 $2.7
Parks $143.7 $7.2 $0.0 $7.2
Swimming Pools $17.5 $1.8 $0.0 $1.8
TOTAL $483.8 $41.2 $11.2 $30.0
1Deferred maintenance needs currently identified by the City, based on documentation provided to Management Partners 2Current maintenance needs spread over 10 years for pavement, facilities, and pools, and spread over 20 years for parks. 3Remainder of calculated yearly need less amounts approved for maintenance in the FY 2019-20 budget However, this estimate may not represent the full extent of deferred maintenance needs in the City or represent an apples-to-apples comparison, given the siloed data sources. For example, deferred maintenance needs for facilities is based on the 2017 Facility Assessment; needs in parks are taken from the 2019 Parks Department Deferred Maintenance List; and the estimate for pavement maintenance was first reported in the 2017 Pavement Condition Index Report and quoted again in the FY 2019-20 Proposed Budget. Deferred maintenance needs for swimming pools were provided informally by City staff, i.e., they are not reflected in a particular report. The other factor that should not be ignored is that these cost numbers are rising as assets age and, therefore, the City’s total unmet need is literally growing daily.

Develop a comprehensive asset
management system based on best practices to plan and
budget for the maintenance and replacement of City
infrastructure assets.

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I3. Expand the Use of Green Infrastructure
Strategy Type
Service Delivery Change
Impact Estimate
The rationale for expanding the use of green infrastructure is based primarily on goals for improving environmental quality, mitigating impacts and complying with State and Federal requirements. However, green infrastructure can present cost savings19. Often these savings will accrue to private property owners or developers through their development plans. However, the City could also expect savings as a part of its CIP or construction of facilities. It is not possible to estimate the cost savings because they will vary based on the type, size and other factors associated with the specific infrastructure.

Achievability
Given the City’s existing work on green infrastructure as noted elsewhere in this report, it seems expanding and accelerating those strategies at the margin could be moderately achievable.

Background/Analysis
The implementation of green infrastructure projects is gaining popularity in the United States and around the world. The concepts originally focused on achieving compliance with stormwater regulations by decreasing impervious areas and reducing pollutants in runoff. It is now being recognized as a strategy with broad environmental, social, and economic benefits.

Green infrastructure can be especially beneficial for cities in areas with combined sewer systems and the resulting overflows. It can also bring added benefits for flood control, compliance with Clean Water Act requirements, and asset management. In fact, the Environmental Protection Agency (EPA) has highlighted effective green infrastructure policies and practices in Chicago, Philadelphia, Olympia, Portland, Santa Monica, and Seattle.

19 The EPA website features an analysis of a green infrastructure subdivision in Frederick County, Maryland which resulted in cost savings estimated at more than $5 00,000, in addition to savings in wetlands mitigation and a 17% reduction in paving costs.
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The EPA has also recognized the nearby cities of San Jose and Emeryville as cities with green infrastructure best practices.

For example, San Jose integrates stormwater planning into the development process, uses quantitative performance standards, and promotes the use of vegetation and infiltration-based stormwater controls. It also integrates stormwater with its smart growth objectives.

One best practice resulting from San Jose's policy is a 10,000 square-foot threshold for new development and redevelopment. This threshold gives developers an incentive to find creative ways – such as narrow streets, shared driveways, vegetated swales, and pervious pavement – to reduce impervious surfaces below this limit.

Emeryville was faced with a particularly difficult situation of contaminated soils, dense development, and a high-water table. As a result, the City now requires all new development projects to manage stormwater with green infrastructure and to comply with the City’s green infrastructure guidelines. These guidelines offer a range of alternatives including innovative parking strategies and methods to infiltrate, evaporate, harvest and use stormwater such as green roofs and permeable pavements.

A study by the American Society of Landscape Architects (ASLA) found that green infrastructure practices can be cost effective, reduce energy costs, reduce the impacts associated with flood events, and protect public health. ASLA reviewed 479 case studies and found that green infrastructure solutions often reduced costs related to capital and land acquisition, operations, repair and maintenance, and infrastructure replacement. Examples of green infrastructure successes in other cities include the following:
• Chicago used green infrastructure to divert stormwater from the CSO system.
• Portland, Oregon reported cost reductions resulting from porous pavement, green streets, and green roofs.
• Seattle saw a 49% reduction in pavement costs related to the implementation of green infrastructure policies.

Green infrastructure techniques are especially valuable in areas with combined sewers. The City of Sacramento maintains the sanitary sewers in 65% of the City. The SASD maintains the sanitary sewers in the remaining 35% of the City. About 20% of the area maintained by Sacramento (the older central city) has a combined sewer system, i.e., sewage and storm drainage are collected in the same system. In fact, the Sacramento 2035 General Plan establishes a goal to “rehabilitate the 149

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Combined Sewer System (CSS) to decrease flooding, CSS outflows, and combined system overflows” for this reason.

Green infrastructure has value beyond the combined sewer areas. As part of its compliance with the NPDES stormwater permit, the City must reduce stormwater pollution to the maximum extent possible. Also, the new stormwater permits give credit to green infrastructure projects.

The 2035 General Plan prescribes that Sacramento shall “encourage green infrastructure design and low impact development techniques for stormwater facilities (i.e., using vegetation and soil to manage stormwater) to achieve multiple benefits.” In addition, it requires “proponents of new development to submit drainage studies that … incorporate … green infrastructure and low impact development techniques.”
Sacramento already has excellent examples of green infrastructure project implementation. For instance, the City required the Railyards Development to incorporate Low Impact Development (LID) measures into the project to reduce the increase in runoff volume and reduce the pollutants in the runoff. Multiple bio-retention planters were installed along the roadway to treat all the runoff from the road right-of-way. A bio-retention planter is designed to receive runoff from the adjoining paved areas. A shallow surcharge zone above the vegetated surface temporarily stores runoff. The runoff gradually infiltrates through the root zone of the vegetation and into the underlying sand/peat bed. A variety of natural mechanisms remove pollutants from the runoff as it infiltrates through the root zone and is detained in the sand/peat bed before reaching a base layer of gravel.

As of July 1, 2019, new development and redevelopment projects larger than one acre (including roadways) and stand-alone roadways equivalent to more than five acres are required to incorporate LID controls to reduce the increase in runoff volume by 50% and reduce pollutants in the runoff.

These LID controls include green infrastructure such as bio- retention/stormwater planters and green streets.

The new development/redevelopment requirements are located in Sacramento’s Stormwater Quality Design Manual. The City keeps a database of all LID controls that are installed in the City to demonstrate compliance with its Stormwater NPDES permit and to ensure the controls are maintained. These LID controls are installed on private and public property. Some LID controls or green street locations in the City include:
16th Street public right-of-way between Capitol Avenue and S Street and Railyards Boulevard. The LID controls are utilized to minimize pollutants 150

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in runoff before discharging to local waterways protecting aquatic life, recreational use of the waterways and the municipal water supply.

The implementation of green infrastructure projects - such as permeable pavement, rain gardens, and planter boxes - may be a cost-effective way for Sacramento to lower costs associated with both its drainage challenges as well as its wastewater treatment obligations. While the City is already working on several green infrastructure issues, we recommend that strategies be explored to expand its green infrastructure work as part of a long-term cost-management strategy with meaningful environmental benefits. Such strategies include improving integration with other planned capital projects, developing greater economies of scale, leveraging partners using incentives (potentially including public-private partnerships or Pay for Success strategies), and rethinking long-term maintenance strategies with a focus on cost reduction.

Expand and accelerate strategies to
implement green infrastructure.

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I4. Analyze the Cost/Benefit of the Community Workforce Training Program (CWTP)
Strategy Type
Service Delivery Change
Impact Estimate
The focus of the Community Workforce Training Program (CWTP) is to prioritize the use of local employees on larger City capital construction projects with local employees. However, the City’s staff report for establishing the program and other background materials provided little or no analysis of the financial impacts to the City arising from the CWTP.

This was likely because it was assumed that designating employees for these capital projects from the local area would have the same cost as hiring employees without regard to where they live.

However, these types of programs have the potential of increasing costs for related projects. Now that the CWTP is in place, the costs should be examined as a part of a regular program evaluation. For example, increasing project costs for capital projects should be of particular concern in Sacramento given the significant backlog of capital investment in facilities and infrastructure. More analysis is required to assess the full costs of the CWTP, whether the program is accomplishing its intended goals, whether benefits outweigh costs, and whether the program may be resulting in unintended consequences.

Achievability
The achievability of this strategy is moderate. Considerable effort will be required to track and analyze project costs and local labor/employment data and evaluate whether the program is having its intended result.

Background/Analysis
In August of 2018, the Sacramento City Council adopted the Local Hire and Community Workforce Training Program (CWTP), which prioritizes contractor use of local labor for City capital projects over $1 million. The objective of the program is to direct the City’s capital spending to the benefit of local and disadvantaged residents.

The CWTP requires such projects to use local, primarily union labor and meet all other requirements of the Community Workforce Training Agreement (CWTA). Since adoption, the program has been applied to two large projects: the McKinley Vault and the Third Street Sewer, and to 152

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a portion of the Convention Center and Memorial Auditorium projects with no evidence of adverse impacts. For smaller projects undertaken in 2019 (primarily in Parks), where the bidding environment was already challenging, the requirements of the CWTA may have contributed to higher than expected project cost or resulted in unacceptable bid results.

Considering the City’s substantial capital funding needs and the limited capital resources that have been discussed previously, it is appropriate for the City to evaluate the impact of this program on each capital project.

Estimating the additional cost associated with compliance with the CWTA – on a project by project basis – can help the public better understand the trade-offs between the specific policy goals of the program and the City’s need for efficient capital project completion.

However, the current labor market and constrained bidding environment make it difficult to ascertain how, or if, the CWTA impacts the cost of capital projects. If bids come in over budget, particularly for smaller projects in a tight labor market, the underlying reason is not necessarily due to CWTA requirements, but the availability of qualified contractors and sub-contractors.

When the program was first adopted, engineers’ estimates for City projects included a “CWTA factor” to account for increased labor costs associated with the program. However, that practice was discontinued during the bidding phase of the Convention Center project, when it became clear bidders were including any cost they associated with the CWTP in the project estimate for labor and materials.

As one might expect, non-union bidders, usually subcontractors, are more likely to incur additional costs to comply with the union requirement. Contractors on CWTA-compliant projects may use up to four non-union workers, matched with four union workers, but any additional workers must all come from the union ranks. Electrical contractors are likely being impacted more than other trades, as the current makeup of electrical companies in the Sacramento area is 80% non-union, 20% union.

Anecdotal evidence from contractors indicates that sub-contractors’ availability is the most critical factor in meeting bid requirements, not the impacts associated with the program.

The goal of the CWTA is to:
“promote efficiency of construction operations in the construction of major projects set forth in the City of Sacramento’s Capital Improvement Plan and other public works projects,… thereby 153

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promoting the public interest in assuring the timely and cost- effective completion of such projects, and supporting the efforts of the City to increase employment opportunities for workers who are local area residents, and to provide construction career training and employment opportunities for the City's at-risk youth, military veterans, women and other disadvantaged residents through local apprenticeship and pre- apprentice programs.” The first goal of timely and cost-effective completion of the project was addressed in the agreement by precluding any strikes or work stoppages.

Evaluating whether the second and third goals of increasing employment opportunities for residents and providing training opportunities for disadvantaged residents are being met requires data tracking and analysis. We are advised that the City has partnered with the Sacramento Employment Training Agency (SETA) to provide this type of analysis.

Given the difficulty in estimating any fiscal impact of the CWTP on a specific project, it may be more useful for the City Council to understand whether the hiring and training goals are being met, or at least what impact the program has had on job seekers and trainees in the Sacramento area. The City should be responsible to conduct periodic audits of the SETA-provided information concerning hiring and training outcomes, and to report that information to the City Council.

