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HomeMy WebLinkAboutMINUTES - 09142010 - D.1RECOMMENDATION(S): ACKNOWLEDGE that the County Administrator was directed to return to the Board in September with recommendations and/or refinements to the Proposed County Special District and County Service Area Budgets; 1. 2. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 09/14/2010 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Mary N. Piepho, District III Supervisor Susan A. Bonilla, District IV Supervisor Federal D. Glover, District V Supervisor ABSENT:Gayle B. Uilkema, District II Supervisor Contact: Lisa Driscoll, County Finance Director 925-335-1023 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: September 14, 2010 David J. Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: Lisa Driscoll, County Finance Director, Rich Seithel, Senior Deputy/Fire, Chief Daryl Louder D. 1 To:Board of Supervisors From:David Twa, County Administrator Date:September 14, 2010 Contra Costa County Subject:Contra Costa County Fire Protection District - Corrective Action Plan RECOMMENDATION(S): (CONT'D) ACKNOWLEDGE that the delay in adoption of the Special Districts' budgets was specifically to give the new Fire Chief an opportunity to review the operation of the Contra Costa County Fire Protection District and present a corrective action plan to the Board; CONSIDER the Corrective Action Plan prepared by the County Administrator and the Contra Costa County Fire Chief on recommended changes to the Contra Costa County Fire Protection District's operation and FY 2010/11 Budget; and DIRECT the County Administrator to return to the Board on September 28 with adjustments to the FY 2010/11 Budget. FISCAL IMPACT: As described in the background information below, this report makes recommendations to adjust appropriations and revenues to reduce reliance on fund balance and begin to re-balance District expenses with revenue projections. Because the Proposed Budget included the closure of four stations for twelve months and the Corrective Action Plan includes the closure of two stations for six months, the fiscal impact of the plan, although a decrease from current operations, is actually an increase in budgeted expenses of $764,173; however, the plan also increases revenues in the amount of $851,750 resulting in a decreased reliance on reserves of $87,577. BACKGROUND: On April 20, 2010, the Board of Supervisors adopted a FY 2010-11 Proposed Budget for the Contra Costa County Fire Protection District that included significant reductions to the District’s operations. The reductions were needed to offset the impact of expenditure and revenue forecasts that projected a reliance on reserves of over $16 million (see Recommended Budget pages 336-337). The Proposed Budget included a $7.4 million expenditure decrease, which incorporated the elimination of approximately eight positions and “browning-out” four stations on a rotating basis. Even with these proposed reductions the District anticipated the utilization of $8.8 million from reserves. With property taxes continuing to drop and personnel contracts in place with pending cost-of-living increases, the District’s utilization of reserve funds was not only already high but projected to grow, making it increasingly difficult to balance its budget in the future. Understanding that the reliance on reserves was increasing, that the fiscal problem was structural, that the District must remain fiscally solvent, and that the District must prudently plan for FY 2011-12 and beyond in an uncertain and challenging economic environment, the District had no choice but to make plans to reduce its budget along with accompanying service level reductions. The District evaluated staffing models, the effectiveness of overtime versus relief staffing for positions required due to contractual minimum staffing requirements, and the equipment replacement program. It is important to note that the District has not made a capital expenditures since FY 2008-09 and have no expenditures planned for capital in FY 2009-10 and 2010-11. Capital expenditures are primarily needed to replace aging fire engines, fire trucks and other fire apparatus as well as light vehicles; and to make significant repairs to some 40 buildings including 30 fire stations. Continuing to reduce capital funding to zero will ultimately result in a pent-up capital demand that will eventually have to be addressed – likely at