What’s next for Fire District 1 billing, contract?

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FD1 invoiceNow that Fire District 1 has given the City of Edmonds a hefty bill for two years’ worth of back pay for its union employees, what happens next?

My Edmonds News explored that question and more during a 45-minute interview with Mayor Dave Earling and City Finance Director Scott James Wednesday.

James said he has been meeting with Fire District 1 officials, as well as his counterparts in the cities of Mountlake Terrace and Brier (which also contract with the fire district and just received large increases in their respective bills) to determine if the city owes all of the $1.67 million it was invoiced for in late August.

“We are doing our due diligence to make sure the number’s real,” James said. “The city’s not questioning the services or what we are getting from the Fire District or the value that our citizens receive, because it’s a great value, great service.”

Earling and James also said they stand behind Earling’s statement – made in a Sept. 16 press release – that the $1.67 million bill for retroactive pay raises — $786,300 for 2013 and $881,392 for 2014 — was surprising to the city.

“The mayor was absolutely right on when he said it was a surprise,” James said. “No one would have anticipated an increase of this magnitude.”

When the city in 2009 signed the Fire District 1 contract to provide fire services for Edmonds, the city’s Fire Department employees became Fire District 1 employees. It was common knowledge that the union contracts for 2013 and 2014 were being discussed and had not yet been settled, and that retroactive pay was on the table, James said. But Fire District 1 had been facing financial challenges during the economic downturn and announced it was cutting staff, and union leaders “were hinting that they were going to ask for minimal increases,” James said.

In addition, James noted that when he served as finance director for the City of Mukilteo prior to coming to Edmonds earlier this year, he sat in on meetings for the Regional Fire Authority, formed to discuss the possibility of regionalizing fire service. During those meetings “the idea was floated that there might even be decreases in labor costs,” James said.

Fire District 1On July 29, the Fire District amended its budget following the settlement of the labor contract. James said that “a concerned citizen” – a Mukilteo resident whom James had known from his time working in that city – called him July 31 and said “did you hear your city’s fire department contract is going to go up by $1.3 million?”

James said he called Fire District 1 the next day, Aug. 1, and was referred to Fire Chief Ed Widdis, who told him, “I don’t know how that number came about. We haven’t even calculated Edmonds’ portion.”

James said he didn’t hear anything more until Aug. 11, when he received an email from Fire District 1 asking for a meeting, which was set for Aug. 21. No number was provided from the Fire District at that time, but the $1.3 million that James had heard about from the citizen was a starting point for expectations, Earling said.

“At least in my family budget, if I was expecting an increase of $1.3 million and then you get a billing of $1.67 million knowing that there’s a 300-and-some-odd- thousand-dollar gap in there, that would surprise me,” the mayor said.

James said the fire district “did not present their number to us until Aug. 21,” when officials hand-delivered to City Hall an invoice for $1.67 million. (While the invoice was dated Aug. 11, the city did not receive it until Aug. 21, James added.)

For the next few weeks, the city performed what Earling described as “due diligence – some early communication with other two cities to get together.” During this time, the finance directors from Edmonds, Mountlake Terrace and Brier met to discuss options, he said. The city’s Sept. 16 news release was issued with the goal of keeping citizens informed of the status, Earling said.

“When you get a number like that, you don’t say, ‘Oh here’s the check and pay it,'” Earling said. “You want to say, ‘OK show us what makes that number up. Since that time the three cities have been going to the district and asking them so we can maybe see if there’s room for negotiations…did they negotiate in good faith? Because the contract says there were certain criteria that they had to meet, so we asked for facts to back that up.”

James noted that his predecessor, Roger Neumaier, who left the Finance Director job in January 2014, allocated an additional $278,000, or 4 percent, in the 2014 City of Edmonds budget for the Fire District 1 contract – for a total of $6.5 million – in anticipation of an increase in fire service fees.

“When we got the bill, it equated to a 26.8 percent increase,” James said. “That’s a number that no one would expect or should expect.”

“If you are getting those kinds of bumps we have to know how they came to the conclusion,” Earling added. “Is there some administrative cost rolled in, is there some apparatus costs?”

Earling and James said that negotiations with Fire District 1 over the final bill will be approached both as a group with the cities of Mountlake Terrace and Brier, as well as separately. While the three cities have “common interests,” Edmonds has a unique service model that the other two cities do not: a dedicated paramedic unit. That was negotiated into the 2010 contract to ensure that Fire District 1’s level of service would match the service that had been provided by the City of Edmonds Fire Department, James said.

