HomeMy WebLinkAboutMINUTES - 07262006 - SD2.D Cor♦rte
TO: BOARD OF SUPERVISORS
FROM: JOHN CULLEN, County Administrator e yxA- is C o
DATE: JULY 26, 2006 County-
s
'A ""UKP
SUBJECT: RESPONSE TO GRAND JURY REPORT NO. 0609, ENTITLED
"FIRE DANGER FOR WEST COUNTY RESIDENTS: HAS
COMMON SENSE GONE UP IN FLAMES?"
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATION:
APPROVE response to Grand Jury Report No. 0609, entitled "Fire Danger for West County
Residents: Has Common Sense Gone Up in Flames?", and DIRECT the Clerk of the Board to
forward the response to the Superior Court no later than August 18, 2006.
BACKGROUND:
On June 6, 2006,the 2005/2006 Grand Jury filed the above-referenced report, which was reviewed by
the Board of Supervisors and subsequently referred to the County Administrator and Capital Facilities
Committee, who jointly prepared the attached response that clearly specifies:
A. Whether a finding or recommendation is accepted or will be implemented;
B. If a recommendation is accepted, a statement as to who will be responsible for
implementation and by what definite target date;
C. A delineation of the constraints if a recommendation is accepted but cannot be implemented
within a six-month period; and
D. The reason for not accepting or adopting a findi or recommendation.
CONTINUED ON ATTACHMENT: YES `SIGNATURE: r
e/t3ECOMMENDATION OF COUNTY ADMINISTRATOR _RECO EDATION OF BOARD COMMITTEE
!APPROVE _OTHER
SIGNATURE(S): )—
ACTION OF BO D N Q �_I �j C e APPROVE AS RECOMMENDED C _ OTHER
VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE
AND CORRECT COPY OF AN ACTION TAKEN
_UNANIMOUS(ABSENT ) AND ENTERED ON THE MINUTES OF THE
BOARD OF SUPERVISORS ON THE DATE
AYES: NOES: SHOWN.
ABSENT: ABSTAIN:
ATTESTED: AUGUST 1,2006
CONTACT: JULIE ENEA(925)335-1077 JOHN CULLEN,CLERK OF THE BOARD OF
SUPERVISORS AND COUNTY ADMINISTRATOR
CC: PRESIDING JUDGE OF THE GRAND JURY
GRAND JURY FOREPERSON
COUNTY ADMINISTRATOR
CHIEF,CONTRA COSTA COUNTY FIRE PROTECTION DISTRICT
CAO,SPECIAL DISTRICTS ANALYST
' ,D
BOARD OF SUPERVISORS RESPONSE TO
GRAND JURY REPORT NO. 0609:
Fire Danger for West County Residents:
Has Common Sense Gone Up in Flames?
FINDINGS
1. The City of Richmond unilaterally withdrew from the "Automatic Aid"agreement between
the Richmond Fire Department the Contra Costa County Fire Protection District in August
2002. Richmond officials have stated that"Automatic Aid"was terminated because the
County cut the money it paid to RFD for the service.
Response: Agree.
2. Portions of unincorporated areas of West Contra Costa County are closer to RFD stations
than to CCCFPD stations. In an emergency, the closest unit will not respond.
Response: Partially disagree. The lack of an automatic aid agreement with the Richmond
Fire Department has prevented a potentially closer unit from being dispatched without prior
approval from Richmond Fire Administration for each incident. This more cumbersome
"mutual aid"system causes an unreasonable delay in the dispatch of the closest resource.
3. The City of San Pablo is served by a single fire station. It is the busiest station in the
CCCFPD. Prior to the termination of"Automatic Aid", most of the calls to the RFD were for
incidents in San Pablo.
Response: Agree.
4. Both CCCFPD and RFD have stated that an"Automatic Aid" agreement is a desirable goal
for the West County area.
Response: Agree.
5. The two jurisdictions have different dispatch systems and separate command centers. These
differences existed during the former agreement and were not a hindrance to operations.
Response: Partially disagree. The two jurisdictions had different dispatch systems from 2000
until the automatic aid was stopped in 2002. Prior to 2000, CCCFPD stations were dispatched
by the City of Richmond from its dispatch center.
6. There have been many meetings since 2002, between the CCCFPD Chief and various other
parties including the RFD Fire Chief,Richmond City Manager,and representatives of RFD
fire fighters union, to discuss what it would take to renew the "Automatic Aid" agreement.
Response: Agree.
Fire Danger for West County Residents: Has Common Sense Gone Up in Flames? July 26,2006
County Response to Grand Jury Report No. 0609 Page 2
7. The most recent writtenP P Y osaro l was one made b CCCFPD to the RFD November 2, 2005.
Response: Agree.
8. The State of California has a standard formula for compensating Fire Departments when they
respond to emergencies outside of their jurisdiction. This is known as the "backcharge
formula".
