Ten years into a 30-year contract, the city of Fresno wants out of a money-losing agreement to provide firefighting services to a sprawling rural area west of the city.
The Fresno City Council will consider a resolution Thursday terminating the service agreement with the North Central Fire Protection District. The resolution comes two weeks after the council, in a closed session, directed City Manager Bruce Rudd to provide a nine-month termination notice to the Kerman-based fire district.
Rudd said Tuesday that while North Central currently pays the city about $5.1 million per year for the Fresno Fire Department to staff its stations in Kerman, Biola and near Kearney Park and respond to fires and emergencies over a rural area of about 250 square miles, the payments are about $1.9 million short of what it costs for the city to provide the service with 43 firefighters, captains and battalion chiefs.
“We’re not looking to make money. We’re just looking to break even. We’ve got to make a change,” Rudd said. “This isn’t sustainable. … The city cannot be in a position to subsidize fire protection for the city of Kerman and county residents.”
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This isn’t sustainable.
Fresno City Manager Bruce Rudd
There are about 46,000 residents in the North Central service area. When the contract was approved, the district’s firefighting personnel became Fresno Fire Department employees.
Ken Price, a Fresno attorney who is North Central’s legal counsel, and Rudd both said it’s been about a year since the city wrote to the district indicating a desire to renegotiate the terms of the agreement, which was approved by the fire district’s voters in November 2006 and took effect in July 2007.
The agreement includes a formula that establishes what North Central pays to the city, with annual adjustments based on property tax revenue growth in the district or increases in the Consumer Price Index, whichever is lower – and not what it costs the city to cover the three North Central stations. It also allows for the sides to negotiate adjustments in the compensation paid by the district to the city.
Rudd said that subsequent meetings and correspondence over the past year have yielded no movement by the district. “The response I’ve gotten (from the district) is basically, ‘A deal is a deal.’ ”
A March 10 letter from Rudd serving notice that the city was terminating the contract also canceled an April 28 mediation session that had been scheduled for the sides to discuss the matter.
“The plan was to engage in mediation in April, and the district was moving forward with that understanding,” Price told The Bee. “The district was more than willing to go through mediation to understand the city’s point of view, so it’s curious that the city is canceling the mediation.”
But Price added that he doesn’t believe the city has the right to unilaterally terminate the deal. “It appears that the city finds the services more expensive to provide than it prefers, or perhaps that it estimated when it negotiated the agreement with the district in 2006,” Price wrote on the district’s behalf in a March 15 letter to Rudd. “Such concerns are not grounds to terminate.”
It appears that the city finds the services more expensive to provide than it prefers, or perhaps that it estimated when it negotiated the agreement with the district in 2006.
Ken Price, attorney for North Central Fire Protection District, in a letter to the city of Fresno
In a 2006 staff report to the City Council prior to the city’s approval of the agreement, then-Fresno Fire Department Chief Randy Bruegman wrote that the fee structure in the contract “was designed to provide for full cost recovery” for the city. The agreement was unanimously approved by the City Council on Aug. 29, 2006, and approved by then-Mayor Alan Autry about a week later. The contract fee for the city’s services to the district was set at almost $4.4 million per year, subject to the formula for annual adjustments.
The district’s 2016-17 budget estimated North Central’s net compensation to the city under the contract this year at about $5.1 million. But Rudd said the formula artificially caps the contributions compared to the city’s rising costs. Rudd said the city’s collective losses under the service contract will be about $3 million by the end of this fiscal year in June.
“I’m surprised it’s taken this long to get into a deficit,” Rudd said. When North Central’s firefighters became city employees, they entered the city’s scale of step increases for pay, “so automatically those costs are going to go up 5 percent annually because of step increases,” he said.
“So the day we signed this agreement, we were already beginning to lose ground,” Rudd added.
Price’s March 15 letter demands that the city revoke the notice of termination. Otherwise, he warned, “the district will be forced to seek immediate judicial intervention.”
The resolution to be considered Thursday, however, would reaffirm the city’s intention to cancel the contract, effective in December.