That dedicated paramedic unit costs Edmonds more, and it’s possible that Edmonds could receive the same level of service without the extra expense. So it may be an issue “that should be put on the table for the council and mayor to see if that’s what they want,” James said.

“I think in light of this huge bill, we should open up and look at all the options,” James added. “I think that’s good common business sense.”

Fire District 1 has extended the due date of the invoice to Nov. 1, and the Edmonds City Council will have a chance to ask questions of Fire District 1 Chief Ed Widdis when he attends the Oct. 14 City Council meeting. Earling said he plans to meet with each of the city councilmembers prior to the Oct. 14 meeting. “It’s important for them to have context of how and why we got where we are at,” the mayor said.

The council also has a bigger question to address, and that is whether the city wants to continue its current services with Fire District 1, modify those services or pursue other options. The city signed a 20-year agreement that prohibited any changes by either party for the first five years, and that five-year window ends Dec. 31, 2014. From that time on, through the duration of the contract, the city or the Fire District could make changes as long as they provide two years’ notice to the other party, James explained.

Among the options:

  • The city could again start its own fire department, although that would be expensive and require the city to buy fire apparatus because it sold all of its equipment to Fire District 1. (The city did retain ownership of its fire station buildings and property.)
  • It could contract with another entity, such as the City of Shoreline, which is now handling the Town of Woodway’s fire services. Woodway had received services from the City of Edmonds Fire Department and initially contracted with Fire District 1 after Edmonds made the shift. But according to the Town of Woodway’s November 2013 newsletter, a decision was made to switch in January 2014 to the Shoreline Fire Department after receiving a proposal from Shoreline for reduced response times at a lower cost.
  • Edmonds could choose to become part of Fire District 1, which means that the district would tax citizens directly for services. That move would also mean that the City of Edmonds would gain a seat on the Fire District 1 governing board. “We have zero voice currently,” James said. However, the budget impacts of such a move are unclear. “Nobody knows what the cost would be to our citizens,” he said.
  • It’s also possible that interest could be renewed in forming a Regional Fire Authority. Nine jurisdictions – including Edmonds, Mountlake Terrace, Brier, Mukilteo and Fire District 1— initially came together in March 2011 to discuss the planning for a regional fire protection authority. But Edmonds – along with Lynnwood, Woodway, Mill Creek, Mukilteo and Fire District 7 – over time declined to be active participants in the planning process, although all jurisdictions said they would continue to be interested observers.

Meanwhile, Earling and James said that they will include a placeholder for Fire District 1 costs in the 2015 budget, set to be presented to the City Council Oct. 7. ”We’ll have to guessimate what the increase might be on top of whatever the final number is we get for this year,” Earling said, noting that the city is once again in the dark about a final number since the Fire District is now negotiating its 2015 labor contract.

“We are trying to plug in a big number and hope that that’s in the ballpark,” Earling added.

18 COMMENTS

  1. Did FD1 really expect our city to pay an invoice of such a magnitude without providing the detail as to how the amount was determined?

  2. Just walked by Edmonds Fire Station 17 there are two paramedic units located here not one.

    The real question in need of full disclosure is: How is the Esperance Fire District 1 tax revenue ($800,000+) allocated to the operational expenses of Edmonds Fire Station 20?

  3. I am concerned that Mayor Earling would state:

    “At least in my family budget, if I was expecting an increase of $1.3 million and then you get a billing of $1.67 million knowing that there’s a 300-and-some-odd- thousand-dollar gap in there, that would surprise me,” the mayor said.

    Mr. James indicated that the $1.3 million originated when a Mukilteo resident called him July 31 and said “did you hear your city’s fire department contract is going to go up by $1.3 million?”

    James said he called Fire District 1 the next day, Aug. 1, and was referred to Fire Chief Ed Widdis, who told him, “I don’t know how that number came about. We haven’t even calculated Edmonds’ portion.”

    If so, why would Mayor Earling base his expectations on a phone call from a Mukilteo Resident?

    The City’s 2013 and 2014 budgets may indicate that the City had some expectations and that the expectations were much lower than $1.3 million.

    I think previous Finance Directors may have allocated an additional $124,456 in the 2013 City of Edmonds budget for the Fire District 1 contract and an additional $274,221 in the 2014 City of Edmonds budget for the Fire District 1 contract. This totals to $401,667 which is far less than both the strange $1.3 million figure as well as the actual invoice which totals to $1,667,692.