Response: Partially disagree. Although there is a standard methodology used by the
California Office of Emergency Services for calculating reimbursement to local fire agencies
for mutual aid responses, we'are not familiar with the term "backcharge formula':
9. The El Cerrito Fire Department currently maintains an "Automatic Aid" agreement with
CCCFPD covering areas adjacent to El Cerrito. Even though it uses the RFD dispatch system,
it also uses the CCCFPD dispatch system as a backup system. El Cerrito serves as an example
of how this issue can be swiftly resolved, either technically or organizationally.
Response: Agree.
RECOMMENDATIONS
The 2005-2006 Contra Costa County Grand Jury recommends that the Contra Costa County Board of
Supervisors and Richmond City Council:
Immediately, re-institute the "Automatic Aid" agreement. Use the standard State of California
"backcharge"formula or any other mutually acceptable formula to compensate the RFD.
Response: Has been implemented on July 11, 2006 on an interim basis pending a formal
written agreement between the agencies.
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ADDENDUM
August 1, 2006: Agenda Items SD.2-A, B, C and D
On this day, the Board of Supervisors considered approving proposed responses to
2005/06 Grand Jury reports No. 0602, 0607, 0608, and 0609, and directing the Clerk of
the Board to forward the County's responses to the Superior Court.
The Board considered each report.
A) No. 0602, entitled ''Contra Costa County Capital Facilities Projects: How are
New County Buildings Justified?"
Chair Uilkema noted that she would like to see a letter of appreciation from either the
Chair of the Board or from the County Administrator be sent to the City of Martinez to
thank the City for showing support by the waiving of related fees.
B) No. 0607, entitled !'County Outspends Income Four Years in a Row: Have the
Supervisors Finally Kicked the Habit?"
Rollie Katz, Public Employees Union Local 1, provided public comment on SD.2-B,
suggesting that it would have been irresponsible for the County not to utilize reserve
funds to maintain County programs.
C) No. 0608, entil led "Contra Costa County Adult Detention Facilities: Try
Walking in a Deputy's Shoes"
D) No. 0609, entitled "Fire Danger for West County Residents: Has
Common Sense Gone Up in Flames?"
Chair Gioia suggested a largeJr discussion with Fire officials be scheduled.
By a unanimous vote with none absent, the Board of Supervisors took the following
action:
APPROVED responses to 201105/06 Grand Jury reports No. 0602, 0607, 0608, and 0609,
and DIRECTED the Clerk o ,the Board to forward the County's responses to the Superior
Court.
I
County Administrator Contra Costa Board of Supervisors
County Administration Building Is'District
651 Pine Street, 111h Floor
Martinez, California 94553-4068 GAYLE B.UILKEMA2 nd District
V-925-335-1080
F-925-335-1098MARY N.PIEPHO
0% 1
1.:5 3District
John Cullen
MARK DESAULNIER
.County Administrator .--4f6u 4'h District
FEDERAL D. GLOVER
5th District
August 2, 2006
Honorable Terence L. Bruiniers
Presiding Judge of the Grand Jury
725 Court Street
P.O. Box 911
Martinez, CA 94553
Dear Judge Bruiniers:
Transmitted herewith are the C I ounty Board of Supervisors' responses to 2005/06 Grand
Jury Reports No. 0602, entitled"Contra Costa County Capital Facilities Projects: How
Are New County Buildings Justified?' ; and No. 0607, entitled "County Outspends
Income Four Years in a Row: Have the Supervisors Finally Kicked the Habit?". These
responses were approved by the Board on August 1, 2006.
Sincerely,
JOHN CULLEN
County Administrator and Clerk of the Board of Supervisors
JAN PENNNINQ ON
Chief Clerk of the and of Supervisors
Attachments
cc: Grand Jury Foreperson
County Administrator
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BOARD OF SUPERVISORS RESPONSE TO
GRAND JURY REPORT NO. 0602:
HOW ARE NEW COUNTY BUILDINGS JUSTIFIED?
FINDINGS
County Finances
1. In each of the last three fiscal years,the County's expenditures have exceeded revenue by
amounts ranging from$17 million to $22 million. The County drew down reserve funds to
cover the shortage.
Response: Agree.
2. On June 28, 2005,the Board of Supervisors approved the 2005/2006 budget with a projected
$20 million deficit. At this rate of deficit spending,the June 30, 2006 unreserved fund
balance will be approximately 3.5% of revenue -- below the 5% minimum.level recently
established by the Board-- and will be exhausted before June 30, 2008.
Response:. Partially disagree.) This statement was true as of June 28, 2005, however, the
County did not continue the budgeted rate of deficit spending and, now, at year-end the
unreserved fund balance,is expected to be above the June 28, 2005 estimate.
3. On May 2, 2006, the Board)of Supervisors approved a balanced budget for fiscal year
2006/2007 that includes a reduction of 200 staff positions and reductions in services provided
by the County.
