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Fire Services Fiscal Review
In October 2016, the City Council authorized the release of a Scope of Work to conduct a Fire Services Fiscal Review. This webpage will be a repository of any information collected and actions taken regarding the effort.
Special Edition of the Atherton on Fire Services
Receive Resident Input & Review Fire Service Options
Atherton residents contribute more than $18 million per year in property taxes to the Fire District for the provision of basic fire and emergency medical services. After completing a Fire Services Fiscal Review, the Town determined that the cost to provide basic fire and emergency medical services to the Town ranges from $4.6 million to $7.4 million.
The difference between the revenue received and the cost to provide services results in a surplus of $10.9 million to $13.7 million per year to the Fire District. This revenue surplus has allowed the Fire District to purchase infrastructure, homes, equipment, fund high salaries, benefits, and overhead and subsidize services provided to other communities. It is projected that within the next 10 years, this surplus from Atherton residents will grow to as much as $20.9 million per year.
Options that the Town is considering include detachment from the Fire District prompting a redistribution of the property tax allocations and allowing the Town to contract directly for the provision of fire services at a fee more in line with expected costs; and/or a State legislative measure to redistribute property taxes allocations set under Proposition 13 and AB 8.
Assessed value for property is set by the County Assessor’s Office. Property owners pay 1% of the assessed value of their property to basic property taxes. The various service agencies in the County receive a portion of that 1% base property tax based on an allocation established under Proposition 13 and AB 8; and this is enhanced by parcel taxes and other bond issuances. Taxing agencies include: county government, the schools, mosquito abatement, sewer, library, the Fire District, the Town, etc.
The Town receives between 8.6% and 10.6% of that 1%, or as much as 10.6 cents of every dollar of property tax paid to provide basic municipal services to Atherton residents – police, public works, building, planning, administration, finance, and capital infrastructure. The Fire District receives between 13.83% and 15.7% of that 1%, or as much as 15.7 cents of every dollar of property tax to provide basic fire and emergency medical services.
Using Assessed Valuation and tax amounts from the County Assessor’s Office, Table 1 shows the revenue received based on the assessed value of all properties in Atherton from Tax Year 2011/12 to the current year, Tax Year 2019/20. Over the nine-year period, the Town received $84.9 million and the Fire District received $125.8 million – approximately $41 million more - contributing to a surplus of over $60 million for the Fire District.
Property tax revenue is expected to continue to grow each year; and, projecting forward at 5 and 10 years, with a 4% per year growth in assessed value*, Table 1 shows annual property tax revenue to the Fire District for the provision of basic fire and emergency medical services to the Town is projected to reach at least $27 million.
Neither the Town, nor the Fire District have the ability to modify the basic property tax amount. Modification of the basic tax amount requires action by the State Legislature to modify the allocations established under Proposition 13 and AB 8. Fire services, like the services provided by the Town, are services often a part of the full services of some jurisdictions, like Palo Alto or Redwood City, or they are provided directly under contract. The Town can opt to detach from the Fire District and provide services under contract with another agency (called “detachment”) or if negotiated, back with the Menlo Park Fire Protection District (at a different cost). Detachment will prompt a reallocation of the tax amounts.
The Fire District’s service area covers about 30 square miles and includes the communities of Atherton, Menlo Park, East Palo Alto and some areas of unincorporated San Mateo County. The District service population is around 90,000. The Town has 7,207 residents or 8% of the District’s total population. Table 2 shows 9,347 calls for service in 2019 for the entire District. The map reflects that the bulk of calls for service go to communities outside of the Town. Service calls to Atherton residents represent approximately 9-10% of the total calls for service (inclusive of false alarm calls, good intent calls, and basic service calls) with the majority of those calls being emergency medical calls, prompting an outside ambulance service.
In Fiscal Year 2019/20, Atherton residents paid an estimated $18.3 million in tax revenue to the Fire District. This represents approximately 34% of the District’s revenue of $54.3 million+ for the year. That’s significant given that Atherton represents only 8% of the District population and 9-10% of the District’s total calls for service. Approximately 90% of District’s calls for service are to areas outside of the Town of Atherton.
