october 12, 2004 - board of supervisors agenda item · 12/10/2004 · in considering the prior...

DEPT: CHIEF EXECUTIVE OFFICE BOARD AGENDA# B-17

urgent Routine AGENDA DATE October 12 , 2004

CEO Concurs with Recommendation -ifso- YES 415 Vote Required YES (Inform tion Attached)

N O ? .

SUBJECT. CONSIDERATION OF A REQUEST FROM THE STANISLAUS CONSOLIDATED FIRE PROTECTION DISTRICT FOR AN ADDITIONAL ADVANCE OF FUTURE DISTRICT REVENUES AND CONSIDER SPECIFIC CONDITIONS FOR THE REQUESTED ADVANCE

STAFF RECOMMEN- 1. CONSIDER A REQUEST FROM STANISLAUS CONSOLIDATED FIRE DATIONS: PROTECTION DISTRICT FOR AN ADDITIONAL ADVANCE CONSISTENT

WITH SECTION 203 10 OF THE GOVERNMENT CODE.

2. RECEIVE AN UPDATE FROM STAFF REGARDING STANISLAUS CONSOLIDATED FIRE PROTECTION DISTRICT FINANCIAL STATUS.

3. CONSIDER IMPOSING CERTAIN CONDITIONS ON THE DISTRICT FOR THE ADVANCE OF ADDITIONAL FUTURE DISTRICT REVENUE.

(Continued Page 2)

FISCAL The Stanislaus Consolidated Fire Protection District is an independent public agency, which IMPACT: is governed by a Board'of Directors. The Board of Supervisors does not have authority or

control over the operations of the District. The Stanislaus County Consolidated Fire Protection faces a financial crisis. For the past two fiscal years, the District has spent more funds than collected in revenue and as a result has accumdated a significant cash deficit. On August 3,2004 the Board of Supervisors approved the advance of $500,000 and again on August 24,2004 an additional $600,000 to Stanislaus Consolidated Fire Protection District consistent with Government Code Section 230 10. (Continued Page 2)

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BOARD ACTION AS FOLLOWS: NO. 2004-81 0

On motion of Supervisor ---- !??!!I_ ---------------------I_ , Seconded by Supervisor ---- Ma_~iel_d_--iiiiiiiii----- and approved by the following vote, Ayes: S u p e ~ i s o r s : ~ P ~ ~ l ~ ~ a ~ i e I d ~ ~ ~ ~ ~ e r , ~ ~ ~ ~ _ n ~ ~ ~ r l d ~ ~ h a i ~ r n ~ a n ~ a ~ u _ s _ Q ....................................... --- Noes: Su~ervisors:-Nm~ .................................................................................... Excused or Absent: Supervisors:N~u~ ........................................................................ Abstaining: Supervisor:N~rm ................................................................................ 1) X Approved as recommended 2) Denied 3) Approved as amended 4) Other: MOTION: APPROVED THE REOUEST; APPROVED IMPOSING CERTAIN CONDITIONS ON THE DISTRICT;

AND. THE AGREEMENT, INCLUDING THE FINAL CONDITIONS, WILL BE RETURNED TO THE BOARD FOR APPROVAL

ATTEST: CHRISTINE FERRARO TALLMAN, Clerk File NO. DF-20-A-3

Click Here to Return to Age - c13N S ~ L I ~ K A 1'1 F A REQUEST FROM THE STANISLAUS CONSOLIDATED FIRE PROTECTION DISTRICT FOR AN ADDITIONAL ADVANCE OF FUTURE DISTRICT REVENUES AND CONSIDER SPECIFIC CONDITIONS FOR THE REQUESTED ADVANCE PAGE 2

STAFF RECOMMENDATIONS (Continued)

4. AUTHORIZE THE CHIEF EXECUTIVE OFFICER TO FINALIZE AND EXECUTE ALL NECESSARY AGREEMENTS AND CONDITIONS APPROVED BY THE BOARD OF SUPERVISORS ASSOCIATED WITH ANY FURTHER ADVANCE OF FUNDS.

FISCAL IMPACT (Continued)

The District has exhausted this funding and does not have the cash to cover costs currently being incurred. The District has no operating funds past the October 13 payroll for its employees.