Conduct periodic audits of hiring
and training outcomes for the Community Workforce
Training Program and report the findings to the City
Council.

With that information in hand, an economic impact analysis can be completed to quantify the CWTP’s impact on changes in the employment rate and economic health for the segment of the community the program is intended to benefit.

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I5. Monetize Sewer and Stormwater Assets for Fiber Optic Deployment
Strategy Type
Revenue Enhancement
Impact Estimate
To be determined based on demand and project scale.

Achievability
While the practice of monetizing sewer and stormwater assets for fiber optic development is relatively new in North America, we suggest Sacramento evaluate whether this might be viable via a pilot program. In an ideal situation, the City would explore the feasibility of partnering with other local jurisdictions that own sewer and stormwater pipes as part of this process. This is an emerging concept for deploying fiber optic infrastructure, but without consultation with other agencies and a review of governing laws, the achievability of this strategy is low.

Background/Analysis
Because of the increasing demand for internet capacity, the demand for fiber optic cable capacity continues to increase. In many jurisdictions, however, the cost of deploying additional cable is very high. In response to this challenge, boutique service providers have begun to use existing sewer and stormwater pipes to deploy fiber optic cable. In addition to being less expensive, this process can reduce street/curb/sidewalk cuts (along with their resulting infrastructure damage) and congestion, lower weather-related outages, and de-clutter aerial/above-ground installations.

Sacramento has not implemented this concept. The City did support the Verizon Public-Private Partnership for 5G and intelligent transportation systems. The City is familiar with the general concept and has also “monetized” utility assets by renting out antenna space on its elevated water reservoirs.

CableRunner International has installed fiber optic cables in sewers in Vienna, Moscow, Copenhagen, Calgary, St. Petersburg (Russia), and Cleveland. San Francisco installed two miles of fiber optic cable in a joint pilot project with CableRunner in 2003. CityNet Telecommunications Inc. has installed fiber optics in Albuquerque, Indianapolis, and Omaha.

The City of Anacortes (Washington) is in the process of connecting its major facilities with fiber optic cable and plans on using this as a 155

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backbone to serve businesses and residents throughout the entire City.

Portions of the network are being constructed by feeding the fiber optic cables through existing water pipes. They expect this technique to save a significant amount of time and money. The process also has been successfully implemented in the United Kingdom, Spain, New Zealand, and South Africa.

Water UK (United Kingdom), however, took the position that water companies should not allow the introduction of fiber optic cabling into potable water systems, citing risks of contamination hampering of repairs, introduction of restrictions in the pipes, and concerns over public acceptability.

Explore opportunities to monetize
sewer and stormwater assets with telecommunications
utilities.

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Previous Recommendations
In April 2010, Management Partners completed an analysis to help Sacramento with its efforts to develop a plan for long-term financial and service sustainability. The Citywide Financial and Operational Review incorporated 52 recommendations spanning the City’s various departments and program areas, and which we, at the time, estimated would have a positive financial impact on Sacramento ranging from $101 million to $154 million.

About two years later, in May 2012, Management Partners also assisted the City of Sacramento with an analysis of operational efficiencies in the Fire Department. The Fire Innovation and Efficiency Study provided an additional 13 recommendations for improvements in the Department. At the time we estimated these improvements would have a positive financial impact on the City in the range of $8.6 million to $9.6 million.

Sacramento implemented many of the recommendations contained in these two reports. Indeed the 2010 report identified a local sales tax increase as a possible strategy for fiscal sustainability and the City successfully implemented a 0.50% sales tax increase in 2012. This tax was replaced with a full 1% sales tax measure approved in November 2018.

In the spirit of financial sustainability, the consulting team has reviewed these previous recommendations and proposes reconsideration of six strategies, that were presented in one (or both) of the prior reports, but which have not been implemented. We have reexamined each of these strategies and, wherever possible, updated the analysis and financial impact
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PR1. Closely Monitor and Manage City Hiring, Eliminate Vacant Positions and Give Departments Greater Flexibility on Staffing
Strategy Type
Service Delivery Change
Impact Estimate
The City added approximately 145 full-time positions in the adopted FY 2019-20 budget, but these positions have largely yet to be filled. Over the last 11 years Sacramento has gone from 3,954 employees in FY 2007-08, down to 2,749 employees following the Great Recession and now to 3,59920 positions in FY 2019-20. These employee counts represent only the General Fund positions. However, the point is that the City has added a substantial number of employees in each of the last seven fiscal years.

Per capita staffing provides another way of looking at this issue. Staffing now stands at 7.0 positions per 1,000 population, which is up from the 5.7 per 1,000 observed in 2013, but below the 8.5 per 1,000 level that existed in 2008.

Unfortunately, the fiscal realities dictate that the continuation of this growth cannot be maintained, and the City will have to look at other ways of delivering services.

In addition to the 145 positions added in this year’s budget the City has hundreds of additional vacant positions that could be considered for elimination. The City currently has some 831 vacant positions but not all of these are truly vacant, many are temporary positions, and not all are in the General Fund. Reducing the number of vacancies for so-called “non- budgeted positions” and looking at the General Fund only, we estimate the City has approximately 521 vacant positions in the General Fund.

Eliminating the temporary positions leaves approximately 376 vacant career positions.

If we use an average total cost of $110,600 (conservative) and assume half the vacant career positions are eliminated it equates to an annual savings of $20.8 million. Management Partners recommends that this strategy of eliminating vacant positions be considered in the near term for two

20 This is the total number of FTEs authorized under the General Fund. The grand total number of City employees (including all funds) is 4,774.
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reasons. First, it provides immediate budget relief which will allow the City some time to pursue other more complicated strategies set forth in this report. Second, the City has to find alternative means of delivering services that do not rely on traditional full-time employees. The trends facing the City, and reflected in the fiscal model work, are inescapable.

Employee costs are rising much faster than City revenues. The fact is that the City cannot afford its traditional full-time employee-based service delivery approach and the sooner it considers alternatives such as those discussed in this strategy the better for long run sustainability.

Achievability
Although difficult, given the population growth in the City and accompanying increased demands for service, the achievability (indeed the necessity) of reducing the rate of authorized position growth is high.

Sacramento will also need to navigate its internal rules and practices with respect to contracting and outsourcing. It is also likely that this recommendation could require collaboration with one or more of the City’s labor associations.

Background/Analysis
In the 2010 Citywide Operational and Financial Review we prepared for Sacramento, we recommended the City continue its practice of not filling vacant positions without regard to the City’s long-term strategic need for the position. While the observation is now nine years old, the recommendation remains valid as the City’s current hiring pace is unsustainable and will outpace the growth in revenues if continued.

For the FY 2018-19 budget year, employee services made up 52.5% of the City’s $1.1 billion total budget. In the General Fund, expenditures on employee services account for over 90% of the revenues available. The number of full-time equivalent (FTE) positions added for FY 2019-20 to the General Fund operating divisions was projected at 145 FTEs. Over the last seven years the General Fund has added 850 FTE, an average of 121.4 FTE per year.

This cumulative growth in positions, however, is not sustainable given current and projected revenues. The FY 2019-20 budget document states of the General Fund organizations, “The City’s multi-year labor agreements, coupled with growing benefit and pension costs, are driving expenditure growth well in excess of revenue growth.” The rate of increase in employee costs, therefore, makes the current level of position growth unsustainable.
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Furthermore, during several of our interviews, staff from the departments indicated that they believed they could improve service and reduce costs if they were given more flexibility to customize their staffing models (including the use of part-time staff, contingent staff, and contractors).

For example, the Convention and Cultural Services Department has been migrating towards a dynamic staffing model that more closely resembles the peaks and valleys of its facilities-related workload. That transition was driven, in part, by the need to control costs at money-losing venues.

It was facilitated, however, by the attrition in workforce resulting from the multiple facility renovations currently underway and the recent competitive bid process for the operation and management of key facilities. Similarly, Public Works (Maintenance Services) uses a mix of full-time staff (focused on policy and quality assurance/quality control) and contractor personnel (handling some of the frontline tasks) to manage the peaks and valleys of its workload related to resurfacing, streetscape management, and forestry. Examples of other positions that could be managed this way include construction inspectors, consultant engineers, and leaf season employees. We expect that other departments would similarly benefit from greater workforce flexibility. Similarly, IT and the Utilities departments would benefit from the ability to use specialty sub-contractors and niche partners more extensively.

During our interviews, turnover of parks and recreation maintenance entry-level staff was identified as a challenge for the Parks Maintenance Division. In order to make the best use of a workforce constrained by vacancies and a tight labor market, the Department may wish to consider adopting a dynamic staffing model that recognizes differences in facility usage, customer expectations and project priorities and staffs sufficiently to meet operational demand. Dynamic staffing provides management with greater flexibility to deploy limited resources to meet customer service and operational goals, without assuming “one size fits all” for maintenance of city parks, trails, open space and recreation facilities. The model can lead to high impact results in targeted areas, without needing to upstaff beyond the Department’s capabilities.

Additionally, to the extent there are unfilled positions in high turnover areas, analyses can be conducted to determine whether dynamic staffing models consisting of part-time staff, contingent staff or contractors make operational sense.

Internal and External Constraints
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with applicable bargaining units and evaluating independent contractor status for potential CalPERS/employment impacts.21
Prepare an analysis of unfilled
positions to identify opportunities to eliminate budgeted positions and implement dynamic staffing models.

Allow departments to use part-time
and contract staffing models to provide greater flexibility in meeting service demands and maximizing cost
effectiveness. Implementation of staffing models must
incorporate analyses of internal/external constraints and unfilled positions/turnover rates and may require
negotiations with applicable bargaining units.

21 When considering the hiring of part-time staff or awarding contracts for services, local agencies must apply common law factors to determine whether to classify an individual as an employee or independent contractor, with employees requiring payroll tax deductions and enrollment in CalPERS if working more than 960 hours in a fiscal year. Agencies must also consider CalPERS annuitant status. The 2018 California Supreme Court Dynamex decision places a substantial burden on private sector employers to justify independent contractor status and its immediate impact is not material on public sector employers. However, future impacts could result from changes to State law, whether adopted by the Legislature, established by wage order determinations or adjudicated through the courts. 161

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PR2. Calculate Fair Labor Standards Act Overtime in a Manner Consistent with Federal Laws
Strategy Type
Expenditure Control
Impact Estimate
The City of Sacramento generally calculates overtime based on the total number of hours worked during a pay period. However, “time worked” can still include some amount of paid leave. As such, based on our estimates, if overtime was calculated in accordance with FLSA rules, the City would realize savings of about 5%, or an average of $1.1 million per year.

Achievability
Though this strategy may be subject to collective bargaining, we rate its achievability as moderate to high.

Background/Analysis
The City Auditor’s Office completed an audit focused on the use of overtime in the Fire Department in February 2017. Further, as Management Partners identified in our 2010 Citywide Financial and Operational Review and again in our 2012 review of the Fire Department, employees continue to receive overtime pay if they exceed a designated number of hours in a pay period. Federal law provides for overtime payment only when an employee’s actual hours worked in the pay period exceed the maximum amount (generally 40 hours per week).

It should be noted that the beginning in 2015/16 The City addressed the sick leave dimension of this problem for most labor groups and this has reduced costs.

However, under the City of Sacramento’s current practice, paid time off such as vacation and other paid leave is treated as hours worked. For example, an employee on a 5/40 schedule, who worked an hour of overtime on Monday, Tuesday, Wednesday and Thursday but took a vacation day on Friday, would be compensated for four hours of overtime for that week despite having worked just 36 hours. In other words, employees are counting leave time so that they can qualify for overtime. It is difficult to precisely estimate savings from this change because overtime use may be impacted by other paid leave time use.

However, overtime expenditures for 2008 through 2018 ranged from 162

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$12.9 to $35.1 million per year, with an annual average of $21.6 million.

