Utility Board. Agenda topics. For Meeting of July 14, :00 PM to 9:00 PM City Council Chambers, City Hall. Board Members:

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1 Utility Board For Meeting of July 14, :00 PM to 9:00 PM City Council Chambers, City Hall Board Members: Council Liaison: Staff: Kwan Wong, Chairman, Tim O Connell, Vice Chairman, Tom DeBoer, Susan, Kaltenbach, Stephen Milton, Will Pokorny, Wendy Weiker Council Member Debbie Bertlin Glenn Boettcher, Maintenance Director Chip Corder, Finance Director Francie Lake, Deputy Finance Director Patrick Yamashita, City Engineer Anne Tonella-Howe, Assistant City Engineer Terry Smith, Utilities Operations Manager Asea Sandine, Recording Secretary Agenda topics 7:00 PM Approve Minutes All EMS (Ambulance Cost of Service Study) FCS Group All 2015 Work Plan All Transmitted via Agenda Meeting Minutes Work Plan Next Meeting: TBD

2 UTILITY BOARD REGULAR MEETING MINUTES JUNE 09, 2015 CALL TO ORDER: Vice Chair Kwan Wong called the regular meeting of the Utility Board to order at 7:05 p.m. in the Council Chambers Room at City Hall, 9611 SE 36th Street, Mercer Island, WA. ROLL CALL: Vice Chair Kwan Wong, Tom DeBoer, Steve Milton, Tim O Connell, Wendy Weiker, Kwan Wong and Council Liaison, Debbie Bertlin were present. Susan Kaltenbach was absent. City Staff: Glenn Boettcher, Maintenance Director and Asea Sandine, Recording Secretary were also present. MINUTES: O Connell moved to approve the minutes from the February 10, 2015 meeting. DeBoer seconded the motion. The Board unanimously approved the minutes. REGULAR BUSINESS: BOARD ELECTIONS Staff conducted an election for Chair and Vice Chair. Commissioner O Connell nominated Wong for Chair. Milton seconded the nomination. Commissioner Wong accepted the nomination and was elected Chair. Weiker nominated O Connell for Vice Chair. DeBoer seconded the motion. O Connell accepted the nomination and was elected Vice Chair. WORK PLAN Boettcher advised the Board that Terry Smith, Utilities Operation Manager is resigning in July. The Board requested an update on conservation efforts and the Sewer Plan Update. NEXT MEETING: The next scheduled meeting is July 14, ADJOURNMENT: 7:34 p.m. Asea Sandine Recording Secretary Mercer Island Utility Board Meeting Minutes 1

3 Memo Finance Department To: Utility Board Members From: Francie Lake, Deputy Finance Director Date: July 10, 2015 Re: 2015 Ambulance Utility Rate Update Attached is a draft technical memorandum from FCS Group, which was hired to perform a cost of service study and to update the rate structure related to the City s ambulance (EMS) utility. The City has contracted with FCS Group on a biennial basis from 2004 to 2012, to perform a review and update of the Ambulance Utility Rate. The 2014 rate study was rescheduled for 2015, in order to move this work to a non-budget year. In years between the formal Utility Rate update studies by FCS Group, rates have been adjusted by the increase in the average budgeted costs of four firefighters. Back in 2004, FCS Group was hired to assist the City in updating rates from a flat rate per residential equivalent unit to a rate based on the call demand placed on the utility by different customer classes. This study was based on the 2003 salary and benefit costs of 4 firefighters hired in 1996 to provide capacity to handle simultaneous EMS call volumes. In 2006, FCS Group assisted the City in complying with Engrossed Substitute House Bill (ESHB) 1635, which significantly changed the basis for determining ambulance utility rates. This study resulted in a substantive biennial update of the City s ambulance utility rate model in terms of calls for service and equivalent living units (ELUs) by customer class. The need for a biennial update of the rate model was endorsed by the Utility Board at its February 21, 2006 meeting given the significant development in the City s Town Center and on the Island in general (which is impacting the calls for service and ELUs for each of the customer classes). FCS Group again performed an EMS utility rate update in 2008, where the number of calls for service and equivalent living units (ELU s) were reviewed, and the EMS rates were updated. As part of this study, the Commercial class was divided into 4 groups based on building size, for rate purposes. In 2010, FCS Group was again hired to conduct the biennial Ambulance Rate Update in compliance with ESHB During this study it was found that the revenue being generated by the utility was inadequate to cover the full costs of the 4 firefighters it was originally created to cover. The Board unanimously recommended a rate structure which would fully fund the 4 firefighters. Page 1

