That the City Council receive and file this report on the status of fire services agreement negotiations with the Los Angeles County Fire Department, and provide direction to staff regarding terms and conditions.

In February 2005 the City of La Habra (City) and the Los Angeles County Fire Department (LACFD) entered into a 10-year fire service contract (agreement) for the provision of fire protection services, hazardous materials response, paramedic services, emergency medical treatment services, and other related services. In exchange for these services, the City was assessed an annual fee in accordance with the terms and conditions of the agreement. This fee is adjusted by LACFD each year and there are provisions that cap the annual fee increases (generally up to 4 percent per year) in any given fiscal year, with any excess fees above the cap carried over to the next fiscal year.

Prior to its agreement with LACFD in 2005, the City provided these types of public safety fire and paramedic services to the La Habra community through the City's own municipal Fire Department, which was disbanded once the contract with LACFD commenced. It should be noted that the City contracts separately for ambulance transportation services. The City’s current contractor, CARE Ambulance, provides trained ambulance operators for two City-owned ambulances that work in conjunction with LACFD operations from City-owned fire stations.

In 2014 the City and LACFD negotiated a 10-year contract extension with the same basic terms and conditions of the original agreement. This extension is scheduled to end in February 2025.

LACFD currently provides fire and paramedic services from four City-owned fire stations.  Three are original stations that the City operated prior to the LACFD contract:

As a condition of the original 2005 fire services agreement with LACFD, the City agreed to fund half of the property acquisition and station construction cost for a new fire station, Station 194, on Beach Blvd. The total cost of this project (land acquisition and construction), which was completed in 2010, was approximately $4.55 million. The City funded approximately $2.275 million of this cost, with LACFD paying for the other half. While this fire station is immediately adjacent to the City of La Habra, it is physically located in Los Angeles County in the City of La Mirada at its border with the City of La Habra. The City of La Habra is the sole owner of this property and facility.

The original agreement for fire services included a cost sharing arrangement between the City and LACFD that was subsequently renewed, without change, in 2014 and is currently in place today.  As is detailed in Attachment 1, the current fire resources cost sharing agreement provides for the following:

The result of the current fee sharing arrangement obligates the City to pay for approximately 49 percent of the fire resource costs in La Habra and LACFD pays for approximately 51 percent of these costs. Based on this fee sharing agreement, and using the estimated FY 23/24 resource costs that were recently provided by LACFD (Attachment 1), the City is scheduled to pay approximately $7.7 million for fire resource costs next fiscal year and LACFD will fund approximately $8.0 million.

After additional fire prevention staff costs of $338,000 and LACFD’s 36.5 percent overhead rate, equaling $2.9 million, are added to the cost share formula, the City’s total projected FY 23/24 fire contract costs is estimated at approximately $11 million, with LACFD funding approximately $8.2 million, of the total annual fire services cost of approximately $19.2 million. The $11 million City cost for next fiscal year is approximately 10 percent, or $1 million, higher than this fiscal year's General Fund budget for fire services.

It is staff’s understanding that the original terms and conditions of the fire services agreement, including the cost sharing methodology, was negotiated to not only provide fire services to the City of La Habra, but to also take advantage of the City’s network of fire stations to provide LACFD fire and paramedic services to areas within Los Angeles County adjacent to La Habra.  These areas include the cities of Whittier, La Mirada, and La Habra Heights, as well as unincorporated areas of Los Angeles County.

Based on discussions with former staff who were involved with the original contract negotiations, this is also the primary reason why Station 194 was built, and why LACFD has paid 100 percent of the costs for this station since it went into operation. Staff has reviewed station specific call response data provided by LACFD, which seems to indicate that, on average, approximately one-third of all call responses from La Habra fire stations over the past five years are to areas outside the City, with the vast majority going into Los Angeles County jurisdictions. The highest percentage of these calls are dispatched from stations 191 and 194.

City staff contacted LACFD in late 2022 to begin discussions about another long-term contract extension, as the current agreement is scheduled to end in February 2025. During an initial meeting with LACFD staff in January 2023, it was made clear to the City that, while LACFD would like to continue providing fire services to the La Habra community, LACFD would no longer be able to support a cost sharing arrangement with the City due to their current fiscal constraints and budget challenges. LACFD’s preliminary discussion suggested that, if the City desired to renew this agreement, the City would need to fully fund the cost of fire resources at all stations, with no LACFD cost share.

