HomeMy WebLinkAboutStaff Report 13499
City of Palo Alto (ID # 13499)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 11/2/2021
City of Palo Alto Page 1
Title: Receive and Discuss Report on Public Safety Long Term Financial Trends
From: City Manager
Lead Department: Administrative Services
Recommendation
Discuss the Finance Committee referral to review Public Safety long-term financial trends,
beginning with the Fire Department.
Executive Summary
This report is intended to facilitate a more detailed discussion of the impact of personnel-
related costs rising faster than revenues and the resulting service adjustments, including
availability of resources, beginning with the Fire Department as an example. Specifically, the
Council referred to the staff a discussion to ‘explore changing delivery of services from a
dominant fire-oriented model to a dominant medical-oriented model,’ which staff completed in
February 2021. As a result of that discussion, the Committee initiated this new referral for
additional research and review. This report includes a summary of services provided, significant
service delivery and staffing changes, and the primary revenue and e xpense drivers that impact
cost recovery. A financial summary is provided in Attachment A that includes ten years of
historical actuals and a five-year projection, and a staffing summary is included in Attachment
B.
Overall, the baseline costs for major expense categories such as salary and benefits have
steadily increased due to changes in employment terms, increasing benefit costs, and proactive
measures to contribute to pension liabilities above the required payment amounts. Although
the department generates revenues through an agreement with Stanford University for fire
services, medical transport fees, and state reimbursements, historical trends suggest that these
sources are not keeping pace with escalating expenses. The Department is in the process of
implementing new ongoing revenue sources and evaluating service delivery model updates;
however, if trends persist it may be necessary to balance net cost increases through additional
General Fund support, increasing revenues, managing expenses, or a co mbination of all these
options. Although this report focuses on revenues and expenses in the Fire Department, similar
trends persist across the organization. There is no one solution to address these issues, and
staff continues to work with the Council on a number of different avenues in the General Fund
to increase revenues and manage expenses.
1
Packet Pg. 3
City of Palo Alto Page 2
Background
At the February 2, 2021 meeting, the Finance Committee approved a staff referral to return to
the Finance Committee to review Public Safety long-term financial trends, beginning with the
Fire Department. As part of the discussion, the Finance Committee acknowledged that net costs
in the Public Safety departments are increasing at a faster rate than the General Fund and that
the need for additional General Fund support has been largely curbed by reducing staffing
levels. Further, the Finance Committee identified the need for the City to develop a plan to
maintain and sustain service delivery, understand costs, and reach a steady-state of financial
sustainability.
PAFD provides various services to the community, including emergency medical services (EMS),
fire suppression, technical rescue, hazardous materials mitigation, fire investigation, and public
fire and life safety education, among others. Unlike most other municipal fire departments,
PAFD provides paramedic transport services and generates associated revenue. Through a fire
protection agreement with Stanford University, the Department provides services to the
University and receives payment for these services per the contract terms. PAFD also
participates in mutual aid agreements with neighboring municipalities and is a member of the
California master mutual aid agreement. As discussed in the most recent semi-annual
performance report in April 2021 (CMR 12065), the Department eliminated eight sworn
firefighter positions through attrition and brown-out of Fire Station 2 – College Terrace as part
of the City’s efforts to adjust to the financial impacts of the pandemic. During the first half of FY
2021 (July 2020 through December 2020), the Department responded to the following:
− 3,678 total calls for service
− 2,120 rescue and EMS incidents (58% of all calls for service)
− 1,104 good intent1 and false alarm/false calls (30% of all calls for service)
− 277 service calls (8% of all calls for service)
− 105 hazardous condition, no fire calls
− 72 fire calls
During this period, a total of 1,502 paramedic transports were provided, with 71% of EMS calls
resulting in hospital transport. Additionally, the Department responded to 57 calls for mutual
and auto aid at the municipal, county, and state levels.
Over the past ten years, several significant changes to services have occurred, such as the
renegotiation of the Stanford fire services agreement and subsequent staff right-sizing, closure
of the fire station at the Stanford Linear Accelerator Center (SLAC), the transition of Fire
Prevention services to the Planning and Development Services Department, the creation of the
Office of Emergency Services as a stand-alone department, and staffing reductions following
the pandemic. Since 2012, staffing levels have decreased from 121.74 full-time equivalents
1 A good intent call is made in good faith that a true threat of fire, gas, or other emergency hazard requires
response and are found to be nonemergent after investigation of the situation.
1
Packet Pg. 4
City of Palo Alto Page 3
(FTE) to 90.25 FTE. Other notable changes, include a new partnership with neighboring
jurisdictions to staff Fire Station 8 in the foothills and the recently awarded SAFER grant for
staffing resources.
