HomeMy WebLinkAbout2012-01-24; City Council; 20790; MASTER AGREEMENT BEST VALUE SERVICES PROGRAMCITY OF CARLSBAD - AGENDA BILL
AB#
MTG.
DEPT.
20,790
1/24/12
APPROVAL OF A MASTER
AGREEMENT FOR ASSISTANCE WITH
THE BEST VALUE SERVICES
PROGRAM
DEPT. DIRECTOR
CITY ATTY.
CITY MGR.
RECOMMENDED ACTION:
Adopt Resolution No. ?ni7-ni9 approving a master agreement with Baker Tilly Virchow
Krause LLP for assistance with the Best Value Services Program.
ITEM EXPLANATION:
On October 3, 2011, the city issued a request for proposal (RFP) for Best Value Services
Program Assistance. On October 28, 2011, staff received a total of four (4) proposals from
management consulting firms specializing in operational assessments of city services, service
delivery method evaluations and the implementation of alternate service delivery models.
Staff utilized the standard purchasing process, consistent with Carlsbad Municipal Code
Section 3.28.070. The RFP was made available on the city's website, and distributed to 11
consultants identified by staff as previously completing similar work for the City of Carlsbad or
other cities nationwide. The four (4) proposals received were evaluated based on
understanding ofthe project, methodology, ability to meet schedule, qualifications ofthe firm
and staff, and cost. The evaluation team consisted of city staff, and the team rated Baker Tilly
Virchow Krause, LLP as the top rated firm.
Staff recommends that the city execute a master agreement with Baker Tilly Virchow Krause,
LLP for assistance with the Best Value Services Program. The master agreement will be valid
through January 2013, and may be extended by the City Manager for three (3) additional one
(1) year periods. As project-specific work tasks are identified, individual project task
descriptions and fee allotments are negotiated with Baker Tilly Virchow Krause, LLP. Each task
description and fee allotment will include an exhibit that defines a detailed scope of services
and an associated fee. It is recommended that the task descriptions shall not exceed $300,000
per agreement year.
FISCAL IMPACT:
Adequate funding for the master agreement is available in the General Fund's non-
departmental account for Innovation Projects.
DEPARTMENT CONTACT: Greg Hermann, 760-434-2958 qreq.hermann(5)carlsbadca.qov
FOR CITY CLERKS USE ONLY.
COUNCIL ACTION: APPROVED CONTINUED TO DATE SPECIFIC •
DENIED • CONTINUED TO DATE UNKNOWN •
WITHDRAWN • RETURNED TO STAFF •
AMENDED • COUNCIL RECEIVED THE •
REPORT/PRESENTATION
OTHER-SEE MINUTES •
Page 2
ENVIRONMENTAL IMPACT:
Pursuant to Public Resources Code section 21065, this action does not constitute a "project"
within the meaning of CEQA in that it has no potential to cause either a direct physical
change in the environment, or a reasonably foreseeable indirect physical change in the
environment, and therefore does not require environmental review.
EXHIBITS:
2012-019
1. Resolution No. approving a master agreement with Baker Tilly Virchow Krause
LLP for assistance with the Best Value Services Project.
2. Master agreement for assistance with Best Value Services Project with Baker Tilly
Virchow Krause, LLP.
3. Background - Baker Tilly Virchow Krause, LLP
1 RESOLUTION NO. 2012-019
2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, APPROVING A MASTER
^ AGREEMENT FOR ASSISTANCE WITH THE BEST VALUE
4 SERVICES PROGRAM.
5
WHEREAS, the City Council ofthe City of Carlsbad, California, desires to
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^ proceed with an implementation ofthe Best Value Services Program; and
g WHEREAS, staff issued a request for proposals for assistance with the Best
9 Value Service Program; and
10 WHEREAS, staff received and reviewed four (4) proposals in response to the
^ ^ request for proposal; and
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WHEREAS, staff rated Baker Tilly Virchow Krause, LLP as the top rated firm;
13
and
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WHEREAS, staff recommends the City Council enter into a master agreement
with Baker Tilly Virchow Krause, LLP for assistance with Best Value Services Program;
17 and
18 WHEREAS, sufficient funding is available in the General Fund's non-
19 departmental account for Innovation Projects.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Carlsbad, California, as follows that:
1. The above recitations are true and correct.
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25 Program with Baker Tilly Virchow Krause, LLP is hereby approved.
26 3. That the Mayor of the City of Carlsbad is hereby authorized and directed
27 to execute the master agreement for assistance with the Best Value Services
2. That the master agreement for assistance with the Best Value Services
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Program with Baker Tilly Virchow Krause, LLP for and on behalf ofthe City of
Carlsbad.
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PASSED, APPROVED AND ADOPTED at a Regular Meeting ofthe City Council
of the City of Carlsbad on the 24"^ day of January, 2012, by the following vote to wit:
AYES:
NOES:
Council Members Hall, Kulchin, Blackburn, Douglas and Packard.
None.
ABSENT: None.
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(SEAL)
MASTER AGREEMENT FOR ASSISTANCE WITH THE
BEST VALUE SERVICES PROGRAM
BAKER TILLY VIRCHOW KRAUSE, LLP
THIS AGREEMENT is made and entered into as of the 24tb day of
January, 2012, by and between the CITY OF CARLSBAD, a municipal corporation, hereinafter
referred to as 'City", and Baker Tilly Virchow Krause, a limited liability partnership, hereinafter
referred to as "Contractor."
RECITALS
A. City requires the professional services of a management consultant that is
experienced in operational assessments of city services, service delivery method evaluations
and the implementation of alternate service delivery models.
B. The professional services are required on a non-exclusive, project-by-project
basis.
C. Contractor has the necessary experience in providing professional services in
these areas.
D. Selection of Contractor is expected to achieve the desired results in an expedited
fashion.
E. Contractor has submitted a proposal to City and has affirmed its willingness and
ability to perform such work.
NOW, THEREFORE, in consideration of these recitals and the mutual covenants
contained herein, City and Contractor agree as follows:
1. SCOPE OF WORK
City retains Contractor to perform, and Contractor agrees to render, those services (the
"Services") that are defined in attached Exhibit "A", which is incorporated by this reference in
accordance with this Agreement's terms and conditions.
Contractor's obligations with respect to any project granted to Contractor under this Agreement
will be as specified in the Task Description for the project (see paragraph 5 below).
2. STANDARD OF PERFORMANCE
While performing the Services, Contractor will exercise the reasonable professional care and
skill customarily exercised by reputable members of Contractor's profession practicing in the
Metropolitan Southern California Area, and will use reasonable diligence and best judgment
while exercising its professional skill and expertise.
3. TERM
The term of this Agreement will be effective from the date first above written to January
2013. The City Manager may amend the Agreement to extend it for 3 additional 1 year periods
or parts thereof in an amount not to exceed three-hundred thousand dollars ($300,000) per
Agreement year. Extensions will be based upon a satisfactory review of Contractor's
performance, City needs, and appropriation of funds by the City Council. The parties will
prepare a written amendment indicating the effective date and length of the extended
Agreement.
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4. PROGRESS AND COMPLETION
The work for any project granted to Contractor pursuant to this Agreement will begin within ten
(10) days after receipt of notification to proceed by City and be completed within the time
specified in the Task Description for the project (see paragraph 5 below). Extensions of time for
a specific Task Description may be granted if requested by Contractor and agreed to in writing
by the City Manager or the Project Director as authorized by the City Manager ("Director").
The City Manager or Director will give allowance for documented and substantiated
unforeseeable and unavoidable delays not caused by a lack of foresight on the part of
Contractor, or delays caused by City inaction or other agencies' lack of timely action. In no
event shall a specific Task Description exceed the term of this Agreement.
5. COMPENSATION
The cumulative total for all projects allowed pursuant to this Agreement will not exceed three-
hundred thousand dollars ($300,000) per agreement year. Fees will be paid on a project-by-
project basis and will be based on Contractor's Schedule of Rates specified in Exhibit "A". Prior
to initiation of any project work by Contractor, City shall prepare a Project Task Description and
Fee Allotment (the "Task Description") which, upon signature by Contractor and City, the City
Manager or Director, will be considered a part of this Agreement. The Task Description will
include a detailed scope of services for the particular project being considered and a statement
of Contractor's fee to complete the project in accordance with the specified scope of services.
The Task Description will also include a description of the method of payment and will be based
upon an hourly rate, percentage of project complete, completion of specific project tasks or a
combination thereof
6. STATUS OF CONTRACTOR
Contractor will perform the Services in Contractor's own way as an independent contractor and
in pursuit of Contractor's independent calling, and not as an employee of City. Contractor will be
under control of City only as to the result to be accomplished, but will consult with City as
necessary. The persons used by Contractor to provide services under this Agreement will not
be considered employees of City for any purposes.
The payment made to Contractor pursuant to the Agreement will be the full and complete
compensation to which Contractor is entitled. City will not make any federal or state tax
withholdings on behalf of Contractor or its agents, employees or subcontractors. City will not be
required to pay any workers' compensation insurance or unemployment contributions on behalf
of Contractor or its employees or subcontractors. Contractor agrees to indemnify City within
thirty (30) days for any tax, retirement contribution, social security, overtime payment,
unemployment payment or workers' compensation payment which City may be required to
make on behalf of Contractor or any agent, employee, or subcontractor of Contractor for work
done under this Agreement. At the City's election, City may deduct the indemnification amount
from any balance owing to Contractor.
7. SUBCONTRACTING
Contractor will not subcontract any portion of the Services without prior written approval of City.
If Contractor subcontracts any of the Services, Contractor will be fully responsible to City for the
acts and omissions of Contractor's subcontractor and of the persons either directly or indirectly
employed by the subcontractor, as Contractor is for the acts and omissions of persons directly
employed by Contractor. Nothing contained in this Agreement will create any contractual
relationship between any subcontractor of Contractor and City. Contractor will be responsible for
payment of subcontractors. Contractor will bind every subcontractor and every subcontractor of
a subcontractor by the terms of this Agreement applicable to Contractor's work unless
specifically noted to the contrary in the subcontract and approved in writing by City.
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8. OTHER CONTRACTORS
The City reserves the right to employ other Contractors in connection with the Services.
9. INDEMNIFICATION
Contractor agrees to indemnify and hold harmless the City and its officers, officials, employees
and volunteers from and against all claims, damages, losses and expenses including
reasonable attorney's fees arising out of the performance of the work described herein caused
by any negligence, recklessness, or willful misconduct of the Contractor, any subcontractor,
anyone directly or indirectly employed by any of them or anyone for whose acts any of them
may be liable.
The parties expressly agree that any payment, attorney's fee, costs or expense City incurs or
makes to or on behalf of an injured employee under the City's self-administered workers'
compensation is included as a loss, expense or cost for the purposes of this section, and that
this section will survive the expiration or early termination of this Agreement.