As of September 30,2004, the District has a total cash operating deficit of $2,002,189.40. As of September 30,2004 if the District's restricted funds were to be counted, the total cash deficit would have been $1,088,277.94, however the District has committed use of a portion of these funds for payments for equipment and apparatus.

Under State law, a county may advance, by Board resolution, 85% of the district's annual anticipated revenue. These advanced funds shall be repaid to the County Treasury with interest, out of the District's revenue prior to payment of any other obligation of the District.

The District submitted a business plan to the Board of Supervisors on August 24,2004, which committed to obtaining a private loan to repay the accumulated deficit. In addition, the business plan called for the refinancing of four of their six fire apparatus so that the debt payment could be delayed until after the first of the year.

The District was not able to secure private financing and while they refinanced their fire vehicle debt payments, the first payment was due September 27,2004, during the height of the cash flow crisis. District counsel demanded this payment be made by the County, because the payment was to be taken from District restricted funds.

In considering the prior advances of cash, the Auditor-Controller had included all District cash in the County Treasury including the restricted funds. The District's legal counsel demanded and a subsequent written request was received on October 7,2004, for the $196,247 payment of the District obligation for the fire apparatus refinancing. Initially it was believed that this change would eliminate any consideration of the District's restricted funds when evaluating the overall cash position of the District. However, discussions with the Auditor-Controller and County Counsel have determined that all current contractual debt obligations for the District's debt payments on all of their financed fire apparatus to be paid from restricted funds, would be excluded when determining the District's overall cash position, and not the full amount of cash in the restricted funds. As a result, the cash deficit in the General Fund including the October 13,2004 payroll is projected at $2.15 1 million. District obligations on their restricted funds for all six of their fire vehicles is $267,826, which would leave $646,085 of District unrestricted cash that we believe has not been obligated. If the net of the restricted funds is applied to the General Fund deficit, the net cash deficit is $1.5 million.

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L W N ~ E R A T I O N OF A REQUEST FROM THE STANISLAUS CONSOLIDATED FIRE PROTECTION DISTRICT FOR AN ADDITIONAL ADVANCE OF FUTURE DISTRICT REVENUES AND CONSIDER SPECIFIC CONDITIONS FOR THE REQUESTED ADVANCE PAGE 3

Government Code Section 23010 permits the County to advance 85% of District revenue. If the District's revenue assumptions for Fiscal Year 2004-2005 materialize, the total District revenue to be considered for the advance calculation would be $4.7 million. This does not include some of the District one time revenue and half of the revenue the District budgeted for the County contracts ("Agreement to Provide Fire Protection and Emergency Services" and "Agreement to Provide Less than County Wide Fire Services"). Excluding a portion of this revenue is because this is a County revenue for which two contracts for services exist. It was determined that a portion of this revenue should be excluded in the event the District is not able to meet the obligations under these contracted services in the second half of the fiscal year. Eighty-five percent of $4.7 million or approximately $4 million represents the total amount of funding that can be advanced to the District.

As of June 30,2004, the District's General Fund deficit, excluding restricted funds, was $967,909, as of September 30,2004 was $2,002,189, and as of the October 13 payroll, the deficit is projected to be $2,15 1,000. This deficit includes the $34 1,000 advanced for July expenses. The additional funds that can be advanced to the District for the entire fiscal year would be approximately $1,586,091.

For illustration purposes:

Total Anticipated District Revenues $4,700,000 (Includes ?4 of both County contracts) x 85% $3,995,000

Minus Advances to Date: Accumulated deficit ($ 967,909) July Expenses ($ 341,000) August 3 Advance ($ 500,000) August 24 Advance ($ 600,000)

Remainder of 85% $1,586,091

While the Board can advance these funds as part of the District's "dry period" financing, as revenue materializes, this does not correct the District's negative cash balance in their General Fund. Previous advances were made based on the District's commitment to obtain a loan for the prior year operating deficit in the General Fund. This has not occurred to date. The District has two options to address the deficit: 1) obtain outside financing or 2) reduce their budget. The District voted to place an assessment increase on the ballot for District property owners that will significantly increase District revenue, but not until next Fiscal Year. The results of the election will be known in December, and if approved, increased revenues will not be collected until December 2005. Should it pass, the likelihood of the District obtaining outside financing is improved. The assessment will bring new revenue and cash next fiscal year, but provides no immediate relief to the current cash crisis. A loan will be needed to fund the accumulated deficit.