Discussion
The subsequent sections of this report include a more detailed discussion of the individual
revenue and expense categories and the strategic actions the City is taking in the near and long -
term to address fiscal sustainability. Fiscal sustainability is a value to which the City of Palo Alto
has demonstrated continued diligent dedication . In addition to ensuring balanced annual
budgets, the City has also implemented proactive measures to anticipate and position the City
for changes in financial assets and liabilities. For example, the City increased its hotel tax rate
to provide a stable ongoing source of funding for needed infrastructure investments. Most
notably, the City has been a leader in proactively addressing its largest General Fund cost as a
service-driven organization: the cost of employee salaries and benefits. This is evident through
changes in compensation agreements, such as employee pick-up of a portion of the employer’s
PERS contribution and proactively addressing long term liabilities such as pensions and other
post-employment benefits (OPEB) through establishment of a Section 115 Trust.
Overall, based on staff’s review of the variables impacting the long term financial sustainability
of the organization, continued diligence in managing both the near term and long term financial
projects through a myriad of strategies will be necessary to continue to address the balance of
resources, revenues, and services.
General Fund Status
Since the onset of the COVID-19 pandemic in March 2020, the City has experienced significant
financial constraints resulting from state and county health orders and declines in major
revenue categories such as sales and hotel tax. Overall, revenues in the General Fund have
reduced from adopted levels of $232.1 million in FY 2020 to $206.5 million in FY 2022, a $25.6
million or 12.4% reduction. As part of the FY 2022 Adopted Budget, nearly $20 million in
services and staffing reductions were made on an ongoing basis to balance expenses with lower
revenue estimates. Other strategies to balance the budget included the use of one-time federal
funding relief, use of reserves, a zero percent general wage assumption for employee groups
out of contract (subject to negotiations), and reduced investments in Capital infrastructure. The
City continues to prioritize services with the greatest community impact, maintain essential
services, and manage risks associated with a shrinking organization. While these actions
address the near-term financial constraints, they are not sustainable in the long term. As such,
the City Council engaged in Community and Economic Recovery (CER) workplan in Fall 2020
(webpage) and identified economic recovery as the top priority for 2021 (At places memo). This
workplan includes revenue generation ideas to explore a potential ballot measure for the 2022
election and adds economic development staff that will connect with the business community
to advise on shifts caused by the pandemic and strategies to bolster revenues. Recognizing that
the pace and level of recovery is still uncertain, the City is exploring other options to evaluate
and modernize service delivery, diversifying the City’s revenue mix, increasing revenues, and
1
Packet Pg. 5
City of Palo Alto Page 4
managing expenses across the organization.
Fire Department Fiscal Sustainability
The Palo Alto Fire Department prides itself on its innovative practices. It is one of the few
departments to operate with only three personnel to a Fire Engine or Truck; run an all -
Advanced Life Support operation; and cross-staff engines with ambulances. It recently became
one of the rare fire departments to operate a two-person squad unit. It was also one of the first
departments to establish an ambulance service in the 1970s, and the only fire department in
the County operating its own ambulance service. Over the last decade the Department has
reduced the number of units and personnel that are staffed 24 hours each day. This has
enabled the Department to be a leader in innovation, but has also impacted response times,
workload and training operations.
From a financial perspective, the Department’s net cost to the General Fund has ranged from a
low of 7.5 percent to a high of 12.8 percent over the past ten years. This is low for a city fire
department. For comparison to other local jurisdictions, the Redwood City Fire Department
accounts for 26 percent of its city’s general fund, Mountain View 22 percent, and Santa Clara 21
percent. In comparison to other larger Palo Alto departments, Community Services is a net cost
to the General Fund of 8.3 percent, and th e Police Department is 18.2 percent for Fiscal Year
2022. Contributing to this increase, the baseline costs for major expense categories such as
salary and benefits have steadily increased due to changes in employment terms, increasing
benefit costs, and proactive measures to contribute to liabilities above the required payment
amounts. Although the department generates revenues through an agreement with Stanford,
medical transport fees, and state reimbursements, historical trends suggest that these are not
keeping pace with escalating expenses.
As previously discussed, the Department is continuing the process to establish an ambulance
subscription fee in FY 2022 to generate additional ongoing revenue. Updates to service delivery
are implemented where possible. In FY 2022, the Department updated its fire alarm response
policy in order to mitigate emergency response service impacts and ensure that units are
readily available for confirmed emergencies. Further service delivery model changes will
continue to be evaluated to ensure the Department is providing the highest quality services
with the resources available. Additionally, the City will engage in a collective bargaining process
with all safety groups to negotiate new agreements and terms for wages, hours , and other
terms and conditions of employment upon expiration of the current agreements on June 30,
2022. Over the next five years, staff expects that pension expense will continue to increase,
peaking in FY 2025 and tapering thereafter. However, this trajectory may change due to
favorable investment returns in the most recent valuation period and ALM and Experience
Studies that CalPERS will complete in November 2021. Ultimately, these studies will inform the
discount rate and other economic and demographic assumptions for future pension costs.
