The Garden Grove Fire Department was established in 1926, and is a full-service fire department that provides emergency fire and paramedic response, and fire prevention services to the City’s businesses and residents.  The City’s Fire Department budget for Fiscal Year (FY) 2018-19 is $24,861,357, which includes 96 sworn positions, 4 non-sworn positions, and 1 Fire Apparatus Mechanic. This budget includes all labor costs (i.e. salaries, pension obligations and benefits), as well as contractual services (i.e. dispatching services and hazardous material cleanup), commodities and supplies, equipment, and vehicle maintenance and replacement.  In addition, the Fire Department provides approximately $150,000 a year in revenue from plan check fees and permits.  

As part of labor negotiations with the Garden Grove Fire Association Local 2005 in 2017, the City Council agreed to solicit a proposal from OCFA for City fire and emergency medical services.  In March 2018, the City received a proposal from OCFA with a cost for FY 2018-19 totaling, $22,592,221 (Attachment 1).  The total proposal cost includes OCFA’s service charge, facilities maintenance, and vehicle depreciation/replacement.  The proposed cost excludes one-time start-up costs and the City’s annual unfunded accrued liability payment to the California Public Employees’ Retirement System (PERS).

OCFA Proposal

OCFA’s proposal cost includes all emergency response units, personnel, equipment, vehicle depreciation and replacement, routine station maintenance, fire prevention, and administration.  Annual contract cost increases are capped at 4.5%, however, there is a recapture clause in which increases over the 4.5% maximum is banked and charged back to the City during years when the increase is under 4.5%.  The City will have an option to withdraw every ten years; the first opportunity to exercise the option would occur in 2030.  

Personnel:  All currently employed sworn employees will be offered positions with OCFA.  All employees will be required to pass a pre-employment check which includes a medical/physical examination and background check.  The proposal originally required that all non-sworn employees (5 employees) apply for open positions through OCFA; however, since that time 3 employees have been offered positions.  The City is responsible for resolving the employment status of any employees who do not pass OCFA’s pre-employment check. 

Facilities:  OCFA will lease from the City the 7 fire station facilities for $1.00 per year per facility.  OCFA would assume normal daily maintenance operations, such as cleaning, trash pickup, minor repairs, and utilities.  The City will be responsible for any capital improvement (repairs in excess of $15,000) and will be required to contribute $15,000 per year per facility for any repairs over $1,000. 

Vehicles:  OCFA will assume the maintenance and replacement for 6 Fire Engines, 1 Battalion Chief Vehicle, 1 Battalion Utility Vehicle, 1 Fire Truck, and 1 Air Light Unit.  OCFA will provide all maintenance of the vehicles, fuel, and vehicle replacement. 

Administration:  OCFA will provide all administration and support necessary to operate fire services. These services include human resources, finance, payroll, legal, risk management, and costs associated with community education and public relations.

Fire Prevention:  Fire prevention services include plan check review, inspection of construction projects, annual fire safety inspections, and the issuance of operational permits.  Planning and development fees are 100% funded by fees paid by developers, architects, contractors, or subcontractors.  Permits, special events, and annual inspections are approximately 50% funded through fees primarily paid by businesses, building owners, and special event contractors, with the remaining 50% considered a general fund expense by OCFA.  All fees are established, collected, and retained by OCFA (see Attachment 2 for OCFA’s fee schedule).

Deployment:  OCFA’s deployment model operates every engine and truck company as a full Advanced Life Support (ALS) unit.  This allows for 2 paramedics on each unit at any given time.

Start-Up Costs:  As part of the proposal, OCFA requires the City to reimburse OCFA for start-up costs associated with the transition to OCFA.  These one-time costs include the cost of pre-employment checks, standardization of the fire stations and equipment, and communication and information technology.  Start-up costs total $1,136,225 and OCFA will amortize the cost over 10 years ($113,623 annually).

The City created an internal committee to analyze OCFA’s proposal.  The purpose of the committee was to identify additional costs and/or savings related to contracting services with OCFA, as well as to determine the potential impact to City services or other departments.

The cost of OCFA’s proposal does not include the City’s ongoing unfunded pension liability and other post-employment benefits (OPEB) paid to PERS, which totals $3,545,268 and $83,928 respectively for FY 2018-19.  In addition, the City identified services that the Garden Grove Fire Department currently provides but will not be provided by OCFA.  These services include records management, hazardous material clean-up, emergency operations planning, management and training, weed abatement, and hydrant maintenance.  However, Staff also identified savings which include the cost of utilities at the Fire Stations, routine maintenance, and insurance premiums for workers’ compensation and general liability.

In addition, developers, contractors, businesses, building owners, and special event contractors may see an increase in fees for plan check services and operational permits because the City does not currently achieve full cost recovery for these services.  For planning and development services, OCFA achieves 100% cost recovery and approximately 50% cost recovery for operational permits.

Staff presented its findings to City Council on July 10, 2018 (Attachment 3) and a follow-up presentation during a City Council Study Session on August 8, 2018 (Attachment 4).  Staff projected an estimated additional cost to the City for fire services between $14.5 million and $15.4 million over 10 years if the City contracted with OCFA.