Based on the FY 23/24 fee estimates provided by LACFD, and assuming current staffing levels and resource allocation at all four fire stations, this proposal would increase the City’s projected fire services costs from approximately $11 million per year to $21.9 million. This would represent a cost increase of approximately 100 percent, or $10.9 million more per year (Attachment 2).

A variation of this proposal (Attachment 3) discussed at that meeting contemplated the potential removal of fire resources at Station 193 and reducing staffing levels at Station 194, as cost saving measures. This proposal; however, still resulted in the City incurring a total fire services cost of approximately $16.4 million compared to the current fiscal year budget of $10 million, representing a 64 percent cost increase.

City staff indicated that this was not a financially feasible proposal based on the City’s historical cost sharing arrangement and due to the limits of the City’s current financial resources and budget capacity. Furthermore, this proposal was not in the spirit of why the current cost sharing arrangement was originally structured. As LACFD’s data seemed to indicate, fire resources from La Habra stations are frequently deployed to respond to calls within Los Angeles County jurisdictions. This utilization was contemplated in the original agreement and built into the cost sharing arrangement with LACFD. The meeting ended with an agreement that additional financial and operational data would be provided to the City for analysis prior to the next meeting.

In March, staff from both agencies met to further discuss these issues. Based on additional data that was provided by LACFD, discussions focused on response times, resource allocation and cost by station, types of calls, call responses into and out of La Habra, call response activity and volume per station, and cost sharing options. There was also an in depth discussion about the origination of this contract, why LACFD had historically funded a portion of the operational cost of certain stations, and the construction and purpose of Station 194. LACFD staff reiterated that, despite these factors, the Department was facing significant budget constraints and that LACFD would no longer be able to provide the level of cost sharing that had been in place since 2005.

At its Regular Meeting of April 3, 2023, City Council reviewed various options regarding fire service provision and directed staff to attempt to negotiate a renewal and extension of the existing LACFD contract for fire services.

The City’s initial formal proposal was to extend the existing fire services agreement for another 10 year term, starting in February 2025, at the current service levels and cost sharing arrangement (Attachment 1).  Staff also requested information regarding the cost to upgrade certain fire stations to provide enhanced paramedic services, as paramedic/medical aid calls make up approximately 85 percent of all fire services calls each year in La Habra.

In response, LACFD provided a counter-proposal in May that reduced staffing at Station 194 to cut resource cost at that station from $4.1 million to approximately $3.2 million, and proposed to split that cost with the City at $1.6 million per agency. Their proposal; however, did reiterate that the City would need to pay 100 percent of all other fire resource costs at stations 191, 192 and 193.

To help control cost, LACFD staff again indicated that the City could consider the removal of fire resources from Station 193. In an earlier discussion, LACFD staff observed that La Habra was more appropriately sized for three fire stations, rather than four. While the removal of fire resources at Station 193 would likely result in longer response times, LACFD indicated that the call responses would still be within their thresholds due to the proximity of the other La Habra Fire stations. To better understand the potential shift from a four station service model to three stations, staff reviewed average daily incident response data with LACFD. Based on the data provided it appears that, over the past five years, LACFD units in La Habra respond to an average of 20 incidents per day, detailed as follows:

This final proposal from LACFD (Attachment 4), assumes the removal of fire resources from Station 193, and results in a total annual FY 23/24 fire cost to the City of approximately $14.1 million. This is $4.1 million higher than the current fiscal year budget, and $3.2 million more than the current cost sharing agreement for next fiscal year. This proposal would reduce the LACFD shared fire costs from $8.2 million in FY 23/24 to approximately $1.8 million.

Staff considered the LACFD proposal, as well as the concept of operating a three fire station format (which had been the format in place in La Habra prior to the LACFD contract). Based on LACFD’s stated need to reduce costs, City staff proposed that, rather than closing Station 193, that Station 194 be closed. The rationale expressed to LACFD was that:

Staff further proposed upgrading fire resources at stations 192 and 193 to provide enhanced paramedic services, and that the City, subject to City Council consideration and approval, could potentially fund more of the fire resource costs at Station 193 while keeping the current fee sharing arrangements in place at Stations 191 and 192.