Response: Agree.
Capital Projects
4. The Capital Facilities Committee, a two-person committee of the Board of Supervisors,
oversees most major capital projects.
Response: Partially disagree. The County Administrator's Office oversees the management of
capital projects. The Board's Capital Facilities Committee recommends priorities for capital
facilities funds to the Board Jof Supervisors and monitors the progress of major capital projects.
5. All major capital projects require the approval of the Board of Supervisors for each major
phase, i.e., feasibility, design, and construction.
Response: Agree.
6. The Board of Supervisors has not adopted a written policy regarding the justification and
approval of capital facilities projects which addresses such basic questions as:
County Response to Grand Jury Report No.0602 Page 2
a. How large does a project have to,be before it is subject to review and approval outside a
department?
b. What specific information is required for the justification for each phase of a project?
c. What is the approval process for each phase of a project?
Response: Partially disagree. The Capital Facilities Committee of the Board of Supervisors
reviews capital projects and makes recommendations to the Board The Committee reviews all
capital projects with an estimated project cost of$1 million or more. The Committee has
established criteria that it uses to evaluate and prioritize capital projects. The Committee has
directed staff to develop a standardized format for presenting proposed projects, which will
allow the Committee to receive information to evaluate projects in a consistent format. This
reporting format will include information concerning the facilities need to be addressed by a
proposed project, details of the proposed solution,, and the proposed financing plan for the
project
Capital projects are evaluated on the basis of the project as a whole, rather than in individual
phases. However, the Board or the Capital Facilities Committee,may direct staff to provide
status reports at the completion of various phases of a project to ensure that assumptions made
at the outset of a project remain valid For example, cost estimates made at the outset of
capital projects are usually based on preliminary information concerning project design.
These estimates may change once the design of the project is completed.
Capital projects typically involve multiple actions that must be reviewed and approved by the
Board of Supervisors during the course of project completion, including the following:
Execution of contracts with architects and other project consultants
e Approval of findings required for compliance with the California Environmental
Quality Act(CEQA)
• Authorization to seek construction bids
• Award of construction contracts
Approval of financing
R
These approvals occur at different stages of project development, allowing for Board review
throughout the course of a project For example, architects are usually hired during the early
planning stages, CEQA findings are approved during the design phase, and construction
contracts are approved at the completion of design. In addition,for larger projects staff
typically provides progress reports to the Capital Facilities Committee afthe completion of
each major project phase. Moreover, budgetary controls exist that prevent funds from being
allocated or transferred to capital accounts without the approval of the County Administrator's
Office and Board of Supervisors.
7. The Capital Facilities Committee has no written document, which outlines the scope of its
activities.
sx
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_.z.HowAre-New_County_Bu (lings_Justified -JuIy26,_2006
County Response to Grand Jury ReportlNo. 0602 Page 3
Response: Partially disagree. The Capital Facilities Committee was established during the
Board's reorganization of offices on January 9, 2001. The purpose of the Capital Facilities
Committee was defined in a December 20,2000 memo from incoming Chairwoman Uilkema to
the Board members, recommending that the Committee was to work closely with staff in order
to develop a workable, long-term financing plan to meet the County's capital facilities needs.
The specific activities of the Committee to accomplish this goal are determined by the
Committee members.
8. In capital facilities project justifications,prior year fund balances and other funds, (e.g.,the
Criminal Justice Construction Fund) which could be used for many other purposes, are treated
in financial projections as "free" funds and are used in the projections to reduce the amount of
funding and related interest cost of the project.
Response: Partially disagree. The County does accumulate funds over multiple years to apply
towards large capital projects in the same way a home buyer might save money for a down
payment on a house. This is a sound business practice. If by `free"funds, the Grand Jury
means funds that are availablel at no interest charge (as opposed to borrowed funds), then the
County agrees with this portion of the finding. Prudent planning for capital needs often
involves a multi year financing plan that may include the accumulation of funds in a capital
account prior to construction. J This approach reduces the amount of debt required to
implement a project, which is turn reduces the ultimate project cost.
However, if`free"funds are meant to imply that the County has complete discretion over the
use of the funds, then the County disagrees with that assumption. Some of the funds
designated by the County for long-term facility needs are restricted to facility construction and
maintenance purposes. For example, the Criminal Justice Facilities Construction Fund,
which is derived from penaINI assessments levied on court fines, may be used only for the
following limited purposes: assisting any county in the construction;reconstruction;
expansion, improvement, operation, or maintenance of county criminal justice and court
facilities and for improvement of criminal justice automated information systems.
9. The District Attorney Building is partially justified by "improved productivity or reductions
in net County cost", howeIver even the best case justification shows an increase in net County
cost over the life of the project. (The annual increase in net County cost would be another $1
million, if"free" funds, as described in Appendix A, were not utilized in the justification to
reduce the amount of lease revenue bonds required to fund the project and the related interest
cost.)