Assuming just 5% of overtime expenses are derived from the use of paid leave rather than time worked, the average savings to the City from FLSA-compliant overtime calculations would have been $1.1 million over that period.

Change overtime calculation
practices to be fully consistent with Federal law.

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PR3. Eliminate General Fund Subsidies for Non-Essential Services
Strategy Type
Process Improvement
Impact Estimate
Eliminating General Fund subsidies for non-essential services will free up funds for core services associated with the public health, safety and welfare. Based upon our prior assessment, we estimate this may save $2.6 million.

Achievability
Given the importance of maintaining essential services, with political will, the achievability of this strategy is moderate.

Background/Analysis
In our 2010 report, Management Partners identified approximately $2.6 million in savings associated with the elimination of General Fund subsidies for fee-charging non-profit entities including:
• Crocker Art Gallery ($1,428,000),
• Sacramento Zoo ($518,000),
• Discovery Museum ($144,000),
• Center for Sacramento History ($339,000), and the
• Sacramento History Museum ($144,000).

Additionally, the City provides General Fund subsidies for its own fee- based services and programs such as operating the marina and pools, as well as making improvements to golf courses (although golf course maintenance is now outsourced). The question posed in this strategy is twofold: First, are these businesses the City needs to support given core public service delivery responsibilities? Second, if continuation is merited can the General Fund subsidy be reduced or eliminated?
As Sacramento continues to experience significant fiscal pressures associated with personnel-related costs, it is critical that the funding of non-essential services, whether provided by the City or non-profit entities, be carefully evaluated to determine what can and/or should be self-supporting.

Conduct a program-by-program
review to determine which non-essential services should 164

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be continued and how the level of General Fund support
can be reduced or eliminated.

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PR4. Establish a Paramedic/Ambulance Subscription Program Strategy Type
Revenue Enhancement and Service Delivery Change
Impact Estimate
Based on results in other agencies which were documented in our 2012 Fire Innovation and Efficiency Study, Sacramento could increase its revenues in the range of $1 to $1.5 million per year.

Achievability
The achievability of implementing this recommendation is moderate.

Background/Analysis
The Sacramento Fire Department does not have a paramedic/ambulance subscription program. Subscription programs implemented by other cities have provided additional revenues as well as a safety net for residents who do not have insurance coverage. Our 2012 report for the Fire Department recommended that a subscription program be established. Revenue data from the seven California cities (mainly in Orange County, with the exception of Burbank in Los Angeles County and Corona in Riverside County) we studied in 2012 have been updated and are shown below in Table 23.

Table 23. Ambulance Subscription Program Revenue for FY 2017-18 Jurisdiction Population Annual Membership Revenue
(FY 2017-18 Actual) Revenue Per Capita
Corona 163,585 $902,803 $5.52
Anaheim 349,007 $1,417,210 $4.06
Fullerton 139,976 $1,452,308 $10.38
Huntington Beach 200,415 $893,180 $4.46
Orange 140,289 $411,577 $2.93
Burbank 104,765 $273,953 $2.61
Santa Ana 334,493 $163,429 $0.49
Average 204,647 $787,780 $4.35
Median 163,585 $893,180 $4.06
Sources: 2017 American Community Survey 5-Year Estimates; FY 2019-20 Approved Budget documents; Burbank OpenGov site Based on the experience of other communities, a subscriber rate of 6% of households is a reasonable estimate. With an annual fee between $35 and $50, the City could expect revenue of $1 million to $1.5 million annually. 166

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We understand that the Fire Department has concerns about how the payer mix, i.e., the percentage of patients being transported for which ambulance costs are covered by Medicare, Medi-CAL, commercial insurance or private pay, may impact the amount of revenue generated from a Sacramento subscription program (and the overall subscriber rate).

A detailed analysis of the patient transport payer mix of each jurisdiction cited in Table 23 as compared to Sacramento is beyond the scope of this engagement. However, based on publicly available data from the UCLA Center for Public Health Policy Research, the relative mix of insurance coverage types by region is not significantly different, suggesting that the patient transport payer mixes are likely similar.

Given the similarities in insurance coverage and the actual average per capita revenue of $4.35 generated by the cities in Table 23 (all of whom have established subscription programs), we believe the revenue range of $1 million to $1.5 million (or $2.00 to $3.00 per capita) for Sacramento is attainable. However, as suggested below in the recommendation, the subscription program could be established as a limited-term pilot project that will give the Fire Department actual data for further evaluation.

As Sacramento ambulance services are an integral part of the Fire Department, this revenue can offset an equivalent amount of General Fund revenue that can then be used for other priorities. The City may wish to explore collaborating with other fire agencies in the Sacramento area to ensure that the benefits of a paramedic/ambulance subscription program are offered on a regional basis.

Establish a paramedic/ambulance
subscription program. Include a cost/benefit analysis of operating the billing and collection program with City staff or by contractor. The program can be established and
marketed on a pilot basis (a two-year minimum is
suggested) to evaluate results and determine continuation.

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PR5. Pursue Legislation to Collect Franchise Fees from the Sacramento Municipal Utility District
Strategy Type
Revenue Enhancement
Impact Estimate
Based on results in other agencies, Sacramento could increase its revenues in the range of $5 to $7 million per year.

Achievability
Given the unpredictability of legislation we rate the achievability as low.

Background/Analysis
Sacramento is in a unique position relative to the local electric utility, Sacramento Municipal Utilities District (SMUD). SMUD is an independent, publicly owned utility chartered by the State that does not pay the City a franchise fee like those paid by investor-owned utilities such as Pacific Gas and Electric Company (PG&E). As SMUD is not a City-owned utility it is not subject to franchise fees accruing to the General Fund, such as those paid by Pacific Gas and Electric (PG&E). This situation deprives the City of a significant revenue source.

Additionally, Article XIII of the City Charter grants authority to the City Council to issue franchises for the use of public rights-of-way, further enumerated in Chapter 3.74 of the Municipal Code.

As franchise fee formulas are complex, often including factors such as gross revenue and miles of public right-of-way used, it is not possible to make a precise estimate on the City’s revenue loss. However, extrapolating from cities that receive franchise fees from private electricity utilities, the loss is probably in the range of $5 to $7 million dollars annually.

Pursue legislation that allows the
City to collect payments to the General Fund from
SMUD, similar to what private organizations pay.
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PR6. Amend Charter to Remove Binding Arbitration for Police and Fire
Strategy Type
Expenditure Control
Impact Estimate
The amount of savings cannot be estimated currently because it would be based on potential future increases in Police and Fire compensation.

Achievability
This would require voter approval and, given the unpredictability of such a vote, we rate the achievability as low.

Background/Analysis
Articles XVIII and XIX of the City Charter provide for binding arbitration for sworn police and fire personnel. Binding arbitration removes the final authority for determining salaries, benefits and other conditions of employment from directly elected representatives and vests it in the hands of a third party without direct financial responsibility for managing the public’s money.

Police and Fire personnel costs represent more the 50% of City’s General Fund budget. An arbitrator looks only at the prevailing practices of other public agencies and does not consider the City Council’s prerogative to establish priorities for core services and service levels and for the expenditure of public funds that reflect a balance of services to the community.

Sacramento has been to binding arbitration twice. In a 2000 arbitration with the police union, the City settled many significant cost issues including enhanced retirement benefits out of fear that the result of arbitration would be worse. In 2004 the City went to arbitration with the fire union and generally prevailed. The reality of binding arbitration is that the employer, fearful of the dynamics of the arbitration process, will often concede and enter into agreements that are more costly and result in fewer dollars available to provide other services.

Binding arbitration is used by a relatively small number of Charter cities in California and is no longer used by General Law cities pursuant to a 2003 state Supreme Court decision. Additionally, the peer cities of San Jose and Stockton referenced in our 2010 report presented Charter amendments to repeal binding arbitration, both of which have been 169

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approved by local voters. Other cities including Palo Alto, San Luis Obispo and Vallejo have also successfully repealed their Charter provisions for binding arbitration.

Evaluate the feasibility of placing a
Charter Amendment on the ballot to remove the
requirement for binding arbitration for sworn police and fire personnel.
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Conclusion
Sacramento provides a rich array of municipal services and community enhancing programs that set it apart from many other cities. It is evident that decision makers are committed to the concept of a “full-service” city.

At the same time, these services and programs have grown more and more expensive and this leaves Sacramento at a crossroads. As our fiscal model shows, the trend of expenditures outpacing revenues will continue into the 2030s. Moreover, the projections show the current level of expenditures will deplete the City’s reserves relatively soon.

Fortunately, as this report shows, Sacramento has many options to improve operations, increase revenues and reduce costs. However, there will be certain obstacles and opposition in doing so.

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Attachment A – List of Recommendations
Create an innovation strategy to guide internal and external initiatives, drawing from the more developed similar programs in Denver and Phoenix.

Prepare and submit a local ballot measure to modernize the Business Operations Tax.

Convert three positions within the Police Department Digital Forensic Unit from sworn to non-sworn positions.

Convert the Police Volunteer Coordinator position to a non-sworn position.

Conduct an audit of current Police department administrative duties to determine the non-sworn duties that can be consolidated and civilianized.

Convert the Fire Public Information Officer and two IT positions to non-sworn positions.

Conduct an internal audit of current Fire administrative duties to identify non-sworn duties that can be consolidated and civilianized in the future.

Establish a cross-functional team including Public Safety, Information Technology and Finance staff to create a dashboard, monitor and provide guidance to all departments regarding methods to manage overtime.

Develop a process to continually review utility billing to reduce errors, maximize collections, and improve data quality and accuracy of utility billing.

Conduct a third-party audit of utility invoices received by the City.

Implement a business operations tax amnesty program and explore additional tax/fee compliance opportunities based on results.

Conduct a street damage restoration and recovery study to ensure that the excavation cost recovery fee captures all related pavement life cycle costs.
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Establish a moratorium of five years on pavement cuts following new street construction or major resurfacing projects.

Automate human resource and other support service processes and workflows to streamline tasks and eliminate manual systems.

Prioritize the program areas and select at least two to analyze in-depth annually for the next several years.

Expand market-based parking meter fees and enforcement to Sundays.

Develop guidelines to determine when it is most advantageous to use Design-Build and similar public contracting methods to streamline capital project planning/ construction, align with existing strategic partnership initiatives and reduce overall infrastructure costs.

Identify one or two functional areas to begin gainsharing implementation.

Determine departments or functional areas suitable for gainsharing.

Initiate discussions with labor associations affiliated with the identified departments or functional areas.

Issue a request for proposals (RFP) to obtain competitive proposals for solid waste collection and recycling services.

Conduct a re-routing exercise to balance routes, workload, and tonnage on a periodic basis.

Utilize Global Positioning System (GPS) to monitor efficiency of refuse collection trucks.

Adjust life cycle intervals to align with more common government fleet cycles.

Incorporate salvage value, auction fees, and make-ready costs into future fleet replacement costs.

Develop a dedicated internal service fund that supports future fleet replacements.

Develop a comprehensive and accountable chargeback system that supports the fleet replacement fund.
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Complete a comprehensive inventory of Citywide infrastructure assets that includes condition assessments and priority levels for maintaining/replacing.

Develop a comprehensive asset management system based on best practices to plan and budget for the maintenance and replacement of City infrastructure assets.

Expand and accelerate strategies to implement green infrastructure.

Conduct periodic audits of hiring and training outcomes for the Community Workforce Training Program and report the findings to the City Council.

Explore opportunities to monetize sewer and stormwater assets with telecommunications utilities.

Prepare an analysis of unfilled positions to identify opportunities to eliminate budgeted positions and implement dynamic staffing models.

Allow departments to use part-time and contract staffing models to provide greater flexibility in meeting service demands and maximizing cost effectiveness.

Change overtime calculation practices to be fully consistent with Federal law.

Conduct a program-by-program review to determine which non- essential services should be continued and how the level of General Fund support can be reduced or eliminated.