CONSIDERATION OF A REQUEST FROM THE STANISLAUS CONSOLIDATED FIRE PROTECTION DISTRICT FOR AN ADDITIONAL ADVANCE OF FUTURE DISTRICT REVENUES AND CONSIDER SPECIFIC CONDITIONS FOR THE REQUESTED ADVANCE PAGE 4

The next major influx of District revenue will occur in December. An analysis of District cashflow, including restricted funds, indicates that by the end of December, even with significant General Fund revenue receipts the District would be out of cash.

DISCUSSION:

On August 3,2004 the Board of Supervisors approved the recommendation to advance up to $500,000 to the Stanislaus Consolidated Fire Protection District to cover operating costs for Fiscal Year 2004-2005. An additional advance of $600,000 was approved by the Board on August 24, 2004. These two advances were in addition to District costs paid in the month of July of $341,000. The Board's action approving the two advances, was intended to give the District time to seek a loan for their General Fund deficit in order to ensure there was no interruption to the critical fire and emergency medical services provided to residents of Stanislaus County.

The District Chief presented a business plan on August 24,2004. The plan included a number of recommendations, including refinancing of District fire apparatus and assurance that a private loan would be obtained. The District entered into a security agreement with the County to ensure that the advance of District funds would not negatively impact the County General Fund.

There is no immediate private financing in place or even imminent at this point. The District will have exhausted the additional $600,000 advanced with the October 13 payday. A number of District bills owing as of the end of September have not been paid at an estimate of approximately $225,000. These costs include District retirement payments, building utilities/maintenance costs, Fire Chief salary reimbursement to the County, financial/legal/appraisal costs and past due payments to the County's Strategic Business Technology Department.

The August 24th business pan submitted by the District included refinancing of new fire apparatus and delay of the payment until January 2005. The District did not complete the refinance as planned, as the first payment date was due on September 27,2004. This $196,247 payment has been made out of the District's restricted funds, which has served to further exascerbate the District's cash deficit.

Additional advances from the County without a balanced and responsible spending plan for Fiscal Year 2004-2005 and beyond is a risk for the County General Fund. The District has not secured private funding because it cannot demonstrate a balanced operating plan and is unable to identify sufficient assets to secure private financing. December represents the greatest influx of District revenue, although it is anticipated that even if the District pays only the most minimal of its expenses they would be in a negative cash position by the end of December.

It is the County's opinion that the District will not be able to obtain a private loan without a credible business plan, assurance of management stability and change and a balanced operating budget.

At their October 6,2004 meeting, the Board of Directors of the District voted not to pursue bankruptcy and to seek assistance from the County. The District has requested an advance. A copy of their request is attached. At the same meeting, the Board of Directors approved an increased assessment to be voted on by District property owners.

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CONSIDERATION OF A REQUEST FROM THE STANISLAUS CONSOLIDATED FIRE PROTECTION DISTRICT FOR AN ADDITIONAL ADVANCE OF FUTURE DISTRICT REVENUES AND CONSIDER SPECIFIC CONDITIONS FOR THE REQUESTED ADVANCE PAGE 5

If the Board of Supervisors considers approving an additional advance, it is clear that without private financing, stable governance and management and approval by the voters of the new assessment, the district may not be able to continue without significant service reductions in 2004- 2005.

If the Board of Supervisors considers approving an additional advance, it is recommended that the advance would be contingent upon the District agreeing to conditions to the advance. It is recommended that the District agree to a number of conditions. These conditions would address the financial management crisis facing the District and cause the District to re-evaluate its overall structure and organization. Management oversight must be provided immediately to the district. This is necessary for the District's success in securing a loan. County staff believes any lending agency will require confidence in those responsible to lead the District out of its financial crisis before any loan is approved. A sound management plan and business plan and a balanced budget for 2004-2005 must be implemented immediately. The District would be required to guarantee that there would be no interruption of vital fire and emergency services. The conditions would require a close, outside view of the District spending plan and revenue projections and preclude the District from entering into new obligations until their debt is repaid. The District would be required to provide the Board of Supervisors notice prior to entering into any bankruptcy action. Finally, the District would be required to once again sign a security agreement that the County Treasury would be repaid for all funds advanced the District in order to protect the County General Fund from any future liability. The actual amount of the advance would not exceed $1,586,091 for the remainder of the fiscal year and the Auditor-Controller would continue to approve all payments from the

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advanced funds.