    On September 25, 2014, I asked Mr. James “what was the amount the City expected to pay? As I have yet to receive a response, perhaps the budget provides a clue as to what the City’s calculated expectations were. I get:

    2.00% increase for 2013.

    Another 2.41% increase for 2014

    Using the budget as a guide, the bill for $1,667,692 may identify a “gap” of $1,266,025.

    Hopefully more will be known soon.

  4. Fire District 1’s June 30, 2014 Financial Update document shows that FD1’s original 2014 budget related to the City of Edmonds was $6,537,652. The Edmonds Budget for 2014 was $6,500,000….so the two budget amounts were very close.

    Despite the budget, Edmonds was still paying at the $6,222,779 rate. I believe this was the rate based on the 2012 contract and both FD1 and Edmonds agreed that there would be a retroactive billing at some point in time.

    I think it is reasonable to believe that both FD1 and Edmonds believed the retroactive billing adjustment for 2014 would be in the $277,221 – $314,873 range. Both knew there would be a 2013 retroactive billing adjustment also – I believe Edmonds expected it would be for around $124,456.

    FD1’s June 30, 2014 Financial Update indicates that the Edmonds amount was amended to $7,873,954. This exceeds FD1’s original budget of $6,537,652 by $1,336,302. This is possibly where the resident of Mukilteo came up with his $1.3 million figure.

    If you take the $7,873,954 amount and subtract Edmonds annual payment rate of $6,222,779, you get $1,651,175, which is very close to the $1,667,692 amount we were actually billed.

    Does anybody know where this $1.667,692 cash is going to come from….especially the possible “gap” of $1.266 million?

    • Ron’s figured out the $300,000 difference. I did not know Edmonds was paying less than the $6.5 million budgeted amount. I only saw the FD1 budget for Edmonds and the proposed increase that was in the FD1 Commission meeting packet on line for their July 29 meeting. I assumed Edmonds may have already known about this on a preliminary basis but I called Scott James Edmonds Finance Director to make sure Edmonds was aware of it as I had not seen anything disclosing anything about this elsewhere and knew it would be a shock if not known.

      It is my understanding Edmonds budget for fire service was about $9 million when they contracted with FD1 to provide the same service for about $6+ million, a $3 million a year saving. Questions are now being raised about possible subsidy by FD1 to Edmonds, Brier and Mountlake Terrace using taxes they collect from their unincorporated fire district citizens and whether that is legal. Was FD1 really able to cut 1/3 off the cost of providing Edmonds fire service or has that service been subsidized?

        • Thanks for confirming why there was a $300,000 difference Mr. Pancerzewski. The Fire Chief is going to be at the Edmonds City Council Meeting tomorrow night. Any chance you will attend that meeting? – it would be a pleasure to discuss these issues with you.

        • I had not considered attending the Edmonds Council meeting as I am living in Mukilteo and I will be at a Mukilteo Council workshop tonight, on the subject of parking not fire departments.

          There are 3 Mukilteo Councilmembers that form a Council Safety Committee and they are spending a lot of time on our Mayor’s goal to have FD1 take over our fire dept. Many issues have been raised and things like the retroactive compensation invoice to the 3 cities from FD1 enter into their questions and thinking.

          A large question that has come up is one I mentioned in my response above. That is whether FD1 is subsidizing the cost of providing service to Edmonds, Brier and/or Mountlake Terrace using taxes collected from the 150,000 county residents in FD1–and is that legal. This question surfaced from others not living in Mukilteo or the 3 cities served by FD1. But it may be very important if the actual costs of service are not being billed to the 3 cities. The question if one taxing district (FD1) can subsidize other taxing districts legally. And if not, what is the future risk that the contracts will have to be substantially revised or even retroactively amended so FD1 taxpayers recover any subsidy that may have been enjoyed by the taxpayers in the 3 cities in the past.

          One could ask where FD1 got the money to purchase the fire equipment from the 3 cities as they are not a profit making business with accumulated profits to spend as they see fit or did they borrow the money to buy your equipment? In any case the money was transferred to the cities to purchase their fire and EMS equipment. Does the contract with FD1 result in those 3 cities paying back the amount they spent to purchase the equipment that they now are using to provide the service? If not, who is permanently out of pocket for all that equipment purchase money?

          I won’t go on here as it is not my responsibility to analyze this for Mukilteo or Edmonds but only to point it out to our Council Safety Committee to use as they deem appropriate in their overall evaluation of the FD! takeover proposal. If I learn of other information they might find useful, I will try to pass that along as well.