Longer-term, the City continues to take measures to proactively contribute above and beyond
the required payments to manage liabilities such as pensions and OPEB.
1
Packet Pg. 6
City of Palo Alto Page 5
Ultimately, if trends persist it may be necessary to balance net cost increases through
additional General Fund support, increasing revenues, managing expenses, or a combination of
all these options. Although this report focuses on revenues and expenses in the Fire
Department, it should be noted that the tr ends are not unique to the Fire Department. There is
not one solution to address these issues, and staff continues to work with the Council on a
number of different avenues in the General Fund to increase revenues (ballot measures, new
and updated cost recovery fees), and manage expenses (pension funding policy, service
delivery prioritization and changes, public private partnerships).
Fire Department: Revenues
Stanford Fire Services
The City has provided fire protection services to Stanford University s ince 1976, when the
respective fire departments merged. The agreement was subsequently amended four times, in
1981, 2006, 2016, and 2017. On July 1, 2018, a new agreement was developed as terms we re
renegotiated to right-size revenue with current service levels and provide a new cost allocation
methodology as a baseline for agreement costs. The current fire services agreement extends
through June 30, 2023, with renewal through 2028 unless otherwise terminated. As part of this
agreement, a new staffing deployment model for suppression and medical services was
approved by the City Council in October 2017 and deployed in January 2018 (CMR 8530), which
reduced the level of service and staff in order to reduce expenses , offseting a reduction in
revenues for fire services from Stanford. Moving forward, under this current agreement, this
forecast assumes increases in revenue from Stanford in alignment with the average growth of
the expenses in the Fire Department. These services generate approximately 61% of overall
department revenues and recover staffing and administrative costs to provide service to the
campus. Revenues have remained relatively consistent at $6.2 million during the course of the
current agreement and include a $1.0 million credit to Stanford for apparatus overcharges
(allocated over four years). FY 2022 is the last year this credit will be applied.
Paramedic Transport Services
Unlike most traditional fire departments, the PAFD provides paramedic transport services to
individuals within the city limits. The Department has the abilit y to deploy up to four
ambulances at any given time to provide medical personnel and supplies to sick or injured
persons and transport them to hospital emergency departments. During the period of FY 2012
to FY 2022, this revenue source has gradually increased from 20% to 34% of overall department
revenues. Annual revenue generated from this service is approximately $3.4 million and
includes approximately $150,000 in federal and state funding through Ground Emergency
Medical Transportation (GEMT) and Intergovernmental Transfer (IGT) programs.
Ambulance Subscription Program
In September 2021 the Finance Committee approved a recommendation to implement an
optional ambulance subscription program for residents and businesses (CMR 13469). The
voluntary program consists of a participation fee that would waive the insurance co-pay
1
Packet Pg. 7
City of Palo Alto Page 6
participants would otherwise be charged when transported to a hospital by ambulance. The flat
monthly participation fee will be collected through household or business utility bills and is
estimated to generate $1.2 million annually. The program has the potential to reduce revenue
generated by the City’s paramedic transportation service fees by an estimated annual amount
of no greater than $15,000 to $25,000. Other expenses related to marketing and program
administration expenses may further offset the revenue generated.
State of California
PAFD participates in the County's North Santa Clara County Strike Team - XSC 2301A, as part of
a mutual aid group that provides available resources for requests from neighboring counties
within the California Office of Emergency Services (CAL OES) region for major incidents on a
short-term basis and requests by CAL OES for major incidents under the California Fire Service
and Rescue Mutual Aid Plan. When responding to requests, a fire engine and associated staff
are provided. As a result, the State provides reimbursement revenue for overtime costs and
administrative overhead. This revenue source varies from year-to-year and is based on the
number and severity of incidents. Requests are anticipated to increase in the coming years as
the effects of climate change impact California fire seasons.
Plan Check and Inspection Fees
Revenues in this category are attributed to plan checks, reviews, permitting, and field
inspections completed by the Fire Prevention Division. In FY 2015, this division was reallocated
from the Fire Department to the newly created Development Services Department to centralize
development partners across the City and work more comprehensively as a “one -stop shop”
service model. This cost-neutral action reallocated nearly $2.0 million in staff, non-salary
expenses, and corresponding revenues. In FY 2020, the Development Services Department,
including the Fire Prevention team, was merged with the Planning and Community
Environment Department to create the Planning and Development Services Department. Fire
prevention services remain a cost-neutral service in the General Fund.