Response: Agree. The crit ria of improved productivity was used as part of the justification
for the District Attorney project because the new building will allow the District Attorney staff
who work in the downtown Martinez area to consolidate from multiple, crowded office spaces
to one space located in close proximity to the Taylor Courthouse. This will improve
productivity.
3
_=HowAreNew_CountyBuiidings"usfille _ �_ __ . __-�_ Juiv.26,,2006 _,� _
County Response to Grand Jury Report No. 0602 Page 4
?' The financial projections for the project involve a range of scenarios,some of which include a
relatively small increase in net County cost. The District Attorney has indicated a willingness
to absorb such a cost in the operating budget of his department, should it occur,so as to
maintain cost neutrality to the project budget.
10. The justification for the District Attorney Building does not contain specific information or
data that document the life/safety threats or overcrowding that exists or how the issues will be
resolved by the new facility.
Response: Partially disagree. Recent staff reports have not included detailed descriptions of
overcrowding in the District Attorney's current office spaces because this condition was
identified and described in the initial needs assessment and feasibility studies for the new
facility performed in 2002/2003. The amount of office space allocated to the District
Attorney's Office has not changed significantly in 10—15 years. Overcrowding in the District
Attorney's current facilities is the result of incremental staff growth over this period without a
commensurate increase in office space. The new building provides space for current
authorized positions, including positions that are being held vacant due to budget cuts.
11. The Clerk-Recorder/Elections Building is partially justified by"improved productivity or
reductions in net County cost",however the justification shows a$64,000 increase in annual
g net County cost over the life of the project. (The annual increase in net County cost would be
another $150,000, if"free" funds, as described in Appendix A,were not utilized in the
justification to reduce the amount of lease revenue bonds required to fund the project and the
related interest cost.)
Response: Agree. The offices of the County Clerk-Recorder and Elections Department are
currently spread across six facilities in downtown Martinez. These are all older facilities that
the County leases from private property owners. Several of these facilities have chronic
maintenance problems that cause interruptions to department operations. The size of the
current office spaces is insufficient to meet the needs of the Department.
The proposed new facilityfor the County Clerk-Recorder and Elections offices would improve
productivity by providing adequate office space for staff to efficiently conduct department.
business. The new facility would be built to modern construction standards and would have
highly functional building systems, which would greatly reduce operational disruptions caused
_k by maintenance problems. The new facility would also result in the consolidation of staff from
3 multiple sites into one facility, improving coordination among staff and increasing
productivity.
1
The project does involve a modest incremental increase in building occupancy costs. The
Board determined this incremental cost was justified by the benefits associated with the new
facility-
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_-=How Are_New_County_Buildings Justified? __ _ __ __ ______ _ _ -Jury 26,2006=_____
County Response to Grand Jury Report No. 0602 Page 5
12. The justification for the Clerk-Recorder/Elections Building does not contain specific
information or data that document the life/safety threats or overcrowding that exists or how
the issues will be resolved by the
e new facility.
Response: Partially disagree. The project will mitigate crowded conditions and improve the
productivity of the Clerk-Recorder's Office, as described in the County's response to Finding
No. 11. I
13. The justification for the Clerk-Recorder/Elections Building dated April 26, 2005 provides no
explanation why the costs increased from the September 23, 2003 justification. (See
Appendix A for more detail.)I
Response: Agree. The cost increase was due to refined cost estimation and construction cost
inflation between the dates of thIe estimates.
RECOMMENDATIONS
The 2005/2006 Contra Costa County Grand Jury recommends that the Board of Supervisors:
1. Defer the District Attorn I y Building and all other non-emergency capital projects unless
they reduce net County cost, until the County's unreserved fund balance in the General
Fund is at least 5%of annual revenue --the minimum level specified by the County's
Reserve Policy. I
Response: Will not be implemented because it is not warranted The Fina12006/07
budget is balanced in compliance with the Board's minimum reserve policy, including a
sound financing plan for the District Attorney building. The Final Budget resulted from
an open deliberation process that took into account planned capital projects. As a result of
actions already initiated by the Board, it is anticipated that the County will reach its
minimum unreserved fund balance goal by July 1, 2007. Deferring planned projects will
only increase project cosi and exacerbate strained financial resources.
2. Establish rigorous standards for justification of capital projects that include the following:
a. Contents to be included in the justification for each phase of a project -- feasibility
study, design phase, and construction phase.
b. Information requirements for each prioritization criterion.
C. Specific guidelin Is on the financial information and projections to be included which:
(1) prohibit the use of prior years' savings and other sources of"free"money to
determine the funding required and the related impact of a project on net County cost
and (2) track andl explain changes in project cost estimates.