10. INSURANCE
Contractor will obtain and maintain for the duration of the Agreement and any and all
amendments, insurance against claims for injuries to persons or damage to property which may
arise out of or in connection with performance of the services by Contractor or Contractor's
agents, representatives, employees or subcontractors. The insurance will be obtained from an
insurance carrier admitted and authorized to do business in the State of California. The
insurance carrier is required to have a current Best's Key Rating of not less than "A-:VH" OR
with a surplus line insurer on the State of California's List of Eligible Surplus Line Insurers
(LESLI) with a rating in the latest Best's Key Rating Guide of at least "A:X".
10.1 Coverages and Limits. Contractor will maintain the types of coverage and minimum
limits indicated below, unless City Attorney or City Manager approves a lower amount. These
minimum amounts of coverage will not constitute any limitations or cap on Contractor's
indemnification obligations under this Agreement. City, its officers, agents and employees make
no representation that the limits of the insurance specified to be carried by Contractor pursuant
to this Agreement are adequate to protect Contractor. If Contractor believes that any required
insurance coverage is inadequate. Contractor will obtain such additional insurance coverage, as
Contractor deems adequate, at Contractor's sole expense.
10.1.1 Commercial General Liability Insurance. $1,000,000 combined single-limit
per occurrence for bodily injury, personal injury and property damage. If the submitted policies
contain aggregate limits, general aggregate limits will apply separately to the work under this
Agreement or the general aggregate will be twice the required per occurrence limit.
10.1.2 Automobile Liability (if the use of an automobile is involved for
Contractor's work for City). $1,000,000 combined single-limit per accident for bodily injury and
property damage.
10.1.3 Workers' Compensation and Employer's Liability. Workers' Compensation
limits as required by the California Labor Code. Workers' Compensation will not be required if
Contractor has no employees and provides, to City's satisfaction, a declaration stating this.
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10.1.4 Professional Liability. Errors and omissions liability appropriate to
Contractor's profession with limits of not less than $1,000,000 per claim. Coverage must be
maintained for a period of five years following the date of completion of the work.
cms I I If box is checked, Professional Liability
City's Initials Contractor's Initials Insurance requirement is waived.
10.2. Additional Provisions. Contractor will ensure that the policies of insurance required under
this Agreement contain, or are endorsed to contain, the following provisions:
10.2.1 The City will be named as an additional insured on General Liability.
10.2.2 Contractor will obtain occurrence coverage, excluding Professional
Liability, which will be written as claims-made coverage.
10.2.3 This insurance will be in force during the life of the Agreement and any
extensions of it and will not be canceled without thirty (30) days prior written notice to City sent
by certified mail pursuant to the Notice provisions of this Agreement.
10.3 Providing Certificates of Insurance and Endorsements. Prior to City's execution of this
Agreement, Contractor will furnish certificates of insurance and endorsements to City.
10.4 Failure to Maintain Coverage. If Contractor fails to maintain any of these insurance
coverages, then City will have the option to declare Contractor in breach, or may purchase
replacement insurance or pay the premiums that are due on existing policies in order to
maintain the required coverages. Contractor is responsible for any payments made by City to
obtain or maintain insurance and City may collect these payments from Contractor or deduct the
amount paid from any sums due Contractor under this Agreement.
10.5 Submission of Insurance Policies. Citv reserves the right to require, at anytime, complete
and certified copies of any or all required insurance policies and endorsements.
11. BUSINESS LICENSE
Contractor will obtain and maintain a City of Carlsbad Business License for the term of the
Agreement, as may be amended from time-to-time.
12. ACCOUNTING RECORDS
Contractor will maintain complete and accurate records with respect to costs incurred under this
Agreement. All records will be clearty identifiable. Contractor will allow a representative of City
during normal business hours to examine, audit, and make transcripts or copies of records and
any other documents created pursuant to this Agreement. Contractor will allow inspection of all
work, data, documents, proceedings, and activities related to the Agreement for a period of
three (3) years from the date of final payment under this Agreement.
13. OWNERSHIP OF DOCUMENTS
All work product produced by Contractor or its agents, employees, and subcontractors pursuant
to this Agreement is the property of City. In the event this Agreement is terminated, all work
product produced by Contractor or its agents, employees and subcontractors pursuant to this
Agreement will be delivered at once to City. Contractor will have the right to make one (1) copy
of the work product for Contractor's records.
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14. COPYRIGHTS
Contractor agrees that all copyrights that arise from the services will be vested in City and
Contractor relinquishes all claims to the copyrights in favor of City.
15. NOTICES
The name of the persons who are authorized to give written notice or to receive written notice
on behalf of City and on behalf of Contractor under this Agreement are:
For City: For Contractor:
Name Name Christine Smith
Title Principal
Dept
CITY OF CARLSBAD
Address Address Ten Terrace Court
Madison, Wl 53707
Phone No. Phone No. 608.240.2391
Each party will notify the other immediately of any changes of address that would require any
notice or delivery to be directed to another address.
16. CONFLICT OF INTEREST
Contractor shall file a Conflict of Interest Statement with the City Clerk in accordance with the
requirements of the City of Cartsbad Conflict of Interest Code. The Contractor shall report
investments or interests in all four categories.
17. GENERAL COMPLIANCE WITH LAWS
Contractor will keep fully informed of federal, state and local laws and ordinances and
regulations which in any manner affect those employed by Contractor, or in any way affect the
performance of the Services by Contractor. Contractor will at all times observe and comply with
these laws, ordinances, and regulations and will be responsible for the compliance of
Contractor's services with all applicable laws, ordinances and regulations.
Contractor will be aware of the requirements of the Immigration Reform and Control Act of 1986
and will comply with those requirements, including, but not limited to, verifying the eligibility for
employment of all agents, employees, subcontractors and consultants whose services are
required by this Agreement.
18. DISCRIMINATION AND HARASSMENT PROHIBITED
Contractor will comply with all applicable local, state and federal laws and regulations prohibiting
discnmination and harassment.
19. DISPUTE RESOLUTION
If a dispute should anse regarding the performance of the Services the following procedure will
be used to resolve any questions of fact or interpretation not othenwise settled by agreement
between the parties. Representatives of Contractor or City will reduce such questions, and their
respective views, to writing. A copy of such documented dispute will be forwarded to both
parties involved along with recommended methods of resolution, which would be of benefit to
both parties. The representative receiving the letter will reply to the letter along with a
recommended method of resolution within ten (10) business days. If the resolution thus
obtained is unsatisfactory to the aggrieved party, a letter outlining the disputes will be fonwarded
to the City Manager. The City Manager will consider the facts and solutions recommended by
each party and may then opt to direct a solution to the problem. In such cases, the action of the
City Manager will be binding upon the parties involved, although nothing in this procedure will
prohibit the parties from seeking remedies available to them at law.
5 City Attorney Approved Version 5/9/11
20. TERMINATION
In the event of the Contractor's failure to prosecute, deliver, or perform the Services, City may
terminate this Agreement for nonperformance by notifying Contractor by certified mail of the
termination. If City decides to abandon or indefinitely postpone the work or services
contemplated by this Agreement, City may terminate this Agreement upon written notice to
Contractor. Upon notification of termination. Contractor has five (5) business days to deliver any
documents owned by City and all work in progress to City at the address contained in this
Agreement. City will make a determination of fact based upon the work product delivered to City
and of the percentage of work that Contractor has performed which is usable and of worth to
City in having the Agreement completed. Based upon that finding City will determine the final
payment of the Agreement.
Either party upon tendering thirty (30) days written notice to the other party may terminate this
Agreement. In this event and upon request of City, Contractor will assemble the work product
and put it in order for proper filing and closing and deliver it to City. Contractor will be paid for
work performed to the termination date; however, the total will not exceed the lump sum fee
payable under this Agreement. City will make the final determination as to the portions of tasks
completed and the compensation to be made.
21. COVENANTS AGAINST CONTINGENT FEES
Contractor warrants that Contractor has not employed or retained any company or person, other
than a bona fide employee working for Contractor, to solicit or secure this Agreement, and that
Contractor has not paid or agreed to pay any company or person, other than a bona fide
employee, any fee, commission, percentage, brokerage fee, gift, or any other consideration
contingent upon, or resulting from, the award or making of this Agreement. For breach or
violation of this warranty. City will have the right to annul this Agreement without liability, or, in
its discretion, to deduct from the Agreement pnce or consideration, or othenwise recover, the full
amount of the fee, commission, percentage, brokerage fees, gift, or contingent fee.
22. CLAIMS AND LAWSUITS
By signing this Agreement, Contractor agrees that any Agreement claim submitted to City must
be asserted as part of the Agreement process as set forth in this Agreement and not in
anticipation of litigation or in conjunction with litigation. Contractor acknowledges that if a false
claim is submitted to City, it may be considered fraud and Contractor may be subject to criminal
prosecution. Contractor acknowledges that California Government Code sections 12650 et seq.,
the False Claims Act applies to this Agreement and, provides for civil penalties where a person
knowingly submits a false claim to a public entity. These provisions include false claims made
with deliberate ignorance of the false information or in reckless disregard of the truth or falsity of
information. If City seeks to recover penalties pursuant to the False Claims Act, it is entitled to
recover its litigation costs, including attorney's fees. Contractor acknowledges that the filing of a
false claim may subject Contractor to an administrative debarment proceeding as the result of
which Contractor may be prevented to act as a Contractor on any public work or improvement
for a penod of up to five (5) years. Contractor acknowledges debarment by another junsdiction
is grounds for City to terminate this Agreement.
23. JURISDICTIONS AND VENUE
Any action at law or in equity brought by either of the parties for the purpose of enforcing a right
or rights provided for by this Agreement will be tried in a court of competent jurisdiction in the
County of San Diego, State of California, and the parties waive all provisions of law providing for
a change of venue in these proceedings to any other county.
24. SUCCESSORS AND ASSIGNS
It is mutually understood and agreed that this Agreement will be binding upon City and
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Contractor and their respective successors. Neither this Agreement or any part of it nor any
monies due or to become due under it may be assigned by Contractor without the prior consent
of City, which shall not be unreasonably withheld.
25. ENTIRE AGREEMENT
This Agreement, together with any other written document referred to or contemplated by it,
along with the purchase order for this Agreement and its provisions, embody the entire
Agreement and understanding between the parties relating to the subject matter of it. In case of
conflict, the terms of the Agreement supersede the purchase order. Neither this Agreement nor
any of its provisions may be amended, modified, waived or discharged except in a writing
signed by both parties.
26. AUTHORITY
The individuals executing this Agreement and the instruments referenced in it on behalf of
Contractor each represent and warrant that they have the legal power, right and actual authority
to bind Contractor to the terms and conditions of this Agreement.
27. LIMITATION ON DAMAGES AND INDEMNIFICATION
(a) The City agrees to indemnify and hold harmless the Contractor and its current, former or
future partners, principals, employees, and personnel from any and all claims, liabilities, costs,
and expenses but only where such claims, liabilities, costs and expenses arise out of false,
materially incomplete, or inaccurate information provided by the City relating to the Contractor's
services under this agreement.