a higher expense. The Contra Costa County Fire Protection District’s operations are funded over 88% by property taxes; therefore, it has been particularly hard hit by the housing market decline’s impact on property tax revenue. The County Administrator’s Recommended Budget for the District described a $7.4 million gap between projected revenues and expenses for FY 2010-11. The Board of Supervisors asked the Acting Chief to answer specific questions regarding the gap including workers’ compensation expenses and appropriations. The Board requested the County Administrator to work with the Fire District to review recommendations regarding reductions. The Board stated that it was not opposed to changing some of the budget recommendations to soften the impact of cuts so long as a fiscally prudent plan was in place to correct the structural problem and that the changes and delay did not impact the County General Fund. Since that original direction, the Board named a permanent Fire Chief and directed the County Administrator’s Office to delay adoption of the District’s budget to give the new Chief an opportunity to review the operation and budget and present a corrective action plan to the Board. Attached is the Contra Costa County Fire Protection District’s Corrective Action Plan as recommended by the County Administrator. The Plan is a work in progress and does not include projections for several key items that may decrease or increase costs in the future such as: The Pending Chevron Refinery Property Tax reassessment. This item will be a fixed non-ongoing cost. Contra Costa County Employees' Retirement Association (CCCERA) Board's recent decision to Depool Safety employers. This item will increase retirement expenses in FY 2011-12. The impact of CCCERA 2008 market losses. This item will increase retirement expenses in FY 2011-12. The impact of CCCERA 2009 market gains. This item will decrease retirement expenses in FY 2011-12. Future CCCERA market changes. Future statewide and local pension reform such as AB 1987. CLERK'S ADDENDUM Speakers: Vincent Wells, Firefighters Local 1230; George Figone, Acalanes Home Owners' Associatio n. ATTACHMENTS CCCFPD Corrective Action Plan Contra Costa County Fire Protection DistrictCorrective Action Plan September 14, 2010 Expenditure & Revenue HistoryThe gap between expenditures and revenues represents a use of reserves. Reserves were used in three of the last five fiscal years.45,000,00055,000,00065,000,00075,000,00085,000,00095,000,000105,000,000115,000,000FY 00-01 FY 01-02 FY 02-03 FY 03-04 FY 04-05FY 05-06 FY 06-07 FY 07-08 FY 08-09 FY 09-10TOTAL EXPENDITURESGROSS REVENUE2 Expenditure & Revenue ProjectionsAFTER Proposed ReductionsBeginning in FY 2011-12 reserves funds are depleted and not available to fund the gap between expenditures and revenues.380,000,00085,000,00090,000,00095,000,000100,000,000105,000,000110,000,000FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14TOTAL EXPENDITURESGROSS REVENUE Structural Imbalance►Current expenditures far exceed current revenues►Capital expenditures have not been made since FY 2008-09►Contracted wage increases go into effect July 1, 2011►Retirement expenses increase significantly in FY 2011-12►Reserve use in FY 2009-10 was $2.3 million►Reserve use in FY 2010-11 is projected to be $8.7 million►Property taxes, which funded 88% of operations in FY 2009-10 are expected to be flat in FY 2011-12 and then grow approximately 1% in FY 2012-13►Reserves are projected to be completely depleted in FY 2011-124 CCCFPD POB Stabilization Fund►The CCCFPD Stabilization Fund was established in 2005 with the issuance of Pension Obligation Bonds. Pursuant to the bond documents, monies in the Stabilization Fund may be used to pay increased pension funding costs; to pay reserve replenishment costs and, upon a unanimous vote of the full Board, for any other lawful purpose of the District. ►Since FY 2005-06, the Fund has received approximately $2.7 million each year from District Property TaxesƒIn FY 2006-07 and FY 2007-08 all funds received and accumulated were paid to CCCERA to offset new unfunded pension liabilities, which had grown since the bonds were issued in 2005ƒIn FY 2008-09 and FY 2009-10 stabilization fund payments to CCCERA were not required – as of 12/31/07, CCCERA held an estimated surplus in contributions of $15.4 million. As of 12/31/08, the $15.4 surplus had dropped by $6.1 million to $9.3 million. The practice of using the stabilization fund to annually pay unfunded liability has slowed the over-all growth in pension rates and has decreased future expenses to the District.