Budget: Will the Fire Tax Help the General Fund?

Sebastopol has a $1.7 million deficit. There's a Fire Tax coming up in March of 2024. Will the $1,080,000 Sebastopol is projected to receive if the Fire Tax passes help the town's $1.7M deficit? (I'm using the short form "Fire Tax" but the full title is "Improved and Enhanced Local Fire Protection, Paramedic Services and Disaster Response Initiative.")

The Answer is No. The Fire Tax will not help the City's $1.7M general fund deficit. The Fire Tax is intended to stabilize funding for fire services. It will provide new funding to help fill our current $3.9M to $5.4M funding gap and is not intended to replace or allow the release of amounts currently budgeted for our Fire Services.

The Fire Tax would impose a 2% sales tax increase County-wide. (A 2% increase means an additional 50 cents on every $100 purchase). It requires 50% voter approval to pass.

The County Registrar of Voters has approved the Fire Tax, including the ordinance that was submitted in its support. That ordinance will control distribution of funds if the Fire Tax passes. The full tax packet (including the ordinance) is included in the Resource list at the end of this news post.

Question #1: How much funding is needed for Sebastopol's Fire Services? Answer: A variety of experts have estimated that the true cost of adequately funded Fire Services for Sebastopol is $5.7M to $7.2M: $2M-$3.5M annually for operations, plus $3.7M or more in one time funds to replace aging equipment and upgrade the Fire House.

$2,000,000-$3,500,000 is needed for operations
+ $1,700,000 or more is needed to replace aging equipment
+ $2,000,000 or more is needed to upgrade the Fire House
=$5.7M-$7.2M in Total Funding Needed for Fire Services
- $2M-$3.5M annually for operations
- $3.7M or more in one time funds to replace aging equipment & upgrade the Fire House

Source: Cost of Operations: Ad Hoc Fire Committee Comparison Table, estimating anywhere from $2.0 to $3.5 million needed for operations, depending on which agency manages Sebastopol's Fire Services.

Source: Cost to Replace Aging Equipment: Gold Ridge Fire District Proposal page 5, estimating that it would cost $3 million to replace the aging equipment and that a loan repaid at $486 annually for 7 years would be needed. The Matrix Report, drafted in January 2023, projected at page 59 that it would cost $1.7M to replace aging equipment, but also observed that apparatus costs were expected to increase 20-25% in the subsequent 6 months. At page 58 the Matrix Report stated that a typical fire engine costs $600,000 to $750,000, with a ladder truck costing $900,000 to $1.3M.

Source: Cost for Upgrade of Facility: Sebastopol Fire Department Proposal page 4, estimating that it would cost $2 million for facility upgrades. (Others have suggested that the actual present-day cost would be substantially higher.)

Question #2: How much funding is Sebastopol providing for Fire Services currently? Answer: Sebastopol has budgeted $1.8M for Fire Services this year ($1.5M for operations and $300,000 toward purchase of a fire engine. There is no funding budgeted for Fire House upgrades).

$1,500,000 is budgeted for operations

+ $300,000 is budgeted toward the replacement of an aging fire truck (partial payment)

+ $0 is budgeted to upgrade the facility

=$1.8M in Total Funding is Budgeted by the City for Fire Services

Source: Adopted 2023-24 Budget (pages 97 ($1.55 for operations) and 48 ($300,000 toward a fire engine estimated to cost $1,000,000 (see page 7 of Adopted Budget)).

Question #3: What is the shortfall between the funding needed for Fire Services and the amount Sebastopol has budgeted? Answer: Sebastopol is short $3.9M to $5.4M for Fire Services ($500,000 to $2M for operations, plus $3.4M or more in one time funds to replace aging equipment and upgrade the Fire House).

$500,000-$2,000,000 is the unfunded need (before the Fire Tax) for operations (2.0M-3.5M - $1.5M)
+ $1,400,000 or more is the unfunded need (before the Fire Tax) to replace aging equipment ($1.7M-$300,000)
+ $2,000,000 or more is the unfunded need (before the Fire Tax) to upgrade the Fire House ($2.0M-$0).
=$3.9-$5.4 is the Total Unfunded Need for Fire Services (before the Fire Tax)

Question #4: How much of a difference will the Fire Tax make for Sebastopol’s Fire Services?Answer: The Fire Tax will provide $1,080,000 toward Sebastopol's shortfall of $3.9M to $5.4M for Fire Services. That would reduce Sebastopol's shortfall to $2.8M to $4.3M. The $1.1M Fire Tax revenue could cover all or some of Sebastopol's operations shortfall and/or some of Sebastopol's one-time need for replacement of aging equipment and for upgrades to the Fire House.

$1,080,000 in new Fire Services funding is the amount Sebastopol would get from the Fire Tax.
This is 1.8% of the projected $60,000,000 in annual revenue the Fire Tax is expected to produce (section 12-66(D) of the ordinance, page 20 of 27 in the packet, page 12 of 18 in the ordinance).
The Tax revenue can only be used for fire services expenses: (1) wildfire prevention, preparedness, response, and vegetation management, (2) recruitment and retention of local firefighters, and (3) to update essential equipment and facilities (section 12-66(C) of the ordinance, page 18 of 27 in the packet, page 10 of 18 in the ordinance).
There is no separate amount in the Fire Tax for purchasing apparatus or for facilities improvements.

Source: Fire Tax Ordinance included in the full Tax Packet.