(b) Because of the importance of the information that the City provides to the Contractor with
respect to the Contractor's ability to perform the Services, the City hereby releases Baker the
Contractor and its present and former partners, principals, agents and employees from any
liability, damages, fees, expenses and costs, that arise from or relate to any information,
including representations by management, provided by the City, its personnel or agents, that is
not complete, accurate or current.
Executed by Contractor this_
CONTRACTOR
24th day of. _January_ 2012.
(sfgri here)
Baker Tilly Virchow Krause, LLP
(print name/title)
(sign here)
Christih^ Smith, Principal
(print name/title)
CITY OF CARLSBAD, a municipal
corporation of the State of California
City Manager or Mayor or Director
ATTEST:
'i ir "
City Attorney Approved Vtfusioiii^Syb/l 1
Proper notarial acknowledgment of execution by Contractor must be attached. If a corporation,
Agreement must be signed by one corporate officer from each ofthe following two groups:
Group A
Chairman,
President, or
Vice-President
Group B
Secretary,
Assistant Secretary,
CFO or Assistant Treasurer
Otherwise, the corporation must attach a resolution certified by the secretary or assistant
secretary under corporate seal empowering the officer(s) signing to bind the corporation.
CITY OF CARLSBAD, a municipal corporation ofthe State of California
APPROVED AS TO FORM:
RONALD R. BALL, City Attorney
BY:
Assistant City Ati City Attorney
This instrument was signed before me
on January 19, 2012 by Christine Smith
as Principal of Baker Tilly Virchow
Krause, LLP
Notary^
Commission expires:
,
/^v.
;%OTARy\ V
: : —— : •
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EXHIBIT "A"
SCOPE OF SERVICES
Phase 2: Operational Assessment
• Assist in documenting current service levels/scope of work
• Design operational assessment
• Develop a methodology for cost analysis for comparing internal (city staff) versus
external services providers using data currently available from the city
• Conduct operational assessment and prepare report with recommendations
o Complete a preliminary cost analysis
o Benchmark lines of business/major services against best-in-class service
providers
o Prepare written report and recommendations
• Conduct briefings with City Council, city management and staff, as needed
Phase 3: Alternative Service Delivery Evaluation
• Design managed competition or other alternative service delivery evaluation process
• Assist city with preparation of the RFP
• Assist city in evaluating proposals
Phase 4: Performance Management
• Develop implementation plan
CONTRACTOR'S SCHEDULE OF RATES
Staff title and Hourly rates
Partner/Principal - $275
Senior Manager - $250
Experienced Manager/Manager - $200
Senior Consultant - $160
Consultant-$130-$150
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State & Local Government focus
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About Baker Tilly Virchow Krause, LLP
Founded in 1931 with one central objective, to use our expertise to help
our clients improve their "businesses," Baker Tilly has grown steadily
over the years, broadening our service offerings and expanding our
geographic presence to nneet the evolving needs of our clients, in 2011,
Baker Tilly ranked as the 16th largest certified public accounting firm in
the United States according to Inside Accounting's "Top 100" list. As an
independent member of Baker Tilly International, the world's 8^ largest
network of accounting firms, we bring you access to market specific
knowledge in more than 120 countries.
We currently have more than 1,300 total staff members including 169
partners and 518 CPAs, serving clients nationwide from offices
throughout Illinois, Wisconsin, Michigan, Minnesota, Washington DC,
and New York. Strategic mergers and acquisitions continue to add
breadth and depth to the firm.
Our Public Sector expertise
Our devotion to government organizations is manifested in our Public Sector Group, a
group with a commitment spanning more than seventy-five years, and a team of more
than 120 professionals dedicated entirely to serving governmental clients. We understand
the issues governments face, providing more than 100,000 hours, annually, to the public
sector. Our extensive experience provides us with the specialized knowledge and insight
to find effective solutions. Our current public sector clients include 346 municipalities,
50 counties, 124 K-12 schools, 150 colleges and universities, 314 utilities, 42 renewable
energy projects, and 986 not-for-profits. A significant portion of those clients have
engaged us for consulting projects.
Baker Tilly has a dedicated State & Local Consulting practice that focuses on nothing
other than government clients. The following case studies exhibit our specific focus on
government transformation. We encourage you to contact the listed references to
discuss how our team has helped them to transform their organizations. This is just a
sample of our work; more examples of our work can be found in the Staff Qualifications
section, starting on page 40.
Our extensive
experience
provides us with
the specialized
knowledge and
insight to find
effective solutions.
Helping you meet your objectives
Like other communities throughout Califomia, the City of Carlsbad is carefully considering
its approach to municipal service provision. The scale and depth of the current recession
have created a unique window for municipalities across the country to critically examine
the scope of their services, to focus increasingly scarce resources on core services, and
to consider new approaches to structuring their organizations to be more nimble. We
strongly commend the City for viewing the current fiscal crisis as an opportunity to rethink
how its organizational structure and staffing resources are aligned to support delivery of
quality services that City residents need. We further applaud the City for doing so in a
strategic and proactive manner (i.e., before a fiscal crisis requires such an assessment).
It is our understanding that the City seeks the assistance of an independent consulting
firm with a track record of providing realistic, value-added recommendations that:
> Facilitate transformation of high-opportunity areas
> Assess the full continuum of available service approach options
> Present a roadmap to align the organizational structure and resource allocations with
strategic and service priorities, and that supports optimal operational performance
> Enhance service quality through consistent adoption of innovative and best value
service delivery approaches
> Reduce the City's ongoing fiscal obligations through consideration of alternate
models for service delivery (e.g., process reengineering, shared services, managed
competition)
> Position the organization for success by eliminating duplicative or redundant
functions, assessing the feasibility of cross-functional teams, and enhancing
collaboration and coordination with other entities • I
As we have indicated, our team of experienced municipal specialists is well positioned to
provide this value-enhancing assessment.
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M
We will adopt an integrated team approach to the City's engagement, blending our public
sector consulting specialists and our municipal functional advisors in the areas most
important to you. This combination of financial, business, and service-specific
specialization ensures you will be working with knowledgeable professionals who
understand your organization and the challenges you face—and can create innovative
solutions to help you overcome them. And, because the City will be working with a single
engagement team, you can expect to receive consistent, efficient, and exceptional
service for the duration of our relationship.
3
3
3
Understanding your needs
Tlie Baker Tilly advantage
As a Baker Tilly client, you will work with a dedicated, knowledgeable team with a
genuine interest in the details and challenges of your community. With your interests in
mind, they will work closely with other Baker Tilly resources to help you understand your
current position, improve your existing operations, and make the best decisions for the
City's future. Specifically, relative to this project, the City will directly benefit from our
extensive experience with:
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Public sector budget reduction initiatives
Municipal resource and service delivery analysis in all areas
Consolidated and shared service feasibility analysis and implementation
Outsourced service assessment and management
Cost/benefit methodology
Hands-on municipal management experience
Large municipal governments
We understand
effective
government
operations and how
partnerships and
technology can be
used to enhance
service delivery.
Your proposed
project team have
national experience
with managed
contracts.
Through our
experience with
government
transformation we
balance your
strategic vision and
fiscal responsibility.
Government is our
focus. Your
proposed staff have
all worked as
practitioners. We
bring a passion for
public service to
your project.
Beyond all of this, you can also expect a fair, competitive fee arrangement that delivers
continuous value throughout our relationship.
The following sections of this proposal focus more closely on the solutions Baker Tilly is
offering in response to your needs. We will provide detailed recommendations outlining
the specific services that will help the City grow and thrive. You will also find more
information about our staff, the fees for our services, and the overall value you can
expect to realize from working with us.
Thank you for considering Baker Tilly. We look forward to helping you ensure a
successful future for the City of Carlsbad.
1. Capabilities and qualifications of organization
We wouid like to highlight a few projects that demonstrate our technical expertise in
leading resource optimization and service realignment initiatives. As is demonstrated in
the following project summaries, our team offers organizational and staffing experience
across all major municipal functions in mid-sized (and larger) communities.
Large city/municipal experience
Our project team members have provided consulting, advisory services, and single
audit/financial management consulting services to a variety of similarly sized municipal
entities. The following list exhibits just some of the clients of similar or larger size whom
we have served:
Burbank Water and Power
Central Brown County Water Authority
City of Burbank, CA
City of Chicago, IL
City of Dearborn, Ml
City of Eagan, MN
City of Elgin, IL
City of Evanston, IL
City of High Point, NC
City of Madison, Wl
City of Milwaukee, Wl
City of Minneapolis, MN
City of Modesto, CA
City of Racine, Wl
City of Richmond, CA
City of Rockford, IL
City of St. Paul, MN
City of Wauwatosa, Wl
Colorado Springs (CO) Utilities (CSU)
Dane County Wl
DuPage Water Commission
(Elmhurst IL)
Elgin (IL) School District
Guam Water Utilities
Hennepin County, MN
Milwaukee County, Wl
Modesto Irrigation District /
MSR Public Power Agency
Sacramento Municipal Utility District
State of California
Village of Woodridge IL
Will County, IL
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Best Value Services
Shared
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CARLSBAD
Initial
Screening
Operational
Assessment
Managed
Competition
Performance
Management
Phase I
Phase 2
Phase 3
Phase 4
City of Rockford
Outsourcing Assessment Report
January 6, 2011
City of Rockford
Prepared by: Baker Tilly Virchow Krause, LLP
Table of Contents
Executive Summary ............................................................................................................................. 1
Overview ............................................................................................................................................................ 1
Summary of Potential Consolidated / Shared Service Arrangements ............................................................... 2
Project Scope, Methodology, and Approach .................................................................................... 4
Purpose and Scope ........................................................................................................................................... 4
Approach and Methodology ............................................................................................................................... 5
Report Format .................................................................................................................................................... 5
Outsourcing Strategy & Framework .................................................................................................. 6
Outsourcing Framework ..................................................................................................................................... 6
Business Case Finalization ................................................................................................................................ 6
Implementation .................................................................................................................................................. 8
Target Area Analysis ......................................................................................................................... 14
Fleet Management .............................................................................................................................. 15
Overview .......................................................................................................................................................... 15
Budget Reduction Options and Decision Items ............................................................................................... 18
Street Sweeping ................................................................................................................................. 32
Overview .......................................................................................................................................................... 32
Budget Reduction Options/Decision Items ...................................................................................................... 34
Emergency Medical Services ............................................................................................................ 45
Overview .......................................................................................................................................................... 45
Budget Reduction Options and Decision Items ............................................................................................... 47
Head Start ........................................................................................................................................... 62
Budget Reduction Options and Decision Items ............................................................................................... 65
City of Rockford
Page 1
Prepared by: Baker Tilly Virchow Krause, LLP
Executive Summary
Overview
Similar to many of our municipal clients, the City of Rockford is faced with a significant budget deficit and is at a
cross roads in determining how to resolve the current budget gap. At the start of the FY2011 Budget process,
the projected deficit was $5.5 million. However, based on budget reduction strategies presented to the Council
on November 22, 2010, the City now estimates a reduced projected deficit of $2.234 million for FY2011.
