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HomeMy WebLinkAboutStaff Report 11710 City of Palo Alto (ID # 11710) Finance Committee Staff Report Report Type: Action Items Meeting Date: 12/15/2020 City of Palo Alto Page 1 Summary Title: Review a Fire Department Ambulance Subscription Fee Program & Budget Amendment Title: Review and Recommend to the City Council a Fire Department Ambulance Subscription Program: 1) Adopt Ordinance to Establish Program and Fees, and 2) Approval of a Budget Amendment in the General Fund From: City Manager Lead Department: Fire Recommendation To Establish a Fire Department Ambulance Subscription Program, Staff recommends that the Finance Committee: 1. Review and provide direction on an annual Program fee amount from the proposed rate ranges for Residential and Business Participants; 2. Recommend that City Council approve the Program and adopt the Finance Committee’s recommended Program fee level(s); 3. Recommend that City Council adopt an Ordinance amending the Fiscal Year 2021 Municipal Fee Schedule (Attachment A); and, 4. Recommend that City Council make budget amendments as necessary to begin and maintain this program. Executive Summary As part of the Fire Department budget for Fiscal Year 2021, both a new Ambulance Subscription Program and First Responder Fee were proposed for residents and businesses. These programs were programed to achieve $1.86 million in net revenues combined in the FY 2021 Adopted Budget. This report specifically addresses establishing the new ambulance subscription program. This program will be voluntary and proposes to waive the insurance co-pay participants would otherwise be charged when transported to the hospital by ambulance. It is recommended that the program be established with a flat annual participation fee that would be administered by adding it to the household or business utility bill. Ultimately, staff is seeking the Finance Committee’s review of the specific attributes of this program most notably a discussion and recommendation on the proposed fee levels, for recommendation to the City Council for formal adoption. City of Palo Alto Page 2 Background The Palo Alto Fire Department (PAFD) has been operating an ambulance service since 1974. PAFD is the only fire agency in Santa Clara County that provides an ambulance service, which responds to approximately 3,500 transports each year. Emergency medical calls for service make up approximately two-thirds of all calls for service. For at least 5 consecutive years, PAFD has exceeded the response standard for Emergency Medical Service (EMS) response for a unit to arrive on-scene in 8 minutes or less 90% of the time, and a paramedic on-scene in 12 minutes or less 99% percent of the time. The ambulance transport service has been recognized as one of the City’s highest-rated services. In recent operational model changes, the City now cross staffs apparatus at the majority of stations; this means that crews either take an engine or an ambulance depending on the call types and need. On June 22, 2020, City Council adopted a budget that included an estimated $1.86 million in revenue from creating a new Ambulance Subscription Program and First Responder Fee. The First Responder Fee would be charged for all EMS calls regardless of transport and would cover cost for initial response for first due engine. This fee would be assessed on insurance companies. The Ambulance Subscription Program is an optional fee for residents and businesses to secure co-pay free ambulance transport. This report focuses on the ambulance subscription program (FY 2021 Adopted Budget estimate of $1.48 million), provides the background, details and options for the program to be recommended for adoption by the Finance Committee for City Council consideration. Staff expects to return separately for the First Responder Fee. Discussion An Ambulance Subscription Program proposed by the Fire Department is modeled after similar programs offered by other Fire Departments in Califonia that also provide an ambulance transport service. The voluntary program covers the co-pay for ambulance transports to the residents or employees of participants. The first known Ambulance Subscription Program was established in 1985 in Anaheim, California, and has been very successful. Subscription Program Landscape in California The PAFD identified five other Fire Departments in California that offer an Ambulance Subscription Program. All cities offer the program to residents and some offer it to businesses. Each City has a flat annual fee for participation that was determined when the program started, and they have not been adjusted since the programs started: Table 1. California City Rate Comparison City Year Implemented Residential Fee Business Fee Anaheim 1985 $43 $43 Huntington Beach 1990 $60 Only residential Newport Beach 1993 $60 $60 Orange 1995 $48 $48 Corona 2004 $60 $60 for every 5 employees City of Palo Alto Page 3 The PAFD reached out to informationally interview all cities to discuss the performance and details of their programs. The cities that adopted the program in the 1980s and 1990s have a flat fee for both residential and businesses, and the one city, Corona, CA, which established its program in 2004 has a structure for businesses based on employee headcount. All cities reported participation rates of 25-30% of all residents and/or businesses in the initial year of implementation and slowly declining participation rates over decades as residents and businesses turn over. Some cities reported running marketing campaigns every 2-3 years to boost enrollment or even adding an automatic voluntary payment on the utility bill once per month to encourage enrollment. Costs to Patients and Program Design The PAFD has established ambulance transport fees, and contracts with a third-party vendor to collect insurance fees. Often patients are responsible for