As of this writing, the County staff is working to respond to the action taken by the Consolidated Fire Protection District Board of Directors at their meeting of October 6,2004. Contingent upon the direction and approval of the Board of Supervisors, the County and the District would need to finalize and execute an agreement prior to any further advance of future District funds. County staff will prepare a full presentation for October 12,2004.

POLICY ISSUE:

In considering this report and any recommended actions to be taken, the Board members may evaluate whether their stated goals of ensuring a safe, healthy community, achieving multi- jurisdictional cooperation and modeling community leadership is achieved.

STAFFING IMPACTS:

County Executive Office, County Counsel, Auditor-Controller and County Fire Warden staff has devoted significant staff time to this issue.

Stanislaus Consolidated Fire Protection District 3705 Oakdale Road

Modesto, California 95357 Phone (209) 552-3700

Fax (209) 552-3705

October 8,2004

County of Stanislaus 1010 loth St Modesto, CA 95354

RE: Request for Loan; Fiscal Year 2004-2005

Gentlemen and Ladies,

At a properly noticed Special Meeting of the Board of Directors ("Board") of the Stanislaus Consolidated Fire Protection District ("District") held on October 6,2004, the District Board authorized a request for a loan or "dry-period" financing from the County of Stanislaus for the 2004-2005 fiscal year. On October 7,2004, the District Counsel requested an indication as to the procedure to be followed. The District requests the balance of the referenced 85% of annual district revenues as determined by the County Auditor-Controller.

This request is made under the provisions of Government Code sections 23010,23010.1, and applicable law. Additionally, the District will ensure that the County Auditor-Controller is made aware of all components of the District's revenue stream. Also, District staff is reviewing all sources of reimbursement from third parties to also assure adequate District finances.

If the form of this request needs to be different, please notify as soon as possible.

Your consideration of this matter is respectfully requested.

Sincerely, /- /

Joe Housewright Board President

cc: District Board Members Lyn Rambo, District Chief William D. Ross, District Counsel Matt Criswell, Union Representative Union 3399

BOARD OF SUPERVISORS

Pat Paul, 1'' District Thomas W. Mayfield, Yd District

Nick W. Blom, fd District Raymond Clark Simon, dfh ~is f r ic t

Paul W. Caruso, !ith District

1010 Tenth Street, Suite 6500, Modesto, CA 95354 Phone: 209.525.4494 Fax: 209.525.4410

striving to be the Best

October 13,2004

Mr. Joe L. Housewright, Chairman Stanislaus Consolidated Fire Protection District

3705 Oakdale Road Modesto, California 95357

Dear Mr. Housewright:

On October 6,2004, the Stanislaus Consolidated Fire Protection District requested an additional advance of annual revenues for the District to provide immediate fimding for the District's cash and financial crisis. At the regularly scheduled October 12,2004 meeting, your request was considered by the Board of Supervisors.

As you know, the Board of Supervisors and County staff are extremely concerned about the District's financial crisis. In addition to the accumulated cash deficit in the General Fund, as of June 30,2004 of $967,909, funds have already been advanced for July ($341,000), and two additional advances were approved in August ($500,000 and $600,000). Because of the seriousness of the District's financial problems, the County is very concerned that most of the anticipated revenue still to be collected for the 2004-2005 fiscal year will be spent with this additional advance.

The Board of Supervisors approved the County staffs recommendation that any further advance, up to the 85% allowed by law, of annual revenues be conditioned so that the District can return to fiscal stability. It is the County's interest in this matter to ensure that there will be no interruption of fire and emergency services for the community you serve.

The Board of Supervisors will agree to the additional allowable advance only based upon adoption of conditions which ensure that the emergency and fire services you provide will not be interrupted, that fiscal accountability and both short and long range planning begin immediately, through the direction of a Management Oversight Committee led by the County Fire Warden and appointment of a Community Based Fire Service Advisory Committee.