ƒCurrently the fund has $5.4 million on deposit5 Proposed/Recommended Budget►The Proposed Budget adopted by the Board of Supervisors on April 20 included $7.4 million in reductions to begin to address a budget gap of over $16 million. The $16 million gap included $4 million in increase transfers to the workers compensation trust fund. The Budget reductions proposed included “browning-out” 4 stations for 12 months and eliminating 8 positions.►During Budget Hearings in May, the Board stated that it was not opposed to changing some of the budget recommendations to soften the impact of cuts so long as a fiscally prudent plan was in place to correct the structural problem AND that the changes and delay did not impact the County General Fund. Specifically, the Board identified the expense of workers compensation as a funding item that might be delayed.►The Board directed the County Administrator to work with the newly appointed Fire Chief to develop a corrective action plan.6 Correction Measuresto Replace those Originally Proposed►Expenditure Reductions ($2.18 million)►Closure of two Fire stations as of January 1, 2011 ($1.58 million)ƒThe first unit is Engine Company 16 located in LafayetteƒThe second unit is Engine Company 22 located on Crystal Ranch Drive in ConcordƒGiven current depleted personnel ranks cost savings will be achieved through overtime reductions, the equivalent of 9 positions►8 positions eliminated on June 1 ($600,000)►Deferring $4 million in transfers to the Workers Compensation Trust Fund ($4 million)►Revenue Increases ($1.5 million)►Property Taxes drop of 2.44% rather than 5% originally projected ($1.2 million) ►Increased Fee Revenue ($307,000) - weed abatement, dispatching services, licenses, permits, plan review, and inspections ►Reserve use $8.7 million7 Contra Costa County FPD 2010/11OBJECTORIGINAL RECOMMENDATIONPROPOSED BUDGET*REVISED RECOMMENDATION DIFFERENCESalaries & Benefits70,160,979 70,949,289 788,310Services & Supplies8,239,775 7,785,638 454,137 Other Charges3,103,125 3,226,125 123,000Capital Outlay---Expenditure Transfer12,975,794 12,975,794 -Chevron Payment-307,000 307,000Total Expenditures 94,479,673 95,243,846 764,173Current Property Tax77,678,479 78,833,443 1,154,964Other7,988,541 7,685,327 (303,214)Total Revenue 85,667,020 86,518,770 851,750Fund Balance Needed (8,812,653) (8,725,076) (87,577)*The original submission included the elimination of 8 positions for a $600,000 savings and browning out 4 station for 12 months each for a savings of $6.8 million. The 8 positions were eliminated 6/1/10. 8 CCCFPD 4-Year ForecastIncluding Proposed Reductions8.5% workers comp thru FY 11/12 and 16% in 12/13 and 13/1409/10 Actual FY 10/11 FY 11/12 FY 12/13 FY 13/14Salaries 49,276,088 50,973,000 52,707,101 53,266,784 53,799,453 Benefits16,212,854 17,556,289 18,047,852 18,909,129 19,635,097 Workers Compensation4,203,774 4,332,705 4,480,104 8,522,686 8,607,912 Services & Supplies/Other21,465,532 22,074,852 22,500,000 23,175,000 23,638,500 Capital Outlay00 0 0Chevron Payment0307,000614,000 00Total Expenditures 91,158,24895,243,846 98,349,057 103,873,599 105,680,962 Current Property Tax80,624,945 78,833,443 78,833,443 79,621,777 80,816,104 Other8,204,9517,685,327 7,988,541 8,349,357 8,685,000 Total Revenue 88,829,896 86,518,770 86,821,984 87,971,13 89,501,104 Fund Balance Needed2,328,352 8,725,076 11,527,073 15,902,465 16,179,858 Fund Balance Available*17,610,425 8,885,349 (2,641,724) (18,544,189) (34,724,047)9* Does not include $1.4 million in outstanding encumbrances Future Considerations/Issues►Pending Chevron Property Tax reassessments►Contra Costa County Employees’ Retirement Association (CCCERA) Board’s recent decision to Depool individual agencies►CCCERA market impacts►Statewide and local pension reform10 Conclusion►Without an influx of significant new/ increased revenues and/or additional service reductions the Contra Costa County Fire Protection District will have depleted its reserves in 2011►A formal, long-range solution to the structural problem must be implemented in the current fiscal year11 Recommendation►CONSIDER the Corrective Action Plan described above►DIRECT the County Administrator to return to the Board on September 28 with adjustments to the FY 2010/11 Adopted Budget, which fiscally implement the Plan12 Questions?