With District participation, the Town conducted a Fire Services Fiscal Review and determined that the cost to provide basic fire and emergency medical services to the Town would be a low of $4.6 million to a high of $7.4 million per year. If the Town were to detach, the Town would not form its own fire department; rather, the Town intends to contract for services, either with the Fire District or with another neighboring jurisdiction.
Based on the data in Table 1, property taxes paid to the Fire District by Atherton residents far exceeds the actual cost to provide fire service. Even more concerning was the fact that the taxes paid appear only to be increasing year after year, in a way that could significantly increase the gap between the taxes paid and the actual cost of service.
A more accurate property tax percentage for fire services would be 8% instead of 15.7%. That means that a property owner in Atherton with an assessed property value of $7.1 million (the median property value) would pay $5,680 per year to the Fire District versus the current $11,147. Table 3 reflects what is currently paid versus what might be paid based on a few hypothetical assessed valuations, with the difference being distributed to schools and other County services.
While the Town cannot change the tax allocated to the Fire District, there are options that can be considered. The Town met with the District in the hopes of identifying collaborative solutions that would allow the District to invest directly in the Town by providing public safety infrastructure to improve congestion, emergency response routes, safe routes to school, etc.
Ultimately, the District declined to work with the Town to address the issue. This forced the Town to move toward a legislative or detachment solution in the hopes of a reallocation of the basic tax amount amongst the current taxing entities.
In the end, this is an effort to equalize revenues amongst the taxing entities and reduce the reliance by other agencies on special tax levies or parcel tax assessments. The Town hopes that by doing so, it will reduce the overall long-term tax burden to Atherton residents by providing a more equitable distribution of property taxes.
If the Town detached from the District, the residual taxes collected (the difference between a negotiated cost to provide services and the taxes collected) could be redistributed amongst the existing taxing entities. Each taxing entity would receive its proportional share of the taxes collected and thereby hopefully reduce the reliance upon additional special taxes and charges – reducing the long-term tax burden on local residents.
To learn more about this issue and provide input, please attend one of the upcoming information sessions. Visit the Town’s Fire Services Fiscal Review website for additional information - www.ci.atherton.ca.us/FireServices.
|Tuesday, March 24||Wednesday, April 1|
|6:30 pm to 8:30 pm||6:30 pm to 8:30 pm|
|Pavilion @ Holbrook-Palmer Park||Pavilion @ Holbrook-Palmer Park|
At the information sessions, the Town will provide background data and analysis completed as part of the Fire Services Fiscal Review, solicit input and discuss possible next steps. These next steps include further conversation with State legislators about the possibility of a legislative adjustment under Proposition 13 and AB 8 as well as the pursuit of a detachment effort through the Local Agency Formation Commission (LAFCo).
The LAFCo process involves more detailed analysis of the current and potential cost of services, sources of revenue, environmental review, impact on other jurisdictions, and the plan for new services. The LAFCo process requires one or more public hearings as well as the possibility of a protest ballot process and election. There are costs involved with moving forward with detachment. These costs involve the completion of the application and studies required to submit the application to LAFCo. Most of that preliminary analysis has been completed as part of the Town’s Fire Services Fiscal Review; but additional work will be necessary. Those costs are not yet determined.
HISTORY AND OVERVIEW
The effort first began in 2013/14 when the Town sought out data for its Local Municipal Services webpage. The Local Municipal Services webpage is designed to inform residents about the various services and service providers they use as residents of the Town. When preparing the webpage, an issue arose related to the property tax revenue received by the Fire District from Atherton residents. It was thought that perhaps revenues could have outpaced the cost to provide fire services to the community. The District’s 2016/17 Budget reflected 8,547 Calls for Service in 2015. The map of each call with the Town’s boundary superimposed is shown below (the underlying call image is from the District’s 2016/17 Budget Document) (PDF).
The image reflects that the bulk of calls for service from the Fire District are provided to areas outside of the Town of Atherton.