Establish a paramedic/ambulance subscription program.

Pursue legislation that allows the City to collect payments to the General Fund from SMUD, similar to what private organizations pay.

Evaluate the feasibility of placing a Charter Amendment on the ballot to remove the requirement for binding arbitration for sworn police and fire personnel.
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Appendix 1 – Summary Baseline Forecast of General Fund and Measure U

Actuals Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Revenues: FY18-19 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 FY27-28 Property Tax $160.3 $171.3 $180.7 $189.9 $195.6 $203.5 $215.4 $227.8 $241.3 $253.3 Sales Tax 87.7 90.4 93.9 92.7 93.7 99.2 104.9 111.0 115.0 119.1 Utility Users Tax 60.8 61.2 61.7 62.2 62.8 63.4 64.0 64.6 65.2 65.9 Other Taxes 48.9 48.1 48.9 48.3 48.4 49.7 51.2 52.7 53.5 54.4 Other General Revenue 13.9 9.6 10.3 10.3 10.2 10.1 10.0 10.0 10.0 10.1 Enterprise Tax-Utilities 29.0 31.2 32.0 32.8 33.7 34.5 35.4 36.2 37.1 38.1 Dept Revenues 114.6 106.5 109.2 109.8 111.6 115.4 119.4 123.6 126.8 130.1 Total Revenues 515.2 518.4 536.8 546.1 555.9 575.8 600.2 625.9 649.0 671.0 Expenditures:

Salary/Incentive/Benefits 304.1 380.5 394.2 405.1 416.0 426.9 438.0 449.4 461.0 473.0 Pension 81.6 102.1 114.4 123.9 133.6 141.2 149.2 152.0 157.9 163.7 Medical 31.5 32.4 33.5 34.8 36.3 37.9 39.8 42.0 44.4 47.0 Overtime/Other 44.7 44.7 45.5 46.4 47.3 48.2 49.1 50.0 51.0 52.0 Vacancy Savings - (61.0) (12.7) (13.0) (13.4) (13.8) (14.2) (14.6) (15.0) (15.4) Total Personnel 461.8 498.7 574.9 597.2 619.7 640.5 662.0 678.8 699.3 720.3 Services/Supplies/MYOP 130.9 138.6 141.0 143.4 145.9 148.5 151.1 153.7 156.5 159.2 Equip/Capital Outlay 2.3 8.2 8.3 8.5 8.7 8.9 9.0 9.2 9.4 9.6 Reimbursements (130.0) (168.0) (211.4) (198.7) (204.7) (214.7) (222.7) (232.3) (240.4) (248.8) Debt Service 20.9 20.3 19.2 16.4 17.1 16.6 16.6 16.6 16.6 16.6 Capital Projects 19.5 20.3 7.9 8.3 8.3 8.4 8.7 9.0 9.2 9.5 Budget Additions - - - - - - - - - - Efficiencies/Innovation - - - - - - - - - - Fiscal Capacity Used - - - - - - - - - - Total Expenditures 505.5 518.2 539.8 575.2 595.0 608.2 624.7 635.0 650.6 666.4 Net Surplus/(Deficit) 9.7 0.2 (3.0) (29.1) (39.1) (32.4) (24.5) (9.1) (1.5) 4.6 Total Begining Balance 172.4 210.6 210.8 207.8 178.7 139.6 107.2 82.7 73.6 72.0 OPEB Trust Pymts - - - - - - - - - - Chng in Reserves/Adjusts 28.5 - - - - - - - - - Total Ending Balance 210.6 210.8 207.8 178.7 139.6 107.2 82.7 73.6 72.0 76.6 Cash & Investments 204.4 204.6 201.6 172.5 133.5 101.1 76.5 67.4 65.9 70.5 Allocation of Balance:

Nonspendable 0.4 - - - - - - - - - Operating Programs 62.0 57.7 57.7 42.7 42.7 42.7 42.7 42.7 42.7 42.7 Capital Reserves 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 OPEB Reserve 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6 6.6 Pension Reserve 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5 Econ Uncertainty Reserve 55.2 58.7 62.6 66.6 70.8 75.3 80.2 85.6 91.4 97.5 Unassigned Balance 32.9 34.2 27.3 9.3 (34.0) (70.9) (100.4) (114.9) (122.2) (123.7) Unassign+EUR+PERS+OPEB 108.3 113.1 110.1 96.0 56.9 24.5 0.0 (9.1) (10.7) (6.1) % of Total Expenditures 21.4% 21.8% 20.4% 16.7% 9.6% 4.0% 0.0% -1.4% -1.6% -0.9% Sales Tax $64.0 $103.4 $105.1 $103.4 $104.3 $110.2 $116.4 $122.9 $127.1 $131.3 Interest 1.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Total Revenues 65.3 103.6 105.4 103.7 104.6 110.5 116.7 123.2 127.3 131.6 GF Program Support 44.5 59.1 79.9 78.2 79.1 85.0 91.2 97.7 101.8 106.1 Library - - - - - - - - - - Econ Develop/New Progs - 7.5 22.0 19.0 16.0 13.0 10.0 10.0 10.0 10.0 Debt Service - - 3.0 6.0 9.0 12.0 15.0 15.0 15.0 15.0 Capital/Other 9.4 22.6 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Total Expenditures 54.0 89.2 105.4 103.7 104.6 110.5 116.7 123.2 127.3 131.6 Net Surplus/(Deficit) 11.3 14.4 - - - - - - - - Total Begining Balance 36.2 47.5 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 Chng in Reserves/Adjusts 0.0 - - - - - - - - - Total Ending Balance 47.5 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 Bal % of Total Expenditures 88.1% 69.5% 58.8% 59.8% 59.2% 56.1% 53.1% 50.3% 48.7% 47.1%

GENERAL FUND

MEASURE U
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Appendix 2 – Summaries of Managed Competition Case Studies

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Howard Chan
City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

MEMORANDUM

DATE: March 5, 2020

TO: Jorge Oseguera, City Auditor

FROM: Howard Chan, City Manager

CC: Mayor and City Council

SUBJECT: CITYWIDE INNOVATION AND EFFECIENCY ASSESSEMENT,

POTENTIAL STRATEGIES REPORT

This communication is in response to the Citywide Innovation and Efficiency Assessment, Potential Strategies Report prepared by the City Auditors Office and the consultant team at Management Partners. As City Manager, I acknowledge the receipt of this report. The purpose of this memorandum is to provide a succinct response to each of the 39 recommendations included in the report.

I would like to take the opportunity to thank the City Auditor and Management Partners for working with all City Departments and the Assistant City Manager team to ensure accurate, thorough, and responsive information was collected. I would also like to thank my staff for making this work a priority and their openness to the recommendations. This truly was a team effort.

Below please find responses to each of the recommendations.

Recommendation 1. Create an innovation strategy to guide internal and external initiatives, drawing from the more developed similar programs in Denver and Phoenix.

Response: The City Manager’s Office supports this recommendation. The City is a leader in innovative initiatives and partnerships. There are many examples of award-winning innovations like Streamline Sacramento, Front Street Animal Shelter, Electrify America, Parking Modernization, 5G Wireless, 311Call Center, Inclusive Economic Development, as well as many more internal efficiency programs. However, the City also recognizes continued opportunity for growth and formalization of the innovation program. The City is currently in the 162
180

Howard Chan
City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704
planning stages of updating the city’s Digital Strategy that will include an innovation component with a focus on formalizing innovation culture and measuring innovation successes.

Reco
mmendation 2. Prepare and submit a local ballot measure to modernize the Business Operations Tax.

Res
ponse: The Finance Department has continued to recommend this strategy and supports this recommendation.

Response: The Police Department does not support this recommendation. DFU requires investigative experience and the ability to look at, retrieve and investigate highly classified material for criminal misconduct. Investigators must also testify in court and conduct investigations as a sworn officer.

Response: This recommendation has been implemented. The sworn full-time employee has been transferred to the Outreach and Engagement Division. The duties of the Police Volunteer Coordinator have been transferred to professional staff (non-sworn) employee.

Response: The Sacramento Police Department supports this recommendation. However, this recommendation is specific to the Police Training Unit. The Academy, Field Training, and In- Service Training units are staffed by both sworn and civilian personnel subject matter experts responsible for managing the unit and delivering and coordinating training. Generally, training specific to sworn employees is provided by sworn employees and civilian training is delivered by civilian personnel, although some courses are interchangeable. There is a recognized benefit to having sworn officers train sworn and vice versa with civilians as they are most knowledgeable about certain aspects of the job.

Response: The Fire Department believes that it is necessary to have a subject matter expert on fire and emergency incidents (like the Police Department structure). The department does 163
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Howard Chan
City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

not currently have a budgeted sworn Public Information Officer. However, a Captain currently is serving in this capacity.

The Fire Department believes that it is necessary to have a subject matter expert in the IT Captain position as this position requires operational knowledge. Currently, the Department has one sworn IT Captain position. This was reduced from two IT positions in 2016. The IT Captain is the Computer Aided Dispatch coordinator, which handles verification of response files and run zones, represents the Department at regional meetings with their peers, is the communications supervisor for all field communications, and is tasked with managing and project tasking all day-to-day repairs of in service field units.

Response: The Fire Department supports this recommendation and is continually analyzing its staffing models to identify efficiencies. As efficiencies are identified, we are required to work with our local bargaining units to implement.

Recommendation 8. Establish a cross-functional team including Public Safety, Information Technology and Finance staff to create a dashboard, monitor and provide guidance to all departments regarding methods to manage overtime.

Response: The Finance Department, Fire Department, Sacramento Police Department and Information Technology Department supports this recommendation. However, SPD does maintain significant controls over overtime, including management of overtime policies and reporting procedures. This recommendation, while helpful, does not address the driving factors of overtime or the requirement that the Department provide certain services irrespective of staffing levels.

Response: The Department of Utilities (DOU) supports this recommendation and has recently updated the utility review process as part of a billing system upgrade:

1. As mentioned in the report, DOU’s billing system was audited in 2012 and all recommendations were implemented.

2. A significant upgrade of the billing system was completed in May 2019, which corrected many of the challenges with the previous billing system and initiated a utility billing review process. It would be appropriate to operate under the new system for at least two to three years then evaluate timing of a subsequent comprehensive audit. 164
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Howard Chan
City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

3. To further assist, the City Auditor has developed a risk-based audit priority list for the department. Although a billing audit does not currently rank high, this could change over the next few years as we operate the new system and challenges arise.

Response: The Department of Utilities supports this recommendation. As background, the City has various practices and efforts related to auditing of utility invoices received. The City has over 1,800 energy accounts for municipal electricity and natural gas consumption. Currently, staff monitors and tracks energy use at a high level using the city’s energy management system, EnergyCAP, which is used in part for auditing of billing information.

Additionally, an audit of the City’s green efforts is currently underway, which includes analysis of streetlight data and billing, and may recommend process improvements.

Recommendation 11. Implement a business operations tax amnesty program and explore additional tax/fee compliance opportunities based on results.

Response: The Finance Department does not support this recommendation. The department currently contracts with Avenu Insights & Analytics (AI&A) for business operations tax (BOT) compliance. We are currently working to cross check businesses on our vendor payment list with businesses that have City BOTs to determine compliance. Additionally, AI&A cross checks businesses reporting sales tax with our BOT list.

The department currently works with businesses that are out of compliance by waiving late penalties and offering the business a payment plan to allow them the opportunity to come into compliance. Given the current efforts underway, we are moving businesses to compliance and receiving backpay for unreported taxes. As such, the department does not believe that an amnesty program will result in significant savings and may result in a loss to the City.