Other Revenue
This category includes revenue from miscellaneous fees and makes up the minority of overall
revenues, an example of which is the five new fees related to false fire alarm registrations and
false alarms were added in the FY 2022 Adopted Budget. The new fees replaced a fee range and
increased cost recovery levels by aligning fee amounts with what is currently billed by
equivalent Police Department fees. False alarm fees will apply to repeat offenders (typically
construction sites) as fees will be assessed and collected through the Department’s external
vendor. These new fees are expected to impact the number of false alarm response calls and
allow for resources to be available for more urgent types of calls.
Fire Department: Salary & Benefits and Staffing
Salaries
The two primary labor groups within the Fire Department are the International Association of
1
Packet Pg. 8
City of Palo Alto Page 7
Firefighters (IAFF) and the Fire Chiefs’ Association (FCA). Detailed below, each group has had
three Memorandum of Agreements (MOA) since FY 2012, consisting of negotiation terms
including salary increases and total compensation market studies. As part of citywide strategies
to offset major tax revenues losses resulting from the COVID-19 pandemic, side letters were
signed with IAFF and FCA in 2020 to extend the terms of the current agreements through June
2022 and defer scheduled wage and step increases by one year, from July 2020 to July 2021.
The savings generated from this wage deferral were used to offset an attrition period that
allowed the Fire Department to delay the separation of filled positions identified to be held
vacant in FY 2021 (position freezes) and eliminated in FY 2022.
The City Council adopted new IAFF MOAs in 2011 (CMR 2191), 2016 (CMR 6789), and 2018
(CMR 9583). Associated salary increases occurred in June 2014 (2% cost of living increase), April
2016 (2.5% salary increase and 5% market adjustment), June 2016 (2.5% salary increase and 8%
market adjustment), June 2017 (2.5% salary increase), October 2018 (3% salary increase and
2.5% market increase), July 2019 (3% salary increase), and July 2021 (3% salary increase; side
letter). Additionally, a total compensation market study was completed in the summer of 2015
that evaluated the total package of salary, other cash benefits, and insurance for employees in
comparison to similar positions in sixteen comparable Bay Area agencies. Employees below the
median received additional market increases of 5% following the June 2016 salary increases.
The City Council adopted new FCA MOAs in 2012 (CMR 2599), 2017 (CMR 7840), and 2018
(CMR 9583). Associated salary increases occurred in June 2016 (6.22% salary increase), April
2017 (6.28% salary increase), July 2017 (3% salary increase), October 2018 (3% salary increase
and 2.5% market increase), July 2019 (3% salary increase), and July 2021 (3% salary increase;
side letter). Similarly, a total compensation study was completed in the fall of 2017 that
provided up to 2.5% market adjustment in December 2017 to place the benchmark to the
median of the market for those employees below the median.
During FY 2022, the City will engage in a collective bargaining process with all safety groups to
negotiate new agreements and terms for wages, hours, and other terms and conditions of
employment upon expiration of the current agreements on June 30, 2022.
Overtime
Overtime costs are primarily driven by vacancies in order to keep units staffed at minimum
levels and in service. During instances when positions are vacant or staff leave is utilized (e.g.
sick, vacation, disability, light duty, workers’ compensation, new hire academies) back-fill
positions are utilized. When back-fill positions are unavailable, overtime pay is provided for
other staff to fill vacancies. Additional overtime costs are incurred when the Strike Team is
deployed, though these costs are reimbursed by the State. In general, overtime cost s vary from
year to year based on the number of vacancies in the department.
Pensions
The City of Palo Alto provides a defined pension benefit to its employees through the State of
California Pension Retirement System (CalPERS), which manages and administ ers a trust for
1
Packet Pg. 9
City of Palo Alto Page 8
safety and miscellaneous employees. With the passage of the California Public Employees’
Pension Reform Act (PEPRA), the City has three retirement benefit tiers for miscellaneous and
safety plans.
Annually, CalPERS provides actuarial reports detailing the latest status of the City of Palo Alto
pension trust plans. These actuarial reports calculate the Actuarial Determined Contribution
(ADC), which reflects the blended or combined cost of both the Normal Cost (NC) and
Unfunded Accrued Liability (UAL) used in the annual billing of employer contributions. The most
recent report was brought forward in September 2021 for the valuation period ending June 30,
2020 (CMR 13440).
The following graph provides a summary of past and projected employer payments for the
safety group, expressed as a percentage of payroll:
Total ADC has increased in the safety group from 30.1% in FY 2012 to 69.6% in FY 2022. These
costs are anticipated to peak in FY 2025 at 74.0% and taper over the horizon of the
amortization period. It is important to note that calculations for annual employer contributions
are based on a set of actuarial assumptions for demographic (e.g., mortality, retirement,
termination, and disability rates) and economic factors (e.g., future investment earnings,
inflations, salary growth). These assumptions reflect CalPERS’s best estimate for fut ure
experience and vary from one year to the next due to assumption or method changes, changes
in plan provisions, and experience that is different than anticipated.