The budget reduction strategies being proposed are not easily implemented and, while intended to preserve
existing levels of service, could have unintended service consequences. As such, the information we present in
the following analysis is a further step in the City’s quest to address a budget deficit without significantly
impacting core municipal service levels. The City, like many other municipalities, is forced to consider a
continuum of service delivery alternatives ranging from service level approach changes to outsourced service
options. The report which follows analyzes service delivery alternatives (i.e., modifications to the way a service
is provided be it staffing levels, salary levels, etc.) and outsourced service options.
The City initially identified eight functional areas of focus for study, which were further refined to four based on
the direction of the Outsourced Steering committee. Baker Tilly analyzed specific options within these four
areas based on our discussions with department staff, the outsourcing committee, City budget staff and our
experience with others in terms of high potential budget reduction areas. The information presented should not
be interpreted as a recommendation, but rather as a policy decision needing to be made by the City Council,
relative to which options are acceptable for exploration given the fiscal situation. While all of these decision
items have merit, some of them are more readily feasible in the short term given existing contractual
agreements.
The chart which follows lists the potential positive fiscal impact that could be realized by the City on an annual
basis. This should not be interpreted to mean that these savings could all be realized in one year or that all of
the savings are possible within the first year. The reader should go to the individual items for a discussion of
likely timing of potential savings. Also, while most of the savings provide a direct impact on the general fund
balance, others provide impacts on general fund liquidity and/or avoided transfers from other City funds.
The results of this analysis do not represent recommendations; rather, budget reduction options for the
City’s current and future consideration relative to Outsourcing Opportunities.
City of Rockford
Page 2
Prepared by: Baker Tilly Virchow Krause, LLP
Summary of Potential Consolidated / Shared Service Arrangements
Shared and/or consolidated services are increasingly being examined by local government entities throughout
the state and the Midwest. The current fiscal environment is leading many local decision makers to re-examine
the obstacles to consolidation in light of the current budget challenges. Our work on behalf of other
municipalities, school districts and other local government entities suggests that there are six primary success
factors to any cooperative effort:
For any shared service or other cooperative effort to be successful there must first be a demonstrated fiscal
benefit and potential for improved service outcomes. Without these two critical factors, it is unlikely that the
effort will come to fruition. However, the existence of a clear fiscal benefit or potential for better service
outcomes is not sufficient – other factors must also be present. These factors include leadership by key staff
and trust between the two entities, a shared perception of need, and support from the community (or at least,
the absence of outright opposition).
Decision
Item # Area & Focus Option
Annual
Maximum
Annual
Minimum
Page
Number
1 Outsourcing Outsource Parts Management - One time 1st year $172,400 $98,500 18
Outsource Parts Management - Recurring $87,300 $27,000
2 Service Delivery Change Downsize Fleet Pool to Maximize Fleet Utilizations $542,000 $216,800 22
3 Outsourcing Fleet Replacement Through Leasing $2,415,700 -$197,300 27
4 Outsourcing Contract for Street Sweeping - Sanitation Fund Savings $375,500 $375,500 34
5 Service Delivery Change Reduce Sweeping Service Levels Outside the
Central Business District - Sanitation Fund Savings $39,200 $0
41
6 Outsourcing Outsource EMS $1,844,000 $0 47
7 Service Delivery Change Reduce Engine Company Apparatus Minimum Staffing
to Three Firefighters $5,072,000 $0
57
8 Service Delivery Change Retain City Head Start Program - Establish Market
Based Compensation Rates - Increased liquidity only $232,850 $0
65
9 Outsourcing Discontinue Operation of Program by the City - Increased
liquidity only $1,832,900 $99,400
69
Discontinue Operation of Program by the City $170,000 $0 69
Total Savings General & Sanitation Fund $10,718,100 $520,500
General Fund Total Savings $10,303,400 $145,000
Note: Total savings excludes decision items that result in increased liquidity only
Decision Item Summary
Emergency Medical Services
Street Sweeping
Fleet Maintenance
Head Start
Critical Success Factors
Clear Fiscal Benefit Improved Service Delivery
Success Factors - Additional
Leadership Trust
Shared Perception of Need Community Support
City of Rockford
Page 3
Prepared by: Baker Tilly Virchow Krause, LLP
In addition to the outsourcing opportunities outlined as follows, there are a number of other potential short,
medium, and long term shared service opportunities that deserve additional study. A separate, stand alone
business case analysis for each opportunity would involve in-depth review of various options, projections and
forecasts, potentially the collection of current market price points, and an assessment of potential partners’
current service delivery costs. We would be happy to complete these business case analyses; however,
permission from the district and potential partners would be required before proceeding.
Each of these is a feasible alternative implemented by other municipalities both within and outside of the state.
Key considerations outlined above will be critical in defining whether or not a shared service opportunity has
merit, and can succeed.
Function Activity/Service
SHORT TERM
Fleet Management Maintenance Function
Fleet Management Parts & Supplies Management
Fleet Management Centralized Motor Pool
CDBG Grant Administration
MEDIUM to LONG TERM
911 Dispatch/PSAP Management
EMS Service Regional Fire/EMS District
City of Rockford
Page 4
Prepared by: Baker Tilly Virchow Krause, LLP
Project Scope, Methodology, and Approach
In September of 2010, the City of Rockford (“the City”) selected Baker Tilly Virchow Krause, LLP (“Baker Tilly”)
to conduct an outsourcing assessment and provide analysis to assist the City in addressing short and long term
budget concerns. Specifically, the overall focus of this project is to critically examine the options available to the
City in terms of reducing recurring costs and long-term liabilities related to staff.
Purpose and Scope
The project as a whole is intended to assist the City with identifying and implementing effective approaches to
provide services in a manner that is both responsive and cost effective. Specifically, the project aims to assist
City decision-makers to:
Reduce the City’s ongoing fiscal obligations through consideration of alternate models for service
delivery (i.e. outsourcing and shared services)
Reduce the City’s total expenditures to provide services, both from a direct and overhead cost
perspective, through more efficient allocation of scarce staffing resources
Provide a roadmap to align the organizational structure and resource allocations with strategic priorities
and core services, and that supports optimal operational performance
Position the organization for success by eliminating duplicative or redundant functions, assesses the
feasibility of cross-functional teams, and enhances collaboration and coordination with other entities
Originally, this project identified potential service delivery options and opportunities at a high level of analysis for
eight functional areas, selected by the City’s Outsourcing Committee. The list the committee selected is as
follows:
Emergency Medical Services
Community Development Block Grant
Parking System Management
Street Sweeping
Human Services/Head Start Program
Vehicle and Fleet Maintenance
911 Call Taking and Dispatch
311 Non-Emergency Customer Service
Based on work performed as part of the first phase diagnostic review, the City’s Outsourcing Committee then
selected the following four specific functional areas for further analysis. This report defines the details around
impacts, potential cost savings and alternative organizational and service delivery approaches for these four
target areas.
Emergency Medical Services
Street Sweeping
Head Start Program
Fleet Management
The analysis specifically outlines key decision items for the City relative to enhancing service delivery,
improving cost effectiveness management and potential cost savings within these four areas.
City of Rockford
Page 5
Prepared by: Baker Tilly Virchow Krause, LLP
Approach and Methodology
The cornerstone of our approach to completing this analysis is our Decision Item model. By looking at a variety
of variables within these areas, we determined the key information to be analyzed for each area and the
appropriate questions to be asked to determine potential impacts and available options for reduction or
elimination.
In designing the Decision Item model, we embedded two crucial features. First, we took great lengths to avoid
substituting our value judgments for those of City decision-makers. As a result, we do not offer
recommendations, but rather use objective quantifiable data wherever possible to frame the budget decision
options. The second crucial feature of our model is that all functions are analyzed within the same framework.
The application of a standard set of screening criteria (coupled with an objective perspective) was intended to
foster consistency in analyzing functions across program areas.
The cumulative result of the information that follows is a series of options to be considered by the City in
meeting its ongoing fiscal and operational challenges.
Report Format
The report is organized in sections; one for each of the target area programs selected by the City’s outsourcing
committee. Each section begins with an overall discussion of program area functions. This is followed by
budget and staffing information for the area and other operational items of note. Each section then provides at
least one decision item to be considered.
All of the decision items discuss a potential modification to current service delivery. Each decision item then
provides specific supporting information related to current service statistics, FTE, expenditures and revenues,
expected impacts on the general fund, service delivery, staff and collective bargaining, potential market and
shared service considerations and risk factors relevant to the modification.
Our report also outlines key frameworks required for effective performance contract management. Given that
the City is contemplating the provision of some key municipal services or internal supports to key services
through a third party, it is imperative that the City carefully consider the required resources and frameworks to
protect itself and its citizens from unintentional service level reductions, or increases in cost of service delivery.
City of Rockford
Page 6
Prepared by: Baker Tilly Virchow Krause, LLP
Outsourcing Strategy & Framework
Outsourcing Framework
Outsourcing can take many forms but typically falls into one of the following four categories:
A service contract – fee based arrangement to manage part of a municipal service for a short period of
time (less than two years)
A management contract – performance based fee for managing a municipal function for the midterm (3
to 6 years)
A concession contract – multi-year contract (20 to 25 years) to provide service requiring significant
capital investment as part of transition or start up
A lease – contractor will lease assets from the municipality for a multi-year period
Regardless of the form, the City needs to keep in mind that by outsourcing it is not getting rid of the
responsibility for the quality, responsiveness or cost of a service, but rather is merely staffing the service
provision externally rather than internally. Too often outsource service contracts are terminated as much due to
a City’s lack of ability to manage a contract as due to the inability of the contract vendor’s ability to meet the
contract requirements.
Clearly scoping the specific activities and responsibilities of the contractor are vital for a successful contract.
This will involve carefully considering what should remain and what needs to change relative to how a certain
function or service is being delivered. (e.g., is one day of month for brush pick-up going to be enough or do you
need to retain the one day a week schedule). These decisions and parameters will significantly impact contract
costs and therefore the true net fiscal effect of a situation.
Also for each situation in which the City makes a decision to outsource, it should have the intended
benefit/desired outcome (e.g. lower overall costs, revenue enhancement, and service improvement) of that
arrangement clearly in mind in order to hold the contracted vendor accountable in a manner that directly aligns
with the desired outcome. Performance contracting will be a key component of the City’s success in pursing an
increase in outsourced services.
The following are key components of moving from outsourcing decision to implementation.
Business Case Finalization
Cost Benefit Analysis
A component of this analysis is to determine the “true” fiscal impact of going to an outsourced model of service.
The “true” impact can often be difficult to determine based on difficulty in calculating the fully loaded cost of
service (current city-provided model) based on inaccurate or incomplete service operational statistics and/or the
inability to calculate cost per hour or cost per activity/transaction. Similarly, a vendor is often reluctant to
provide costing information until they have had a chance to fully assess the operations or function they will be
assuming.
A fully loaded cost methodology is required to ensure comparison of apples to apples. However, to be accurate
this must assume that both entities are using the same service assumptions (e.g. hours of operation, cycles of
service delivery, etc).
