Even with the catch that the state might ask for more money beyond what is contracted, the Morgan Hill City Council approved July 25 a five-year agreement with Calfire to provide the city’s fire and emergency medical services.
The total contract amount is $19.2 million, with an option by Calfire to raise the price by 2.5 percent annually for inflationary costs starting in 2014. The contract will save the city about $800,000 per year compared to its current contract with Santa Clara County, city staff said.
The contract, which follows standard contract language used by the state department of general services for such agreements with municipalities, also allows Calfire to recover additional costs beyond the agreed-to amount. If the state firefighting agency invokes that option while under contract with the city, it could affect service levels or general fund expenses, according to council members and city staff.
However, the council is not too worried about that possibility, as the city’s contact with other cities and counties who have contracted with Calfire in recent years indicates that, for the most part, such uncontracted price hikes are unlikely.
Mayor Steve Tate said the risk of the expenses rising dramatically in this way is “minuscule.”
He added that the contract provides the city the same or higher services as its current provider, the Santa Clara County Central Fire Protection District.
The Calfire price averages about $800,000 in annual savings from the current agreement with the county, according to city staff. That savings likely includes the expense of the city buying two county fire stations in Morgan Hill, which has not been enacted yet.
The city paid about $5.6 million for services to the county in 2011-2012.
“Even though the county has done an outstanding job for us, we’ve had assurances that we’re not going to take any loss of service,” Tate said.
The city’s last five-year contract with the county expired June 30, but the two parties agreed to extend the services through the end of this calendar year while the city and Calfire work out the last details of the new contract and make the transition to the new provider.
Councilman Gordon Siebert said despite the possibility of unexpected cost increases over the five-year agreement, he thinks the Calfire contract provides the city with more local control because Morgan Hill will own its two fire stations as a result.
The city must buy the two county fire stations in the city limits – one on East Dune Avenue and one on Old Monterey Road – in order to provide Calfire the infrastructure to serve the city. City Hall is currently in the process of negotiating that purchase.
“I’m (also) hoping the economies for lower costs we project will occur, so we can provide excellent service to residents while not putting much strain on the general fund so we can expand service in other areas” such as senior or youth services, Siebert said.
Because government agencies, such as Calfire and the city for example, are not allowed to make a profit, Siebert also thinks it is unlikely that Calfire will present exorbitant bills for unexpected cost recovery to the city.
If Calfire does present such a bill, the city would have three options, according to city staff. The city could lower the services levels specified in the contract which was just approved; it could pay the costs requested by Calfire; or it could terminate the contract.
Councilman Rich Constantine added that with the new contract, the city will effectively gain a third fire station that will be needed eventually anyway – the Calfire region headquarters station on Monterey Road in south Morgan Hill.
Constantine, a fire engineer for the San Jose Fire Department, noted that “being charged above and beyond (the contracted amount) would obviously negate any savings we might (expect).”
But he too doesn’t think the state will enact such a “bait-and switch” based on its track record.
The council and staff started the effort to seek a new contractor more than two years ago, in an effort to save money without sacrificing service.
Cities and counties throughout the state have shared the same idea in recent years, and some who are served by Calfire – such as the Coastside Fire Protection District in San Mateo County – are even considering dropping Calfire in favor of a new provider, according to media reports.
In Riverside County, which contracts with Calfire and is substantially larger than Santa Clara County, a grand jury report found that Calfire’s “administrative charges” – the extra costs levied beyond the contract amount – rose from $5.5 million to $12.5 million between 2003 and 2008. Officials in that county have been under some pressure to create its own department as a result, according to media reports.