Since 2012, notable assumption changes include:
- Lowering the discount rate: The discount rate was reduced from 7.75 to 7.50% in FY 2012
and 7.50 to 7.00% phased in over three years in FY 2018, FY 2019, and FY 2020. The
liabilities generated from the 7.00% phase-in are subject to a five-year ramp-up period (20%
1
Packet Pg. 10
City of Palo Alto Page 9
cost increase each year), peaking in FY 2025, and remaining steady over the amortization
period.
- Changing the amortization period: Beginning with the June 30, 2019 valuation (FY 2022), the
amortization period was changed from 30 to 20 years for new bases, shortening the period
in which actuarial gains and losses are amortized.
- CalPERS investment returns that differ from assumed rates of returns:
Looking forward, CalPERS is anticipated to complete an Asset Liability Management (ALM) and
Experience Study in November 2021 that will consider changes to the discount rate and other
economic and demographic assumptions. Several outcomes are anticipated but not limited to:
− Preliminary investment return of 21.3% for the period ending June 30, 2020
− Reduction in the rate of return from 7.00 to 6 .80% as triggered by the CalPERS Risk
Mitigation Policy; this may be adjusted further in final ALM decisions.
− Budget impact beginning in FY 2024
The City has taken several proactive steps to address pension obligations, including negotiating
terms with labor groups to pick up a portion of the employer share of pension costs,
establishing an irrevocable section 115 Pension Trust, and adopting a Pension Funding Policy.
Over the last several years there has been a consistent movement for employees to contribut e
more to the employer side of pensions. Employees in PAFD safety groups have increased
contributions to the employer share of normal cost from 1% in 2015 to 4% in 2020.
Additionally, the City established a Pension Trust Fund in 2017 to begin proactively s aving for
growing pension costs. In total, the City has made $37.3 million in principal contributions to the
pension trust since its inception. In 2019, the City Council identified “Fiscal Sustainability” as
one of four priorities, including initiatives to develop a policy that addresses unfunded pension
liabilities. Subsequent discussions with the Finance Committee and City Council ultimately
resulted in the adoption of a formalized Pension Funding Policy in 2020 (CMR 11722). As part of
the policy goals, the City seeks to reach a 90 percent funded status by FY 2036. This policy
outlines a practice to budget pension normal costs at a more conservative discount rate than
1
Packet Pg. 11
City of Palo Alto Page 10
CalPERS and contributes savings into the pension trust as part of the regular budget process.
Additionally, one-time contributions continue to be made to this fund when the Budget
Stabilization Reserve exceeds target levels. Several other funding mechanisms considered in the
development of this policy included the issuance of Pension Obligation Bonds (POBs), a “fresh
start” to re-amortize pension obligations over a shorter time period, and contributions to the
pension trust using a more conservative discount rate for UAL. This policy is subject to
modification at City Council discretion and requires that staff report the status of the funding
goal every three years. Staff anticipates return ing in Fall 2022 with this analysis. In FY 2022,
supplemental pension contributions are $3.1 million in the General Fund ($5.1 million
Citywide), including $0.8 million in the Fire Department.
Other Post Employment Benefits (OPEB)/Retiree Health
The City of Palo Alto offers its employees and retirees a Retiree Healthcare benefit plan which is
managed and administered by CalPERS. The City uses actuarial studies to inform the
development of annual operating budgets, the most recent report was completed in Ma y 2020
(CMR 11284). Beginning in FY 2021, the City has taken proactive steps to fund retiree health
costs at a more conservative discount rate than required and uses those savings as an
additional payment to the California Employers’ Retiree Benefit Trust (CERBT) Fund. In FY 2022,
this additional contribution is approximately $1.4 million in the General Fund ($2.2 million
Citywide), including $0.4 million in the Fire Department.
Workers’ Compensation
The City is self-insured for Workers’ Compensation and provides wage and medical benefits for
employees who sustain an injury or develop an occupational illness within the course and scope
of employment. This program uses an 85 percent confidence level to determine funding levels,
calculated by an outside actuarial consultant, and assesses costs to departments based on their
respective utilization. These costs fluctuate depending on the number and dollar amount of
claims in a given period. In the past few years, the Fire Department has experienced increasing
costs due to several factors such as increases in strains (back, knees, shoulders), which have the
highest claim frequency and severity and require a high number of lost work days. Also,
cumulative trauma claims including multiple body parts from long -term injuries. In FY 2019-
2020, several claims were filed for Post Traumatic Stress (PTS) as a new presumpt ion injury type
in California. There has been a wide variation in the claim cost for these instances but the most
severe cases are expected to result in permanent disability.