After publishing the webpage, the Town sought separately to clarify the data with the Fire District and asked the District for more detail. Over the intervening time, there was correspondence back-and-forth via email and ultimately, a formal request for data and a formal response from the District (PDF). As part of the District’s response, the District had recently updated an analysis of their property tax revenue from the various jurisdictions within their District. The District had their consultant, MuniServices, extract the data for Tax Rate Areas within Atherton (PDF). That Report provided in summary that the District receives $11.8 million a year in property tax revenue from the residents of the Town of Atherton (after ERAF). The Report also identified that Atherton was responsible for 31.7% of the District’s total property tax revenue - the County making up 15.6%, Menlo Park 47.1% and East Palo Alto, 5.6%. While the Town made up 31.7% of the District’s revenue, Atherton residents make up 8% of the District’s population of 90,000 and potentially a lesser amount of calls for service as shown in the map above.
The Council wanted to know with more specificity, what the costs were to provide services to Atherton residents. In response to this question, the District advised that they did not collect data in that way and were unable to provide a detailed answer. Acknowledging that response, but still seeking an answer to the query, the Council directed that staff put together a scope of work to get at the data they were seeking. The District advised that while they would not be actively participating in the Study itself, they would continue to provide whatever information they had available via their website.
The Study, ultimately completed, focused on three areas:
First, what revenue does the District receive from property taxes from Atherton residents? That question was essentially been answered by the District. The purpose of the question was to determine the actual amount of property taxes that the District receives solely from Atherton residents.
Second, what are the actual costs for services received by Atherton residents? To get to that data, the consultant extracted the cost of services attributable to the Town and its population and land use demographic. Because the District serves multiple independent agencies within its own District boundaries, they do not segregate services (or data) by jurisdiction. The District provides services District-wide. As a result, the consultant parsed the data by jurisdiction to the maximum extent possible, inclusive of any overhead and special services provided by the District, District-wide. For example, while the Town only has 1 Fire Station within the Town’s boundaries, the residents are actually serviced by 5 or more Stations using the “closest unit” model of response. The consultant looked at the community as a whole and segregated out those costs from all Stations attributable to the Town.
Data from the District was provided for calls for service from October 2015 to October 2016 (PDF). During this year period, there were 517 calls, the call breakdown is as follows:
|Incident Type||# of Calls||%|
|Fire Response (cooking fire, property fire, vehicle fire, grass fire, etc.)||8||1.54%|
|Rescue & EMS (medical assist, EMS, vehicle accident) - note: the District assists but does not transport||242||46.80%|
|Hazardous Condition (no fire - power lines, short circuits, gas leak, etc.)||16||3.09%|
|General Service Call (water problem, smoke/odors, animal rescue, public assist)||103||19.92%|
|Good Intent Calls (cancelled enroute, no incident found, etc.)||55||10.63%|
|False Alarm/False Calls||93||17.98%|
Third, to allow residents to get a true comparative, the consultant was tasked with a third task of determining what the cost of services would be if the Town itself were responsible for providing the services independent of the District. It is anticipated that this cost would likely be more than the cost of services provided by the District due to economies of scale.
The City Council has been clear that the intent of the analysis was not to consider providing services independent of the Fire District; nor is the Town seeking to gain any additional revenue share. At this stage, the intent was data gathering.
However, if after the results, the District and Town are able to identify different service levels or service needs for the Town and have a conversation about how to address those needs, that would be a positive outcome. Also, if the residents of the Town wish to address the issue in some other way, the Council would be participants in those conversations as well.
Fire Impact Fee Nexus Study by the Fire District
The issues were further complicated in 2015 when the District completed an Impact Fee Nexus Study and sought to have Atherton, Menlo Park, East Palo Alto and the County adopt the Study and thereby impose a new fee on Atherton residents. The District itself could not impose the fee so each respective jurisdiction was required to impose the fee on behalf of the District. Because the Town would be adopting the Impact Fee Nexus Study independently and vouching for its analysis of need, more data was required to validate the need to impose fees on Atherton residents when the question of property taxes versus cost of services was still unanswered.
Responses to the Town's Request for Proposal were due at 4 pm on March 31. The Town received 4 bid responses:
Staff reviewed the proposals and recommended Matrix Consulting Group to the City Council at the April 19 Council Meeting. The Council awarded the professional services agreement to Matrix Consulting Group and a Kick-Off Meeting was held on May 10.