The City’s proposal (Attachment 5) would result in City costs for FY 23/24 increasing to $11.8 million, which is approximately $1.8 million higher than the current fiscal year budget, and approximately $800,000 more than the current cost model estimates for next fiscal year. This proposal would reduce LACFD costs from $8.2 million in FY 23/24 to approximately $3.6 million.

LACFD considered and rejected this proposal citing unacceptable response times into LA County jurisdictions if Station 194 were to close, and indicated that their previous proposal had not changed (Attachment 3). When asked, LACFD staff indicated that they intend to continue operating Station 194 as an LA County Fire Station if the City’s agreement is not renewed or is terminated early. The agreement allows LACFD the continued use of the City’s property and facility at Station 194 for five years at no lease cost, after which they may continue to lease the facility from the City for an additional six and one-half years, for a total of 11½ years after the end of the contract. The cost for LACFD to continue operating Station 194, even at reduced staffing levels, will be at least $3.2 million per year.

In an attempt to continue good faith negotiations with LACFD and address their stated budget constraints, staff recommends that the City Council consider a final contract proposal (Attachment 6). The general terms of this proposal would include the following:

If approved, this proposal would increase the City’s total fire services costs in FY 23/24 to $12.1 million. This is $2.1 million more than the current fiscal year budget and is approximately $1.1 million more than the current cost model estimates for next fiscal year.  This proposal would reduce LACFD’s annual cost from approximately $8.2 million to approximately $3.4 million, which is very close to what LACFD would continue to spend each year operating Station 194 should the City's agreement not be renewed. This proposal results in annual savings to LACFD of approximately $4.6 million. 

LACFD staff have been consistent in their position that they will not fund more than half of the fire resource cost for Station 194 (currency estimated at approximately $1.6 million per year) as their portion of a new cost sharing arrangement with the City. As such, LACFD may reject this proposal, despite it significantly reducing their annual costs, while increasing the City’s costs and reducing service levels to the community, and opt to either not renew the City’s contract, or to cancel the contract early on a one-year termination notice.

The following table provides annual budget information for fire services from the inception of the LACFD contract through FY 22/23, and includes the current FY 23/24 cost estimates based on the current agreement terms, as well as staff’s current recommended proposal, and LACFD’s last proposal:

Staff recommends that City Council consider and approve the formal submission of the proposed fee sharing arrangement to LACFD as discussed in this staff report and detailed in Attachment 6. Based on the negotiating position taken by LACFD staff to date, it is possible that LACFD rejects this proposal as insufficient and chooses to either not renew the City’s agreement, or terminate it on a one-year notice.

As an alternative, the City Council could consider directing staff to attempt to identify at least $2 million more in additional General Fund budget reductions from the proposed FY 23/24 budget to provide the necessary resources to meet the LACFD’s contractual demands. It should be noted that the City's Finance Department has already made significant budget adjustments and reductions in the proposed General Fund budget to provide sufficient funding to meet the City’s $12.1 million contract proposal, as outlined above. The process necessary to identify an additional $2 million in annual operating funds to meet LACFD’s demands will likely result in significant and adverse impacts to staff positions, programs, services and projects across all other non-fire budgets in the General Fund.

The City’s approved FY 22/23 budget for the LACFD contract is approximately $10 million and the proposed FY 23/24 budget includes an increase to approximately $11 million. Fire services costs are a General Fund obligation; however, the City does program a small amount of these costs (usually less than $100,000 per year) from Public Safety Augmentation funding, when available.

Staff has developed a proposed General Fund budget for FY 23/24 that can accommodate a fire services budget of up to $12.1 million per year that will not adversely impact other department budgets or City Council spending priorities. The allocation of an additional $2 million per year from the General Fund that would be necessary to meet LACFD’s demands will require either additional new revenue sources or significant budget cuts in other General Fund operations.

The Fire services contract discussion is consistent with the following areas of the General Plan:

FS 1.1 and 1.6 – 1.8
NH 2.3 – 2.6
EP 1.4 and 1.6

It is also consistent with the following City Council Goals and Objectives:

Goal 2, Objective B: Regularly review and evaluate programs, services, and professional agreements to assess effectiveness and identify opportunities for greater efficiencies and cost containment.

Goal 6, Objective E: Build and maintain partnerships and collaborations with other local government agencies, the business community, local non-profit organizations, and the faith-based community.

Goal 7, Objective C: Provide and maintain quality public services for our residents, businesses, and visitors.