Healthcare and Other Benefits:
Expenses in this category include healthcare (medical, dental, and vision), pay differentials, and
other terms of employment. These terms are negotiated as part of the collective bargaining
process and outlined in the various labor group MOA's. Links to MOA’s can be found in the
previous section for salaries. Beginning January 2017, the safety groups agreed to move from a
90/10 percentage share of medical premiums to a flat dollar rate, capping the limit on medical
premiums paid by the City. Other actions include but are not limited to: capping different ial pay
for specialty training and certification (17.5% of base pay), eliminating tuition reimbursement
1
Packet Pg. 12
City of Palo Alto Page 11
($1,000 per employee), and adding City contributions towards employee 457 plans (1%).
Staffing Levels
Since 2012, staffing levels have decreased from 121.74 full-time equivalents (FTE) to 90.25 FTE,
a 31.49 FTE or 26% reduction. Several actions have taken place in prior years that significantly
adjusted staffing levels, most notably is the elimination of 20.00 positions in FY 2013 and FY
2018 due to changes in Stanford fire services and the elimination of 8.60 positions in FY 2022 to
offset major tax revenue losses resulting from the COVID-19 pandemic. Additionally, a cost-
neutral action in FY 2015 reallocated 8.74 positions from the Fire Department to the
Development Services Department. A summary of these changes are discussed in more detail
below and presented in Attachment B:
− In FY 2013, Stanford initiated the closure of Fire Station 7 located at the Stanford Linear
Accelerator Center (SLAC) resulting in the elimination of 9.00 Fire Captain and Firefighter
positions. These staff reductions were made by reducing the equipment and daily staffing
available to respond to emergencies, specifically eliminating the Fire Rescue Unit which
responded to technical rescue incidents, car accidents, etc. Additionally, 1.00 Fire Inspector
and several other administrative staff were added in this period, partially offsetting
reductions.
− In FY 2015, 6.00 Fire Inspectors, 1.00 Deputy Chief/Fire Marshall, and several administrative
positions in the Fire Prevention Division were reallocated from the Fire Department to the
newly established Development Services Department. This cost-neutral action reallocated
nearly $2.0 million in staff, non-salary expenses, and corresponding revenues. Additionally,
the department reduced 3.0 FTE part-time emergency medical technician positions and
eliminated the Basic Life Support (BLS) program. This program staffed a BLS Ambulance with
EMTs in order to relieve the Advanced Life Support (ALS) paramedic staffed ambulances
from low-acuity calls.
− In FY 2019, elimination of 4.00 Apparatus Operators and 7.00 Firefighters as a result of the
current Stanford Fire Services agreement and staffing redeployment model (CMR 8530).
This action resulted in salary and benefit savings of approximately $1.5 million. Daily staffing
was reduced by removing the fourth Firefighter on the Fire Truck, eliminating a full-time
ambulance, and staffing a 12-hour ambulance during the day on overtime only. This
required some creative shifting of personnel to allow for a full technical rescue team and
shifted the workload of ambulance response to the remaining crews during evening hours.
− In FY 2022, elimination of 5.00 Firefighters, 1.00 Fire Captain, 1.00 Deputy Chief, 1.00
Administrative Associate II, 0.40 Fire Inspectors, 0.20 Deputy Director Technical Services.
The FY 2021 Adopted Budget included position freezes that generated cost savings
equivalent to holding positions vacant to offset revenue losses resulting from the COVID -19
1
Packet Pg. 13
City of Palo Alto Page 12
pandemic. Per City Council’s direction, these positions were fully eliminated in FY 2022
(CMR 11872). As a result, Fire Station 2 was browned-out, staffed only when no vacancies
or leaves were impacting daily staffing. During FY 2021, Fire Station 2 was browned out 91%
of the time after the reductions went into effect in August 2020. The administrative duties
of staff were reassigned, and outreach, training, and strategic planning were eliminated or
limited to available resources. In total, 2.00 of the 4.00 Fire Inspectors were eliminated
(1.60 positions in Planning and Development Services) which resulted in delayed inspection
and plan check services. In total, this action resulted in salary and benefit savings of $1.6
million.
Fire Department: Non-salary Expenses
Allocated Charges
Allocated charges are billed internally from one department to another for the provision of
services. The Department is billed for many of the same services as other City departments,
such as information technology (support, equipment, software, infrastructure), building
maintenance and custodial services, utilities, print and mail services, and radios. The largest
allocated charge is for the maintenance and replacement of vehicles and equipment. As part of
cost savings strategies in FY 2021 and FY 2022, the allocations for vehicle maintenance were
reduced by nearly 50% citywide and services limited to regulatory or critical maintenance
issues. These costs are anticipated to return to normal levels in FY 2023. All ambulances and
were deferred for replacement in outer years, and two administrative vehicles associated with
eliminated positions were auctioned and removed from the replacement list.