Question #5: Will the Fire Tax cover all of Sebastopol’s Fire Services expenses? Answer: No, the Fire Tax of $1.1M will not address the full shortfall of $3.9-$5.4M. Even when combined with the currently budgeted $1.8M in City funds, there will still be a shortfall of $2.8M to $4.3M.

$5.7M to $7.2M total funding need
-$1.8M budgeted for Fire Services this year by the City
=$3.9M to $5.4M still needed for Fire Services beyond what the City has budgeted
-$1.1M projected revenue from the Fire Tax
=$2.8M to $4.3M funding gap still remaining after Fire Tax proceeds and City budgeted amount

Source: See answers to questions #1-#4

Question #6: If the cost of operations is at the low end - $2,200,000 per year – would the new funding from the Fire Tax allow reallocation of some portion of this year’s $1.8M in City funding to other City needs? Answer: No, there would be a $700,000 gap in funding needed for operations, which the Fire Tax could satisfy. The rest of the $1.1M in Fire Tax funds - $400,000 - would be available to help cover equipment and facility needs, but there would be no excess that could reasonably be used for other City needs.

Assumptions:
- $2.2M needed for operations annually
- $3.7M needed (one time expense) for combined equipment replacements ($1.7M) and facility upgrades ($2M).
- City Funding: $1.8M ($1.5 for operations + $300,000 for equipment)
Funding Gap Before the Fire Tax
- $700,000 gap for operations ($2.2M need-$1.5M from City)
- $3.4M gap for equipment and facility ($3.7M need-$300,000 from City)
How to Allocate the Fire Tax Funds of $1.1M – one example
- $700,000 annually for operations, closing that funding gap
- $400,000 annually toward purchase or loan for equipment to help with that $3.4M gap

This exercise shows that IF annual operations costs can be kept at $2,200,000 and IF loans can be arranged for no more than $400,000 annually to purchase the $3.7M or more in needed equipment and to pay for needed facility improvements, the Fire Tax might be sufficient to cover all costs of Sebastopol’s Fire Services.

Unfortunately, this exercise also establishes that even at this low end of operations expenses for a well-functioning Sebastopol Fire Services, there is no excess amount that can be reasonably reallocated to other City needs.

As the operations costs rise (in the various other scenarios in the Comparison Table), more of the $1.1M in Fire Tax money will need to be used to cover operations costs, leaving even less than $400,000 available toward the one time equipment purchases and facility upgrade costs. In these other scenarios, it becomes even more obvious that the Fire Tax will not allow any funds currently allocated to Fire Services to be reallocated to other City needs.

Source: Fire Ad Hoc Comparison Table, answers to questions #1-#5.

Question #7: Will the Fire Tax allow a reallocation of any of Sebastopol's currently budgeted $1.8M to other general fund needs? Answer: No. See answer to Question #5 and #6. The Fire Tax, even when combined with the City's currently budgeted $1.8M will still leave Fire Services underfunded. There will be no "excess" funds that can be released for other uses. (Note also that the Fire Tax has a "maintenance of effort" provision. It states explicitly that Sebastopol's future funding of Fire Services cannot dip below its 2021-22 funding level, which is estimated at $1.15M. See Ordinance, section 12-65, on page 9 of 18.)

Source: See answers to questions #1-#6.

Question #8: Why is more funding needed for operations? Answer: More funding is needed for operations in order to pay for the "career staffing" model that is crucial to improving response times.

Insufficient Budget for Operations: All estimates provided in the Resource documents require an increase in paid employee firefighters in order to ensure faster response times. The explanation for the current slower response times is that volunteers have to come to the Fire House from home or work before the Fire Engine can be deployed to respond to an incident. Career employee firefighters would remain on site at the Fire House and be ready to deploy as soon as a call was received. That staffing model is more expensive than the volunteer model. This "career staffing" model is referenced in all scenarios in the Fire Ad Hoc Comparison Table. The current $1.5M budgeted by the City for operations is insufficient to cover the cost of employee firefighters in a "24 hour career firefighter" staffing model. (See discussion at page 71 of Matrix Study. See also Ad Hoc Fire Committee Sept 26 Report Out, page 5 of 6, noting goal of "ultimately advancing 24- hour career staffing.")
Insufficient Budget for Equipment Replacement Costs: In addition, the City's current budgeted amount does not allocate adequate amounts toward equipment replacement. What is allocated is $300,000 toward a fire engine that is estimated to cost $1M. That is insufficient to purchase one fire engine, and is substantially below the projected cost of $1.7M or more to replace multiple aging fire engines.
Insufficient Budget for Facility Upgrades: Finally, the City's current budgeted amount does not allocate anything toward the cost of upgrading the Fire House, a need that is estimated to cost $2M or more. This is particularly important for a 24 hour career firefighter staffing model because of the need for adequate sleeping facilities and adequate bathrooms (See page 7 of Matrix Study).

Question #9: Why didn't Sebastopol allocate sufficient funding for Fire Services? Answer: Sebastopol is in a fiscal crisis, facing many unmet fiscal needs and working on a strategy to address them all. Sebastopol has a deficit this year of $1.7M and general fund reserves that will run out as the City goes into the fiscal year beginning July 2026. The Council is aware of the Fire Services funding needs, as well as many other unfunded needs in the City, and is actively considering a variety of options to provide long-term stability to the City.

Source: News Article - The City's $1.7M Budget Deficit - Cold Hard Facts.

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