Response: The Department of Public Works supports this recommendation and has already initiated development of a scope of work for a pavement cut fee study to evaluate appropriate fees and a moratorium policy for pavement cuts on new street construction and recently resurfaced streets. The goal is to bring a proposal forward for City Council adoption by the end of calendar year 2020.
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Howard Chan
City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

Response: The Department of Public Works supports a moratorium but will refrain from establishing a timeframe until we have completed our pavement cut fee study to evaluate appropriate fees and a moratorium policy for pavement cuts on new street construction and recently resurfaced streets. The goal is to bring a proposal forward for City Council adoption by the end of calendar year 2020.

Response: The Finance, Human Resources and Information Technology Departments support this recommendation and have already automated new hire and rehire transactions, which are the most labor-intensive transactions. The departments will continue to work together to automate all additional transaction types.

Response: The City Manager’ Office supports the further evaluation of whether managed competition is a viable strategy. This strategy will require discussion with labor unions prior to implementation as it has a potential to impact our unionized workforce.

Response: The Department of Public Works supports this recommendation. The Parking Services Division has initiated a study that is currently evaluating the needs of the overall parking system including parking and mobility enhancements. This will include an initial review of expanding market-based parking meter fees and enforcement to Sundays.

Response: The City Manager’s Office supports this recommendation to develop guidelines for public contracting methods for capital projects to ensure the best contracting method is used.

Historically, the City has used various contracting methods including Design-Bid-Build, Design- Build (DB) and Design-Assist (DA). The DA contracts were also chosen to proceed with construction contracts using the Construction Management at Risk (CMAR) method. Some recent DB examples include Meadowview Navigation Center, Sam & Bonnie Pannell Community Center HVAC Control Replacement, and Energy Efficiency Retrofit Phase II.

Some DA and CMAR examples include the North Natomas Community Center and Aquatic 166
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Howard Chan
City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

Complex, Memorial Auditorium Renovation, Sacramento Convention Center Renovation and Expansion, and Community Center Theater Renovation.

The Department of Utilities (DOU) is using an alternative procurement method, Multiple Award Task Order Contract (MATOC), for the ongoing Accelerated Water Meter Program (AWMP), which is a best-value contractor selection process based on qualifications, performance, and pricing. The process includes Request for Qualifications, Requests for Proposals, Council approval of a Master List of pre-qualified contractors and award of Task Order contracts. DOU has used a similar process to bid the McKinley Vault and 3rd Street Sewer Upsizing projects.

Response: The City Manager’s Office will further evaluate whether gainsharing is a viable strategy.

Response: The City Manager’s Office will further evaluate whether gainsharing is a viable strategy.

Response: If after evaluation gainsharing appears viable, the Human Resources Department will initiate discussions with appropriate labor unions.

Response: The City Manager’s Office supports further evaluation and analysis prior to issuing a request for competitive proposals. It is important to recognize that an evaluation and contracting for these services is a multiyear process and will require discussion with labor unions as it will impact our unionized workforce.

The Department of Public Works is currently evaluating solid waste and recycling services, rates, and opportunities to reduce costs and improve service. Although these services rank high in the latest Community Survey, the department recognizes that the industry and State regulations and requirements continue to change requiring innovative solutions to improve services while being cost effective.
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City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

Response: The Department of Public Works supports this recommendation and is part of the department’s ongoing management practices. The last re-route study was completed in 2017.

A new re-route study will take place in 2020 to right size routes which have become out of balance with much of the new development that has recently occurred in the City.

As noted above, the department is reviewing opportunities to improve services while being cost effective and periodic re-routing is a best practice that the city will continue to implement.

As part of the proposed re-route study, an evaluation will be done to consider transitioning from a 4-10 work schedule in favor of a 5-8 schedule in order to improve efficiencies.

Response: The Department of Public Works supports this recommendation. In fact, the department is currently evaluating a proposal to pilot innovations, to monitor and improve efficiency, such as real time GPS route management, widespread radio frequency identification deployment, and truck mounted pavement assessment equipment.

Response: The Department of Public Works Fleet Management Division supports this recommendation and has already initiated an effort to better reflect life cycle intervals using best practices.

Response: The Department of Public Works, Fleet Management Division will evaluate the recommendations relative to salvage value and auction fees, however, these are subject to real-time market conditions at the time of disposal and can vary significantly. The department already includes make-ready costs into the fleet replacement budget.

Response: The City has already established an internal service fund for the operation, maintenance and replacement of its fleet. Further, funding for annual fleet operations is centralized and departments do not have to “budget” for fleet replacement, rather funding is 168
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City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

included in the annual budget to replace vehicles based on established replacement criteria. It is important to note that the City actually has a hybrid funding model, whereby investments in our large apparatus including fire and solid waste vehicles are included in the City’s five-year capital improvement program and funds are set aside in advance for these purchases. While it is our goal to fund all replacements in advance of end of useful life, this is not financially feasible at this time.

Response: The Public Works and Finance Departments do not support this recommendation as outlined above in recommendation 26
Response: The City Manager’s Office supports this recommendation. The City has documented inventories for most of its infrastructure including pools, parks, street lighting, traffic signals, bridges, pavement, traffic signs, pavement markings, parking meters, facilities, floodgates, drinking water, wastewater, and storm drainage. Yet not all have condition assessments and priority levels for maintaining/replacing. The report noted that the City has detailed infrastructure studies for some areas (pavement, facilities, parks, swimming pools) that identify over $484 million of deferred maintenance needs. The Department of Utilities has also identified at least $248 million in drainage system deferred maintenance. Further evaluation is needed to identify other areas that may require a comprehensive inventory and detailed study.

Response: The City Manager’s Office supports this recommendation. As noted in the report, the City does have studies identifying deferred maintenance needs (pavement, facilities, parks, pools) of over $484 million yet it does not account for all the City’s infrastructure needs. The Department of Utilities has identified at least $248 million in drainage system deferred maintenance. There are other asset management systems (traffic signs, pavement markings, streetlights, water, wastewater, and others) in use, beyond those listed in the report. The Department of Utilities is in the process of identifying and categorizing all assets and working on finalizing risk models to develop rehabilitation plans for all three water systems. Further evaluation is needed to determine the feasibility and cost of developing a comprehensive asset management system for the maintenance and replacement of the City’s infrastructure. 169
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Howard Chan
City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

Response: The Department of Utilities supports this recommendation. As noted in the report, the City already has several great examples of advancing green infrastructure through development of Stormwater Quality standards and recently completed projects. The department will continue to explore strategies to continue to implement green infrastructure toward meaningful environmental benefits and as part of a long-term cost-management strategy.

Response: The City Manager’s Office supports this recommendation. Currently, outcomes are monitored on a monthly basis. It is anticipated that a report will be provided to the City Council in Spring 2020.

Recommendation 32. Explore opportunities to monetize sewer and stormwater assets with telecommunications utilities.

Response: The Department of Utilities supports this recommendation yet agrees with the report that achievability is low. Some initial challenges that would need to be reviewed include:

1. Wastewater lines are a corrosive environment and would not be suitable for telecommunications infrastructure.

2. Concern that the presence of telecommunications infrastructure in wastewater, or storm drainage lines would hinder the City’s ability to maintain the lines. Maintenance includes high pressure water jetting, root cutting, root killing herbicide.

3. Concern that there may be some liability for the City if the facilities was damaged.

4. Future rehabilitation/replacement would incur extra costs and likely require additional time to complete if telecommunication conduits were located in the City’s mains.

Recommendation 33. Prepare an analysis of unfilled positions to identify opportunities to eliminate budgeted positions and implement dynamic staffing models.

Response: The Finance and Human Resources Departments support this recommendation.

As a matter of practice, positions are continuously evaluated in the context of availability of funds against the needs and demands of our operating departments to deliver programs and services and adjusts accordingly. Many positions that are vacant now are due to the extremely tight labor market. It is difficult in a rules-driven employment process to quickly and efficiently fill positions.

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City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

In addition, it is important to note that the 376 career vacancies (as of March 27, 2019) identified on page 141 of the report did not account for positions that had been alternately filled (position held vacant while non-budgeted position was filled) and that many of the identified positions outside of sworn safety positions are tied to required reimbursements/revenue activities. Consequently, elimination of these positions will not result in savings. Also, of the 376 identified in the report, 149.5 are safety recruits or sworn safety positions. Elimination of the safety positions would significantly affect service levels in both the Police and Fire Departments.

As of February 25, 2020, there are 197 career vacancies. Currently, 99 positions have been filled or in active recruitment, 79.3 positions held vacant are associated with reimbursements/revenues leaving a net 2.5 positions that could be eliminated, creating savings.

Response: The Human Resources Department supports this recommendation. The City will work within the limits of negotiation requirements and the law to provide as much flexibility as possible relative to flexible staffing. In addition, keeping in mind the legislation that went into effect January 1, AB5, which dictates who can be classified as a contractor.

Response: The Human Resources Department supports this recommendation. The City has made improvements to the overtime calculation by excluding sick leave from the calculation.

This will remain on the list for negotiations for all units.

Recommendation 36. Conduct a program-by-program review to determine which non- essential services should be continued and how the level of General Fund support can be reduced or eliminated.

Response: The Finance Department supports this recommendation and works with departments annually to align department budgets with program/service level needs. There is a complete inventory, Program Oriented Development, tied to the budget for all programs/services provided and the resources (positions and dollars) required to run these programs/services. Prior policy decisions have been to continue funding these programs/services.
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Howard Chan
City Manager
City Hall
915 I Street, Fifth Floor
Sacramento, CA 95814-2604
916-808-5704

Response: The Fire Department supports the evaluation of a subscription program. However, the department strongly disagrees with the financial estimates provided by the consultant ($1-

1.5 million annually). The department estimates that the additional annual revenue is closer to $500K.

Further complicating the implementation of this type of program is that the ambulance transport program in Sacramento County is a borderless system with the closest ambulance dispatched, regardless of the changes made to the City’s Fire Department. The department believes that a subscription program may be more successful if it is implemented by all four fire agencies (Sacramento, Sacramento Metro, Folsom, and Cosumnes). Implementation of a city- only program will require the development and implementation of countywide policy for ambulance transport by a non-city ambulance.

Recommendation 38. Pursue legislation that allows the City to collect payments to the General Fund from SMUD, similar to what private organizations pay.

Response: This recommendation was also included in the previous Management Partners report. At that time, the City Council was not supportive of pursuing this legislative change, which likely would result in increased rates.

Response: This recommendation along with any City Charter amendment requires direction from the City Council.

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Attachment 2

Updated Responses to the Recommendations in the 2020 Citywide Innovation and Efficiency Assessment

Recommendation 1 - Create an innovation strategy to guide internal and external initiatives, drawing from the more developed similar programs in Denver and Phoenix.
2020 Response: The City Manager’s Office supports this recommendation. The City is a leader in innovative initiatives and partnerships. There are many examples of award-winning innovations like Streamline Sacramento, Front Street Animal Shelter, Electrify America, Parking Modernization, 5G Wireless, 311Call Center, Inclusive Economic Development, as well as many more internal efficiency programs. However, the City also recognizes continued opportunity for growth and formalization of the innovation program. The City is currently in the planning stages of updating the city’s Digital Strategy that will include an innovation component with a focus on formalizing innovation culture and measuring innovation successes.

Latest Update: This recommendation has been implemented. The City Manager’s Office continues to support small businesses and workforce development partners, enhancing our reach into the community through the Community Engagement Team’s Community Ambassador Program and City Management Academy, lowering barriers for housing development and partnering with UC Davis on the development of Aggie Square, an innovation hub for research programs, private industry partners, classrooms, housing and community programs.

Recommendation 2 - Prepare and submit a local ballot measure to modernize the Business Operations Tax.
2020 Response: The Finance Department has continued to recommend this strategy and supports this recommendation.
2024 Update: This recommendation has been implemented. Council placed a Business Operation Tax ballot measure, Measure C, on the March 2024 ballot and it did not pass.

Latest Update: The Law & Legislation Committee has directed staff to conduct outreach for a potential Business Operation Tax ballot measure. Staff will return to the Committee in the fall to receive further direction.