a co-pay when transported to the hospital, depending on their insurance coverage. In Fiscal Year 2019 the average deductible/co- pay required for a single trip to the hospital for patients with commercial insurance was $650, with most patients paying $385 out-of-pocket for a transport. For residents or businesses that elect to enroll in the Ambulance Subscription Program, a flat annual fee will be assessed, and eligible participants will have the co-pay amount waived when transported by PAFD to the hospital. As this program does have the potential for the erosion of current co-payments for transport services, staff will monitor the revenues estimates. However, with the expected participation levels, staff estimates the impact to be no greater than $15,000 to $25,000 of the approximately $3 million in transport fees collected annually. During the implementation of this new subscriptions program, staff will track how many waivers are granted to monitor the real impacts. Participation in the program will be limited to residents and businesses within the City of Palo Alto, and would apply only to EMS responses within the Palo Alto city limits. - For residential participants, all household members who are permanent residents of the subscribing household will be covered. The program will include umbrella coverage for visitors who need emergency medical transport from a resident that is a program participant. - For business participants, the Program will cover all employees at the business address or those elsewhere in the City of Palo Alto during the course of their duties. A business subscription will not cover customers or other visitors to the premises of the business. Program Administration and Fee Collection Participants who elect to enroll in the Program will be able to do so through various methods including online, email or phone. Current administrative staff within the PAFD will be assigned to assist residents and businesses with enrolling and answering any questions they may have about the program, and the Department will use current technology to create a database of City of Palo Alto Page 4 participants. Fees will be collected in partnership with the Utilities Department, and Fire Administrative staff will collaborate with Utilities Customer Support to coordinate enrollment and billing. From a customer perspective, the enrollment will be seamless after submitting their information, and the pro-rated monthly charge will show up on their next utility bill. Participants will be able to elect to unenroll at any time for any reason, and their subscription benefits will be terminated upon request. All cities interviewed reported the success of enrolling participants in the program resulted from a strong marketing and outreach campaign over the course of the first year. The PAFD will collaborate with the City Manager’s Office to launch a community education and outreach campaign to inform the residents and businesses about the new program benefits, and provide clear communication on the eligibility and enrollment. Fee Setting and Revenue Estimates The FY 2021 Adopted Budget estimated $1.48 million of net revenue generated from residential and business participants. The Fire Department is seeking direction from the Finance Committee on the amount to set as the annual Residential and Business Fees. The cities identified with similar programs in California set fees upon the program’s onset and have not increased them. With most of those fees set more than thirty years ago, the Fire Department is proposing a higher rate than compared to other city programs based on the current cost of services as well as the financial benefit of the program should the co-payment paid by the participant be waived. Residential Participants With the average residence in Palo Alto having 3 people, the Department proposes modeling other programs by offering the program with a flat annual fee for any and all permanent residents living in a household located within the City of Palo Alto. There are approximately 25,000 residential Utility customers in Palo Alto that could elect to participate in the program. The Fire Department is proposing the following residential rate options. Revenue estimates are calculated using an expected participation rate of 27.5%, this is right in the middle of the 25-30% participation rates reported by the five cities interviewed. Table 2. Residential Rate Options Option A Option B Option C Annual Fee $80 $100 $120 Utility Customers 25,000 25,000 25,000 Expected Participation Rate 27.5% 27.5% 27.5% Estimated Annual Revenue $550,000 $687,500 $825,000 City of Palo Alto Page 5 Business Participants In March of 2020 the City of Palo Alto considered a Local Tax Measure (Staff Report #11161) which provided data on business population from the California EDD. That data showed an estimated 3,141 businesses with employee counts ranging widely from under 10 to 1,000 or more. It should be noted that these estimates and data reflect information prior to the current shelter in place environment and the long-term impacts of business models as a result of the current public health emergency. A modified program approach similar to that of Corona, CA, that sets the Business rate based on employee headcount is recommended. The Palo Alto Ambulance Subscription Program would establish 5 tiers of rates for businesses based on employee headcount. Table 3. Business Rate Options Tier Employee Headcount Number of Businesses Option A Option B Option C 1 0-10 2,300 $200 $250 $300 2 11-50 621 $1,000 $1,250 $1,500 3 51-100 121 $2,000 $2,500 $3,000 4 101-250 62 $5,000 $6,250 $7,500 5 251-1000 37 $10,000 $12,500 $15,000 Expected Participation Rate 27.5% 27.5% 27.5% Total Estimated Revenue $550,825 $688,531 $826,238 Resource Impact The Department is requesting input and a recommendation from the Finance Committee on which rate options to set as the proposed