4 In 2011, the EMS rate structure was modified to reflect the impact of the new BLS ambulance transport fee implemented in During its budget deliberations, the Council decided to institute a BLS ambulance transport fee in 2011 for a one year trial period to help balance the budget, and then made it permanent. This action had an unintended consequence, driven entirely by Washington State law, of replacing the long standing variable EMS rate structure (with different rates for each customer class based on actual historical experience), with the same flat rate (per equivalent service unit) for each customer class. This flat rate structure was put in place for 2012 rates. For the current EMS utility rate update, FCS group has again reviewed the number of calls for service and equivalent living units (ELU s). There were no new issues or rate structure changes as a result of this study. It should be noted that no changes are recommended to the current 2015 rates. Rather, this analysis is intended to form the basis for the City s 2016 EMS utility rates. FCS Group will give a presentation and discuss the recently completed Ambulance Rate Update at Tuesday night s meeting. Page 2

5 Solutions-Oriented Consulting Memorandum To: Chip Corder, Finance Director Date: June 17, 2015 City of Mercer Island From: Peter Moy, Principal Tage Aaker, Project Consultant RE: Summary of 2015 Ambulance Rate Update BACKGROUND The City of Mercer Island engaged to update the City s 2015 ambulance utility cost of service and rates to reflect updated call information, customer class account data, and costs. In September 2004, the City adopted a new rate structure that replaced the City s prior rate structure of $2 per month per equivalent service unit. The new rate structure continued to fund the estimated salary and benefits costs of four firefighters added in 1996 to provide capacity to handle simultaneous emergency medical service EMS call volumes. In July 2005, the Washington legislature established the process required to set ambulance utility rates by passing RCW According to this law, the rates and charges must be determined through a cost of service study and cannot include capital costs for construction, major renovation, or major repair of physical plant. The cost of service study is intended to identify the costs attributable to the availability of ambulance service and the demand placed on the service. The full cost of the ambulance services is calculated, and then these costs are allocated to availability and demand categories. The availability costs must be uniformly applied across user classifications, while the demand costs must be based on each user classification s burden on the utility. In addition, RCW provides that the costs for exemptions or reductions are a general expense of the utility and are designated as an availability cost to be uniformly spread across the customer classes. Specific examples include: Medicaid eligible persons who reside in a nursing home, assisted living facility, or adult family home, or who receive in-home services, and Designated classes consistent with Article VIII, section 7 of the state Constitution may be exempt from or have reduced rates. In March 2011 the City began charging a fee for ambulance transports, followed in January 2012 by an additional fee for the mileage related to these transports. These revenues are used to offset demand costs. Additionally, during this rate update, approximately 7% of the budgeted King County EMS Levy resources were allocated to cover demand costs. The 7% represents the actual City staff time spent responding to EMS related incidents, or the demand time, relative to total EMS staff time. The remaining 93% is referred to as availability or standby time, which represents the time staff are on-duty and available to respond to an emergency call. Just as in the 2012 study, the updated rates are the same across all customer classes because the 2015 projected revenue from these two resources is greater than the demand costs identified by the cost of service study. As a result, all costs used to develop the updated utility rates are related to availability. Since availability costs must be uniformly applied across all customer classifications, the updated rates are the same for all customer classes. The rate update for 2015 was based on the average salary and benefits costs of a firefighter, multiplied by four, to represent those positions added by the City in For 2015, the total cost was estimated at $528,382. It should be noted that in July of 2011, RCW was updated by Page 1

