Santa Paula Council Revisits County Fire Discussion

By Sheryl Hamlin

Item 12 F on the June 20, 2016 Santa Paula City Council was a continuation of the discussion about the viability of Santa Paula’s joining the Ventura County Fire Department.

Background

Santa Paula spends about 16.8% of its budget on the Fire Department, but in actuality the fire department has been underwritten by successful grant writing efforts which have provided hundreds of thousands of biannual SAFER Grants, so the actual percentage of the General Fund is much less.

The chart below taken from the recently approved FY 2016/2017 Santa Paula budget shows the 2016/2017 General Fund operating budget where Fire is $2,523,848 million. Note that there is a SAFER grant in place through 2017.

budget_20162017

The city hired Matrix, a professional consultant, to study options of funding the fire department in a sustainable way. A review of the Matrix presentation was previously published here. The two Matrix options involving Ventura County Fire Department (VCFC) were a) $2,928,443 to join VC Fire District or b) $2,100,000 to contract for one fire station.

It was generally felt at the council that both of these options seemed expensive, but Chief Araiza said subsequently that these were “list prices” and everything was negotiable, so the city granted 100 hours of the Chief’s time to flush out the details.

Chief Araiza’s June 20, 2016 Presentation

The Chief met with the VCFD and LAFCO and returned with the following important information:

  • The process for annexation into the county fire district involves LAFCO. This appears to be relatively straightforward and does not require a vote because theoretically there is no new tax. A tax “swap” is needed in the annexation and subsequent payment.
  • The chief explained the “rate” other cities pay and what this meant in real dollars. The “rate” is a negotiated value and is used by the assessor’s office to calculate the tax swap.

The chart below shows two groups of cities: the top group has joined VCFD (Camarillo, Port Hueneme, Thousand Oaks, Simi Valley, Moorpark and Ojai), while the bottom group (Oxnard, Ventura, Santa Paula, Fillmore) has not joined the county fire district. The charts show the “rate” and the recent annual payment to the county fire department

Cities In Ventura County Fire District

joined_cities

Cities Not In Ventura County Fire District

 not_joined

The chief noted that the monies to fund the VCFD come from the city property tax and that no sales tax is contributed. The obvious benefits include an economy of scale, which small cities cannot obtain. Chief Araiza explained there is a move toward regionalization due to costs. The chief also noted that those who joined earlier have a lower rate, which will be obvious when the calculations unfold.

Analysis

The Chief provided a TRA (Tax Rate Area) report for Ojai, which gave an indication of a single year of contributions to county fire. This was an important piece in the understanding of the funding between the cities and VCFC, which was missing from the Matrix report.

Downloading all available TRA reports for Ojai, the following simple report was produced showing the increase in payments to the VCFD over time.

ojai_history_vcfd

The “rate” column is the “negotiated” value which the Chief described in his report. Ojai’s rate is much lower than the other cities in the “joined” group. Several trends can be seen in this chart:

  • Ojai paid $920,707 in FY 2006-2007 and $1,762,258 in FY 2015-2016, a 91.4% increase over nine years.
  • The “increment” column is increasing chronologically forward.
  • The “rate” increases slightly.

Contacting the County Assessor’s office, I received the following explanation from Ms. Yamaguchi which makes understanding forecasting these costs straightforward.

For each city, explained Ms. Yamaguchi, the ‘increment’ is derived as follows:

Each city, county, special district and school fund (taxing jurisdiction) is allocated an amount of property tax revenue equal to the amount it received in the prior year plus a proportionate share of the change in property tax revenues in the current year. The annual tax increment is the revenue change that arises from the change in Assessed Values (AV) in the Tax Rate Areas (TRA) that a taxing jurisdiction occupies. The annual tax increment is calculated by multiplying the change in AV in the TRA by 1.00%.

So, as a practical example, let’s look at 2015-2016 for Ojai, where the property values have been ramping regularly. The current year Assessed Value for the City of Ojai is $13,959,267.63 and the prior year was $13,224,228.15 for an increase of $735,039.48. Taking the .126284574 “rate” of the ‘rate’ column yields the current year increment of $92,704. Thus, as the property values are reassessed each year, the tax base increases and thus the amount paid to the VCFD increases.

Going Forward

Basing the increases paid to the VCFD on assessed property values is measurable, but also subject to vagaries in the financial markets over which the city and county have no control. As of this moment, property value increases are limited by Proposition 13, but Sacramento, needing money, is considering decoupling commercial property from residential property, in which case Sacramento will receive more money, but the residual effect on counties and municipalities will not mean more money to these governments, but could allocate more money to the county fire department.

A useful study would be the comparison of the increases under the property tax allocation system versus the increases to fund the fire department under current municipal budgeting techniques. There should be enough data in Santa Paula’s history to make such an analysis using hypothetical “rates” of payment.

Clearly, Chief Araiza’s report took the city council a step forward in understanding the implications of joining the county fire department, but a pro forma using potential property tax increases and city general fund obligations should be done. That study, unlike the Matrix study, could be worth $50,000 and it may exist somewhere. This should include various choices for the “negotiated rate” value.

When the property tax revenues are all directed to the VCFD in perpetuity, there is still the matter of funding the rest of the city’s budget, particularly the police, which is where the proposed 1% sales tax increase will enter the picture. That will be covered in a subsequent report.

For more information about the author, visit sheryhamlin.com

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Sheryl Hamlin

Note the OJAI growth rate is about 7.5% compounded annually (CAGR) for fire over the 9 years reported.