City of Rockford
Page 7
Prepared by: Baker Tilly Virchow Krause, LLP
To ensure that the city receives the optimum benefit from outsourcing opportunities, a quantifiable and full cost
analysis methodology should be developed by the Finance department for use in comparing actual internal
costs to anticipated contracted costs. This methodology should include:
Acceptable sources (including years) for figuring current operational staffing levels
Parameters for figuring salary costs (current or projected) and benefit cost percentages
Acceptable % of overhead for central City support
Delineation of acceptable sources of data for preparing cost analysis
The methodology developed should ensure that costs are compared in an equivalent nature and should include
analysis of costs such as follows:
Direct Costs Indirect Costs Other Costs Revenues
City Personnel
Equipment
Materials
Education
Supervision
City overhead
Development/
Transition
(Deducted)
Vendor Monthly
contract fees
Upfront
payments
Materials fees/upcharges
Fees or add-ons for non-
normal service levels (e.g.
seasonal peaks, non-target
costs)
Delivery fees
One-time
transaction or
administrative
fees costs
One time system
purchase or
modification
costs
One-time payout
for materials or
equipment
(Deducted)
However, through an RFI or RFP process it is feasible to get a better sense of what the actual potential impact
might be in moving to an outsourced service delivery model as the vendor will gather information specific to the
City’s operation and therefore will be more willing to provide exact cost information.
RFI/RFP Process
This is a critical component of the process and needs to be handled carefully to ensure the City receives what it
is anticipating. In these tough fiscal times, it is often the case that the City decision-makers choose to procure
the least cost service without truly understanding what the scopes of services provided for that cost includes.
Many municipalities find the conducting an RFI process prior to an RFP process can provide valuable insight
into the true costs and benefits of pursuing outsourced arrangements. To protect the City and ensure a greater
potential for a successful, long-term outsourced service contract we recommend the following:
All contacts relative to a potential outsourced arrangement selection process should be coordinated by
the purchasing officer
Conduct an RFI process for those situations where the true costs and differences in service levels or
terms have not been explored or researched previously
Involve the operations managers and supervisors responsible for providing this service with the
opportunity for input into what service activities should be within scope and the specific
outcomes/results that should be expected
Finalize an RFP based on the results of the RFI, with specific parameters that require the vendor to
commit to typical cost and service drivers (i.e. if you find through the RFI that costs are substantially
different, ensure that the RFP process requires the vendors to submit an estimated cost for the exact
scope of services – so that you can compare true price differences) but yet allow them flexibility to be
your proponent by offering innovative or cost effective ways or service delivery
Use a service requirements and levels checklist or summary to be sure that minimum service
requirements are understood and can be met and that vendors are given credit for those
services/activities that are in addition and could reduce cost and/or enhance service
City of Rockford
Page 8
Prepared by: Baker Tilly Virchow Krause, LLP
Be sure that all vendors have the same information throughout the process so that decisions are based
on a level playing field
Consider presentations including scenario costing representations for two or more finalists to get more
than the typical “sales” pitch
Consider allowing existing City staff to submit a response to the RFP
Establish an independent review panel to ensure a wall of separation between the city bid team and the
team that develops the request for proposals
Implementation
Vendor Selection
Ensure that those involved in the selection process understand the services or function to be provided so that
detailed questions can be asked of that vendor. The vendor should be selected based on the rating criteria
which at a minimum should include factors such as:
Exhibited experience providing similar services to similar clients
Knowledge of area (i.e. industry expertise)
Positive and long term client references
Service capabilities
Scope responsiveness
Scope of service flexibility - Willingness to serve as City advocate and/or consider unique approaches
delivering service
Service delivery assurances (i.e. after hours, within specified time frames, etc)
Staffing plan and transition plan
Transparency of contract cost
Cost/pricing
Of utmost importance is the ability to measure the vendor’s role and willingness to ensure a smooth transition
from current to outsourced operation. In many cases the existing employees can be hired to continue to provide
the services but under the new management of the vendor (not always the case, but very often it is). Specific
concessions, timelines and terms should be carefully worked out between the vendor and the City.
City of Rockford
Page 9
Prepared by: Baker Tilly Virchow Krause, LLP
Contract Negotiation
This process sets the tone for the relationship with that vendor and can have a significant impact on whether it
is a transactional or collaborative relational (i.e. here as the City’s advocate) relationship. The following terms
must be included as part of the contract:
Scope of service and service requirements/levels required
Legal parameters
Decision-making limitations
Cost structure/pricing terms
Liabilities and warranties
Legal relationship definition
Reporting requirements (i.e. output metrics, form of reporting, system integrations)
Performance measurements and outcome parameters (i.e. financial penalties for “x”, extra
compensation for “y”)
Training requirements
Primary contractor relationships
Asset disposal and/or depreciation terms
Risk allocation terms
Termination agreement and terms
The contract should also clearly outline accountability roles as it relates to the service including who will serve
as tactical versus strategic contacts on the part of the City. Also, specific mechanisms should be outlined for
discussing, resolving and tracking daily and strategic or structural problems (i.e. daily contacts at supervisory
level versus quarterly meetings with high level supervisors). The vendor’s responsibility for developing these
mechanisms jointly with the City should be discussed in the contract.
City of Rockford
Page 10
Prepared by: Baker Tilly Virchow Krause, LLP
Elements of Effective Outsourced Contract Management
Once the contract has been signed there are key elements that must be monitored and adjusted to ensure that
the City receives what it anticipated from the contract. Most notable are the need for comprehensive
performance management and management control processes.
Performance Management
Effective contract management through performance contracting can be a challenging thing to do, especially for
those municipalities who have typically allowed contract management to be handled by the departments. Thus
we recommend the following:
Dual Contract Management Points
- Matrix management of the operational oversight with a centralized contract manager reviewing the
“bigger” picture relative to outcomes and a department specific manager reviewing daily tactical
information and metrics
Contract Performance Monitoring
Central Purchasing Manager Department Contract Manager
Monthly
Review Tactical Metrics/Outputs
Sign off on vendor payment
Reconcile Charges & Fees to Services
Rendered
Review Complaints
Quarterly
Assess overall Financial Performance
(upcharges, extra fees, etc) Review Tactical Metrics/Outputs
Review trends and identify needed changes
or contract amendments Trend performance relative to metrics
Trend complaints
Annually
Review actual fiscal impact - Year 1
Summarize key variances from anticipated
costs, performance
Review outcomes and summary of outputs,
efficiency and effectiveness measures
Review vendor summary of outputs,
efficiency and effectiveness measures and
recommend performance objectives for
next year
Define performance measurement objectives
or changes
Define performance measurement
objectives or changes
Determine financial penalties and rewards
- Integrated reporting system so that all involved in outsourced service management are using the
same data
- Explicit agreements as to after hours or 24/7 response
Explicit Performance Measurements
- Requirements in terms of results translated into production methods/metrics,
- Clear definitions of performance measurement methods and goals, (i.e. Key Performance
Indicators (KPIs), efficiency and effectiveness measures)
- Description of how the contractor’s performance will be evaluated in a quality assurance plan
- Positive and negative incentives based on key metrics (including plan for frequency of review and
by whom)
City of Rockford
Page 11
Prepared by: Baker Tilly Virchow Krause, LLP
Example of Measures
- Input Measure: Number of calls received
- Output Measure: Average time per call
- Efficiency Measure: Number of calls per employee or cost per call
- Outcome/Effectiveness Measure: Percentage of calls resolved during first call
Policy & Accountability Definition & Monitoring
- Transition roles relative to daily decision making (timeline for total change over)
- Regulatory requirements
- Customer complaint resolution parameters
The city should establish a process to evaluate outsourced projects after completion to examine the extent to
which objectives were achieved. Specifically, the following should be included in any evaluation of contractor
services:
Quantify fiscal impact
Quantify impact on FTE needs (and staffing costs)
Assess adherence to project completion standards
Linkage to Municipal Management Control Process
In setting up the performance management framework, it is critical that the vendor is clear as to at what point
and in which processes they are feeding into another processes or reporting frameworks and what specific
controls and data modification requirements they must follow as an agent of the City. To ensure a collaborative
and mutually successful arrangement, we highly recommend the following be determine at the onset of the
contract and modified as needed.
Incorporate vendor input into key control process (i.e. budgeting, programming)
Require reporting that is incorporated into overall department reporting
Require the same level of controls over reporting and financial management
This may involve system modifications or investments which could carry with them a significant investment,
thus, determining the benefit for the type of reporting and how it integrates with the City is crucial.
City of Rockford
Page 12
Prepared by: Baker Tilly Virchow Krause, LLP
To realize the benefits from outsourced arrangements, the City needs to be astute in its management of the
contract, but also needs to allow the appropriate level of flexibility to reach the “best” solution for the City in
terms of cost and service delivery. The change management process is one that those at the highest levels of
City government should be involved in crafting to ensure that the City understands its obligations and expected
receivables from each contract.
Summary Checklist to Maximize Effectiveness of Outsourcing Decisions
Step One: Qualify specific issues with current method of performing the work or delivering the
specific service
Quality of service
Cost of service (e.g. costs appear higher than similar efforts in other comparable cities or in
comparison to industry standards)
Ability to meet project deadlines
Ability to address unique project completion requirements (e.g. disruption to citizens due to work on
major street because of available hours to work)
Step Two: Analyze process specifics
Quantify positives/strengths to maintain
Identify key tasks performed as part of the process
Assess resource inputs (i.e. staff hours/FTE equivalent, salary and benefits rates for required staff,
equipment needed and associated costs)
Develop delivery expectations (i.e. project benchmarks, service frequency, service expectations, quality
measures)
Step Three: Identify scope of services performed as part of the process and assess need to continue
ancillary tasks.
Step Four: Assess possible ways to reengineer the current process or method of delivery for
efficiency.
Improve internal methods – retain in-house
Reevaluate way of doing business – set parameters/requirements for potential vendors
Identify need to create or modify information tracking systems
Step Five: Determine if sufficient market competition
Determine potential vendors in area, costs of securing vendors who must travel
Identify if contractors will have limitations on now service is delivered based on equipment, etc.
Step Six: Perform formal cost analysis
Determine cost and resource impacts of outsourcing using fully loaded approach for both avoided as
well as anticipated cost analysis
Step Seven: Initiate contract process
Incorporate benchmarks and service expectations identified in Step Two.