City Council was provided a summary of the study session on September 25, 2018 and subsequently, City Council directed Staff to work with the Garden Grove Fire Association Local 2005 to include various new assumptions in the cost analysis.  These assumptions include the cost of paramedic school, the inclusion of reserve equipment, the addition of a full-time arson investigator, and a part-time rather than a full-time emergency operations coordinator.  In addition, City Council requested that a sensitivity analysis be conducted to determine the cost savings assuming 1 to 5% salary increases to the labor agreement in FY 2018-19.  Staff presented its cost analysis at the November 13, 2018 meeting (Attachment 5).  Based on these assumptions, Staff estimates that the additional cost to contract with OCFA would range from $0.3 million to $11 million over the next 10 years.  Following that review, City Council authorized Staff to begin negotiations with OCFA. 

Starting in or about December 2018, staff initiated the meet and confer process with the labor groups whose members would be impacted by any decision to contract out fire services.  Staff met and conferred with Fire Fighters Local 2005, the Fire Management Association and the Orange County Employee’s Association, Garden Grove Chapter. The discussions addressed employees’ concerns regarding issues such as leave balances, the pre-employment examination process, and options for those non-sworn employees who do elect not to make the transition to OCFA.  Through the meet and confer process, the City was able to reach tentative agreements with every labor group, as memorialized in Memorandums of Understanding that will govern the transition process if the City makes the final decision to contract with OCFA.

Staff has also held regular meetings with OCFA to negotiate a Fire and Emergency Medical Services Agreement for Council’s review and consideration.  On March 4, 2019, a study session was held to provide the City Council with current information on the performance standards and comparisons between the Garden Grove Fire Department and OCFA (Attachment 6).  Throughout the process, OCFA has responded to multiple requests for information and clarification.  OCFA has also worked with the City’s team to try and address concerns raised by the employee groups.

Attached is a set of documents comprising the proposed Fire and Emergency Medical Services Agreement. The Agreement consists of the following documents:

1.       Fire and Medical Services Agreement, which sets forth terms and conditions of the proposed Agreement. The Agreement provides that delivery of services shall commence on August 16, 2019 and that all Garden Grove personnel who are transitioning from City employment to OCFA employment will also transition on that date.

2.       Attachment A – Service Criteria.  This document specifies the service level, as well the related fire prevention services that OCFA will provide.  Following the initial two-year period, OCFA and the City will evaluate the response performance to determine whether any modifications are warranted.

3.       Attachment B – Transition of Personnel.   This document sets forth the terms and conditions of the transition and employment of City Fire Department safety and non-safety personnel who elect to transition to OCFA.  

4.       Attachment B – Exhibits 1&2.  These documents identify the City Fire Department employees who will be offered employment by OCFA, along with the rank and salary.  OCFA will offer employment to all safety and 3 of the 5 non-safety members of the City Fire Department in good standing, contingent upon the employees meeting minimum physical and medical standards for their designated positions.

5.       Attachment C – Lease Agreement.  This document sets forth terms by which the City will lease its seven fire stations and related real property to OCFA during the term of the Agreement.

In a letter dated January 23, 2019, OCFA determined that contract costs for FY 2019-20 will increase 3.06% from the original FY 2018-19 proposal.  OCFA’s total annual cost for FY 2019-20 is $23,282,999.  If the transition takes place on August 16, 2019, the prorated cost is $20,322,587 for the remainder of FY 2019-20.  OCFA will reduce the first payment by $75,000, which is the amount paid by the City for the cost of the proposal.  Furthermore, the City would be required to pay OCFA $1,136,225 or $113,623 annually for the next 10 years for one-time start-up costs.

The City is still required to pay to PERS Fire’s unfunded accrued liability in the amount of $4,132,425 and approximately $95,418 for OPEB For FY 2019-20  The continuation of services that OCFA will not provide such as records management, hazardous material clean-up, emergency operations planning, management and training, weed abatement, and hydrant maintenance, is estimated to cost $295,718 annually. 

Based on the assumptions used in the November 13, 2018 cost analyses (and including fire hydrant maintenance), the estimated additional cost with contracting with OCFA is between $2.1 million to $13.3 million over the next 10 years.   If the contract is approved by the City Council, funds will be budgeted accordingly in the upcoming biennial budget for FY 2019-20 and FY 2020-21.

It is recommended that the City Council:

• Consider entering into an agreement with the Orange County Fire Authority (OCFA) to provide City Fire and Emergency Medical services for the City of Garden Grove; 

• If approved, authorize the Mayor to execute the Fire and Emergency Medical Services contract with OCFA, and to make minor modifications as appropriate; and

• If approved, authorize the Mayor to execute the Amended OCFA Joint Powers Agreement; and 

• If approved authorize the Mayor to execute the Lease Agreement for Fire Stations #80-86 with OCFA, and to make minor modifications as appropriate; and

• If approved, adopt the attached Resolutions and authorize the City Manager to execute Memorandums of Understanding with Fire Fighters Local 2005, Fire Management Association and Orange County Employee’s Association, Garden Grove Chapter.