Contract Services
The Department engages in various contracts for services during the course of ongoing
operations. For example, the billing component of paramedic transport services is provided by
an ambulance billing company for a cost of approximately $150,000 annually. The Foothills Fire
Management Plan is developed by external consultants for approximately $60,000 (excluding
Community Services Department costs). The Plan, a Council directive, provides a formal
program to manage and mitigate fire in the wildland a rea of the city by Foothills Park through
weeding, brush clearing, and fire prevention outreach. Additionally, physical testing for
firefighters is provided by a medical laboratory for an annual cost of approximately $40,000.
These and related lower dollar amount contracts are utilized when the Department is unable to
provide a specific service in-house or it is less cost-effective to do so.
Other
Other costs are incurred on a regular basis for items such as fire equipment, personal protective
equipment, training, uniforms, other small equipment, facilities, and station maintenance.
Resource Impact
There are no immediate budgetary adjustments recommended as a result of this report.
1
Packet Pg. 14
City of Palo Alto Page 13
Stakeholder Engagement
External stakeholder outreach was not necessary to respond to the Finance Committee referral
to review Public Safety long-term financial trends, beginning with the Fire Department. This
report was generated through coordination between the Fire Department and the Office of
Management and Budget.
Environmental Impact
This report is not a project for the purposes of the California Environmental Quality Act.
Environmental review is not required.
Attachments:
• Attachment A: Fire Department Financial Summary
• Attachment B: Fire Department Staffing Summary
1
Packet Pg. 15
Attachment A: Fire Department Financial Summary
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 5-Yr 10-Yr
Actual Actual Actual Actual Actual Actual Actual Actual Actual Prelim Adopted Projected*Projected*Projected*Projected*CAGR CAGR
REVENUE
Stanford Fire Services 8,461 7,162 6,740 8,120 6,768 6,136 6,774 6,211 6,240 6,253 6,102 6,515 6,712 6,915 7,124 0%-3%
Paramedic Transport Fee 2,777 2,991 2,922 3,373 3,408 3,473 3,722 3,758 3,165 3,014 3,494 3,599 3,725 3,855 3,990 -3%1%
Ambulance Subscription Program - - - - - - - - - - 550 1,200 1,242 1,285 1,330 --
State of California (Strike Team)- - 51 185 557 279 489 257 191 739 - - - - - 22%-
Plan Check & Inspection Fees 2,299 2,212 2,068 461 - - - - - - - - - - - --100%
Other Revenue 188 173 170 194 50 50 105 197 186 169 215 221 229 237 245 28%-1%
13,725 12,539 11,951 12,333 10,783 9,937 11,089 10,423 9,783 10,177 10,360 11,534 11,907 12,292 12,689 0%-3%
Salary 11,982 12,023 11,786 10,943 11,197 13,059 13,191 13,685 14,540 13,648 13,761 14,197 14,551 14,880 15,178 1%1%
Overtime 3,401 1,812 2,561 2,171 2,595 3,248 3,568 2,914 1,910 2,823 1,931 1,993 2,043 2,090 2,132 -3%-2%
Pension 3,610 3,618 4,017 4,209 4,277 5,562 6,030 6,665 8,052 8,517 8,595 9,181 9,565 9,870 9,986 9%9%
Supplemental Pension Contributions - - - - - - - - 973 826 787 777 756 739 715 --
Retiree Medical 2,200 2,330 2,222 2,288 2,034 2,433 2,560 2,223 2,290 2,187 2,223 2,270 2,330 2,395 2,475 -2%0%
Workers' Compensation 1,490 1,090 1,082 793 853 628 1,028 754 1,491 1,330 1,368 1,405 1,443 1,482 1,522 16%-1%
Healthcare 1,931 1,959 2,028 1,857 1,900 1,954 1,952 1,992 2,073 2,074 2,215 2,298 2,380 2,463 2,546 1%1%
Other Benefits 341 603 327 307 316 274 352 340 350 419 499 513 526 538 549 9%2%
Salary & Benefits 24,954 23,434 24,023 22,567 23,171 27,158 28,681 28,573 31,679 31,824 31,379 32,635 33,594 34,457 35,102 3%2%
Allocated Charges 2,964 2,959 2,872 2,655 3,132 2,912 3,145 3,072 3,213 2,213 2,739 3,407 3,464 3,518 3,571 -5%-3%
Contract Services 340 291 535 350 453 456 762 591 726 268 576 542 561 580 601 -10%-2%