6 June 17, 2015 Chip Corder, Finance Director Summary of 2015 Ambulance Rate Update Memorandum eliminating the requirement that mandated a specific ratio of support from the General Fund for those utilities established after May Because the City s ambulance utility was created in 1980, and since only about 12% of the City s EMS costs are supported through the utility, these recent changes to the law have no impact on the City. COST OF SERVICE ANALYSIS The first step in the analysis was to update the cost of EMS and ambulance services. The cost allocation process consisted of the following steps: Identifying the costs within the Fire Department budget for administration, facilities, fire, and ambulance/ems services, Identifying additional costs not included in the Fire Department budget but related to the provision of fire and ambulance/ems services, Allocating administrative and facilities costs to each service, Determining the costs for fire and ambulance/ems services, and Dividing the total ambulance costs between availability and demand costs. Exhibit 1 shows the results of the overall allocation and cost of service process to determine the cost of ambulance services. The total cost of $6,550,333 included the Fire Department s 2015 budget ($5,904,438) as provided by City staff, as well as 2015 projected operating costs for facilities ($148,774), fire apparatus lease payments ($236,460), sinking fund contributions for future fire apparatus replacement ($201,772), and liability insurance ($58,889). The facilities costs were part of Building Services 2015 budget and were distributed to the Fire Department based on its share of overall square footage. Exhibit Cost of Service Results Fire & EMS Total Costs $6,550,333 Fire Costs $2,134,607 Ambulance/EMS Costs $4,415,726 Total Availability $4,130,302 Total Demand $285,424 The detailed budget was allocated between fire and ambulance services by directly assigning specific costs to each category, as applicable. Costs directly assigned to either fire or EMS included items such as medical supplies, fire maps, fire protective clothing, fire suppression costs, fire marshal, Page 2

7 June 17, 2015 Chip Corder, Finance Director Summary of 2015 Ambulance Rate Update Memorandum public education, lease payments, sinking fund contributions, and interfund fleet maintenance and replacement charges. The remaining costs were allocated between fire and ambulance/ems services using the following methods: Labor costs for firefighters and battalion chiefs were allocated based on the proportion of service call time to fire and ambulance/ems services, a 22% to 78% ratio, respectively. Service call time represents the time staff are out on a call. This ratio was calculated using the total service call time and average staffing levels for all of the City apparatuses (e.g. ambulances, fire engines, battalion chief s command vehicle, etc.) that were dispatched for emergency response calls in 2013 and This also included time spent responding to those calls that were eventually cancelled. The operating costs for facilities were allocated based on the square footage of facilities used for either fire or ambulance/ems activities. Areas attributable to both activities, such as the dorms, kitchen, and exercise room were allocated using the service call time ratio, at 22% and 78% for fire and EMS, respectively. The cost of the vehicle maintenance contract with the City of Redmond, as well as other costs for operating supplies, repair, and maintenance of fire and EMS apparatuses, were allocated based on the total annual maintenance hours for the Fire Department s fleet. Approximately 24% of the maintenance time was for the City s three ambulances, while the remaining 76% was for the City s fire vehicles. The costs of dispatch, EPSCA (i.e. East Side Public Safety Communications Agency) access fees, radio replacement, repair/maintenance of communications equipment, and computer replacement for mobile data terminals (MDTs) were allocated using total emergency response calls from 2013 and 2014, at 29% and 71% for fire and EMS, respectively. The remaining costs were for items supporting both fire and EMS operations, such as Fire Administration personnel, awards and recognition, liability insurance, training costs, supplies, printing, and staff uniforms. These costs were allocated using the service call time ratio, at 22% and 78% for fire and EMS, respectively. The costs were then allocated to availability and demand based on the service call time and the standby time, a 7% to 93% ratio, respectively. As previously mentioned, standby time represents the time staff are on-duty and available to respond to an emergency call. Total standby time was assigned to fire and EMS based on the service call time ratio, at 22% and 78% for fire and EMS, respectively. The following definitions describe availability and demand costs: Availability costs are attributable to the basic infrastructure needed to respond to a single call for service and include dispatch, labor, training, equipment, patient care supplies, and equipment maintenance costs, and Demand costs are attributable to the burden placed on the ambulance service by individual calls, such as those associated with the frequency of calls, distance from hospitals, etc. The detailed spreadsheets supporting these allocations are included in Attachment A. The rate update for 2015 was based on the average salary and benefits costs of a firefighter, multiplied by four, to represent those positions added by the City in For 2015, this total cost was estimated at Page 3