Consider issuing contracts on a pilot basis
Include provisions relating to contracting on an as-needed/supplemental basis (i.e. heavy snowfall)
Identify exceptions to low bid process
Consider performing RFI as first step
City of Rockford
Page 13
Prepared by: Baker Tilly Virchow Krause, LLP
Step Eight: Award Contract
Step Nine: Coordinate city and contractor efforts and processes
Define the respective roles of the contractor and the city staff
Outline any efforts or issues relating to the coordination of service delivery (i.e. snow removal storage)
Step Ten: Evaluate Contractor Performance
Appoint designated contract manager
Quantify performance related to benchmarks, service expectations and quality measures (results,
outcomes and outputs expected)
Conduct cost comparison/evaluation to determine actual costs
City of Rockford
Page 14
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Target Area Analysis
City of Rockford
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Fleet Management
Overview
The City of Rockford Equipment Division of its Public Works Department is charged with providing preventative
maintenance and repair services and employs 10.0 FTE (1 FTE cut as part of the FY11 budget process) to
perform these services. The City of Rockford currently expends approximately $3.6 million annually to maintain
its fleet (with the exception of the Fire and emergency response vehicles which are maintained within the Fire
department).
Expenditure Trends
As the City has faced financial constraints, it has not had the ability to make capital purchases, thus, the age of
the fleet has significantly increased. While the Equipment Division has developed a Capital Replacement
Program on paper, in reality the City has been unable to fund its implementation which creates significant
liabilities and costs. Specific key information about the entire fleet follows:
There are 611 vehicles in inventory, excluding equipment (boats, chippers, compressors, diggers,
mowers, rollers, sewer suckers, strippers, thermolays, trailers, and small equipment)
The average age of a city owned vehicle is 10.13 years
Total repair costs on an annual basis averages $6,992,764, with an average repair cost per vehicle per
year of $3,281
Total Preventative Maintenance (PM) costs on an annual basis averages $1,085,694, with an average
PM cost per vehicle per year of $502
A key priority for the City should be to get its fleet inventory up to date to ensure effective management of fleet
resources necessary to conduct the City’s business.
Fleet Management Best Practices
The Fleet Manager and Equipment Division have implemented many best practices including:
Automated Fueling System
Comprehensive Preventative Maintenance Program & Approach
Vehicle Replacement Program
Vehicle Utilization Rotation (as authorized by departments)
The City has taken steps to institute a Centralized Fleet Management approach; however, the current level of
authority granted to the Central Garage in carrying out this function is not always at the optimal level. The City
does not require the maintenance of all vehicles to be managed by the Central Garage. For example, the Fire
Department maintains their own emergency response vehicles, the Streets Department performs minor
preventative maintenance tasks, and the PSB previously maintained police vehicles. This decentralized
approach does not allow the City to take advantage of the benefits of a centralized fleet management approach,
which costs the City money and results in duplicative efforts.
While actual repair and maintenance tasks should ideally continue to be performed on location at Fire
Department stations, the management of the staff maintaining the vehicles, how these vehicles are repaired,
purchasing decisions, the management of the preventative maintenance program and other key vehicle
parameters (e.g. required use of the fuel management system, coordination with Central Garage replacement
program) should be under the direction of a Centralized Fleet Management Program. This centralized program
would work collaboratively with department heads, but would ultimately be held responsible for decisions
relative to city-wide fleet management.
City of Rockford
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Fleet Management Challenges
While the City has invested in systems and approaches that are best practices, the lack of consistency of
departments working within these systems/approaches is severely impacting the effectiveness of fleet
management, City-wide. This results in low utilization, invalid/poor data, and less than optimal preventative
maintenance timing, all which drive up the cost of maintaining a fleet of vehicles. Specific examples include:
Fuel Management System Overrides – these systems work by automatically capturing and tracking
key vehicle information at the time of fueling, including requiring preventative maintenance to be
conducted before authorizing fuel to be dispensed. Currently, there are instances where the parameters
of the system have been compromised to allow City employees to enter erroneous data. In other words,
in some cases, employees are keying inaccurate information in order to keep vehicles “in service”
which are due for maintenance, and results in ineffective and inconsistent usage reporting. The scope
of this study did not allow for a direct analysis of which employees, or vehicles are involved in such
situations; however, a quick review of the data provided by the City indicates 232 of the 661 vehicles
and equipment within the City fleet (roughly one-third) include erroneous information. We have
eliminated the vehicles with erroneous data from our detailed analysis, reducing the sample size by 11
percent.
Validity of Data – information is manually entered which is resulting in inaccurate and incomplete data.
In our review of the fleet utilization information at least two departments had information that was so
inaccurate or incomplete that we were unable to use it at all. For example, in these two departments
there is cost information entered consistently into mileage fields and/or no miles shown for the bulk of
the vehicles in several months of the year for vehicles which are used daily.
Duplicative Tracking of Preventative Maintenance - the Equipment Division has taken to maintaining
a separate preventative maintenance system which requires duplicative entry and results in
inconsistent information.
To be effective in managing the significant investment in fleet and related resources, the City should have the
benefit of comprehensive and valid data on which to base fleet decisions. The systems to provide this
information are available. In our analysis that follows, we have eliminated, as much as possible, any data that
was obviously erroneous; however, there are enough inconsistencies in the data provided that we are not totally
confident that data provided shows the total picture. Thus, the assumptions made in conducting the analysis are
critical and should be discussed thoroughly before major investments or operational modifications are made.
Bottom Line Relative to Fleet Management
While the City has invested in systems and resources to ensure effective fleet management, the current lack of
ability to adhere to its fleet replacement plan and lack of a truly centralized fleet management approach is
significantly hampering the effectiveness of fleet management within the City. There are three primary things
that the City needs to focus on in the short term:
1. Requiring centralized management of all fleet resources
2. Upgrading the age and condition of the fleet inventory
3. Reset the fuel management information system to function as a management tool
To truly realize effectiveness and efficiency gains through proactive fleet management and realize a return on
the investments made in fleet management systems, the City must be willing to hold its departments
accountable to required fleet best practices.
City of Rockford
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If the City is uncomfortable making the changes necessary (i.e. holding departments accountable) to
ensure an effective in-house fleet division, it may be in the City’s best interest to outsource fleet
maintenance. In the short term, the cost to the City will be higher from a recurring operational perspective
given the anticipated non-target costs associated with the older fleet, but it will assist the City to manage the
fleet operation as is intended from efficiency and cost effectiveness perspectives, which will result in long term
cost savings. Other cities which have entered into such an arrangement include: Wilmington, Delaware;
Washington D.C. Metro Police; Arlington, Texas; and Los Angeles County, California.
Another consideration, short of outsourcing the fleet maintenance function, would be to hire a temporary fleet
turn around specialist, who could come in and work alongside the equipment division supervisor to ensure
high impact cost drivers are addressed and the accurate information analyzed to make key decisions.
If the City does not take seriously the need to improve the effectiveness of its centralized fleet management
approach, it may find itself expending resources without the return on investment desired; i.e. pursuing parts
outsourcing, leasing and eliminating underutilized vehicles will not have the long term benefits required to make
the short term investment and effort worthwhile.
Potential ways to upgrade the fleet inventory are described in the decision items which follow.
City of Rockford
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Budget Reduction Options and Decision Items
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Modification
The City should outsource the management of the parts inventory and create a
centralized and integrated parts store. A key decision point is defining the scope of
inventory to be managed by a third party. The Central Garage Supply function
currently manages automotive parts, tools and commodities, and small equipment, a
scope which may or may be something a vendor is willing to manage. This shift would
involve selling off existing, agreed to inventory to the vendor and allowing them to
manage the needs assessment, procurement, parts supplier relationships and
receiving for all parts and supplies maintain in the Central Supply area moving forward.
These arrangements typically involve the following:
Agreed to Value for “Useable” Inventory – Cash Buy-out Upfront
Parts Provided at Cost plus a 10% markup
Monthly fee for On-site Stores Staffing and Management (contract for fixed fee
for three years)
The benefits of such an arrangement can include:
Enhance Inventory Management – minimized obsolete inventory write offs,
improved warranty recovery, no surplus, reduced shrinkage.
Reduced Labor Costs – if positions are not transferred within the organization,
typically find reduced cost
Lower Transaction Costs – eliminate costs associated with procurement as the
parts contractor handles all supply vendor transactions and cuts one monthly
bill
Productivity Improvement through Enhanced Equipment Availability – through
improved fill rate (i.e. on average up to 85% on-demand within 3 months) and
reduced vehicle/equipment down time due to unavailable parts
The City could enter into one of two arrangements:
Contract for all parts inventory (all currently managed by the Central Stores
function) to be managed through outsourced arrangement
Contract for “automotive” parts inventory to be managed through the contract
Annual Service
Statistics
The City currently has a significant number of parts in inventory with over 1,000 unique
parts managed. Inventory turn information is not readily available, but is an important
metric for the City to consider tracking as an indicator of effective management of the
parts inventory.
FTE Four full time employees (FTE) staff the parts management function. A Central Supply
Supervisor, two Inventory Control Clerks and a Senior Account Clerk are responsible
for managing parts inventory distributed by the Central Garage. Total Cost for these
positions is estimated at $298,055 (i.e. $191,175 in salaries, $6,000 overtime and an
additional $100,880 in benefits).
City of Rockford
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Expenditures/Per
Customer Cost
Information
The City currently budgets approximately $400,000 annually for its automotive parts
maintained by Central Garage.
Revenues
No revenues are generated from this function. However, costs for parts are allocated
back to the departments.
Anticipated
Savings/Impact
on General Fund
If the City were to enter into a contract with a third party to manage an on-site central
parts and supplies store, it is estimated that the most significant fiscal impact would be
the one time upfront payment receive for the existing inventory. It is estimated based
that the cash value of the existing inventory could be in a range from $12,981 to
$172,423 dependent the scope of inventory to be managed and the agreed to “useable
inventory”.
Caution should be used in taking this estimate at face value given that parts vendors
will not commit to a figure until:
They have conducted a physical inventory
Inventory figures have been verified with the City
A determination of eligible for purchase inventory has been determined
(typically between 40 and 70% of inventory on hand)
All obsolete and overstocked inventory has been removed
It is not uncommon once a physical inventory is conducted for it to be determined that:
a) the actual inventory varies significantly from what is indicated in the inventory
system; and b) the non-valued inventory (i.e. obsolete, overstocked) is considerable.
The City will need to ensure that it carefully negotiates the terms of the contract in
order to ensure that the benefits of this arrangement and potential cost reductions or
productivity enhancements outweigh the potential for increase recurring costs
associated with parts costs (acquisition plus 10%) and/or the monthly fee (must be less
than what is paid out for City staff). While it is not possible to calculate an actual
savings/ROI for this given the variety of variables involved, it is assumed that the City
will realize the following types of savings:
Note: This is based on the assumptions of a $400,000 budgeted inventory and $246,000 in inventory value.
Assumes the same number of staff required to manage. Also, assumes a benefit add-on of 50% to get to the
fully loaded hourly cost when computing staff savings.
Parts Inventory Summary
Current Parts Value Low End Upper End
Central Garage Inventory 213,866$ 85,547$ 149,707$
Water Department Inventory 32,452$ 12,981$ 22,716$
Total Parts Value 246,318$ 98,527$ 172,423$
Assumed Potential Cash Value
Saving Type Illustrative Estimated Savings
Payroll $176,471 (partially offset by monthly fee to vendor)
Inventory (obsolete & shrink) $30,600
Productivity Based on estimated hours of parts search and pricing effort
Transaction Based on key metrics such as number of vendors, number of
P.O.’s, cost of issuing P.O.,etc.