5
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_____-=--,—How.Are;New County__Buildings_Just�fed?_
-County Response to Grand Jury Report No.0602 Page 6
Response: Will not be implemented because it is not warranted'Capital projects currently
go through a rigorous justification process that includes review and approval by the
Capital Facilities Committee and the Board of Supervisors at multiple points during the
n. course of implementation. The Capital Facilities Committee recently directed staff to
develop a standardized reportingformatfor presentingProPosed caPital projects. This will
ensure consistency in the type of information presented to the Committee in justification of
new projects.
3. Establish.a capital project approval process for each of the three phases (feasibility, design,
and construction)that specifies whose approval is required at various dollar thresholds.
Response: Will not be implemented because it is not warranter. An approval process for
§ various phases of capital projects already exists. With the exception of some small projects
. that are performed entirely "in-house"by County staff, capital projects typically involve
the County entering into contracts with architects, contractors, and various other
- consultants beginning in the early stages of project development. The Board of
Supervisors must approve these contracts. For larger projects,staff prepares periodic
r�<
progress reports to the Capital Facilities Committee during the course of the project,
t � providing an added level of review.
p£, 4. Before proceeding with the District Attorney Building, re-evaluate the project justification
using the recommended justification standards especially-with respect to the financial
projections (Recommendation#2c).
X4%
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} Response: Will not be implemented because it is not warranted The District Attorney w
project has already undergone a rigorous justification process that has included multiple
staff reports and approvals by the Capital Facilities Committee and the Board of
_ y Supervisors.
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How_Ace:New County Buildings_Justified? July_26,_2006_
County Response to Grand Jury ReportlNo.0602 Page 7
APPENDIX A
District Attorney Building
On Apri1.29, 2003,the BOS authorized a feasibility study of a new District Attorney building. The
building consolidates four separate offices into one building adjacent to the courts in downtown
Martinez. In 2005, construction documents for the new building were completed. On May 2,2006,
the BOS authorized issuance of a request for competitive bids for construction.
Total project cost was estimated as follows:
Design phase $2,800,000
Construction 18,500,000
Furniture ` 1,200,000
Total $22,500,000
The projected funding sources were
as follows:
Plant Acquisition Account $3,800,000
Criminal Justice Facility Construction Fund 4,000,000
Lease Revenue Bonds 14,700,000
Total I $22,500,000
The Plant Acquisition Account figure represents accumulations from the District Attorney's annual
operating budget over the past fe I years.
The Criminal Justice Facility Construction Fund ("Criminal Justice Fund") is derived from court
fines and fees. It may be used fort"construction,reconstruction,expansion, improvement,operation,
or maintenance of county criminal justice and court facilities and for improvement of criminal justice
automated information systems."J
The project justification (dated December 1, 2005) assumes that 25-year lease revenue bonds would
be sold in mid-2006, at a rate of 6 percent interest, to partially finance the project. Three revenue
streams are identified for this new debt service:
1. $500,000 annually from the Criminal Justice Fund.
2. $213,340 annually from personnel reductions of two clerks and one office manager, due to
consolidation of offices.
3. $366,608 to $377,380 annually from occupancy cost savings, due to vacating the current
offices at four different locations. This savings assumes that replacement tenants can be
found.
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�> How=ArE.N.ew-.County Buildings_Justified? _ __ __ _.; -_ —_.,_--July-26,2006—:
County Response to Grand Jury.Report No. 0602 Page 8
Projection of Annual Costs and Savings
(in thousands)
2012
2008 2009 2010 2011 & beyond
r
Net Debt Service $847 $1,049 $1,082 $1;117 $1,156
Savings:
Criminal Justice Fund (500) (500) (500) (500) (500)
Personnel Savings (213) (213) (213) (213) (213)
Occupancy Savings (366) j3_70J 373 (377) (377)
BEST CASE (sublease of existing facilities):
Net cost or(savings) $(232) $(34) $(4) $27. $66
POSSIBLE CASE (without subleasing):
Net cost or (savings) $(91) $111 $143 $179 $107 .
i
Comments:
Without the $3.8 million from the plant acquisition account and the $4.0 million from the Criminal
_ Justice Fund (both of which are used to lower the amount of lease revenue bonds required to finance
the project from $22.5 million to $14.7 million), the annual debt service cost would increase by
slightly over 50%, or more than $500,000 per year.
In addition to $4.0 million in up-front money from the Criminal Justice Fund, the project proposal
contemplates using$500,000 per year for 25 years from the Criminal Justice Fund to offset part of
the lease revenue bond debt service.
The source of the Plant Acquisition Account is the General Fund. If this project were not undertaken,
the funds would be available for any General Fund expenditure, which covers most County
expenditures. Using Criminal Justice Funds'(which, as previously indicated may be used for a wide
variety of expenditures related to criminal justice) for this project makes them unavailable for other
expenditures. Such projects will then have to be funded by the General Fund, thus increasing net
County cost at that time. The proposal understates the net County cost by more than $1 million
annually -- $500,000 from understated debt service cost and the $500,000 of"free" funds from the
Criminal Justice Fund.
