HomeMy WebLinkAboutItem 02 Fire Special Operating Levy Renewal. AGENDA ITEM SUMMARY Meeting Date: 5/11/2015
Meeting Type: Work Session
Staff Contact/Dept.: Bob Duey Staff Phone No: (541) 726-3740
Estimated Time: 30 Minutes
S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Provide Financially Responsible and
Innovative Government Services
ITEM TITLE:
FIRE SPECIAL OPERATING LEVY RENEWAL
ACTION REQUESTED:
None. Provide direction to staff in preparation for a second work session and subsequent
ballot title for a November 2015 election date.
ISSUE STATEMENT:
The current Fire Special Operating Levy passed by voters in November of 2010 that provides for the staffing of an engine crew at Springfield’s Station #3 will expire on
June 30, 2016. To renew this levy for the year beginning July 1, 2016 requires that
the Council place a special operating levy request on the ballot for consideration by Springfield voters. Staff is asking that Council provide direction to staff on the
preparation of a ballot title to be formally adopted at a June 15 public hearing.
ATTACHMENTS: 1. Council Briefing Memorandum
DISCUSSION/ FINANCIAL IMPACT:
See Council Briefing Memorandum
MEMORANDUM
Date: 5/01, 2015
To: Gino Grimaldi COUNCIL
From: Bob Duey, Finance Director BRIEFING
Subject: Fire Special Operating Levy Renewal MEMORANDUM
ISSUE:
The current Fire Special Operating Levy passed by voters in November of 2010 that provides for the staffing of an engine crew at Springfield’s Station #3 will expire on June 30, 2016. To renew this
levy for the year beginning July 1, 2016 (Fiscal Year 2016-2017) requires that the Council place a
special operating levy request on the ballot for consideration by Springfield voters. Staff is asking that Council provide direction to staff on the preparation of a ballot title to be formally adopted at a June
15, 2015 public hearing.
COUNCIL GOALS/MANDATE Financially Responsible and Stable Government Services BACKGROUND In 1995, Springfield voters approved a general obligation bond issue that included funding to construct a fifth fire station for the City. The station was designed and scheduled to be opened in
1999. As a result of the passage of Measures 47 and 50, the City lost the financial feasibility of staffing all five stations and chose to re-locate the fire engine staffing from Station #3 to the newly constructed Station #5. Station #3 remained without an engine crew until 2003. In November 2002,
voters approved a thirty-six cent per thousand 4-year special operating levy. This levy provided an equivalent of 12 FTE personnel for the operation of the fire engine crew. The following table is a
record of the three special operating levies for fire services since that time:
Levy Date Duration Levy Rate Yes % No% November 2002 4 years $0.36 60.70% 39.20%
November 2006 4 years $0.40 58.28% 41.72% November 2010 5 years $0.36 70.47% 29.53%
The current levy approved in November 2010 has one year remaining and will fund the staffing of the station from July 1, 2015 through June 30, 2016. To continue any additional property tax
funding for this service past that time the City Council would need to request a vote of our citizens to
approve a subsequent levy for an additional 5 years.
WHY IS IT IMPORTANT Fire Operations provides fire, rescue and emergency medical response to citizen calls for a variety
of emergencies. This program provides the personnel, training, specialized vehicles, and equipment to respond to calls for assistance in our community that threaten life, property, and the environment. This
includes fires, rescues, natural and man-made disasters, hazardous material incidents, medical
emergencies, and ambulance transportation.
The Levy supports the engine company at Fire station #3, on 28th Street, which is instrumental in
delivering needed services. During 2014 there were 13,249 calls for service in the City of Springfield.
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Fire Station #3 alone responded to 2,037, 15% of the volume. The Levy provides $1.5m in revenue which is 8.4% of the Fire & Life Safety department’s FY16 budget. Loss of funding for staffing this
engine company would result in operational changes to maintain coverage in this response area.
Failure to pass the levy, with no replacement revenues identified, would probably produce a 20% reduction in fire suppression, rescue and emergency medical first response capacity for the City and its
three contract fire protection districts. At the same time, we can expect no reduction in calls for
service. This would result in fewer response resources being spread more thinly across the entire service area which will adversely affect the safety of our community and firefighters.
LEVY STRUCTURE State-wide Measure 5 limited general governments (non-education) taxing agencies to a total tax
rate of $10 per thousand with exceptions made for bonded indebtedness. Special levies passed by the voters are to be included in the calculation of the $10 cap. Operating levies are limited to no more
than five years and capital levies for no more than 10 years. Special operating levies can be either a fixed dollar levy or a fixed rate levy, with rate levies
being the most common. A fixed rate levy with the actual dollars resulting from the levy depends upon the annual change in the taxable value of the taxing agency.
