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The Irvine City Council voted to tell the Orange County Fire Authority it may withdraw from the agency, part of a long-running dispute between Irvine and the Fire Authority over the city’s disproportionately large property tax contributions compared to the services it receives.
The council’s 3-1 vote Tuesday, June 26, with councilwoman Melissa Fox dissenting, effectively allows the city to avoid being locked into a contract that wouldn’t expire until 2030, and opens up the next 18 months for further negotiations with OCFA.
Councilwoman Lynn Schott was absent.
“This opportunity arises tonight and is the last one for a decade by which we can seek to address that imbalance,” said Irvine Mayor Don Wagner. The notice says it’s Irvine intent to leave the Fire Authority by 2020.
“In my opinion, this isn’t the end of our association with OCFA. I hope this is the beginning,” said councilman Jeffrey Lalloway. “We vastly overpay OCFA for our services, there’s no disputing that.”
The city of Placentia voted June 19 to also give notice to withdraw from the Fire Authority, citing the rising cost of its annual cash contract. City officials, however, say their intent is not to leave the Fire Authority but negotiate cost savings.
By issuing the notice to withdraw, Placentia and Irvine both lost their seats on the Fire Authority’s board; at the Fire Authority board meeting June 28, two days after the Irvine vote, plaques and seats on the dais for Irvine already were removed.
Fifteen of the Fire Authority’s member cities, including Irvine, pay for services with property tax revenue funneled through the county of Orange, while eight others, including Placentia, pay a lump sum based on cash contracts.
Because of high property values in Irvine that continue to rise — and a property tax formula that is locked-in by state law — Irvine has always paid more to the fund than it uses in services. Revenue from property taxes collected in Irvine make up 15 percent of the Fire Authority’s total revenues.
Irvine council members said their action is aimed at pushing for more serious negotiations with OCFA.
Fox, the only no vote, said the council has failed to take into consideration other benefits the city receives in regional services, such as helicopters, training centers and emergency resources.
If Irvine withdraws from OCFA, the responsibility for providing the city fire services would fall to the county of Orange. An additional negotiation process would be required for Irvine to take over that responsibility.
“My fear is that we put in the hands of the county solely the decision on how we receive our fire services and how its delivered and we’re going to end up in costly litigation and response times will suffer,” Fox said.
As of this year, 24 of the county’s 34 cities contract with the Fire Authority rather than operate their own department. Services generally include OCFA firefighters, emergency medical services and equipment at stations in each member city. Member cities also have access to broader regional services like rescue helicopters and heavy equipment like bulldozers.
The agency had 1,373 employees in the 2017-18 fiscal year.
In the 2016-17 fiscal year, Irvine paid $79 million in property tax revenue into the county’s fund for fire services, according to an Orange County Grand Jury report. That year it was estimated the city received $56 million in fire services, a gap of $23 million, according to the Grand Jury report.
The county does return some property tax revenue, unrelated to payments made to the county’s fire fund, to the city of Irvine based on state legislation aimed at returning revenue to cities impacted after changes to property tax law.
In the 2016-17 fiscal year, the county made nearly $18 million in these payments to Irvine, and considers that money mitigation for the overpayment Irvine makes for fire services.
Irvine and Fire Authority officials tried for several years to reach a solution, coming to a deal in 2013 to directly return property tax revenue from the county fire fund to Irvine’s general fund. But a court later invalidated that agreement – ruling the county fire fund money can only be used for fire services – sending the negotiations back to square one.
In a June 13 letter to OCFA, Irvine officials outlined a proposal in which Irvine would stay a member through 2030 so long as the agency commits to using excess revenue from Irvine to pay down pension liabilities, add a number of new services, transfer all Fire Authority property in Irvine to the city, and agree to transfer all property tax revenue back to Irvine if and when the city leaves.
OCFA officials declined to commit to transferring fire stations or all the property tax revenue, saying any such decision should be made closer to 2030.