8 June 17, 2015 Chip Corder, Finance Director Summary of 2015 Ambulance Rate Update Memorandum $528,382. Based on this amount, the General Fund support was determined after accounting for the King County EMS levy funds as well as revenue from ambulance transport fees. According to RCW , transport revenues are to be applied against the demand costs. Because the projected ambulance transport fee revenue of $275,000 plus the $30,635 portion of the King County EMS Levy allocated to Demand were greater than the calculated demand costs of $282,620, the ambulance utility costs for 2015 included only an availability component instead of both the availability and demand components. It should be noted that after offsetting all of the demand costs, the net remaining demand revenue ($20,211) was used to offset some of the availability costs. Exhibit Ambulance Utility Costs Ambulance Utility Revenue Availability Demand Total Requirement Annual Cost $ 4,130,302 $ 285,424 $ 4,415,726 Offsetting Revenues Availability Demand Total General Fund $ (3,186,609) $ - $ (3,186,609) King Co EMS Levy $ (395,100) $ (30,635) $ (425,735) Transport Fee Revenues $ - $ (275,000) $ (275,000) Adjusted Cost $ 548,593 $ (20,211) $ 528,382 RATE ANALYSIS Costs were updated using two years of call data (January 2013 through December 2014) and 2015 customer data from the City s utility billing system. City staff also contacted 24-hour Nursing and Residential Board and Care accounts to confirm the number of beds and the number of Medicaid eligible residents. Consistent with the City s current ambulance utility rate methodology, the revenue requirement for the updated 2015 rates is based on the cost of four firefighters and is in addition to the revenue from transport fees. Because there are no demand costs to distribute, EMS response calls no longer play a role in determining how much of the costs of the ambulance utility each customer class should pay as they did prior to the implementation of the City s transport fee. Instead only an availability charge was calculated, which is the same for every customer across the ambulance utility regardless of what customer class they belong to. An analysis comparing 2015 customer data to the customer account data used in the 2012 study showed an overall increase of 330 equivalent living units (ELUs), or a 3% increase. Multi-family and single-family customer classes represent the largest increases at 305 and 35 respectively, while 24- Hour Nursing has decreased by 18 and commercial has decreased by 2. As discussed above, because there were no demand costs to distribute, emergency response calls no longer played a role in developing the ambulance utility rates. However the call data used for this study was compared to the call data used in the 2012 study (which also included two years of call data) for informational purposes. Overall calls grew by 14%, from 2,905 calls to 3,310 calls for the 2015 study. Calls grew in most customer classes, with Residential Board and Care increasing by 48% and Public/Schools/Other increasing by 25%, while 24-Hour Nursing calls fell by 19%, likely resulting from a closure of a large 24-Hour Nursing customer account since the previous update. Exhibit 3 shows the proportion of ELUs and calls generated by customer group. Page 4