Recommended Conditions

.A*

Stanislaus Consolidated Fire Protection District October 2004


1. District agrees to provide County at least 120 days written notice if the District intends to file bankruptcy.

2. District agrees that the County will designate a Management Oversight Committee led by the County Fire Warden to assist the financial and service recovery for the District; and to assure the delivery of uninterrupted fire and emergency services.

3. District agrees to work closely with a Fire Service Advisory Committee appointed by the County, to include representatives from the City of Riverbank, City of Waterford, the effected Municipal Advisory Committees (MACs), and business and community leaders to bring expertise to develop a proposal for governmental reorganization of the District through the LAFCO process.

4. District agrees to prepare a balanced budget working with the Management Oversight Committee which shall be submitted to the County within the next thirty days to reduce expenses in order to address their General Fund deficit and identify any options to avoid major service reductions.

5. District agrees not to use restricted funds for any other purposes other than that specifically contractually obligated for District fire apparatus.

6. District agrees to not enter into any additional contractual financial obligations without prior notification and discussion with the Fire Service Advisory Committee until such time as the financial obligations to repay the County's advances have been fully met.

7. District agrees to take all necessary actions to remain solvent throughout the Fiscal Year 2004-2005.


8. District shall take all necessary steps to secure a private loan in the amount of the current accumulated District General Fund cash deficit, prior to December 31,2004.

9. District acknowledges the County's intent to seek requests for proposals for services provided under the contract for the Less than County-Wide Fire Services Fund as recommended in the Adopted Proposed 2004-2005 Stanislaus County Budget.

10. District agrees to work with the Management Oversight Committee to prepare a reduced service level plan for continued provision of emergency services and options that forecast service scenarios in the event the new assessment is not passed by the voters in December, 2004.

11. District agrees to execute an additional security agreement with the County regarding all funds advanced to the District by the County.

12. County agrees to provide an incremental cash advance to the District based on a request prepared by the Management Oversight Committee for actual and essential District expenses on a biweekly basis. This cash advance will not exceed $1,586,091 for the remainder of the 2004-2005 Fiscal Year.

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AGREEMENT

THIS AGREEMENT is made and entered into by and between Stanislaus Consolidated Fire Protection District (hereinafter referred to as "District") and the County of Stanislaus (hereinafter referred to as "County").

RECITALS

WHEREAS, the Stanislaus Consolidated Fire Protection District is in a financial crisis and has an accumulated cash deficit of $2,002,189 as of September 30, 2004;

WHEREAS, District accumulated a $967,909 operating cash deficit in the General Fund as of July 1, 2004 and incurred an additional $341,000 in expenses for July 2004;

WHEREAS, on August 3, 2004, the Stanislaus County Board of Supervisors approved an advance of $500,000 to District pursuant to a request from District under Section 20310 of the Government Code;

WHEREAS, on August 24, 2004, the Stanislaus County Board of Supervisors approved an additional advance of $600,000 to District upon a request from District pursuant to Section 20310 of the Government Code;

WHEREAS, District was unable to secure private financing and resolve their fiscal crises, the District requested an additional advance of the 85% of the remaining balance of annual District revenues as determined by the Stanislaus County Auditor-Controller be advanced to the District;

WHEREAS, the Stanislaus County Board of Supervisors at the October 12, 2004, Board Meeting, approved an additional advance of District revenue conditioned on the District executing all necessary agreements with conditions approved by the Stanislaus County Board of Supervisors with final agreement as executed by the Stanislaus County Chief Executive Officer not to exceed $1,586,091 for the remainder of the 2004-2005 Fiscal Year;

WHEREAS, at a special meeting of the Stanislaus Consolidated Fire Protection District on October 14, 2004, the Board of Directors approved the acceptance of twelve (12) conditions imposed by the Stanislaus County Board of Supervisors for receipt of the additional advance; and

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:

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1. That the County will implement the October 8,2004 request by District for an additional incremental advance of funds pursuant to Government Code section 20310 upon conditions set forth below.