Clerk-Recorder/Elections Building
On September 23, 2003, the BOS approved a project to replace and consolidate the County Clerk-
Recorder and Elections facilities. At present, the functions of this department are located in six
different buildings in downtown Martinez. This project involves a newly constructed office on
Escobar Street in Martinez. On April 26, 2005, the BOS approved a specific lease agreement with a
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___HowtAre,New_County_Buildings,Justified?
County Response to Grand. Report No. 0602 Page 9
purchase option,which, consistent with BOS policy that the County has an equity interest in facilities
in which the County has long-term occupancy, the County is expected to exercise.
Total purchase cost was estimated as follows:
Sept 23, 2003 April 26, 2005
Projection Projection
Building Purchase $8,900,000 . $10,994,000
Other Costs 700.000 769,000
Total $9,600,000 $11,763,000
The projected funding sources were as follows:
General Fund Contnbl+utions $1,950,000 $1,950,000
Micrographic Modernization Fund 2,000,000 2,000,000
Lease Revenue Bonds 5,650,000 7.813.000
Total $9,600,000 $11,763,000
The General Fund Contributions figure represents accumulations from the County.Clerk's annual
operating budget over the past few years.
The Micrographic Modernization Fund receives revenue from filing and recording fees. The funds
are to be used for micrographics and modernization of the Recorder's Office.
The project justification assumes that 25-year lease revenue bonds would be sold in mid-2006, at a
rate of 6 percent interest, to partially finance the project.
Pr Jjection of Annual Costs and Savings
Sept 23, 2003 April 26, 2005
Projection Proiection
Current Facilities Lease Cost:
Fiscal Year 2005-2006 $(612,019)
Fiscal Year 2006-2007 $(765,085)
New Building:
Debt Service 386,500 604,071
Maintenance/Utilities 220,000 225,000
New Building Subtotal $606,500 $829,071
Increase (Decrease) in net County cost $(5,519) $63,986
Comments:
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__How Are=New County-Buildings-Justified? —==—=V ., _ -- - �— =July 2b, 00b_--_
County Response to Grand Jury Report No.0602 Page 10
,, This project justification indicates that it meets the-"improves productivity or reduces'net County
cost"prioritization criterion. However,there are no projected staff reductions and the final
justification shows an increase in annual net County cost of$64,000.
The approach to financing the building purchase is similar'to that used for the District Attorney
Building. As such, it has a similar conceptual flaw. In this case, it assumes the use of$1,950,000 of
funds that originated in the General Fund to reduce the amount of lease revenue bonds required.
Without these "free" funds the County would have to issue $1,950,000 more lease revenue bonds and
the annual net Count cost would increase by more than $150,000 due to higher debt service costs.
There is a similar question with respect to,the $2,000.,000 to be obtained from the Micrographic
Modernization Fund. There are some differences in that the Fund comes from revenue from County
} Clerk functions, the permissible uses are restricted much more than for the Criminal Justice Fund,
and the $2,000,000 is based on the square footage to be occupied by micrographic functions.
There is only a very limited explanation for the changes in project financial projections from
September 2003. (for the BOS's conditional approval)to April 2005 (for final approval). With respect
to the $2.2 million(23%) increase in cost, the April, 2005 presentation states that "project costs have
been refined to incorporate all fixed tenant;improvements, state-of-the-art climate control,
mechanical, electrical, fire alarm and security systems." No further details are provided. This does
not explain why the costs increased: There are no comments on the$117,000 (19%) increase in
occupancy cost in 200512006 or on net County cost, which increased by $69,500.and changed from a
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savings to a cost.
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BOARD OF SUPERVISORS RESPONSE TO
GRAND(JURY REPORT NO. 0607:
COUNTY OUTSPENDS INCOME FOUR YEARS IN A ROW
Have the Supervisors finally kicked the habit?
FINDINGS
1. As.shown in the table below, in each of the last three years the County's expenditures
exceeded revenue by amounts ranging from $17 million to $22 million.
Contra Costa County General Fund Data For Years Ended June 30
(In millions)
2003 2004 2005
Total Revenue $1,001.5 $1,044.2 $1,063.5
Expenditures/Transfers 1019.2 1065.8 1080.7
Deficit $(18.2) $(21.6) $(17.2)
Response: Agree.
2. These annual deficits have occurred despite relatively strong economic and demographic
fundamentals in the CountyJ and a $62.0 million growth in revenue from 2003 to 2005.
Employment is high, sales taxes, property taxes, and special taxes are up, and there have not
been any large non-recurring problems requiring County funds.
Response: Partially disagree.J The $61.5 million growth between 2003 and 2005 included
transfers from other funds and was neither all new revenue growth nor necessarily recurring.
3. As shown in the table belol, the unreserved fund balance in the County's General Fund
decreased from $115.7 million on June 30, 2002, to $58.7 million on June 30, 2005, an
average decrease of almost' $20 million per year.