          You might find it interesting to ask why a Mukilteo resident knew of the added invoice billing on July 28 and the FD1 Fire Chief did not and the Edmonds Mayor did not, and the Council did not learn of it, apparently, until mid September.

          I will pass along to some of the Mukilteo Council tonight that Edmonds is meeting tomorrow night to hear this matter. Maybe one or more of them will chose to attend to get some first hand information.

      • The projected annual savings for the fire contract are $1.2 million not $3 million. The city has expenses related to the three fire stations, as it still owns them. Additionally you must factor in the revenue lost by Edmonds from providing fire service to Woodway and Esperance.

        • I am not speaking from any investigation I have made of Edmonds prior fire service expense but using some information provided to me by someone living outside Mukilteo and Edmonds that is interested in fire service for the area. If his $3 million is incorrect then you should use what you believe is correct as I am not trying to get into what Edmonds should be paying as I don’t live in Edmonds.

          The loss of revenue from Woodway has come up from my other sources and I was told FD1 was to receive the payments for that service that Edmonds received prior to FD1 taking over Edmonds. When Woodway went with Lynnwood the amount they paid no longer went to FD1 I was told but FD! did not try to charge more to Edmonds due to losing that Woodway revenue of about $900,000 a year, I was told. Therefore, FD! may have incurred that much more net expense because it did not cost Edmonds or FD1 much to service Woodway from the Edmonds stations and no stations were closed as a result of Woodway changing fire/EMS service. FD1 appeared to be the loser due to the Woodway shift in providers. Again, I am using information provided to me by others and have not done any investigation of the accuracy of the information. I am just providing the possibility of the above being accurate and the reader can determine how much reliance to put on it or use it to ask questions of those who may have the supportable facts.

        • The $3 million alleged savings by Edmonds is absolutely untrue for the reasons I outlined earlier.

          Woodway is not contracting with Lynnwood for fire service; they signed a contract with Shoreline because FD1’s price was too high for them. The $900,000 figure appears to be bogus. The last contract that Edmonds had with Woodway was for $360,000. It is correct that whatever the revenue was from Woodway, it would have been incremental revenue for FD1, so when they lost the contract they lost revenue but little or no expense.

          The contract that FD1 has with Edmonds does not provide for FD1 being able to increase what Edmonds is being charged as a result of them having lost the Woodway business.

        • You seem to be very close to the information about FD1 and its agreements and invoicing to Edmonds, Woodway and Brier. I am surprised you did not know about the additional billing of $1.6 million before I or Edmonds did and write something about it for the press. Since I have no stake in what happens in those cities, I will stop responding and let you deal with it if you have some connection to one of those cities or FD1. You seem to be satisfied that everything is going as it should and that there is a lot of misinformation going around. You have a chance to set the record straight. I have disclosed that I have not made any attempt to research what I have been saying and just taking information that has been made available to me. You have not disclosed where you are getting your information, hopefully from being intimately involved with the documentation and facts.

        • I am a resident of Edmonds. I was a city councilmember in 2009 when the contract with FD1 was implemented. FD1 certainly would not share information with me before communicating with the city.

  5. Thanks Ron. When I look at the June 30, 2014 interim financials, I see a general fund balance of $ 16,264,476. Do you know if this amount is encumbered or earmarked in any fashion….or is this possible “gap” of $1.266 million only going to use up less than 8% of our available general fund balance? Sorry – government accounting is not my specialty.

    • I can’t answer that. My observation is that every time we get a new finance director a different methodology is used for calculating the EFB. For example, the 2014 budget prepared by Roger Neumaier indicated the EFB to be $4,184,840. Now the 2015 budget by Scott James projects it to be $12,243,656 for 2014; that big delta is not attributable to increased revenue and/or reduced expenses – it has to be methodology. I expect that this and much more will be revealed during the city council’s budget discussions.

  6. One, Woodway does not contract with the the City of Shoreline, they contract with Shoreline Fire District. Two, the cost savings per year for Woodway was a measly $50,000, it wasn’t that much money. Three, there have been problems in sending SnoCo 911 calls to King County, don’t know if that was resolved. Finally, FD1 was picking up a quite a few of the Woodway calls under the mutual aid agreement in the first 3 to 6 months of the year but Shoreline Fire got to bank their money. Shoreline Fire should take all of these calls even though FD1 can respond faster because FD1 customers should not allow Woodway and Shoreline Fire to have a free ride. Shoreline Fire should be required to prove they can meet the minimum average turnout time for their Woodway account.

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