9 June 17, 2015 Chip Corder, Finance Director Summary of 2015 Ambulance Rate Update Memorandum Exhibit 3 ELUs and Calls by Customer Class 10,405 Customer ELUs (2015) 3,310 EMS Calls for Service ( ) Multifamily Residences, 16.6% Single Family Residences 68.7% Multifamily Residences 28.0% Commercial 1.2% Public/Scho ols/other 0.3% Single Family Residences, 38.3% Commercial, 6% Public/Scho ols/other, 18.3% 24-hour Nursing 0.4% Residential Board & Care 1.5% 24-hour Nursing, 6.7% Residential Board & Care, 14.3% The rate calculation followed these steps: The total revenue to be generated from the ambulance rates is $528,382, as shown in Exhibit 2 on the previous page. As discussed above, since the costs related to demand were covered completely by ambulance transport fee revenues and a portion of the King County EMS Levy, the entire revenue requirement (i.e. average cost of four firefighter positions) had to be met through the availability component. The revenue requirement for the availability component was allocated to each customer class based on the number of customer ELUs, excluding Medicaid. For the 2015 study, this annual availability charge for each customer account was $50.78, or $8.46 every two months. Because the calculated bi-monthly rate is only $0.07 less than the already adopted rates, the City may choose to simply keep their adopted rates for The calculated bi-monthly rate for 2015 is a little lower than the current rate by $0.07 or by about 1%. The $8.46 calculated rate represents a 5% increase above the 2012 calculated rate of $8.07 compared to the current rate s 5.7% increase. The City has increased the rate annually based on the increase in salaries and benefits for the four positions. However, the number of ELU s has increased by about 3%, and the cost of service analysis shows that the past rate increases have been slightly offset by an increase in the number of units paying the rate. The small difference between the current rate and the calculated rate shows that the City s method for increasing rates between the rate studies is accurate given a stable ratepayer base. Exhibit 4 summarizes the resulting rates by customer class. The tables also provide a summary of the current rates, for reference. Page 5

10 June 17, 2015 Chip Corder, Finance Director Summary of 2015 Ambulance Rate Update Memorandum Exhibit 4 Rate Schedule Rate Schedule % Existing Calculated Increase Single Family Residences $8.53 $8.46-1% Multifamily Residences $8.53 $8.46-1% Commercial $8.53 $8.46-1% Public/Schools/Other $8.53 $8.46-1% Residential Board & Care $8.53 $8.46-1% 24-hour Nursing $8.53 $8.46-1% Exhibit 5 summarizes the changes in the amount of revenue collected from each class if the newly calculated rates were to be adopted. Each customer class share of the total decrease of $4,163 is in proportion to the number of ELUs. Exhibit 5 Revenue Impact by Class Revenue Revenue Rate Schedule Under Under Existing 2015 Updated 2015 Rates Rates Single Family Residences $ 366, ,229 Multifamily Residences $ 149, ,871 Commercial $ 6,398 6,347 Public/Schools/Other $ 1,382 1,371 Residential Board & Care $ 7,745 7, hour Nursing $ 1,894 1,879 Total $ 532, ,382 Increase / (Decrease) $ $ (2,862) $ $ (1,165) $ $ (50) $ $ (11) $ $ (61) $ $ (15) $ $ (4,163) Looking ahead to 2016, the average cost of four fire fighters per City staff is projected to be $552,417. Assuming the same number of ELUs, this would result in a bi-monthly rate of $8.85, which equates to a 4% increase above the currently adopted rates of $8.53 per bi-month. Page 6

11 ATTACHMENT A SUPPORTING SPREADSHEETS Page 7

12 ATTACHMENT A Page 8

13 ATTACHMENT A Page 9

14 ATTACHMENT A It should be noted that the number of ELUs for Residential Board & Care and 24-hour Nursing may include partial amounts, such as 1.9 Adjusted ELUs for Twilight Adult Family Homes. This is the result of excluding the Medicaid ELUs from the total customer as part of the utility rate calculation. In some cases, the Medicaid ELUs ended up being partial numbers because they had to be converted from beds into ELUs, which is the standardized measure used to adjust customer accounts so that they are equivalent across customer classes (i.e. one ELU is equal to a single family home). Page 10

15 Utility Board 2015 Work Plan Meeting Date January 13 February 10 Agenda Item 2015 Work Plan (Glenn) Cross Connection Control Program Update Process Overview (Francie / Terry) March 10 Cross Connection Control Program Policy Discussion (Francie / Christina) April 14 May 12 June 9 Board Elections July 14 August 11 September 8 October 13 November 10 December 8 EMS (Ambulance Cost of Service Study) (FCS Group) Meeting Potentially Cancelled Storm Water Rate Update (Francie) Sewer Rate Update (Francie) Water Rate Update (Francie) EMS Utility Rates (Francie) Meeting Potentially Cancelled To Be Scheduled: Shorewood Water System (Patrick) General Sewer Plan Update (Anne) Water Advisory Alert Action Plan Update (Confluence Engineering) Sustainability Work Plan (Ross)