El Dorado Hills resident and former Folsom Fire Chief Dan Haverty, functioning as a budget consultant to the El Dorado Hills Fire Board, has recommended an aggressive attrition plan and suggested the board tap reserves to make ends meet in the short term, then lay out plans for reducing hours or even shuttering one station if property tax revenues continue to drop.
Haverty stopped short of recommending any salary restructuring – the firefighter’s union contract negotiation are currently underway – or layoffs.
Pete Voy, a 32-year El Dorado Hills resident and former volunteer firefighter called his fire district a “great outfit, one of the best in the state,” but then said its’ spending – $8 million in six months – “out of control.” The district’s December Revenue and Expense Summary shows that spending through six months is $1.4 million over revenue.
“We can’t go sucking $2 million to $3 million per year out of the reserve,” said Voy. “It’s been Candyland here for a number of years because of the tax structure.”
Haverty was brought in on a $25,000 contract to guide the district through the replacement of recently retired Chief Brian Veerkamp and to make budget and staffing recommendations. He addressed the board on March 17 and spoke highly of the cooperation and initiative he witnessed between the union leadership and the administration.
Haverty recapped home ownership and employment trends in El Dorado Hills and projected their likely effects on the district’s life blood – property tax revenue. He warned that any upbeat national economic stories must be tempered by that fact that California, especially the Sacramento region, is lagging behind the national recovery. The good news, if any, is Haverty said, “We appear to be at or near the bottom market value for home sales.”
Property tax revenues dropped 8.4 percent last year. El Dorado County Auditor-Controller Joe Harn has warned the district to prepare for at least another 5 percent revenue reduction in the 2011-12 budget year.
Haverty encouraged the board to stretch the current “incremental” budget process, which uses last year’s activity to predict next year, to a multi-year “performance budgeting” approach, which allows greater flexibility to stretch the impacts of future revenue downturns over multiple years.
“I don’t want the public to think we don’t do long-term planning,” said Director John Hidahl. “We have a five-year strategic plan and a day-long public meeting every year where we update it. It paints a pretty strong picture of what we anticipate in the foreseeable future.”
The district’s 2010-11 budget has $9.5 million of a $23.8 million reserve designated for equipment replacement, retiree medical costs and other known future liabilities, leaving $14.3 million in the general reserve. Haverty suggested the board review the district policy that mandates retaining a full year’s operating revenue in reserve. The policy locks up $13.6 million of the $14.3 million undesignated reserve balance for fiscal year 2010-11. “That’s very high,” he said. “Ten to 25 percent of operating expenses is common.”
Haverty proposed a 20 percent reduction in operation costs, knocking just more than$200,000 off the 2011- 2012 budget, only to be upstaged by the administration, which has proposed $260,000 in cuts to office supplies, housekeeping, tools, professional services, facility maintenance and travel expenses.
“I’m cleaning toilets,” said an impassive interim Chief Jim O’Camb during followup discussions in his office. “We’ll cut out a lot of things around here before we start closing stations.”
Station 87, located in the El Dorado Hills Business Park, only responds to one call every three nights, most of which are to the north, within range of Station 85. That makes it a target for cost reduction measures. Haverty’s core budget recommendation centers around shuttering it from 8 p.m. to 8 a.m. daily, and then inticing three captains, all at the top of their pay grades, and one chief to retire.
The current attrition incentive, $75,000 cash or two years PERS vesting, has only motivated former chief Veerkamp and one captain to leave. The working group identified four district employees considering retirement in the next few years and possibly willing to leave earlier “under a slightly different package,” said Haverty. The board is currently considering how to incent the chief and captains to retire. Losing one chief lays the groundwork for a reorganization of senor administration. O’Camb reported that the administrators themselves have tentatively agreed to a plan that would eliminate the deputy chief position, shifting responsibilities down to the battalion chiefs and captains.
Depending on whether Veerkamp’s position is filled by one of the two internal candidates, (O’Camb and Battalion Chief Dave Roberts are both in the running) or an outside candidate, the savings will range from $900,000 to $1.2 million annually, including the cost of the retirement packages. The captain vacancies would be filled at entry level salaries, providing firefighters some upward mobility.
Haverty argued said the attrition and administrative reorganization would be transparent to the public. “The impacts are all at the administration level,” he said. A “working group” consisting of members of the administration and union leadership suggested the attrition plan, and defined several other potential cost cutting measures, including reform of education incentives, vacation policies, dental benefits and PERS contributions, all benefits won in prior contract negotiations.
Dropping Station 87 to a two-person non-engine company was also considered, as was moving one firefighter from Station 85’s ladder truck at to Station 87. If tax revenues continue to decline, Haverty suggested the board consider closing Station 87 completely, which would save another $2.3 million annually, or only open it on high risk “red flag” summer days. Even with cuts, attrition and reorganization, Haverty said the reserve must be tapped for between $300,000 and $1.1 million per year over the next few years, depending on future tax revenues and the results of the firefighters’ contract negotiations.
Board President Greg Durante thanked the administration and union leadership for their “tremendous cooperation” and praised the efforts of Directors Barbara Winn and John Hidahl, who sit on the newly consolidated Budget and Negotiating Committee. To Voy and two other residents that challenged the district to tighten its belt, he added, “Everything you say is absolutely true and being taken into consideration.”