Contra Costa County Unreserved Fund Balance as of June 30
(In millions)
2002 2003 2004 2005
Unreserved Fund Balance $115.7 $97.5 $75.9 $58.7
Total Revenue I 986.1 1,001.5 1,044.2 1,063.5
Fund Balance as % of iRevenue 11.7% 9.7% 7.3% 5.5%
Response: Agree.
„_ _,.County Out spendslncome_Four Years_in.a_Row ._=._..- .^__:.. _—___.____- .July-26,26 00 _
County Response to Grand Jury Report No.0607 Page 2
4. On June 28, 2005,the Board of Supervisors ("BOS") approved the fiscal year ("FY")
2005/2006 budget with another$20 million deficit, without analyzing its impact on the
unreserved fund balance or on credit ratings. (At this rate of deficit spending, the unreserved
fund balance will be approximately 3.5%of revenue on June 30, 2006).
Response: Partially disagree. The County did not continue the budgeted rate of deficit
spending and, now, at year-end the unreserved fund balance is expected to approximate the 5%
minimum level recently established by the Board of Supervisors.
5. At the County's rate of deficit spending over t:he past four years, the unreserved fund balance
will be exhausted before June 30, 2008.
Response: Disagree;see response to Finding No. 4.
6. Bond rating agencies (e.g., Standard & Poor's and Moody's) evaluate and rate the County's
credit worthiness. A lower rating means additional costs to the County and less.money
available to provide services for County residents.
Response: Partially disagree. A lower credit rating could result in additional costs only if the
County were to borrow additional money. It would have no impact on the debt service for
existing bonds.
7. On November 30, 2005, Standard&Poor's revised its long-term rating outlook on the County F
to negative from stable, "based on a significant deterioration in the County's reserves."
Response: Agree.
8. On December 1, 2005, Moody's downgraded the County's long-term credit rating one notch
(level), noting that the outlook remained negative and that "the County has taken no concrete
steps to stem the erosion of the financial position.".The new rating of Aa3 places the County
at the lowest of Moody's three high quality ratings. A negative outlook indicates that the
County's trends point to anotherdowngrade in the next year or so, moving the County from
the high quality category to upper medium grade.
Response: Partially disagree. A negative outlook with no improvement may lead to another
downgrade. However, the County's implementation of a plan to increase reserves and
revenues and decrease the growth of expenditures has significantly improved the County's
fiscal outlook.
9. Credit rating downgrades have both tangible and intangible (reputation) costs. It is estimated
that the December downgrade could cost the County an additional $225,000 if the County
were to borrow$25 million, and that a second downgrade could double this additional cost.
Response: Agree.
2
_CouutvOut_spends_Inco_me,EourYears_in_aRnw _ _:___ July_26,.2006 _- _-
County Response to Grand Jury Report No.0607 Page 3
10. At its October 25, 2004 and December 20, 2004 meetings, the BOS Finance Committee
discussed establishing a Rese Ie Policy.
Response: Agree, with the clay fication that the Finance Committee discussed establishing a
Reserve Policy on October 25, 2004 and December 5, 2005.
11. On December 20, 2005, the BOS adopted a Reserve Policy, which resolved, in part, that:
a. "Effective immediately, Ciontra Costa County shall strive to achieve a minimum
unreserved General Fund jbalance of 5% of budgeted General Fund revenues."
b. "Until such time as the County has an unreserved General Fund balance equal to at least
5%of budgeted General Fund revenues, no less than $2 million of year-end fund balance
in any fiscal year shall be added to the appropriation for Contingency Reserve."
C. "Reserves may be,drawn below the minimum level in order to address an unforeseen
emergency, to fund a non-recurring expense, or to fund a one-time capital cost; but only
following the adoption, by a four-fifths vote, of a resolution of the BOS specifying the
circumstances that justify the invasion of the minimum reserve level."
d. "Should reserves fall below the established minimum levels, a request to utilize reserve
funds must be accompanied by recommendations for restoring, within three years,
minimum reserve levels (fiscal stabilization plan)."
Response: Agree.
12, The Reserve Policy sets the minimum reserve level at the bottom of the 5%to 15% range
recommended by the Government Finance Officers' Association.
Response: Agree.
13. On December 27, 2005,the County Administrator instituted a hiring freeze on positions
funded by General Fund revenue effective January 1, 2006.
Response: Agree.
14. On February 14, 2006,the BOS declared "the Board's intent to adopt a FY 2006/2007
General Fund budget than balances annual expense and revenues, and that strengthens General
Fund Reserves."
Response: Agree.
3
CountyQutspend_s__neome_Four_Yearsin_a.Row _ =; .. Juiy-26}2006_
_�__�mss___.
County Response to Grand Jury Report No.0607 Page 4
15. On February 28, 2006, the BOS received-its first report on retiree healthcare costs and
liabilities. This report estimated the County's unfunded liability for retiree healthcare costs in
the $1 to 2 billion range.
