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Garden Grove city leaders are considering merging their fire department with the Orange County Fire Authority, a move aimed at cutting costs as the city faces a growing budget crisis and discusses a possible sales tax increase.

A March proposal by the Fire Authority estimated the city would save $2.5 million this fiscal year by contracting with the agency, or $8.5 million over the next four fiscal years. Among the main features of the contract, Garden Grove would retain the same number of sworn firefighters – 29 – plus four additional paramedics. All of the city’s 84 full-time employees would be eligible to be hired by OCFA, while a handful of nonsworn and part-time employees are not guaranteed positions.

The city’s fire chief, Tom Schultz, said shifting to OCFA would generally raise the city’s level of fire services, lay out a plan to address aging infrastructure needs and make it easier to recruit new firefighters, because OCFA pays more than the city.

But a city staff analysis of the report, presented at a city council meeting Tuesday, noted that once payments for the city’s unfunded pension liability – ongoing retirement costs for firefighters – are added in, the city still is facing deficits for its fire services.

Although the city would save an estimated $2.5 million on operational costs in fiscal year 2018-19, that year the city also must pay more than $3.5 million in pension costs.

“We’re going to be deeper in the hole than we imagined,” said councilwoman Kim Nguyen. “This is no longer a cost savings per the analysis of staff.”

Just about all California cities are grappling with budget problems, fueled largely by growing public employee pension costs that are likely to outstrip new revenue growth. Pension costs for Garden Grove are expected to double over the next ten years, until 2030 when costs begin to decline, according to a city-commissioned report by the firm Management Partners.

At the start of the council meeting Tuesday, Robert Leland, a consultant for Management Partners, pointed to scenarios of two extremes: either the city can balance its budget by cutting staff by 60 percent and make other cuts, or voters can pass a one-cent sales tax increase and largely avoid cuts altogether.

“Reality can be a combination of either of those two” scenarios, Leland said.

Beginning this fiscal year, all city departments except police and fire will institute a five percent budget cut.

The idea to solicit the Fire Authority for a proposal came from the city firefighters’ union during contract negotiations last year, said City Manager Scott Stiles. The current contract for city firefighters expired on July 1, so depending on how long the city council takes to decide on the Fire Authority proposal, the city may have to begin contract negotiations with city firefighters.

The city will begin preparing its next two-year budget in January, Stiles said.

“Time is not your friend here. You really cannot wait too long on this,” Leland said about the city’s overall budget picture. “Current budget challenges are either going to require significant cuts to key services or additional, locally controlled revenues because at least they are not subject to state takeaways.”

Key Features

Under the OCFA proposal, the city would lease its seven fire stations to OCFA for $1 a year and lease existing equipment at no cost to the agency.

The existing deployment model has three teams which are equipped with two paramedics and four teams with a single paramedic, while the OCFA proposal would provide for two paramedics for all seven teams citywide. OCFA would also add a truck company where there currently is none in West Garden  Grove.

The department’s 84 sworn staff would all be offered positions by OCFA, although seven of those positions may be demotions. Five full-time, non-sworn employees and four part-time employees would have to apply for new jobs, and there’s no guarantee positions will be available.

In addition to the $22.1 million annual cost of the contract, the city would be required to pay $1,136,225 in start-up costs during the first five years of the contract, or payments of $227,245 each year for five years.

There may be other hidden costs to the city as well; the city will likely need to create at least one-full time position to handle fire department records requests and manage the city’s ambulance contract, as ambulance services aren’t provided by OCFA.

Councilmembers agreed the Fire Authority proposal would improve fire services in Garden Grove but questioned whether the cost savings would be worth it.

The staff report compared the city’s cost of providing the current level of services to the cost of improved services provided by OCFA, not an apples-to-apples comparison based on the same service levels.

Councilman Phat Bui pressed city staff to return with a more detailed comparison showing the city’s real costs over the next ten years.

“This is a very complex and big decision – I need to understand it fully before I can really make a decision,” Bui said.

As Garden Grove considers joining OCFA, two cities have signaled they may leave the Fire Authority by 2020, to avoid being locked into the contract for the next ten years.

Placentia cited the rising cost of its annual cash contract with OCFA as the reason for a potential departure, although the city’s administrator, Damien Arrula, said the city prefers to negotiate ways to lower costs rather than leave OCFA entirely.

The Fire Authority argues cities are protected from excessive cost increases by an annual cap; OCFA can raise costs by a maximum of 4.5 percent each year. If costs increase above that rate, the difference can be “banked” or carried over to a year where the contracting city doesn’t hit that 4.5 percent maximum.

In a staff report about the potential withdrawal, Placentia officials noted the cost of the city’s firefighting contract has increased 47% since 2009, while the city has been forced to cut services in other departments.

“…The OCFA contract has far outpaced the city’s ability to pay or grow its revenues in such a way as to afford the current and future OCFA cost increases,” the Placentia staff report states. “In addition, the city only has limited control over these costs unlike it does with traditional city departments.”

Irvine, the single largest property tax contributor to OCFA, has always paid more into the agency than it receives in services, prompting a vote by council members last month to notify the agency of its intent to withdraw by July 2020. Until that deadline, Irvine and OCFA will negotiate new terms that will possibly allow the city to stay with the agency.

Tuesday’s Garden Grove council meeting was the first time the city’s firefighters and OCFA officials had seen the city staff analysis.

Garden Grove will schedule a future study session on the Fire Authority proposal in the next few weeks, although a date has not been finalized.

Contact Thy Vo at tvo@voiceofoc.org or follow her on Twitter @thyanhvo.

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