Recommendation 3 - Convert three positions within the Police Department Digital Forensic Unit (DFU) from sworn to non-sworn positions.
2020 Response: The Police Department does not support this recommendation. DFU requires investigative experience and the ability to look at, retrieve and investigate highly classified material for criminal misconduct. Investigators must also testify in court and conduct investigations as a sworn officer.

Latest Update: This recommendation is in process. The Police Department is analyzing the ability to convert one of the three employees being a professional staff (non-sworn/civilian). DFU requires investigative experience and the ability to look at, retrieve and investigate highly classified material for criminal misconduct. Investigators must also testify in court and conduct investigations as sworn officers. The professional staff employee could perform more of the required analytical work/duties.

Recommendation 4 - Convert the Police Volunteer Coordinator position to a non- sworn position.
2020 Response: This recommendation has been implemented. The sworn full-time employee has been transferred to the Outreach and Engagement Division. The duties of the Police Volunteer Coordinator have been transferred to professional staff (non-sworn) employee.

Latest Update: This recommendation has been implemented.

Recommendation 5 - Conduct an audit of current Police Department administrative duties to determine the non-sworn duties that can be consolidated and civilianized.
2020 Response: The Sacramento Police Department supports this recommendation. However, this recommendation is specific to the Police Training Unit. The Academy, Field Training, and In- Service Training units are staffed by both sworn and civilian personnel subject matter experts responsible for managing the unit and delivering and coordinating training. Generally, training specific to sworn employees is provided by sworn employees and civilian training is delivered by civilian personnel, although some courses are interchangeable. There is a recognized benefit to having sworn officers train sworn and vice versa with civilians as they are most knowledgeable about certain aspects of the job.

Latest Update: This recommendation has been implemented.

Recommendation 6 - Convert the Fire Public Information Officer and two IT positions to non-sworn positions.
2020 Response: The Fire Department believes that it is necessary to have a subject matter expert on fire and emergency incidents (like the Police Department structure). The department does not currently have a budgeted sworn Public Information Officer. However, a Captain currently is serving in this capacity.

The Fire Department believes that it is necessary to have a subject matter expert in the IT Captain position as this position requires operational knowledge. Currently, the Department has one sworn IT Captain position. This was reduced from two IT positions in 2016. The IT Captain is the Computer Aided Dispatch coordinator, which handles verification of response files and run zones, represents the Department at regional meetings with their peers, is the communications supervisor for all field communications, and is tasked with managing and project tasking all day- to-day repairs of in service field units.

Latest Update: The City does not support this recommendation. The Fire Department believes that it is necessary to have a subject matter expert on fire and emergency incidents (like the Police Department structure). The department does not currently have a budgeted sworn Public Information Officer. However, a Captain is serving in this capacity. This Captain coordinates advising Councilmembers and community members during critical incidents as well as coordinates the response to all media outlets. This allows for first responders to continue their work while keeping community stakeholders advised of these emergencies and other non- emergency events in the community.

Recommendation 7 - Conduct an internal audit of current Fire administrative duties to identify non-sworn duties that can be consolidated and civilianized in the future.
2020 Response: The Fire Department supports this recommendation and is continually analyzing its staffing models to identify efficiencies. As efficiencies are identified, we are required to work with our local bargaining units to implement.

Latest Update: This recommendation has been implemented.

Recommendation 8 - Establish a cross-functional team including Public Safety, Information Technology and Finance staff to create a dashboard, monitor and provide guidance to all departments regarding methods to manage overtime. 2020 Response: The Finance Department, Fire Department, Sacramento Police Department and Information Technology Department support this recommendation. However, SPD does maintain significant controls over overtime, including management of overtime policies and reporting procedures. This recommendation, while helpful, does not address the driving factors of overtime or the requirement that the Department provide certain services irrespective of staffing levels.

Latest Update: The City does not support this recommendation. Departments continue to utilize data and operational prioritization to manage overtime. This recommendation does not address the understaffing that is the root cause of overtime.

In addition to managing overtime policies and reporting procedures, departments actively maintain significant controls over overtime. The recommendation, although helpful, does not address the factors driving overtime or the requirement that certain services be provided regardless of staffing levels. Certain services, such as emergency response and public safety, must be provided regardless of staffing levels. This means that even during times of limited resources or high overtime, these critical services cannot be compromised. It is important to find a balance between managing overtime and ensuring that essential services are adequately staffed and available to the community.

Recommendation 9 - Develop a process to continually review utility billing to reduce errors, maximize collections, and improve data quality and accuracy of utility billing.
2020 Response: The Department of Utilities (DOU) supports this recommendation and has recently updated the utility review process as part of a billing system upgrade:

1. As mentioned in the report, DOU’s billing system was audited in 2012 and all recommendations were implemented.

2. A significant upgrade of the billing system was completed in May 2019, which corrected many of the challenges with the previous billing system and initiated a utility billing review process. It would be appropriate to operate under the new system for at least two to three years then evaluate timing of a subsequent comprehensive audit.

3. To further assist, the City Auditor has developed a risk-based audit priority list for the department. Although a billing audit does not currently rank high, this could change over the next few years as we operate the new system and challenges arise.

Latest Update: This recommendation has been implemented. As background, the City’s Customer Information System (CIS), was audited by the City Auditor Office in 2012. All recommendations were implemented manually by running queries and tracking through spreadsheets separately. CIS was upgraded to a new version called Customer Care & Billing (CCB) in 2019. CCB has many built in functionalities to automate auditing for billing errors with system generated daily and monthly audits on customer accounts, create (To Do) billing tasks to review and validate any account and make the necessary changes or updates to ensure accurate billing. In addition to the CCB upgrade, a bill proofing manager process was implemented to review monthly bills that generate above a set billing amount to improve data quality and accuracy. To maximize collection efforts, a DOU Claim Collector position was added to Account Management to further help with the collection of internal and external customer accounts.

Recommendation 10 - Conduct a third-party audit of utility invoices received by the City.
2020 Response: The Department of Utilities supports this recommendation. As background, the City has various practices and efforts related to auditing of utility invoices received. The City has over 1,800 energy accounts for municipal electricity and natural gas consumption. Currently, staff monitors and tracks energy use at a high level using the city’s energy management system, EnergyCAP , which is used in part for auditing of billing information. Additionally, an audit of the City’s green efforts is currently underway, which includes analysis of streetlight data and billing, and may recommend process improvements.

Latest Update: This recommendation is in the process of being implemented. The Department of Utilities will initiate a procurement process to hire a third-party auditor to evaluate City utility accounts to check for billing errors.

The City has over 2,000 energy accounts for municipal electricity and natural gas consumption of which approximately 200 are assigned to DOU. DOU has engaged in internal auditing efforts and corrections were applied to the processing of current electric bills to ensure compliance with Proposition 218. Also, there have been prior analyses performed that were focused on the economic impacts of DOU’s participation in renewable energy programs and cost-reduction schemes (e.g. the SolarShares program). It is a goal of the energy program to assess the merits of such participation in the future. Finally, it is a current goal to analyze all DOU SMUD accounts to ensure they are being charged to the correct fund. The EnergyCAP software application is used to process and review bills on a weekly basis and the software has internal triggers to raise a flag for accounts that warrant additional examination (e.g. energy consumption higher than average or bill amount higher than average will trigger a flag). Billing information is provided electronically to the City directly from the utility.

Recommendation 11 - Implement a business operations tax amnesty program and explore additional tax/fee compliance opportunities based on results. 2020 Response: The Finance Department does not support this recommendation. The department currently contracts with Avenu Insights & Analytics (AI&A) for business operations tax (BOT) compliance. We are currently working to cross check businesses on our vendor payment list with businesses that have City BOTs to determine compliance. Additionally, AI&A cross checks businesses reporting sales tax with our BOT list.

The department currently works with businesses that are out of compliance by waiving late penalties and offering the business a payment plan to allow them the opportunity to come into compliance. Given the current efforts underway, we are moving businesses to compliance and receiving backpay for unreported taxes. As such, the department does not believe that an amnesty program will result in significant savings and may result in a loss to the City.

Latest Update: The City does not support this recommendation. Implementation of an amnesty program will result in a reduction of General Fund revenues and worsen the projected budget deficit. Measure C contained provisions to allow Council to set fines and penalties to incentive willfully bad actors into compliance.

Recommendation 12 - Conduct a street damage restoration and recovery study to ensure that the excavation cost recovery fee captures all related pavement life cycle costs.
2020 Response: The Department of Public Works supports this recommendation and has already initiated development of a scope of work for a pavement cut fee study to evaluate appropriate fees and a moratorium policy for pavement cuts on new street construction and recently resurfaced streets. The goal is to bring a proposal forward for City Council adoption by the end of calendar year 2020.

Latest Update: This recommendation is partially implemented. The Department of Public Works publishes a Pavement Conditions Report that assesses and reports on the conditions of pavement on all its streets every two years. The Department commissioned a consultant study to examine options for its pavement cut fee (also known as trench cut fee). The preliminary outcome of that study, which included comparisons with programs in other communities, suggested that it would be more cost-effective to mandate contractors to perform more comprehensive repairs instead of paying a fee to mitigate the damage. As a result, the Department is exploring specific pavement restoration requirements instead of fee payment for trenching in City streets. Additionally, the Department is embarking on a discussion of a regional approach with an existing regional pavement management working group comprising various agencies in Sacramento County.

Recommendation 13 - Establish a moratorium of five years on pavement cuts following new street construction or major resurfacing projects. 2020 Response: The Department of Public Works supports a moratorium but will refrain from establishing a timeframe until we have completed our pavement cut fee study to evaluate appropriate fees and a moratorium policy for pavement cuts on new street construction and recently resurfaced streets. The goal is to bring a proposal forward for City Council adoption by the end of calendar year 2020.

Latest Update: This recommendation is in the process of being implemented. The Department of Public Works recently initiated the first steps to bring forward an ordinance for City Council consideration to establish a five-year moratorium after City resurfacing efforts that would apply to utilities and other entities for pavement cuts.

Recommendation 14 - Automate human resource and other support service processes and workflows to streamline tasks and eliminate manual systems. 2020 Response: The Finance, Human Resources and Information Technology Departments support this recommendation and have already automated new hire and rehire transactions, which are the most labor-intensive transactions. The departments will continue to work together to automate all additional transaction types.

Latest Update: This recommendation has been implemented. The Finance, Human Resources and Information Technology Departments have implemented numerous process improvements including automations of parts of the budget process, payroll service, procurement, and revenue divisions and automated more than 14 types of systems and transactions, which are some of the most labor-intensive business processes including Hire/Re- hires, Transfers, Promotions, Separations, Direct Deposit Changes, Additional Pay, Annual Sick Leave Payoffs, and Payroll enhancements. In addition, IT implemented a new citywide Cashiering System and migrated centralized planning, budgeting, and forecasting solutions (Hyperion) to Cloud for better performance and user experience. The departments will continue to work together to digitalize and streamline business processes.

Recommendation 15 - Prioritize the program areas and select at least two managed competition candidate projects to analyze in-depth annually for the next several years.
2020 Response: The City Manager’ Office supports the further evaluation of whether managed competition is a viable strategy. This strategy will require discussion with labor unions prior to implementation as it has a potential to impact our unionized workforce.

Latest Update: The City does not support this recommendation. The City Manager’s Office has determined that no further evaluation of managed competition as a viable strategy to reduce costs is necessary given the current cost structure of city employees’ salaries and benefits as compared to that of private industry with whom they would be competing. Analysis of the areas in which managed competition could have been applied including garbage services, street, park and tree maintenance indicate that any type of managed competition would require negotiations to reduce employee salaries and benefits to be competitive. Given current Council direction relative to these cost points, staff believes that this strategy will not be an effective tool to reduce costs as part of our labor negotiations efforts to reduce costs.