Response: Agree.
16. On May 2, 2006,the BOS adopted a balanced budget consistent with the resolution of
February 14, 2006.
k�
Response: Agree.
17. On May 5, 2006, the BOS Finance Committee discussed-a recently completed actuarial
analysis that estimated'the County's unfunded liability for retiree healthcare costs at between
$1.4 and $2.6 billion.
Response: Agree, with the clarification"that the_Finance Committee met on May 4, 2006.
financial management practices common in the private sector are very
18. A number of important
limited or absent in the County as follows:
a. Multi-year financial projections'developed by top management, department heads, and
the BOS.
b. Rigorous capital project justification_ s (See Contra Costa County Grand Jury Report 0602
issued earlier.)
c. Regular management reviews of departmental revenues, costs, and performance by top
management, department heads, and the BOS.
Response:`Partially disagree. While management practices can always be improved or
expanded, none of the practices described in the Finding are absent. The County
Administrator's Office performs multi year financial projections, which are largely dependent
on federal and state budget allocations and so are of limited value. Capital projects currently
go through a rigorous justification process that includes review and approval by the County
Administrator, Capital Facilities Committee, and the Board of Supervisors, and is described in
detail in the County's response to Grand Jury Report No. 0602. In the absence of regular
management audits, which have been temporarily suspended due to budget constraints, the
County Administrator annually conducts several performance and fiscal audits targeted at
specific problems or issues, and has focused limited staff resources on Countywide policies and
procedures that affect all County departments and programs. All County department revenues,
costs, and fiscal controls are reviewed on a regular basis under the County Administrator's
budget reporting and the Auditor-Controller's internal audit programs.
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_...-County Outspends_Incom_e—Four-Years-tn a_Row-`, _�.�_ - _ - JuIy_26,-2006.__ __
County Response to Grand Jury Report No.0607 Page 5
RECOMMENDATIONS
The 2005-2006 Contra Costa County Grand Jury recommends that the BOS do the following:
1. Assure that in FY 2006/2007 expenses do not exceed revenue.
Response: Has been implementedThe Fiscal Year 2006/2007 Adopted Budget balances
annual expenditures and revenues. In the last six years, actual General Fund net County cost
has been between $37.4 and$103.6 million less than the budgeted amount. Barring a natural
disaster, the County's current fiscal review practices assure that actual General Fund net
County cost will not exceed budg�ted levels.
2. Bring reserves to the minimum
level specified by the Reserve Policy by June 30, 2008.
Response: Has been implemented The County initiated strategies to build the reserve and
anticipates reaching the minimum specified level by June 30, 2007, if not sooner.
3. Strengthen the Reserve Policy:
a. To require actions that are much more aggressive than simply adding a minimum of$2 -
million to the contingency reserve, when reserves are below the minimum level.
b. To increase the minimum level to an amount greater than the minimum suggested by the
Government Finance Officers' Association and in line with that of peer counties in
California
Response: Has not yet been implemented, but will be implemented in the future. The County
expects to achieve the 5% minimum reserve balance within the next 12 months. At the end of
that time, and in conjunction with service needs and a Facility Life-Cycle Investment Program,
the County will re-evaluate increasing the minimum level to an amount greater than the
minimum level suggested by the Government Finance Officers'Association.
4. Adopt an action plan to mitigate costs and fund the liability for retiree healthcare.
Response: Has been partially iimplemented and will require further analysis to be fully
implemented. The Finance Committee has directed County staff to collaborate with California
State Association of Counties to prepare an analysis of alternative changes to healthcare
benefits, alternative funding approaches, and potential state and federal cost reimbursement.
The required analysis and collaboration must occur before the next logical steps can be
developed. An implementation timeline is dependent on the information obtained in the
investigative stage. The Finance Committee directed staff to make progress reports to the
Committee on a quarterly basis.
5. Establish or strengthen routine financial management practices to mirror more closely
those in the private sector by implementing the following:
5
County.OutspendsJ:ncome_F_mr Years=in_aRo_w—
County.Response to Grand Jury Report No. 0607 Page 6
a. Multi-year financial projections developed by top management, department heads, and
the BOS.
b. Rigorous capital project justifications. (See Contra Costa County Grand Jury Report
No. 0602 issued earlier.)
c. Meaningful action-oriented reviews of departmental revenues, costs, and performance
by top management, department heads, and the BOS.
Response: Has substantially been implemented:
a. The County already performs multi year financial projections and will continue to
perform and refine them.
H b. Capital projects already go-through a rigorous justification process that includes review
E; and approval by the County Administrator, Capital Facilities Committee,and the Board
i' of Supervisors (See response to Contra Costa County Grand Jury Report No. 0602).
c. Meaningful action-oriented reviews of departmental revenues, costs, and performance
already take place. Regular performance auditing will resume when fiscal and staff
resources permit.
J
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