2. The District agrees to the twelve (12) conditions set forth below for the advance of additional funds requested by District in a letter to the Stanislaus County Board of Supervisors and considered by the Stanislaus County Board of Supervisors on October 12, 2004.

3. District acknowledges that they understand and agree to the twelve (12) conditions set forth below by County for the advance of additional funds to District pursuant to Government Code Section 2031 0.

A. District agrees not to file a bankruptcy petition within sixty (60) days of the execution of this Agreement. After sixty (60) days from the execution of this Agreement, District further agrees to provide County notice, that is reasonably foreseeable and no less than twenty-one (21) calendar days regarding the District's plan to take action consistent with seeking bankruptcy protection under the United States Code to ensure the provision of fire and emergency services.

B. District agrees that the County will designate an Ad Hoc Management Oversight Team led by the County Fire Warden to assist the financial and service recovery for the District; and to assure the delivery of uninterrupted fire and emergency services.

C. District agrees to work closely with a Fire Service Advisory Committee appointed by the County, to include representatives from the City of Riverbank, City of Waterford, Stanislaus Consolidated Fire Protection District, the effected Municipal Advisory Committees (MACs) and local fire, business and community leaders to bring expertise to develop a proposal for governmental reorganization of the Distri~t through the LAFCO process.

D. District agrees to prepare a balanced budget working with the Ad Hoc Management Oversight Team which shall be submitted to the County within the next thirty days to reduce expenses in order to address their General Fund deficit and identify any options to avoid major service reductions.

E. District agrees not to use restricted funds for any other purposes other than that specifically contractually obligated for District fire apparatus or equipment.

F. District agrees to not enter into any additional contractual financia! obligations without prior notification and discussion with the Fire Service Advisary Committee until such time as the financial obligations to repay the County's advances have been fully met.


G. District agrees to take all necessary actions to remain solvent throughout the Fiscal Year 2004-2005.

H. District shall take all necessary steps to secure a private loan in the amount of the current accumulated District General Fund cash deficit, prior to December 31,2004.

I. The District acknowledges they have a responsibility under the Agreement dated November 27, 1998, to Provide Less Than County Wide Fire Services. The District acknowledges the County's rights and obligations under this Agreement to ensure these fire services provided to other districts are performed in accordance with the Less Than County Wide Fire Services Agreement. The District acknowledges the County's rights to terminate the Less Than County Wide Fire Services Agreement in accordance with the contract provisions. In addition to those rights, the parties acknowledge that this matter is appropriate for consideration of any governmental reorganization that proceeds through the LAFCO process.

J. District agrees to work with the Ad Hoc Management Oversight Team, to prepare a reduced service level plan for continued provision of emergency services and options that forecast service scenarios in the event the new assessment is not passed by the voters in December, 2004.

K. District agrees to execute an additional security agreement with the County regarding all funds advanced to the District by the County.

L. County agrees to provide incremental cash advances of District funds to the District based on a request of the Ad Hoc Management Oversight Team for actual and essential District expenses. The cash advance will not exceed $1,586,091 for the remainder of the 2004-2005 Fiscal Year.

4. This Agreement contains the entire agreement of the parties and no representations, inducements, promises, or agreements otherwise between the parties, not embodied herein, or incorporated herein by reference, shall be of any force or effect. Further, no term or provision hereof may be changed, waived, discharged, or terminated unless the same be in writing executed by the parties above.

5. If any portion of this Agreement or application thereof to any person or circumstance shall be declared invalid by a court of competent jurisdiction or if it is found in contravention of any federal, state or county statute, ordinance or regulation, the remaining provisions of this Agreement or the application thereof, shall not be invalidated, thereby and shall remain in full force and effect to the extent that the provisions of this Agreement are severable.


Executed this day of October, 2004.

STANISLAUS COUNTY CONSOLIDATED CHIEF EXECUTIVE OFFICE

-- i -- %-\<\:-. -. ,

Richard W. Robinson Chief Executive Officer

Dated:

APPROVED AS TO FORM:

By: William D. Ross, Esq. Attorney for District

By: 'A* \?~,d Michael H. Krausnick- Attorney for County of Stanislaus

Dated:

Dated: \ O - ~ Q - O ~

october 12, 2004 - board of supervisors agenda item · 12/10/2004 · in considering the prior...

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