In 2005, the City of Garden Grove in conjunction with other Orange County cities and parties, executed a Joint Agreement for Operation, Maintenance and Financial Management of the Orange County 800 Megahertz Countywide Coordinated Communication System. The agreement provides for the funding, management and governance of the 800 MHz Countywide Coordinated Communications System (800 MHz CCCS).  This system is utilized countywide by Police, Fire, Public Works, and other public agencies. The current 800 MHz CCCS, is becoming obsolete and unsustainable. 

To ensure future continued operation, Orange County Communications is planning for an extension and upgrade to the countywide “backbone” of the 800MHz radio system.  However, this improvement will cause approximately 75% of the City radios to no longer function on the upgraded backbone. The backbone requires that all future radios be Project 25 (P25) compliant, which is the latest generation. The goal of P25 is to enable public safety responders to communicate with each other to achieve enhanced coordination, timely response, and efficient and effective use of communications equipment. The 800MHz CCCS backbone and required P25 radios are absolute necessities for the City’s public safety and public utilities operations. Garden Grove has no other options but to participate in the countywide emergency communication system.

Orange County Communications, the lead agency, has been in discussions with cities and other parties over the past year to finalize the nature of the system upgrade and requisite costs. The total cost of the upgrade to the 800MHz CCCS backbone and P25 radios have now been articulated and Garden Grove's allocation includes $1,259,322 (Backbone) and $3,380,206 to purchase new system radio and console equipment. The County of Orange is also organizing a debt financing arrangement just for the backbone portion that cities can join. Motorola, the sole source for the P25 radios have also indicated willingness to provide bulk purchase discount pricing and financing for interested cities.

Staff plans to take advantage of the Motorola bulk purchase discount as available. In the current fiscal year budget, $634.438 was approved to purchase 92 radios at such a discount.  With regards to the remaining cost of the upgrade and radios, staff is recommending that the City pursue an internal funding plan and not join the county debt financing arrangement. The County debt financing is limited to the backbone component only and is costly. Staff determined that it would be more prudent for the City to internally finance the necessary costs by borrowing available internal service (vehicle replacement) funds with a 10 year repayment plan. The repayment plan contemplates an annual budgeted debt service amount including interest to payback the borrowed funds over ten years, plus an additional amount that would accumulate and be used for future replacement of the radios and backbone system.

The annual fiscal impact will be approximately $600,000 on the general fund, water and sewer funds.

The costs of the upgrade to the 800MHz CCCS backbone and P25 radios as refined in January 2016 by the Orange County Communications are outlined in the chart below by the fiscal year in which they are projected to be due.

The initial radio cost of $634,468 was approved in the current year budget and hence available to purchase 92 radios on a discount.  The remaining total cost of $4,005,060 will be internally financed. The Financing plan structure would be as follows:

Vehicle Replacement Fund: Transfer $4,005,060 from the Vehicle Replacement Fund to the new Communications Replacement Fund.  The funds will be repaid over a ten year period with annual installments of $400,506 plus interest at the City’s investment portfolio’s rate as of the preceding year end. The balance in the vehicle replacement fund is adequate to support this arrangement without jeopardizing citywide effective vehicle replacement plans.

Communications Replacement Fund: Create a new internal service fund named “Communications Replacement Fund” with a transfer-in of $4,005,060 from the Vehicle Replacement Fund. All payments for the backbone upgrade and radio purchases would be made from this fund. In addition, annual budget allocation of $600,000 will be made to this fund for (a) $400,506 plus interest annual repayment to the Vehicle Replacement fund, and (b) balance accumulated to replace the radios and backbone requirements in the future.

Annual Budget allocation: Annual Budget allocation of $600,000 for communications funding and replacement will be made in General Fund, Water Fund and Sewer fund, and transferred to the Communications Replacement Fund. Staff will allocate the budget to the department and funds based on radio count or other reasonable basis. After ten years and full repayment to the vehicle fund, the annual budget allocation would reduce to $200,000 for system replacement only.

It is recommended that the City Council:

• Approve the creation of the Communications Replacement Fund;

• Approve the internal financing plan with the requisite $4,005,060 transfer/loan from the Vehicle Replacement Fund to the Communications Replacement Fund to pay for the 800MHz CCCS backbone upgrade and P25 radios; and

• Approve the annual budget allocation of $600,000 from the benefiting departments and funds as appropriate to the Communications Replacement Fund for the repayment of the transfer/loan beginning in FY16-17, and accumulation of future replacement funds.