Project Leads for Matrix Consulting Group were:
Matrix Consulting Group hosted initial meetings with the Town and the Fire District to begin gathering data. Matrix began with data collection, interviews, and development of a baseline descriptive profile. Following data collection, Matrix conducted an operational analysis, to include support services, of the current fire response network. Following the operational analysis, Matrix conducted a financial analysis and developed options for fire service delivery.
Tasks 1 through 3 were completed and the completed report was part of the Agenda Item below for January 17, 2018. Matrix completed Tasks 1 through 3 of the Study on budget at $49,500. On March 21, the Council authorized the completion of a Task 4 for the Project. Matrix completed Task 4 for the Project on budget at $13,500. The Task 4 Report was presented to the CIty Council on July 18. On January 22, 2019, the Council held a joint meeting with the Fire District to review the entire report.
Following that meeting, the City Council Ad Hoc Subcommittee met with representatives from the Fire District to discuss next steps and possible ways that the Town and District could collaborate on projects that would address the equity issues raised by the Town.
Discussions and Next Steps
The Town put together a list of opportunities (Attachment 2 to the October 2 Staff Report linked below), that could be discussed by the subgroup. These opportunities were identified as Partnership Opportunities with the Menlo Park Fire Protection District. The intent of the list was to identify those areas of partnership that would assist with mitigating the equity issues raised in the Matrix Study between the cost of fire services and the revenue provided to the District by Atherton residents. A meeting was set for July 23, 2019.
On July 22, the District advised that they had discussed the issue(s) with the Board of Directors and that they would like to explore 5 possible partnership areas. These areas were:
- Emergency Management Services
- A Joint EOC or MAC (at Fire Station 1)
- Communications Infrastructure – Atherton’s Communication Tower
- LRAD and joint community notification systems
- UAS/Drone Agreement
The subgroup met on July 23 to discuss the Town’s list of partnership opportunities as well as the District’s list. The Town Subcommittee advised that aside from Item No. 3 - Communications Infrastructure, the items on the partnership list seemed to be a part of the District’s underlying mission of support for communities within the District itself and were not Atherton-specific; therefore, the items did not go toward addressing the equity issue identified by the Town via the Matrix Study. The District advised that following Board discussion, it was made clear that the District believed that any partnership opportunity offered to one of its sub-jurisdictions should be offered to all and therefore the District must be prepared to do so. Therefore, only those partnership opportunities that were within the District’s basic mission were considered. The Town’s list was largely dismissed in favor of the District’s more focused list.
The Town’s Subcommittee expressed disappointment that the District did not wish to address the equity issue and expressed that the Subcommittee would have to report back to the Council and suggest next steps. The Subcommittee also noted that since the Town’s initiation of concerns of equity, the Fire District has expanded their service model through the acquisition of new facilities, new vehicles, development of a regional fire academy, and enhancement of wages and benefits for fire personnel.
The Town, Council, and Council Subcommittee spent at least 5 years working with the District to identify and solve an equity issue between the cost to provide fire services to Atherton residents and the revenue provided to the District by Atherton residents. As of FY 2015/16, the property tax revenue provided by Atherton residents to the Fire District totaled $11.8 million and can be expected to rise each year based on Assessed Valuation. Projected forward at a conservative rate of 3%, the revenue could be expected to be $13.3 million or more for FY 2019/20. The cost of services based on the District’s FY 2016/17 Operating Budget were estimated at $4.6 million. Projecting forward aggressively at 5% per year, that cost could be expected to be approximately $5.3 million.
The Matrix Study identified options for consideration should the Town desire to move forward. Those options are:
- Tax Agreements
- Special Legislation
Based on the results of the Study and subsequent conversations with the District, it is unlikely that a tax agreement could be negotiated and further unlikely that Special Legislation would be supported. The only option remaining would be to explore further options around detachment by meeting with LAFCO. Meeting with LAFCO does not mean that the Town will ultimately detach from the Fire District and be required to provide alternative services via contract or its own fire department; however, such meetings would begin more formal conversations around detachment should the Town desire to move forward with the option.
