Irvine’s City Council has directed city staff to explore the possibility of leaving the Orange County Fire Authority in 2020. The Council wants to find a more cost effective way to provide fire protection services to city residents. If Irvine can find an alternative that constrains firefighter compensation – especially overtime pay– it may be on the right track. Hundreds of firefighters working for the OC Fire Authority receive $200,000 or more in total comp, largely as a result of generous overtime and pension benefits.
As with most cities participating in OC Fire, Irvine property taxpayers fund OC Fire through a portion of their 1% ad valorem tax. According to the Authority’s most recent budget, OC Fire receives 11 cents of every property tax dollar and Irvine property was assessed at a total of $61 billion. This implies that Irvine property taxpayers are paying $67 million annually for fire protection. That amount is roughly equivalent to cost of Irvine’s city police. Since police forces typically have more headcount than fire departments, it is reasonable to think that the city could handle the job of fighting fires more economically.
Having determined that Irvine is the nation’s most fiscally fit large city, I thought I would check out OC Fire Authority’s finances to see how they compare. The Authority’s financial statements, while reasonably healthy, are not nearly as robust as those of the city’s – and its difficulties are mostly attributable to high pension costs.
OC Fire’s actuarially required pension contributions have doubled from $33.8 million in 2007 to $67.3 million in 2016 – and now account for 19% of its total revenue. To the authority’s credit, it has paid more that its actuarially required contribution to OCERS for each of the last three years, thereby preventing a deterioration in the funded ratio of its pension plan – which was most recently reported to be 68.90%.
One driver of the Fire Authority’s retirement costs is employee overtime. Under the firefighter’s union contract, pensions are based on “final compensation”, defined as the average compensation for any three calendar years chosen by each retiree (presumably his or her three highest paying years).
And OC Fire pays a lot of overtime. In 2016, overtime costs increased by $6.3 million over 2015. Overall, budgeted overtime in 2017 is $45.4 million. OC Fire – or a successor agency – can limit spending over the long term by reducing overtime overall and severely restricting the amount of overtime available to higher paid personnel.