Key elements for the City of Springfield to consider when establishing a fixed rate levy that if successful would take effect July 1, 2016 would be:
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For Revenues
• The estimated taxable value of the tax of the City for FY17 which will be established by
property included in the boundaries of the City on 1/01/2016 and its value as of 3/31/2016.
• Estimated changes in the City’s taxable value for the 5 years beginning July 2016 and ending
July 2020.
• The rate of collection for property taxes received by Lane County during this period.
For Expenses
• The planned expenses for the levy is approximately 85% personal services and 15% material & services
• Between now and end of this 5-year levy the labor contract covering all personnel funded by the levy will be re-negotiated two and possibly three times
• The impact of the very recent Oregon Supreme Court ruling on PERS is yet to be determined. The impact on rates due to the ruling will occur in the second year
Methodology
• Establishing a fixed rate for 5 years most commonly involves taking into consideration the
entire 5 year revenue and expenditure projections through the life of the levy and determining
an identical fixed rate in each of the years.
• This results in over collecting in the initial years when most commonly the total expenses are
the lowest and under collecting in the later years when the expenses are most likely to run the highest.
• It is also sound financial planning for levies that have a history or may be planned for more than one term to establish annual cash-on-hand targets that allow for the levy services to manage its own cash flow needs in the July to late November time frame prior to the receipt of
any tax revenue.
LEVY FINANCIAL HISTORY
Rate
Revenue
Over
Expenses
Ending
Cash on
Hand
FTE
Count
General Fund Initial Cash Flow Contributions $228,800
Levy F-1 FY04 0.36$ 84,941$ 388,741$ 9.00
FY05 0.36$ 4,518$ 318,258$ 9.00
FY06 0.36$ 71,225$ 389,483$ 9.00
FY07 0.36$ (151,283)$ 238,199$ 9.00
Levy F-2 FY08 0.40$ 172,379$ 410,578$ 9.00
FY09 0.40$ 234,949$ 645,527$ 9.00
FY10 0.40$ 232,223$ 877,750$ 9.00
FY11 0.40$ 19,887$ 897,637$ 9.00
Levy F-3 FY12 0.36$ (169,606)$ 728,032$ 9.00
FY13 0.36$ (140,971)$ 587,060$ 9.00
FY14 0.36$ (129,772)$ 457,288$ 9.00
FY15 0.36$ (128,913)$ 399,375$ 9.00
FY16 0.36$ (115,768)$ 212,607$ 9.00
Fire Special
Operating Levy
The table above depicts the results of the blended rate over the first 11 years of the fire levy along with the projected final two years of the current levy (for a total of 13 years over the 3 levies). During the first 4 years with a rate of $0.36 per thousand the levy operated as expected with very little
difference between the levy funds collected and expended when adjusted for the General Fund contribution to assist with cash flow requirements.
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The second levy from FY08 through FY11 benefited in the years just prior to the recession with
greater growth in assessed valuation that was expected. The higher than anticipated revenues out-
paced the expenditure growth for the first three years of the levy and it wasn’t until the fourth year that total revenues and total expenditures came more back in line with each other. This was a direct result
of the recession as the City saw significant drop in its real market value during this period. The
increase in the overall ending cash reserve for this service was partially planned. The intent was to build up the cash flow reserve in the $550k to $650k range; the final result was higher than
anticipated.
The third and current levy rate was discussed at a range from $0.40 per thousand to $0.36 per
thousand with the Council deciding to establish the rate at $0.36. The lower of the two rates coupled
with the lower than anticipated AV growth (the recession stayed around much longer than anyone anticipated) has left the current levy operating in the red in every year lowering the cash on hand from
almost $900K to an anticipated low of $200K at 6/30/16. This is lower than the initial cash infusion provided by the General Fund. In hindsight, a rate of approximately $.39 per thousand would have been necessary during this 5 year period to meet the need for funding the additional crew at Station 3
and encourage a draw down to the minimum reserve level of about $550k to meet the cash flow requirements.
DISCUSSION LEVY RENEWAL As discussed earlier, three of the primary factors in looking at the renewal rate for a fourth fire
special operating levy are the expected growth in Springfield’s taxable value, total expenses requiring funding by the levy and expected ending cash balance.
