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1995-0201_ORANGE COUNTY FIRE AUTHORITY_C1_Agenda Report0 0 AGENDA ITEM February 1, 1995 TO: Honorable Mayor and City Council FROM: George Scarborough, City Manager SUBJECT: Approval of Agreement for Formation of Orange County Fire Authority and Appointment of Representative and Alternate to the Orange County Fire Authority RECOMMENDATION: By Resolution, approve the City of San Juan Capistrano's Participation in the Joint Powers Agreement Creating the Orange County Fire Authority and Appointing a Representative and Alternate to the Board of Directors. SITUATION: Summary On August 2, 1994 the City of San Juan Capistrano took action to approve the City's participation in a Joint Exercise of Powers Agreement (JPA) to form the Orange County Fire Authority. On December 6, 1994, the same day the County of Orange declared Bankruptcy, the County of Orange also approved participation in the Agreement to form the Orange County Fire Authority, but did so with several modifications to the agreement. For the agreement to proceed the County has asked each City participant to reaffirm its commitment to participate in the Fire Authority with the revised conditions made by the County. Staff has reviewed these revised conditions and recommends that the City Council again take action to approve the City's participation in the Orange County Fire Authority. Background On January 11, elected and appointed representatives from Structural Fire Fund and cash contract cities met in Irvine to discuss issues associated with implementation of the joint powers agreement that establishes the Orange County Fire Authority. It was the consensus of the group that the formation of the Orange County Fire Authority should move forward as expeditiously as practical. The organizing meeting of the Fire Authority has been set for February 3, 1995. In order for this to occur participating cities must ratify the changes made by the County to the FOR CITY COUNCIL AGEND Cl 0 0 Agenda Item 2 original Joint Powers Agreement and appoint their respective board member and alternate board member. Thus, the need to consider this item at a special meeting of the City Council. Cities that are served by the Orange County Fire Department have been working with the County on a transfer of oversight responsibility for fire service operations for over three years. Approximately 85% of the department's service areas lie within cities whose elected officials should control these services. A feasibility study conducted for the cities and the County by an independent consultant in 1991 concluded that it was both operationally and financially feasible to convert the existing County Fire Department into a special district or an authority that would be governed jointly by the Cities and the County. After weighing numerous options for over three years, the Cities and the County concluded in 1994 to transfer governance over the fire system to a structure that includes elected representatives for the cities that are served by the department. On August 2, 1994 the City Council adopted Resolution No. 94-8-2-5 approving a joint exercise of powers authority. On December 6, 1994, the agreement was formally approved by the Orange County Board of Supervisors, with several changes. Modifications Made By the Countv The form of the agreement approved by the County was different in several ways from the agreement approved by each participating city prior to the Board of Supervisor's action. These differences were the result of negotiations with the County that continued up to the final days immediately prior to the County's approval of the agreement. The differences are: a. Governing Board: The County Board of Supervisors appoints two, rather than one member to the authority's governing board. This would increase the total size of the governing board from 19 to 20 members. b. Executive Committee: A five or seven member executive committee, comprised of authority board members is to be elected by the Authority governing board to perform such functions as are authorized by the governing board. One member of the executive committee shall be a County Supervisor. C. Equity: This provision of the agreement was modified to provide that any adjustments that are made in the distribution of fire service cost due to equity would be limited to no more than 2% of an agency's prior year contribution. This change has the effect of controlling the rate at which any equity adjustments could be implemented. It does not in any way reduce funding for the authority. d. Asset Transfer. This inserts an earlier understanding with the County regarding reimbursements to the County General Fund for costs incurred on behalf of the fire 0 Agenda Item E 3 department in prior years. When the Special District Augmentation Fund was in place, the cities acknowledged and understood that the County would transfer funds for the reimbursements from the fund. After the fund was eliminated by the State, this obligation