City of Rockford
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Anticipated
Savings/Impact on
General Fund
(cont.)
These savings will be offset by a monthly administration fee which is determined based
on a number of factors including:
Volume of parts purchased
Hours of operation
Level of staffing required (e.g. based on hours of operation, scope of inventory
and need for additional staff i.e. drivers)
Resources for sourcing parts
This fee can range significantly but is often in the range of $10,000 - $15,000 per
month.
A quick illustration of just the labor and inventory savings anticipated for a $400,000
inventory indicates the potential for savings equal to a range of between $27,000 and
$87,000 annually when factoring in a potential monthly fee of between $10,000 and
$15,000. This figure does not include productivity or transaction savings nor does it
consider the additional 10% administrative upcharge for parts which may be negated
by potential savings from economies of scale by virtue of the parts vendors’
relationships and volume of purchase with vendors.
Also, as opposed to the current situation of having to purchase parts and pay for them
even if they aren’t used immediately, this arrangement allows the City to not have to
pay until the part is actually put into service. Based on the “turn rate” of the inventory,
this could mean a substantial savings to the City.
Service Impact
The contract should specifically outline expectations relative to: hours of operation,
levels of security, fill rates and vendor performance indicators. Dependent upon what
terms are negotiated, this could result in service enhancements or perceived
limitations.
The vendor will not only serve as the manager of the parts and supplies store, but will
also negotiate pricing on behalf of the City. Some contracts offer a contingency fee (i.e.
ability for vendor to keep part of the savings realized through this negotiation).
In addition, some of these vendors offer additional services such as cores and
warranty tracking, customized automotive services (e.g. custom paint-mixing, custom
lubricants, etc).
Other municipalities currently engaged in outsourced supply and parts operations
include:
Huntsville, Alabama; Lynchburg, Virginia; Greenwich, Connecticut; and Cary, North
Carolina.
Staff Impact
Staff effort for procurement will be reduced given that the vendor will source non-
stocked products. However staff will need to get used to working with an outside
vendor to identify equipment and supplies needs.
The level of data available for managers to make decisions should increase due to
computerized inventory control and the ability to monitor stock levels and inventory
effectiveness, and have readily available billing information.
Other Impacts Most of these contractual arrangements include a buy-back clause that indicates what
will happen if the City determines it wishes to terminate the contract and revert to its
former operation. This is a positive in that the vendor will purchase any of its own
parts. However, the City will be responsible for any parts that are not the vendor’s.
City of Rockford
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Market/Vendor
Considerations
There are a significant number of vendors available to provide outsourced parts
management functions with one of the major national vendors with a considerable
presence within the Rockford region. Many of the same vendors that provide these
services are currently working with the City to stock the Central Garage Storage room
(e.g. CarQuest, NAPA, Rockford Valley). The City should ensure that the vendor
selected for these services can demonstrate that they have past municipal experience
in managing parts and supplies, and have the level of resources and infrastructure
necessary to totally manage this type of an operation in a manner that will reduce
costs, and ensure enhanced productivity.
Shared Service
Options/Discussion
of Redundancies
The City has historically had multiple locations where parts are stored including Central
Garage, Public Safety Building and Fire. With the closing of the PSB fleet center, parts
for those vehicles will be managed through a contract with Fran Kral. The centralization
of all parts inventory into an on-site parts supply store function (with parts specific to
Fire being stored at the remote locations but managed by the parts operation) can
benefit the City through reduced labor effort and improved economies of scale in
purchasing. Also, merging to one location can significantly improve fill rates.
Risk Factors
Vendor system required investment and/or required integration with existing systems
can create significant risks and costs for the City.
Absent significant contract oversight the City could find itself faced with risks such as
inappropriate deployment of used parts, double billing for the same part, up charges
for on- demand occurrences, unsubstantiated purchases, charge timing issues, and
potential for lack of inventory security.
Collective
Bargaining Impacts
Article II, Section 2.2(H) of the most recent collective bargaining agreement specifies
that the City has the right to:
“Change methods of operations, equipment or facilities, including contracting and
subcontracting.”
Per Article IV, Section 4.8 of the agreement, if the City seeks to implement this
modification and attempt to realize the potential savings outlined in this decision item,
which includes a reduction in force, the following is required:
The City will meet with the Union to discuss the proposed reduction in force
prior to implementation
The City will provide the Union with the rationale for the reduction in force and
give the Union the supporting data
The Union has two weeks to use this data to develop alternative approaches to
achieving the same financial or organizational goals
If no feasible alternative is proposed by the Union that provides a comparable level of
benefits, the City must follow the reduction in force steps laid out in Article IV, Section
4.9 of the agreement.
City of Rockford
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Modification
The City should closely review the current utilization of vehicles and plan to retire those
vehicles that are proving to be high cost vehicles that are not justified based on age
and/or miles driven per year. A major factor to consider is the average miles per year
for each vehicle. We have conducted a very high level analysis of vehicle utilization
applying a standard threshold by vehicle type, and have identified that roughly 74% of
vehicles owned by the City are suspected of being underutilized.
As is the case with any piece of equipment, as vehicles age the cost to repair and
maintain them increases given that they are no longer under warranty and are more
prone to having “issues”.
The total cost to maintain all vehicles currently in the City fleet is roughly $1.437 million
on average per year.
Significant variations in cost exist between vehicle classes and individual vehicles
based on age and usage.
In conducting this analysis, we recognize that the information is not totally reliable due
to data entry errors and lack of consistency in how information is gathered; however,
there is sufficient information to make the case that closer fleet utilization analysis is
warranted and required if the City is to effectively manage its fleet. Specifically, the
information we are using are meter readings captured the last time a vehicle was in for
maintenance or off of the fuel system (where we felt the data was reliable). The fuel
management information system (FMIS) has been breached allowing it to be an
unreliable means of capturing good utilization data. If used appropriately, this is a
critical factor in effective vehicle maintenance. Given significant issues with data, we
have excluded 11 percent of vehicles from our utilization analysis.
Annual Service
Statistics
Of the 590 total vehicles owned by the City (excluding 11 percent) 74% of them do not
meet mileage thresholds used as industry best practices for utilization. Specifically, we
identified 429 vehicles (of the 590 unique vehicles) that are suspected to be
underutilized when applying the following parameters and discussing specific vehicles
with city staff:
Additionally, in 2009, a review of average miles for just cars shows that 36 of the 198
total cars suspected of being underutilized were driven less than 200 miles (average of
108 miles per year). Excluding police cars, this number drops to 12.
Within the current fleet, 340 vehicles are greater than 7 years old with the average age
of vehicles by type as follows:
Vehicle Type Threshold -
Average Miles Per Month
Sedans and SUVs 400
Task Vehicles
(pickups, midsized trucks, dump trucks)250
Police Vehicles 750
Hourly Units 25 hours
City of Rockford
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Annual Service
Statistics (cont.)
For certain vehicle types, the City is holding on to vehicles that are over 20 years old.
FTE There are 10 FTE assigned in the FY11 Budget to the Equipment Division responsible
to maintain City-owned vehicles. Total salary and benefit budgeted cost for these
positions is $924,445.
Expenditures/Per
Customer Cost
Information
The average cost per vehicle type to maintain City owned vehicles of over 7 years of
age is $3,843. (i.e., $448 is Preventative Maintenance and $3,395 is repair, excluding
11 percent of vehicles due to poor data).
Revenues
Net Revenues are not generated for the general fund from this function; however, an
internal service fund model is employed to fund the equipment division operations.
Vehicle Type Count Average Age
Car 125 10.87
Pickup 41 12.56
Van 31 13.78
Bus 15 15.13
Dump 15 14.09
Trailer 15 14.67
SUV 14 12.13
Tandem 11 13.58
Sweeper 10 11.84
Flatbed 6 16.97
Service 6 14.26
Backhoe 5 13.29
Bucket 5 13.42
Compressor 5 14.92
Loader 5 11.20
Mower 4 14.25
Small Equipment 4 21.50
Thermolay 4 15.25
Chipper 3 11.67
Forklift 3 23.00
Tractor 3 14.33
Clamloader 2 23.50
Ambulance 1 23.00
Command 1 11.00
Derrick Digger 1 14.00
Roller 1 11.00
Sewer Sucker 1 13.00
Stepvan 1 15.00
SWAT 1 30.00
Tanker 1 24.00
City of Rockford
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Anticipated
Savings/Impact on
General Fund
If the City were to identify those vehicles that truly should be retired based on age and
utilization (i.e. those less than the industry best practice thresholds and determined by
department heads to be no longer useful) it could generate the following recurring
savings related to vehicle preventative maintenance and repair costs based on an
assumed 10% and 25% vehicle retirement rate overall:
Note: This assumes vehicles that are suspected of being underutilized per the industry
standard thresholds.
Additionally, given the reduction in PM and repairs services required, it is assumed that
between 1 to 1.5 mechanic FTE can be reduced equating to reduced annual salary
and benefits savings as outlined below:
Department PM Cost Repair Cost Total Cost 10% Retire 25% Retire
Streets $54,893 $435,257 $490,150 $49,015 $122,537
Traffic $11,650 $65,852 $77,502 $7,750 $19,375
Water $33,467 $220,492 $253,959 $25,396 $63,490
Sewer $1,189 $6,950 $8,139 $814 $2,035
Equipment $1,456 $10,211 $11,667 $1,167 $2,917
Engineering $2,908 $12,917 $15,825 $1,582 $3,956
IT $127 $410 $536 $54 $134
CD $3,825 $22,435 $26,260 $2,626 $6,565
Building $619 $6,778 $7,398 $740 $1,849
PW Admin $619 $2,384 $3,004 $300 $751
Property $2,669 $20,797 $23,467 $2,347 $5,867
Police $50,313 $262,504 $312,816 $31,282 $78,204
Parking $1,971 $12,633 $14,604 $1,460 $3,651
Forestry $9,189 $122,191 $131,380 $13,138 $32,845
Human Services $9,189 $51,427 $60,617 $6,062 $15,154
Total $1,437,324 $143,732 $359,331
Average Annual - Current Potential Savings
Savings for Labor Reduction
Current 10% 25%
FTE Reduction 10 9 7.5
Salary Level 586,183$ 46,353$ 115,883$
Benefits Level 338,262$ 26,748$ 66,871$
Total Labor Savings 73,101$ 182,754$
Reduction level
City of Rockford
Page 25
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Anticipated
Savings/Impact on
General Fund
(cont.)
Therefore total savings anticipated to the City for reducing the fleet for non-utilized
vehicles could result in a range of between $217,000 and $542,500 in annual recurring
savings.
In examining this issue even more closely for one category of vehicles (CARS), it
appears that if the City were to reduce the fleet of those cars that are driven less than
200 miles per month, it would reduce the cost of maintenance and repair by $43,200
annually, (i.e., for 36 cars which average 10.94 years in age and less than 200 miles
driven per month).