Taxable Value For revenue, Springfield’s Real Market Value saw 3 straight years of decline when the recession
started and a fourth year increase of less than 1%. The current 2014/15 fiscal year is the first year
since 2008/09 where the community has seen a positive move in the real market value with the showing of a stronger real estate market. The total value is still 7% under the value from 2008/09.
The workings of Measure 50, that kept the City from realizing a larger increase in property tax revenues from higher home prices prior the recession, also helped the City not to see as large a reduction in property tax revenues during the recession. The total value anticipated for 2015/16 may
not be able to continue the one-year positive due to the total destruction of one major property in town by fire and the recent successful appeal of its real market value by another major employer in the community.
There will not be any additional information available on changing property values for Springfield
prior to a final decision on the levy. The recommendation from staff would be to elect to follow a
slow but steady growth over the next several years when considering sizing the levy to meet the needs of funding a fire crew at Station 3. A modest approach to this would be:
Actual Taxable Value 2014/15 $4,253,901,084 Current Levy Taxable Value (Est) 2015/16 +2.5% $4,360,248,611
Future Levy Taxable Value 5 Yrs +2.5% Each $4,933,221,088
Expenses
For expenses, the levy currently funds a total of 9.0 FTE wages and benefits (3 Captains, 3 Engineers and 3 Firefighter/Paramedics), plus the resulting overtime (3.0 FTE equivalent) and prorated share of some of the material and services it takes to operate a fire engine crew.
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The proposed budget for FY16 out of the current levy fund is as follows:
Personal Services $1,428,426 Material & Services 254,670
Total $1,683,096
Without a significant change in the service delivery system, the principal factors in the personal
services are wages, as determined by labor contracts, the cost of health insurance and the cost of
PERS. The current IAFF contract expires on 6/30/15 so there is no labor agreement that addresses any years of the next levy. Estimates are used looking at both projected consumer price index information
and contract information from our comparable for wages. As the City has recently moved to self-
insured for health insurance and expanded its wellness clinic the growth that the City may see in health coverage is being projected at 5% to 8%. The very recent rulings on PERS by the Oregon
Supreme Court has made projecting retirement rates very difficult at this time, but it should be assumed that the City will see significant increases in its PERS contribution rates on July 1, 2017 and July 01, 2019 the second and fourth years of the new levy.
Ending Cash Balance
The current levy (FY12-FY16) is projected to expend all of the current revenue generated during
the life of this levy plus about $685k of reserves generated during the previous levy. Because of low projected beginning cash on 7/01/2016 the next levy should be sized to ensure that current tax revenues will be able to meet the needs of the planned services through the entire 5 years. Also, the
ending cash balance on 6/30/2021 should be planned in such a way that whatever transition occurs at that time (levy renewal or levy retirement) the cash flow needs are adequate to meet the requirements.
RATE Based upon the information provided above the following are key elements of the pricing structure
of a renewed 5-year special operating levy for fire services:
• Moderate but steady change in the taxable value for Springfield of 2.5%
• An expense requirement for the 5 years that is estimated to be $9.9M
• Planned ending cash balance of approximately $550K
1) A rate of $0.445 per thousand of assessed valuation is the calculated rate that accomplishes the above criteria for the levy renewal. The existing levy is $0.36 while the actual expenditures of the current levy are running at about $0.39 per thousand.
2) Changing assumptions within the 3 primary areas can have an impact on the final rate calculation and the impact would most likely be in the $0.01 to $0.02 range. Assumption changes in the early years have the most impact on the overall levy while smaller changes in
the later years have little impact on the overall rate. 3) The original levy was established with an overall FTE expectation of 12 which translated into
9 full time employees and the overtime that it takes to cover for vacations, sick time, injury
leave other leave times and regular shift required overtime duty. Although it would place the burden back into the General Fund, consideration could be given to reducing the scope of the
levy and provide less personnel from within the levy. Reducing the expected personnel from
12 FTE to 11 FTE would be a reduction of about $0.04 from the levy. This does not include a service change expectation.
4) The adopted budget for FY16 for Fire & Life Safety does not anticipate any service level changes that would impact the fire engine crew at Station #3. Any future discussion on service levels that might change current practice could have an impact on the levy rate.
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CONCLUSION No decisions. The purpose of this first work session is to provide information to the Council
concerning the expiration of the current levy and the options for considering a renewal levy. Staff is looking of for direction from the Council to proceed with the preparation of a levy with a second work
session scheduled for May 26th, 2015. A tentative public hearing has been scheduled for June 15,
2015 for the final adoption of a ballot title.
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