transferred to the Fire Department budget. e. Indemnification & Insurance: Indemnification and insurance provisions were added to protect the interest of the Authority, Cities and the County during pre and post formation activities. L Effective Date of Authority Formation: The date for formation of the Authority ( e.g. February 3, 1995 or such other date as may be agreed to by the members) is made subject to: (1) the Authority's procurement of worker's compensation and general liability insurance and (2) the Authority's enrollment in the Orange County Employee's Retirement System. Staff has no objection to the above changes in the original agreement and do not believe the changes compromise any of the original objectives for forming the Fire Authority. The agreement, as well as the revisions, were initially drafted by special legal counsel to the fire service project and ultimately approved by County Counsel. The agreement has been extensively reviewed by the five -member Negotiations Committee comprised of city managers from both Structural Fire Fund and cash contract cities and the County Fire Department. Upon formation of the Orange County Fire Authority, it will assume full responsibility for the Orange County Fire Department. The authority will possess the powers granted to it by the attached agreement. These powers are enumerated on pages four through six of the agreement and include all of the powers necessary to carry out both day to day and long range planning functions of the department. All assets and reserves of the fire department as well as current contracts with cash contract cities will be transferred to the fire authority. Creation of the Authority would grant it the same power to tax as is currently held by the Cities and the County. Any tax would require a 2/3 vote of voters voting. Impact of County Bankruptcy Proceedings The impact of the Orange County's Chapter 9 bankruptcy filing on the formation of the Authority is currently under review. The County's petitions for protection under Chapter 9 of the Federal Bankruptcy Code were filed on the same day the Board of Supervisors approved the JPA. Since implementation of the Joint Powers Agreement requires the County to transfer various financial, real property and personal property assets to the Fire Authority, and in light of the Chapter 9 filings, it has become necessary to ensure that (1) the transfers are 0 Agenda Item 0 not constrained by the bankruptcy proceedings, and (2) the transfer is still financially viable and in the best interest of the Cities. Financial assets to be transferred include: 1. An estimated $37 million in Fire Department reserve funds and accounts, 2. All Structural Fire Fund property tax revenue which is estimated to be $65.6 million for 1994-95, and 3. Other revenue equivalent to approximately $36.6 million which includes contract payments for fire protection from six cities. The County Counsel and the County's special legal counsel for its Chapter 9 proceedings have advised that the formation of the Authority can proceed and is not subject to bankruptcy court proceedings. It has not yet been determined, however, exactly how much, if any, of the fire department's reserve fund might be lost in the restructuring of the investment pool, or how much pre-petition revenue will be tied up. The Davis Company of Sacramento, California (the firm that prepared the initial financial feasibility study in 1991) has been engaged to work with the Special legal Counsel and the County to seek answers to these and other critical questions. Their work is presently underway and is not yet complete. A report will be made to the representatives present in the organization meeting on February 3, 1995. However, it is anticipated that the worse case situation in which the Authority would find itself will be as follows: a. The Authority would be a creditor of the investment pool just the same as the other 187 public agencies. The reserves of the Structural Fire Fund plus other fire department reserves are in the pool. b. The Authority would receive current and future Structural Fire Fund revenue on the same basis as other agencies receive their property taxes. C. Non -tax revenue would be received by the Authority without restriction. d. If the County does not transfer Structural Fire Fund revenue or attempts to divert any portion of those funds that are due to the Authority for any reason, it will be in breach of the agreement. Impact if Cities do Not Approve Revisions of the JPA Any Joint Powers Agreement is an agreement between parties. This particular agreement has taken over 18 months to negotiate. Without approval of the revisions, the authority would not be formed and the fire department will remain with the County, subject to its direction and control. 