fees for the Ambulance Subscription Program for Council consideration. The selection of which option may impact the Department’s ability to meet the $1.48 Million annual revenue target for this program. Participation rate is still an unknown factor in the generation of revenue from this Program. However, it is more likely that the revenue target will be reached with Option B or C. Assuming an estimated participation rate of 27.5%, the following rate options would generate the following revenue amounts annually: Table 4. Annual Revenue Estimates Residential Fees Business Fees Total Program Revenues Option A $550,000 $550,825 $1,100,825 Option B $687,500 $688,531 $1,376,031 Option C $825,000 $826,238 $1,651,238 There are costs to implement this program unanticipated at the time of budget development. In collaboration with the Utilities Department, there will be staff resources required to support the billing activities of the Program. Utilities estimates a total of 30 hours each month will be City of Palo Alto Page 6 required for customer support, amounting to an annual charge of $60,000 to support customer inquiries, payment posting, credit collection, and accounting. The fee for Utilities support will be evaluated annually and charged in arrears based on the actual level of effort. The Fire Department interdepartmental services budget will be increased by $60,000 annually to cover the cost of supporting this program. The Fire Department will work collaboratively to conduct a strong marketing and outreach campaign throughout the first year. This will include no-cost efforts, such as press releases, and for-cost efforts including print and digital marketing. Additional funding of $25,000 one-time would be necessary to cover the campaign’s costs. Any budget amendments for either costs or lower than expected revenues would require either use of the City Council COVID -19 reserve or the Budget Stabilization Reserve (BSR). Stakeholder Engagement Residents and businesses have been engaged in the budget adoption process; however, targeted outreach and information marketing are required to provide clear communication and information to residents and businesses about the program benefits and enrollment. The above-recommended approach includes a robust initial outreach campaign. Environmental Review The Finance Committee’s recommendation that Council adopt an Ambulance Subscription Program is not a project requiring environmental review for the purpose of the California Environmental Quality Act, because the Program will not result in a direct or reasonably foreseeable indirect physical change in the environment (Pub. Res. Code sec. 21065). The Finance Committee’s recommendation of an Ambulance Subscription Program fee rate and the Committee’s recommendation to Council for approval of budget adjustments associated with Program approval do not constitute a project requiring environmental review for the purpose of the California Environmental Quality Act, as the creation of governing funding mechanisms and fiscal activities that do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment (14 Cal. Code Regs. sec. 15478(b)(4)). Attachments: • Attachment A: Draft Ambulance Fee Ordinance 30431 AB 1 *Yet to be Passed* Ordinance No. ___ Ordinance of the Council of the City of Palo Alto Amending the Fiscal Year 2021 Municipal Fee Schedule to Add Fire Department Ambulance Subscription Program Fees The Council of the City of Palo Alto ORDAINS as follows: SECTION 1. Findings and Declarations. The City Council finds and declares as follows: A. The City of Palo Alto Fire Department has provided an ambulance transport service since 1974. B. The City plans to establish a new Ambulance Subscription Program (Program) allowing eligible participants to pay an annual fee to have the insurance co-pay waived for ambulance transports occurring within the City. C. All residences and businesses within the City of Palo Alto are eligible for voluntary participation in the program. D. A Residential Program subscription will cover all permanent residents at the subscribing household address. E. A Business Program subscription will cover all employees at the subscribing business address or those who are elsewhere in the City of Palo Alto during the course of their duties. A business subscription will not cover customers or other visitors to the premises of the business, or employees while outside the Palo Alto city limits. The City will fund the Program through a flat annual fee for Residential and Business Program participants. SECTION 2. The Council of the City of Palo Alto approves and adopts new fees for an Ambulance Subscription Program available to residential and business participants and adopts the amendments to the Fiscal Year 2021 Municipal Fee Schedule as set forth in Exhibit “A” and incorporated here by reference. SECTION 3. The fees in this Ordinance are for voluntary enrollment in the Program. Pursuant to Art. XIII C, Section 1(e) of the California Constitution, such fees are not a tax. // // 30431 AB 2 // SECTION 4. The Council finds that this project is exempt from the provisions of the California Environmental Quality Act (“CEQA”), pursuant to Section 20165 of the Public Resources Code, because the Program will not result in a direct or reasonably foreseeable indirect physical change in the environment. SECTION 5. This ordinance shall be effective thirty-one days after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Deputy City Attorney City Manager ____________________________ Fire Chief ____________________________ Director of Administrative Services Exhibit A 30431 AB 3 Fiscal Year 2021 Municipal Fee Schedule Chapter VIII - Fire Fees New Fee: Ambulance Subscription Program Residential Rate Annual Fee per Household TBD Business Rate Rate Tier Employee Headcount Annual Fee 1 0-10 TBD 2 11-50 TBD 3 51-100 TBD 4 101-250 TBD 5 251-1000 TBD