Further reflection on the original recommendations and recent research demonstrates that this was an older strategy that has not been deployed successfully in the recent past. And, when used at all, was in much larger cities with substantially larger population and employee counts.

Recommendation 16 - Expand market-based parking meter fees and enforcement to Sundays.
2020 Response: The Department of Public Works supports this recommendation. The Parking Services Division has initiated a study that is currently evaluating the needs of the overall parking system including parking and mobility enhancements. This will include an initial review of expanding market-based parking meter fees and enforcement to Sundays.

Latest Update: This recommendation has been implemented.

Recommendation 17. Develop guidelines to determine when it is most advantageous to use Design-Build and similar public contracting methods to streamline capital project planning/ construction, align with existing strategic partnership initiatives and reduce overall infrastructure costs. 2020 Response: The City Manager’s Office supports this recommendation to develop guidelines for public contracting methods for capital projects to ensure the best contracting method is used.

Historically, the City has used various contracting methods including Design-Bid-Build, Design- Build (DB) and Design-Assist (DA). The DA contracts were also chosen to proceed with construction contracts using the Construction Management at Risk (CMAR) method. Some recent DB examples include Meadowview Navigation Center, Sam & Bonnie Pannell Community Center HVAC Control Replacement, and Energy Efficiency Retrofit Phase II. Some DA and CMAR examples include the North Natomas Community Center and Aquatic Complex, Memorial Auditorium Renovation, Sacramento Convention Center Renovation and Expansion, and Community Center Theater Renovation.

The Department of Utilities (DOU) is using an alternative procurement method, Multiple Award Task Order Contract (MATOC), for the ongoing Accelerated Water Meter Program (AWMP), which is a best-value contractor selection process based on qualifications, performance, and pricing. The process includes Request for Qualifications, Requests for Proposals, Council approval of a Master List of pre-qualified contractors and award of Task Order contracts. DOU has used a similar process to bid the McKinley Vault and 3rd Street Sewer Upsizing projects.

Latest Update: This recommendation has been implemented. The City has extensive experience with Design Build as well as other alternative delivery methods. Alternative delivery has evolved substantially since this recommendation was originally made in 2010 and Sacramento, like many other Cities, has embraced and normalized alternative delivery when appropriate on CIP’s.

Recommendation 18. Identify one or two functional areas to begin gainsharing implementation.
2020 Response: The City Manager’s Office will further evaluate whether gainsharing is a viable strategy.

Latest Update: The City does not support this recommendation. The value of specified gains resulting from employee recommendations or ideas are not easily quantified nor easily attributable. City employee incentives to utilize alternative working times and conditions are subject to negotiation and limiting implementation to only certain workgroups could be problematic to program or service delivery.

Recommendation 19. Determine departments or functional areas suitable for gainsharing.
2020 Response: The City Manager’s Office will further evaluate whether gainsharing is a viable strategy.

Latest Update: The City does not support this recommendation. Please see the response to Recommendation 18 for more detail.

Recommendation 20. Initiate discussions with labor associations affiliated with the identified departments or functional areas.
2020 Response: If after evaluation gainsharing appears viable, the Human Resources Department will initiate discussions with appropriate labor unions.

Latest Update: The City does not support this recommendation. Please see the response to Recommendation 18 for more detail.

Recommendation 21. Issue a request for proposals (RFP) to obtain competitive proposals for solid waste collection and recycling services. 2020 Response: The City Manager’s Office supports further evaluation and analysis prior to issuing a request for competitive proposals. It is important to recognize that an evaluation and contracting for these services is a multiyear process and will require discussion with labor unions as it will impact our unionized workforce.

The Department of Public Works is currently evaluating solid waste and recycling services, rates, and opportunities to reduce costs and improve service. Although these services rank high in the latest Community Survey, the department recognizes that the industry and State regulations and requirements continue to change requiring innovative solutions to improve services while being cost effective.

Latest Update: This recommendation requires Council direction or action. If desired, the Department of Public Works could hire a consultant to conduct further evaluation and analysis of privatizing solid waste services. The current cost is estimated to be $250,000. Please note that privatizing municipal solid waste services would involve a highly visible, multi-year process requiring input from stakeholders, including the Utilities Rate Advisory Commission (URAC) and various labor unions. Other factors include funding ongoing City liabilities like landfill post- closure expenses, managing long-term disposal agreements, expanding compliance oversight for residential operations, the ongoing franchise fee that would support General Fund revenues, one-time revenues from selling assets, and the savings associated with the avoidance of new pension obligations.

The Department of Public Works continues its assessment of solid waste and recycling services, rates, and opportunities for cost reduction and service enhancement. In January 2022, the City approved rate adjustments to address anticipated costs, particularly those related to organic waste collection and processing mandated by Senate Bill 1383, while also maintaining a prudent reserve. These approved rates are in line with regional standards. It's noteworthy that the City provides a higher level of service compared to many other jurisdictions, including services such as leaf season collection, two annual household junk pickups, two appliance and e-waste pickups, and a dump coupon.

Recommendation 22. Conduct a re-routing exercise to balance routes, workload, and tonnage on a periodic basis.
2020 Response: The Department of Public Works supports this recommendation and is part of the department’s ongoing management practices. The last re-route study was completed in 2017. A new re-route study will take place in 2020 to right size routes which have become out of balance with much of the new development that has recently occurred in the City.

As noted above, the department is reviewing opportunities to improve services while being cost effective and periodic re-routing is a best practice that the city will continue to implement. As part of the proposed re-route study, an evaluation will be done to consider transitioning from a 4- 10 work schedule in favor of a 5-8 schedule in order to improve efficiency.

Latest Update: This recommendation has been implemented. The last re-route study was completed and implemented in February 2021 and included the efficiencies of shifting from a 4- 10 work schedule to a 5-8 schedule. A new re-route study is in the initial planning stages to right-size routes as they become unbalanced due to development throughout the city.

The department is continuously reviewing opportunities to improve services while being cost effective and periodic re-routing is a best practice that the city will continue to implement.

Recommendation 23. Utilize Global Positioning System (GPS) to monitor efficiency of refuse collection trucks.
2020 Response: The Department of Public Works supports this recommendation. In fact, the department is currently evaluating a proposal to pilot innovations, to monitor and improve efficiency, such as real time GPS route management, widespread radio frequency identification deployment, and truck mounted pavement assessment equipment.

Latest Update: This recommendation has been implemented. The City implemented a new GPS tracking software for all City vehicles called Samsara. Additional ways to utilize non-GPS technology to monitor efficiency for Recycling and Solid Waste – such as arm lifts & tonnage – are being evaluated. The department has also evaluated proposals to pilot innovations, to monitor and improve efficiency, such as real time GPS route management, widespread radio frequency identification deployment, and truck mounted pavement assessment equipment. The department is committed to evaluating solutions for technology in refuse trucks to automate processes and improve and monitor efficiency.

Recommendation 24 - Adjust life cycle intervals to align with more common government fleet cycles.
2020 Response: The Department of Public Works Fleet Management Division supports this recommendation and has already initiated an effort to better reflect life cycle intervals using best practices.

Latest Update: This recommendation has been implemented. The Department of Public Works Fleet Management Division has adjusted its replacement model to look solely at life expectancy. When there are multiple vehicles with the same life expectancy, they are reviewed by fund, department and dept ID level. After that information is reviewed, if there are multiple vehicles or more vehicles than can be replaced via fund, department and dept ID, the highest maintenance cost would determine which vehicle(s) would be replaced first. This will allow the Fleet Division to replace the vehicles which have been in the fleet for the longest time which almost always have the highest maintenance costs. Fleet Management replaces most vehicles and equipment with this methodology.

Recommendation 25 - Incorporate salvage value, auction fees, and make-ready costs into future fleet replacement costs.
2020 Response: The Department of Public Works, Fleet Management Division will evaluate the recommendations relative to salvage value and auction fees, however, these are subject to real- time market conditions at the time of disposal and can vary significantly. The department already includes make-ready costs into the fleet replacement budget.

Latest Update: The City disagrees with this recommendation. The Department of Public Works, Fleet Management Division analyzed adding the salvage value and auction fees into the replacement cost of vehicles and equipment and determined that it would not be effective to add either of these values. First, purchase prices could be shortened by deducting the full salvage values into new vehicle purchases, as the City does not typically realize full salvage value at auction. Additionally, salvage values and therefore auction fees (3% of the actual selling price) have been very volatile over the last few years with the vehicle and manufacturing crisis that has been occurring. The unpredictability of these costs due to economic factors would create difficulty in reliable estimation of the replacement budgets for vehicles and equipment if these were factored in. Note that all funds received through salvage (less auction fees) are returned to the fund balance where the vehicle was purchased, making that funding available to be used for future vehicle replacements.

Make-ready costs are included in the replacement estimate for all replacement and newly purchased vehicles and equipment.

Recommendation 26 - Develop a dedicated internal service fund that supports future fleet replacements.
2020 Response: The City has already established an internal service fund for the operation, maintenance and replacement of its fleet. Further, funding for annual fleet operations is centralized and departments do not have to “budget” for fleet replacement, rather funding is included in the annual budget to replace vehicles based on established replacement criteria. It is important to note that the City actually has a hybrid funding model, whereby investments in our large apparatus including fire and solid waste vehicles are included in the City’s five-year capital improvement program and funds are set aside in advance for these purchases. While it is our goal to fund all replacements in advance of end of useful life, this is not financially feasible at this time.

Latest Update: This recommendation has been implemented.

Recommendation 27 - Develop a comprehensive and accountable chargeback system that supports the fleet replacement fund.
2020 Response: The Public Works and Finance Departments do not support this recommendation as outlined above in recommendation 26.

Latest Update: This recommendation has been implemented.

Recommendation 28 - Complete a comprehensive inventory of Citywide infrastructure assets that includes condition assessments and priority levels for maintaining/replacing. 2020 Response: The City Manager’s Office supports this recommendation. The City has documented inventories for most of its infrastructure including pools, parks, street lighting, traffic signals, bridges, pavement, traffic signs, pavement markings, parking meters, facilities, floodgates, drinking water, wastewater, and storm drainage. Yet not all have condition assessments and priority levels for maintaining/replacing. The report noted that the City has detailed infrastructure studies for some areas (pavement, facilities, parks, swimming pools) that identify over $484 million of deferred maintenance needs. The Department of Utilities has also identified at least $248 million in drainage system deferred maintenance. Further evaluation is needed to identify other areas that may require a comprehensive inventory and detailed study.

Latest Update: This recommendation is in process. The City supports facility condition assessments being included in the capital planning process. The Finance Department has incorporated unfunded capital needs in the Capital Improvement Plan and supports efforts to make the information in the CIP as accurate as possible.

The Department of Utilities Asset Management section is working to implement a comprehensive Asset Management Program for the water, wastewater and storm drainage systems.

1. Asset Management (AM) Program recently developed a 5-year Strategic Asset Management Plan (SAMP).

2. SAMP Initiative #2 is in progress as we work towards establishing clear and standardized asset classifications, definitions, and attributes, and revise our asset layers and attribute information in our Geographic Information System (GIS) using these determined standards. This will provide us with a strong foundation for continuing to collect and manage asset inventory.

3. Many individual asset inventory projects have been completed or are in progress to collect, validate, and record asset information. Processes are being put into place to ensure that data on all new assets is collected and recorded, so that we can focus our efforts on older assets with less data.

4. Condition assessments are being performed as funding and staffing resources allow.

5. Risk assessments, including criticality, condition, risk scores, repair vs. replacement decision criteria, and project prioritization methodology have only been fully established for pipe mains. We will continue to work on risk scoring matrixes and action criteria for additional asset classifications.

Recommendation 29 - Develop a comprehensive asset management system based on best practices to plan and budget for the maintenance and replacement of City infrastructure assets.
2020 Response: The City Manager’s Office supports this recommendation. As noted in the report, the City does have studies identifying deferred maintenance needs (pavement, facilities, parks, pools) of over $484 million yet it does not account for all the City’s infrastructure needs.