Following discussion on October 2 at the Study Session, the Council directed the Subcommittee to meet with LAFCO to discuss the Town's options moving forward.
- October 2, 2019 - Study Session of the City Council - Discussion and Direction on Next Steps
- January 22, 2019 - Joint Meeting with Fire Distict - Discuss Matrix Report – Fire Services Review (Complete Report)
- July 18, 2018 - FIRE SERVICES FISCAL REVIEW – REVIEW TASK 4 RESULTS; PROVIDE STAFF WITH FEEDBACK AND DIRECTION ON NEXT STEPS
- March 21, 2018 - FIRE SERVICES FISCAL REVIEW – REVIEW TASK 4 PROPOSAL; DISCUSS MOVING FORWARD WITH TASK 4; AND, IF APPROPRIATE, APPROVE THE SCOPE OF WORK AND AUTHORIZE STAFF TO MOVE FORWARD WITH TASK 4
- February 21, 2018 - FIRE SERVICES FISCAL REVIEW – PROVIDE REVIEW, FEEDBACK AND DIRECTION ON NEXT STEPS
- January 17, 2018 - FIRE SERVICES FISCAL REVIEW – PROVIDE REVIEW, FEEDBACK AND DIRECTION ON NEXT STEPS
- October 19, 2016 - Review of Scope of Work for a Fire Services Fiscal Review and Authorization to Release a Request for Proposal
- April 19, 2017 - Approval of a Budget Amendment and Award of Consultant Services Agreement to Matrix Consulting Group for the Fire Services Fiscal Review
- January 17, 2018 - Fire Services Fiscal Review - Provide Review, Feedback and Direction on Next Steps
- February 21, 2018 - Fire Services Fiscal Review - Provide Review, Feedback and Direction on Next Steps
- March 21, 2018 - Fire Services Fiscal Review - Review Task 4 Proposal; Discuss Moving Forward with Task 4; and, if appropriate, Approve the Scope of Work and Authorize Staff to Move Forward with Task 4
- July 18, 2018 - Review of Fire Services Fiscal Review Task 4 and Discussion on Next Steps
- RFP - Fire Services Fiscal Review (PDF)
- RFP - Attachment 1 - Fire District Staff Report (PDF)
- RFP - Attachment 2 - Alarm Data - 10/1/15 - 10/1/16 (PDF)
- MPFPD CAFR June 30, 2015 (PDF)
- November 4 Letter to City Manager from Fire Chief - Data Collection (PDF)
- Map - Tax Rate Areas - Parcel Level (PDF)
- Tax Rate Area Spreadsheet (PDF)
- Fire Board Committee Liaison Assignments - 10/18/16 (PDF)
- Notes from the Fire Services Fiscal Review Subcommittee Meeting - 10/11/16 (PDF)
- LAFCO - Preliminary/Working Draft Document of Surrounding Agency Cost of Fire Services (PDF)
- HDL Atherton Assessed Values FY 2016/17 - 10/6/16 Email (PDF)
- Property Tax Revenue - Atherton - MPFPD (PDF)
- MPFPD FY 2016/17 Budget (PDF)
- Muni-Services Presentation - MPFPD - 2/16 (PDF)
- Fire District Board Agenda - 9/20/16 (PDF)
- Board Meeting Staff Report - 9/20/16 (PDF)
- Board Meeting Attachment - A (PDF)
- Board Meeting Attachment - B (PDF)
- Board Meeting Attachment - C (PDF)
- Board Meeting Attachment - D (PDF)
- Board Meeting Attachment - E (PDF)
- Board Meeting Attachment - F (PDF)
- Board Meeting Attachment - G (PDF)
- Board Meeting Attachment - H (PDF)
- Mayor's Letter to Fire District - 10/7/16 (PDF)
- Board Response to Atherton Correspondence - 10/7/16 (PDF)
- Fire Services Fiscal Review Study FINAL - January 9, 2018 (PDF)
- Fire Services Fiscal Review Staff Report to City Council - January 17, 2018 (PDF)
- Letter to Atherton Community - Fire Services Fiscal Review - January 18, 2018 (PDF)