Wagner said OCFA has taken a “hard-line” position and seems uninterested in negotiating with the agency.
“I will confess to being perplexed at OCFA’s position since this discussion of our withdrawal started,” said Wagner.
As part of its pitch to keep Irvine, OCFA has proposed a list of additional services it would provide the city to make up for the additional overpayments.
Lori Zeller, Assistant Chief of Business Services, said the Fire Authority has been waiting for a response from the city to the list of additional services it provided back in October, when the discussion first arose.
Those additional services include expanding staffing at a fire station, adding a new battalion, and building a new fire station.
“We came to the city last October with a list of value-added services…we haven’t gotten any feedback on whether those are things to move them forward,” Zeller said. “We have very much been wanting to talk about doing these enhancements.”
Zeller said she does not believe Irvine’s withdrawal, even in a “worst case scenario” where OCFA is no longer entitled to any property tax revenue from Irvine, will significantly impact the agency.
Any changes to how property tax revenue from the fire fund is allocated must be approved by the Board of Supervisors, the city councils of a majority of OCFA member cities, and two thirds of the OCFA Board of Directors, according to the Grand Jury report.
If Irvine withdraws, the agency would also be able to eliminate the city’s expenses, Zeller said.
In the 2016-17 fiscal year, Irvine contributed $79 million in property tax revenue to OCFA; the city receives roughly $56 million in “direct personnel” and services, not counting regional services available to all member cities.
“Right now we have a five-year forecast that is very healthy. We’ve been producing a $20 million surplus that we’ve been trying to preserve for this [Irvine’s withdrawal],” Zeller said. “And we have $37 million in our rainy day reserve and $20 million in our excess reserve.”
In addition to the revenue, operations in Irvine are central to service delivery for OCFA throughout the region.
“They’re right in the middle of our service jurisdiction, so them being a member is very important to our regional delivery of services,” said Zeller.
Division 2, the region which contains Irvine, also includes John Wayne Airport and UC Irvine.
“Irvine’s withdrawal may force OCFA’s renegotiation of fire services for these important entities,” the Grand Jury report notes.
Zeller said the Fire Authority does not believe a potential withdrawal by Irvine will affect other member cities financially or operationally. If Irvine creates its own fire department, there would still be the opportunity for collaboration and mutual aid.
Wagner said so far there is “no discussion” of Irvine creating its own fire department.
“What we have anticipated is the county will contract with OCFA, but that changes the numbers, dynamics somewhat,” Wagner said.
It’s possible the city could still contract with OCFA but pay for the services through a cash contract.
“Our hope and expectation is that we will be able to negotiate a better deal, through the county, that will be less than what we are paying now,” Wagner said.
In Placentia, the threat to withdraw has been motivated by annual cost increases, driven in part by salary increases that recently took effect.
Placentia has seen the cost of its contract grow by 47 percent since 2009, or from $4.5 million to more than $6 million in the 2017-18 fiscal year. By the 2019-20 fiscal year, total costs are expected to reach $6.6 million, according to city administrator Damien Arrula.
The city meanwhile has made a 15 percent reduction to its budget. Because they don’t have their own fire department, costs are more difficult to control, Arrula said.
While the Fire Authority could face the loss of two cities, at least one city is considering joining the agency.
The city of Garden Grove currently is vetting a proposal by OCFA to take over the city’s fire department, after the city firefighters’ union requested the city explore outsourcing to the agency during recent contract negotiations.
The Fire Authority’s proposal to Garden Grove says the city would save $2.5 million annually by shifting to OCFA, a move which would still allow the city to own its fire stations and employ the same firefighters.
All Garden Grove city departments, except for public safety, have cut their budgets by five percent. The city has also surveyed residents about their interest in a sales tax increase, although the City Council has yet to discuss that option.
The City Council is expected to discuss the Fire Authority proposal at its next meeting July 10.