0 0 Agenda Item 5 Impact if Transfer of Fire Department's Reserves Does Not Occur Special legal counsel to the fire project advises that this is unlikely. However, if this were to occur the cities could terminate the Joint Powers Authority agreement for breach of contract. Designation of City Representative and Alternate to Board of Directors The agreement requires each member to designate a representative and alternate to the Board of Directors. The alternate shall act in each director's absence. Each director and alternate shall be a current elected member of the governing body. Each director's term shall be four years. Each director and alternate will serve without compensation. In conclusion, while not all information surrounding the formation of the Fire Authority is known, staff is confident that the City's participation in the Orange County Fire Authority remains to be of benefit to this community. Participation in the Orange County Fire Authority will allow the City more direct involvement in policy decisions affecting the provision of fire services for residents of San Juan Capistrano. At this time, staff recommends the City Council adopt a resolution approving the City's participation in the Orange County Fire Authority and designate a Council member to serve as the City's member of the Board of Directors and another Council member to serve as Alternate. COMMISSION/BOARD REVIEW AND RECOMMENDATIONS: Not Applicable FINANCIAL CONSIDERATIONS: San Juan Capistrano is a Structural Fire Fund City. Currently, costs to provide fire services are paid directly by property owners as part of their property taxes. The City incurs no direct costs to provide fire protection services. No additional costs to provide fire services in San Juan Capistrano are anticipated. The Agreement does, however, provide for a mechanism to adjust costs for any member agency after a three year period. Any such adjustment would not exceed 2 percent of the member's immediately prior annual contribution. NOTIFICATION: Orange County Fire Department Apartment Association of Orange County, Garden Grove, CA L Agenda Item ALTERNATE ACTIONS: s 0 1. By Resolution, approve the City of San Juan Capistrano's Participation in the Joint Powers Agreement Creating the Orange County Fire Authority and Appointing a Representative and Alternate to the Board of Directors. 2. Take no action to approve the agreement, and continue to rely on the County of Orange for the provision of fire prevention and suppression services. 3. Request additional information from staff. By Resolution, approve the City of San Juan Capistrano's Participation in the Joint Powers Agreement Creating the Orange County Fire Authority and Appointing a Representative and Alternate to the Board of Directors. US:JMM:jm Attachments: Draft Resolution Approving Participation Revised Joint Powers Agreement Approved by the County of Orange (Above Attachments in Council Packets Only. Copy available for public review in the Office of the City Clerk) 0 0 RESOLUTION NO. 95-2-1-1 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN JUAN CAPISTRANO, CALIFORNIA. APPROVING THE JOINT POWERS AGREEMENT CREATING THE ORANGE COUNTY FIRE AUTHORITY AND DESIGNATING AND APPOINTING A REPRESENTATIVE AND AN ALTERNATE TO THE BOARD OF DIRECTORS WHEREAS, the City Council of the City of San Juan Capistrano has an agreement for fire protection and suppression services with the Orange County Fire Department; and, WHEREAS, the City Council, by way of Resolution No. 94-8-2-5, approved joining the proposed joint powers authority made of the County and the cities receiving fire protection from the County; and, WHEREAS, after over three years of negotiations, on December 6, 1994, the County Board of Supervisors approved the Joint Powers Agreement creating the Orange County Fire Authority, attached and incorporated as Exhibit A, subject to the execution of that Agreement by all member cities, including the City of San Juan Capistrano; and, WHEREAS, the cities have determined to proceed with the Authority as the Orange County bankruptcy filing makes it even more important to protect restricted fire assets and to have control over costs. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of San Juan Capistrano as follows: 1. The City Council of the City of San Juan Capistrano approves the Joint Powers Agreement creating the Orange County Fire Authority, attached and incorporated as Exhibit A. 2. The City Council appoints Council Member Wyatt Hart as its representative on the Authority, with Council Member David Swerdlin as an Alternate. PASSED, APPROVED, February 1995. ATTEST: AND ADOPTED this 1st CAROLYN NASH, MAYOR -I- day of 0 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF SAN JUAN CAPISTRANO ) 9 I, CHERYL JOHNSON, City Clerk of the City of San Juan Capistrano, California, DO HEREBY CERTIFY that the foregoing is a true and correct copy of Resolution No. 95-2-1-1 adopted by the City Council of the City of San Juan Capistrano, California, at a special meeting thereof held on the 1st day of February 1995, by the following vote: AYES: Council Members Jones, Hart, Campbell, Swerdlin and Mayor Nash NOES: None ABSTAIN: None ABSENT: None (SEAL) CHERYL JO SO , CITY CLERK -2-