The Department of Utilities has identified at least $248 million in drainage system deferred maintenance. There are other asset management systems (traffic signs, pavement markings, streetlights, water, wastewater, and others) in use, beyond those listed in the report. The Department of Utilities is in the process of identifying and categorizing all assets and working on finalizing risk models to develop rehabilitation plans for all three water systems. Further evaluation is needed to determine the feasibility and cost of developing a comprehensive asset management system for the maintenance and replacement of the City’s infrastructure.

Latest Update: This recommendation is partially implemented and in process of being fully implemented. The 5-Year Capital Improvement Plan includes unfunded capital and maintenance costs which will establish baseline needs and allow for effective capital planning and budgeting.

The Department of Utilities Asset Management section is working to implement a comprehensive Asset Management Program for the water, wastewater and storm drainage systems.

1. Asset Management (AM) Program recently developed a 5-year Strategic Asset Management Plan (SAMP).

2. SAMP Initiative #1 is in progress as we work to develop guidance documents for the program that comply with AM Standards outlined in the ISO 55000, 55001, 55002, and 55010 documents. Current work under this initiative is the development of a Water System Asset Management Plan. System plans for Wastewater and Storm Drainage will follow. These system plans will outline best practices and all methodology used for asset management functions including condition assessment, repair and replacement, and project prioritization.

3. SAMP Initiative #2 is also underway as we work towards establishing clear and standardized asset classifications, definitions, and attributes, and revise our asset layers and attribute information in our Geographic Information System (GIS) using these determined standards. This will provide us with a strong foundation for continuing to collect and manage asset inventory.

Recommendation 30 - Expand and accelerate strategies to implement green infrastructure.
2020 Response: The Department of Utilities supports this recommendation. As noted in the report, the City already has several great examples of advancing green infrastructure through development of Stormwater Quality standards and recently completed projects. The department will continue to explore strategies to continue to implement green infrastructure toward meaningful environmental benefits and as part of a long-term cost-management strategy.

Latest Update: This recommendation is partially implemented. The City has advanced green infrastructure through the implementation of the Stormwater Quality Design Manual. The City has successfully funded green infrastructure projects through grant opportunities, such as the 2023 funded Clean California projects.

For the Combined Sewer System, the City initiated the planning for a City of Sacramento Combined Sewer Green Infrastructure Pilot Program. As part of this effort, a green infrastructure location screening was completed, providing a good starting point for selecting conceptual project sites suited to green infrastructure implementation. The City's green infrastructure approach is currently under review as part of the Combined Sewer System Long Term Control Plan Update, aiming to inform the recommendations for the next steps in green infrastructure implementation.

Recommendation 31 - Conduct periodic audits of hiring and training outcomes for the Community Workforce Training Program and report the findings to the City Council.
2020 Response: The City Manager’s Office supports this recommendation. Currently, outcomes are monitored on a monthly basis. It is anticipated that a report will be provided to the City Council in Spring 2020.

Latest Update: This recommendation is in process. A consultant has been hired to provide continuous monitoring of hiring trends and how these tracks with CTWA goals. The City receives monthly reporting on every Capital Improvement Project that is subject to the CWTA.

Recommendation 32 - Explore opportunities to monetize sewer and stormwater assets with telecommunications utilities.
2020 Response: The Department of Utilities supports this recommendation yet agrees with the report that achievability is low. Some initial challenges that would need to be reviewed include:

1. Wastewater lines are a corrosive environment and would not be suitable for telecommunications infrastructure.

2. Concern that the presence of telecommunications infrastructure in wastewater, or storm drainage lines would hinder the City’s ability to maintain the lines. Maintenance includes high pressure water jetting, root cutting, root killing herbicide.

3. Concern that there may be some liability for the City if the facilities was damaged.

4. Future rehabilitation/replacement would incur extra costs and likely require additional time to complete if telecommunication conduits were located in the City’s mains.

Latest Update: The City does not support this recommendation and recommends terminating existing agreements with private telecommunication providers at all Department of Utilities (DOU)-owned facilities, having telecom providers remove existing equipment from DOU owned facilities and exempting DOU facilities for future siting of telecommunications facilities.

DOU has offered to work with Telecommunications service providers to identify alternative locations for their equipment. An internal DOU policy was developed to justify these recommendations. The challenges stated in the 2020 response are still considered obstacles for locating telecommunications infrastructure within underground wastewater and storm drainage pipelines.

Recommendation 33 - Prepare an analysis of unfilled positions to identify opportunities to eliminate budgeted positions and implement dynamic staffing models.
2020 Response: The Finance and Human Resources Departments support this recommendation. As a matter of practice, positions are continuously evaluated in the context of availability of funds against the needs and demands of our operating departments to deliver programs and services and adjusts accordingly. Many positions that are vacant now are due to the extremely tight labor market. It is difficult in a rules-driven employment process to quickly and efficiently fill positions.

In addition, it is important to note that the 376 career vacancies (as of March 27, 2019) identified on page 141 of the report did not account for positions that had been alternately filled (position held vacant while non-budgeted position was filled) and that many of the identified positions outside of sworn safety positions are tied to required reimbursements/revenue activities.

Consequently, elimination of these positions will not result in savings. Also, of the 376 identified in the report, 149.5 are safety recruits or sworn safety positions. Elimination of the safety positions would significantly affect service levels in both the Police and Fire Departments.

As of February 25, 2020, there are 197 career vacancies. Currently, 99 positions have been filled or in active recruitment, 79.3 positions held vacant are associated with reimbursements/revenues leaving a net 2.5 positions that could be eliminated, creating savings.

Latest Update: This recommendation has been implemented and the process of reviewing every position – including vacancies – is part of the annual budget process. The Finance Department also reviews vacancy assumptions as part of the budget process.

Recommendation 34 - Allow departments to use part-time and contract staffing models to provide greater flexibility in meeting service demands and maximizing cost effectiveness.
2020 Response: The Human Resources Department supports this recommendation. The City will work within the limits of negotiation requirements and the law to provide as much flexibility as possible relative to flexible staffing. In addition, keeping in mind the legislation that went into effect January 1, AB5, which dictates who can be classified as a contractor.

Latest Update: This recommendation has been implemented. The City utilizes contract staffing models where necessary to maintain service levels or provide services that City staff cannot and should not provide. Council action to bring these services ‘in house’ would result in higher costs to the General Fund and/or reduced service levels.

Recommendation 35 - Change overtime calculation practices to be fully consistent with Federal law.
2020 Response: The Human Resources Department supports this recommendation. The City has made improvements to the overtime calculation by excluding sick leave from the calculation. This will remain on the list for negotiations for all units.

Latest Update: This recommendation has been implemented.

Recommendation 36 - Conduct a program-by-program review to determine which non-essential services should be continued and how the level of General Fund support can be reduced or eliminated.
2020 Response: The Finance Department supports this recommendation and works with departments annually to align department budgets with program/service level needs. There is a complete inventory, Program Oriented Development, tied to the budget for all programs/services provided and the resources (positions and dollars) required to run these programs/services.

Prior policy decisions have been to continue funding these programs/services.

Latest Update: This recommendation has been implemented. The Finance Department works with all City departments annually to align department budgets with program/service level needs. There is a complete inventory, Program Oriented Development (https://www.cityofsacramento.gov/content/dam/portal/finance/Budget/approved-24/FY2023-24- Program-Oriented-Development_POD_v2.pdf), tied to the budget for all programs/services provided and the resources (positions and dollars) required to run these programs/services.

Prior policy decisions have been to continue funding these programs/services. The Finance Department also works with other departments to ensure the use of funding sources is prioritized by using the more restrictive funding sources first, in line with best practice.

Recommendation 37 - Establish a paramedic/ambulance subscription program. 2020 Response: The Fire Department supports the evaluation of a subscription program.

However, the department strongly disagrees with the financial estimates provided by the consultant ($1-1.5 million annually). The department estimates that the additional annual revenue is closer to $500K.

Further complicating the implementation of this type of program is that the ambulance transport program in Sacramento County is a borderless system with the closest ambulance dispatched, regardless of the changes made to the City’s Fire Department. The department believes that a subscription program may be more successful if it is implemented by all four fire agencies (Sacramento, Sacramento Metro, Folsom, and Cosumnes). Implementation of a city-only program will require the development and implementation of countywide policy for ambulance transport by a non-city ambulance.

Latest Update: The City does not support this recommendation as the Fire Department continues to believe that the ambulance transport subscription program will not work due to the Sacramento County borderless system. However, the Department has taken many actions to recover costs through cost recovery programs and fees.

While the costs for ALS services have increased over the past 25 years (Resolution 93-434), revenues generated by fees for service have not kept pace. Several factors, including our payor mix, prevent the City from recovering fees for service. Around 80% of the city’s payer mix is Medicare, Medicaid/Medi-Cal. The fire department is receiving Medicare and Medi-Cal reimbursements at a fraction of the current billed amounts.

In October 2011, AB 678 established Ground Emergency Medical Transport (GEMT). This program reimbursed Medi-Cal transports, allowing fire departments to recover EMS fees. A fee study was conducted in 2012 and EMS fees were increased. In December 2014, the Department participated in another revenue recovery program called Rate Range Intergovernmental Transfer (IGT). Managed care programs and can now be reimbursed by IGT for transporting Medi-Cal patients.

Another fee study was completed in 2017 and the city council approved increasing the EMS fees for service while adding a Medical Consumer Price Index (CPI) to account for an annual fee for service increases: fees have increased by 12% since the adoption of the CPI. As well as raising fees for service, the fire department created efficiencies; by contracting with a new biller and investing in an electronic patient care report (EPCR) platform.

In December 2022, the GEMT program ended with a change to legislation AB (1705). The Department of Health Care Services (DHCS) developed the Public Provider Ground Emergency Medical Transport Intergovernmental Transfer Program (PP-GEMT-IGT) in January 2023. By applying an add-on increase, this new program provides increased reimbursement for emergency medical transport performed by public GEMT providers. The DHCS approved another fee increase in January 2024.

Additionally, a single-role ambulance program was proposed by the Fire Department and approved by the council in FY 2023/24. In addition to increasing service and bringing in additional revenue, this program will reduce labor costs. By implementing the program, we can provide the same level of service to the community with lower labor costs. The Department is in the final phase of implementation currently.

While the Fire Department can guarantee fee-for-service revenues, revenue recovery programs like GEMT, IGT, and PP-GEMT rely on state and federal funding. The Fire Department has recognized a structural variance with increased labor and supply costs related to our ALS program. A fee study of EMS fees will be conducted by a consultant hired by the Department to address this increase. After the fee study is completed, the Department will recommend raising all pertinent fees to keep pace with Sacramento market rates.

Recommendation 38. Pursue legislation that allows the City to collect payments to the General Fund from SMUD, similar to what private organizations pay. 2020 Response: This recommendation was also included in the previous Management Partners report. At that time, the City Council was not supportive of pursuing this legislative change, which likely would result in increased rates.

Latest Update: This recommendation requires Council direction or action. In 2020, Council was not supportive of pursuing this legislative change; however, staff will pursue it if the current Council provides such direction.

Recommendation 39 - Evaluate the feasibility of placing a Charter Amendment on the ballot to remove the requirement for binding arbitration for sworn police and fire personnel.
2020 Response: This recommendation along with any City Charter amendment requires direction from the City Council.

Latest Update: This recommendation requires Council direction or action. This recommendation along with any City Charter amendment requires direction from and action by the City Council. The prior City Councils that discussed this issue were not supportive of pursuing this legislative change; however, staff will pursue it should the current Council provides direction. Binding arbitration results in higher General Fund costs for labor units that have binding arbitration as well as disciplinary outcomes that are often less than those pursued by management.