Other Expense 556 582 764 618 794 1,005 1,050 1,713 985 775 984 1,002 1,024 1,047 1,070 -5%3%
Non-Salary 3,860 3,832 4,171 3,623 4,380 4,373 4,957 5,376 4,924 3,256 4,298 4,951 5,049 5,145 5,242 -6%-2%
28,815 27,267 28,195 26,191 27,552 31,530 33,639 33,949 36,603 35,079 35,677 37,586 38,643 39,602 40,343 2%2%
(15,090) (14,727) (16,244) (13,858) (16,769) (21,593) (22,549) (23,526) (26,820) (24,902) (25,317) (26,052) (26,736) (27,311) (27,654)
* Projected values reflect the most recent estimates in the FY 2022 - FY 2031 Long Range Financial Forecast (CMR 11954)
159,364 166,690 171,052 185,223 194,179 196,475 214,271 225,756 209,669 196,973 206,452
Net Cost as % of General Fund 9.5%8.8%9.5%7.5%8.6%11.0%10.5%10.4%12.8%12.6%12.3%
121.74 116.24 115.74 107.50 106.50 108.65 108.65 97.85 97.85 97.85 90.25Total Full-time Positions (FTE)
TOTAL REVENUE
EXPENSE
TOTAL EXPENSE
NET INCOME/(LOSS)
Total General Fund Revenue ($)
1.a
Packet Pg. 16
At
t
a
c
h
m
e
n
t
:
A
t
t
a
c
h
m
e
n
t
A
:
F
i
r
e
D
e
p
a
r
t
m
e
n
t
F
i
n
a
n
c
i
a
l
S
u
m
m
a
r
y
(
1
3
4
9
9
:
P
u
b
l
i
c
S
a
f
e
t
y
L
o
n
g
T
e
r
m
Attachment B: Fire Department Staffing Summary
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FTE Chg %
40-Hour Training Battalion Chief - - - 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 100%
40-Hour Training Captain 1.00 1.00 1.00 - 1.00 1.00 1.00 1.00 1.00 1.00 1.00 - -
Administrative Assistant - 0.50 1.50 1.50 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 100%
Administrative Associate II 4.00 4.00 3.00 2.00 2.00 2.00 2.00 2.20 2.20 2.20 2.20 (1.80) (45)%
Battalion Chief 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 - -
Business Analyst - 0.40 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 100%
Deputy Director Technical Services - 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 - - -
Deputy Chief/Fire Marshal 0.84 0.84 0.84 - - 0.05 0.05 0.05 0.05 0.05 0.05 (0.79) (94)%
Deputy Fire Chief 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 1.00 (1.00) (50)%
Emergency Medical Service Director 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 - -
Emergency Medical Services Coordinator 1.00 - - - - - - - - - - (1.00) (100)%
Emergency Medical Services Data Specialist - 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 100%
Emergency Medical Services Manager - 1.00 - - - - - - - - - - -
Fire Apparatus Operator 30.00 30.00 30.00 30.00 30.00 30.00 30.00 26.00 26.00 26.00 26.00 (4.00) (13)%
Fire Captain 27.00 22.00 22.00 22.00 21.00 21.00 21.00 21.00 21.00 21.00 20.00 (7.00) (26)%
Fire Chief 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 - -
Fire Fighter 45.00 41.00 41.00 40.00 40.00 41.00 41.00 34.00 34.00 34.00 29.00 (16.00) (36)%
Fire Inspector 3.00 4.00 4.00 - - 0.80 0.80 0.80 0.80 0.80 0.40 (2.60) (87)%
Geographic Information System Specialist - 1.00 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 100%
Hazardous Materials Inspector 1.90 1.90 1.90 0.01 - 0.30 0.30 0.30 0.30 0.30 0.30 (1.60) (84)%
OES Coordinator 1.00 1.00 - - - - - - - - - (1.00) (100)%
Police Chief - 0.50 0.50 - - - - - - - - - -
Program Assistant - 1.00 - - - - - - - - - - -
Public Safety Dispatcher Lead - 0.40 - - - - - - - - - - -
Senior Management Analyst - 0.50 0.50 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 100%
Subtotal: Full-Time Positions 121.74 119.24 115.74 107.01 106.50 108.65 108.65 97.85 97.85 97.85 90.25 (31.49) (26)%
Temporary/Hourly 5.55 4.07 5.03 0.55 0.55 0.55 0.55 0.55 0.55 0.55 0.07 (5.48) (99)%
Total Positions 127.29 123.31 120.77 107.56 107.05 109.20 109.20 98.40 98.40 98.40 90.32 (36.97) (29)%
year-over-year change (3.98) (2.54) (13.21) (0.51) 2.15 - (10.80) - - (8.08)
FY 2012-22
1.b
Packet Pg. 17
At
t
a
c
h
m
e
n
t
:
A
t
t
a
c
h
m
e
n
t
B
:
F
i
r
e
D
e
p
a
r
t
m
e
n
t
S
t
a
f
f
i
n
g
S
u
m
m
a
r
y
(
1
3
4
9
9
:
P
u
b
l
i
c
S
a
f
e
t
y
L
o
n
g
T
e
r
m