A key step in the process of determining which vehicles to retire will be the input of the
department. As the scope of this engagement was not a full fleet utilization study, we
were unable to include discussions with each department as would normally be the
case. It is our recommendation that the City take that step using the information
analyzed as part of these decision items.
Service Impact
The creation of an expanded “Motor Pool” would significantly enhance the efficiency of
fleet management within the City. Less used vehicles in all classes could be added to
the current pool and rented on demand as departments need them rather than carrying
them as departmental capital.
Not having vehicles specifically assigned to departments may result in the need for
improved advance planning relative to vehicles usage and/or policy changes relative to
Personal Owned Vehicle (POV) use. Not having extra vehicles available may also
reduce productivity if these vehicles are currently used as backups when others are in
for repairs.
Staff Impact
Staff may need to get used to using POVs and submitting reimbursement requests.
This could result in increased efficiency relative to vehicle use.
Other Impacts There are none related to this decision item.
Market/Vendor
Considerations
There is resale value for these vehicles despite their age and rather than using an
auction, which is a more traditional approach, the City should consider using internet
sales media to dispose of vehicles. These types of internet sales transactions typically
bring in 15% more profit than auctions.
Shared Service
Options/Discussion
of Redundancies
An alternative to retiring these vehicles could be to pursue a shared fleet pool with
another public sector entity – most likely candidate would be the County. This
arrangement would allow the City to retain access to infrequently used
vehicles/equipment without having to pay the high cost of maintenance. In other words,
by combining fleets vehicle utilization can be improved; however, the challenge may be
that certain low utilization vehicles may be needed at the same time by each entity
(e.g. Tandems).
Total Annual Savings
10% 25%
Avoided Maintenance Costs 143,732$ 359,331$
Labor Savings 73,101$ 182,754$
Total Estimated Savings 216,834$ 542,085$
Reduction level
City of Rockford
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Risk Factors
If the City expands the use of personally owned vehicles (POV) because of the fleet
downsizing (which based on the utilization should not be significant), it could increase
the potential for false reporting and use of POV reimbursement for personal use.
Collective
Bargaining Impacts
The Mechanics position is represented by AFSCME.
Article II, Section 2.2(H) of the most recent collective bargaining agreement specifies
that the City has the right to:
“Change methods of operations, equipment or facilities, including contracting and
subcontracting.”
Per Article IV, Section 4.8 of the agreement, if the City seeks to implement this
modification and attempt to realize the potential savings outlined in this decision item,
which includes a reduction in force, the following is required:
The City will meet with the Union to discuss the proposed reduction in force
prior to implementation
The City will provide the Union with the rationale for the reduction in force and
give the Union the supporting data
The Union has two weeks to use this data to develop alternative approaches to
achieving the same financial or organizational goals
If no feasible alternative is proposed by the Union that provides a comparable level of
benefits, the City must follow the reduction in force steps laid out in Article IV, Section
4.9 of the agreement.
City of Rockford
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Modification
The City has an extremely old and high mileage fleet based on the fact that it has been
unable to fulfill its vehicle replacement program due to lack of funds. The average age
of vehicles across the fleet is 10.13 years of age. During the past few years, the City
has been unable to adhere to its Capital Replacement Program due to a lack of Capital
Budget funding. The average cost of a new vehicle by category is as follows:
The City should consider updating its fleet through a lease to purchase program. Once
the City has verified those fleet vehicles over seven years of age, that are good
candidates for leasing (i.e. car, pickup, van and SUVs) it should consider entering into
a municipal lease program for those vehicles.
Municipal lease financing has distinctive advantages over commercial equipment
leasing in that it offers the ability to:
Forego Difficult Capital Outlays – allows municipality the ability to replace
capital asset without waiting until next budget cycle and offers the added
flexibility of payment intervals set to meet the entity’s needs (i.e. monthly,
quarterly, annual)
Termination for non-appropriation – most include non-appropriation
clauses, to cover situations where the lessee is unable to obtain funding for
future payment obligations on the lease, which enable the lessee to terminate
the lease agreement at the end of the current appropriation period without
further obligation or penalty
Municipal lease purchase – for the term of the lease, the municipality holds
the title to the leased equipment while the lessor holds the security interest. It
is a full payout contract to purchase the equipment rather than a series of
rental payment as with traditional commercial leases. The financing is
structured so that there is no residual value, balloon payment or purchase
option to consider.
Tax-exempt - interest income on a municipal lease is tax exempt to the lessor.
The municipality benefits when the lessor passes these savings on to the
municipality in the form of a lower interest cost.
Lease to Purchase Credit - municipal lease payments build equity in the
future unencumbered ownership of the asset. Without penalty, the lesee has
the option of purchasing the equipment outright, at any time, for a
predetermined purchase price consisting of the remainder of principal and any
accrued interest.
New Vehicle Costs
Sedan/Car 22,500$
Police Car 27,500$
SUV/Van/Pickup 31,600$
City of Rockford
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Modification (cont.) Based on the age, mileage and type of vehicles it is estimated that 94 of the City’s 661
fleet vehicles would be excellent candidates for leasing within the next fiscal year.
Specifically, for purposes of this analysis we are restricting our pool to vehicle types of
car, SUV, pickup or van. We analyzed candidate for leasing from the total pool (except
11 percent) for those vehicles that are greater than 7 years of age and for which the
mileage exceeds 85,000 (roughly the average mileage for the City’s pool within all
categories). As such, the following vehicle numbers are eligible for consideration of
being retired:
The City has historically purchased used vehicles for certain vehicle categories (i.e.
Fire) to try to contain capital replacement costs. However, this is not a best practice.
Annual Service
Statistics
The majority of City vehicles are listed in poor or fair condition per the January 2010
Condition Report.
FTE There are 10 FTE assigned in the FY11 Budget to the Equipment Division responsible
to maintain City-owned vehicles. Total salary and benefit budgeted cost for these
positions is $924,445.
Expenditures/Per
Customer Cost
Information
The City spent $300,781 during 2009 on preventative maintenance. The average cost
per vehicle type to maintain City owned vehicles of over 7 years of age is $3,843. The
average cost of Preventative Maintenance per vehicle is $448 and repair is $3,395.
This excludes 11 percent of vehicles due to poor data.
Revenues
Net Revenues are not generated for the general fund from this function; however, an
internal service fund model is employed to fund the equipment division operations.
Vehicles type Total Count ‐
Candidates for Leasing
Sedan/Car 19
Police Car 45
SUV/Van/Pickup 30
TOTAL 94
Lease Candidates Average Annual
Repair Costs Percent of Total Fleet
Sedan/Car $2,011.79 2.87%
Police Car $2,691.93 6.81%
SUV/Van/Pickup $3,612.81 4.54%
City of Rockford
Page 29
Prepared by: Baker Tilly Virchow Krause, LLP
Anticipated
Savings/Impact on
General Fund
If the City were to enter into a Municipal Lease Purchase arrangement it is estimated
that the net annual fiscal impact on the general fund would be as follows:
Assumptions:
Only includes sedans, SUVs, vans and pickups
Assumes cost of $765 per month for police cars, $250 for sedans/cars and
$350 for SUV, vans or pickups
Assumes additional $475 delivery fee twice per year
Repair costs would be reduced by 50%, PM cost would remain the
responsibility of the City
Reduction in labor effort and therefore cost equal to 25% (i.e. repair is 50% of
total cost and the vendor would cover about half through extended warranty
services)
In fourth year would receive a $5,000 per vehicle residual value fee for the
50% of vehicles not purchased
It is also important to note that often vendors will offer deferred payment of up to one
year if a 10% down payment is provided. We did not include this assumption in our
savings calculation.
The leasing option could also be possible for additional vehicles including dump trucks,
ambulances, etc if the City were willing to consider a slightly modified approach to the
maintenance of these vehicles. i.e., leasing companies typically will not be able to
accommodate quick changes required of municipal fleets (e.g. snow plow blades
change outs, etc). The arrangements for this are more complicated and would require
specific decisions on the part of the City relative to what would be contracted versus in-
house in terms of maintenance.
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Cost Reduction
Eliminated Repair Costs $267,745 $267,745 $267,745 $248,080 $248,080 $248,080
Eliminated PM Costs $0 $0 $0 $0 $0 $0
Reduced Labor Expense $133,873 $133,873 $133,873 $124,040 $124,040 $124,040
Avoided Capital Costs $2,613,000 $0 $0 $2,445,900 $0 $0
Lease Payment
Annual Payment Plus Fees $598,950 $598,950 $598,950 $876,225 $876,225 $876,225
Lease End Payment Offset $0 $0 $0 $235,000 $0 $0
Net Savings per Year $2,415,668 -$197,332 -$197,332 $2,176,795 -$504,105 -$504,105
Total Savings Over 6 Years: $3,189,589
City of Rockford
Page 30
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Service Impact
The main advantage of using a leasing program to fund vehicles is that it provides the
ability for the City to adhere to its vehicle replacement plan, thus allowing capital
purchases, ensuring safe and effective vehicles and driving down the overall cost of
vehicle maintenance. Leasing payments typically cover extended service plans with
coverage up to 3 years or 100,000 miles while would mean the City’s outlay for
maintenance would be minimal.
A key consideration in entering a lease program is whether or not the productivity
losses incurred in having to take the vehicle back to the lessor for maintenance cancel
out any maintenance productivity savings.
Staff Impact
This could result in a reduction in maintenance staff and should reduce overall labor
effort required; however, this effort savings may not be realized immediately.
Other Impacts There are none related to this decision item.
Market/Vendor
Considerations
There are two types of vendors involved with municipal leasing: 1) the equipment
vendor, and 2) the lease financing entity. Many of these entities have strategic
partnerships with one another or are affiliates of the same company. Lease
agreements are available based on the type of vehicle and the region. Within
Rockford, there are local dealerships that are willing to provide leasing arrangement for
certain vehicles.
There are numerous municipal lease financing entities across the nation including:
Govfunds, WB, Mosaic International, Alpha Equipment Leasing, etc.
Shared Service
Options/Discussion
of Redundancies
If the City were to enter into a pooled fleet management approach with the City (as
was previously in place), the school district or another public or private entity, the
concept of leasing vehicles would still be feasible.
Risk Factors
The City would need to carefully craft its contracts to ensure that the specifications of
vehicles unique to municipal service delivery are fully accommodated through these
arrangements. While companies exist that offer the ability for leasing all vehicles,
certain types of vehicles are much more easily managed through a leasing program
provided by a non-City fleet shop.
City of Rockford
Page 31
Prepared by: Baker Tilly Virchow Krause, LLP
Collective
Bargaining Impacts
The Mechanics position is represented by AFSCME.
Article II, Section 2.2(H) of the most recent collective bargaining agreement specifies
that the City has the right to:
“Change methods of operations, equipment or facilities, including contracting and
subcontracting.”
Per Article IV, Section 4.8 of the agreement, if the City seeks to implement this
modification and attempt to realize the potential savings outlined in this decision item,
which includes a reduction in force, the following is required:
The City will meet with the Union to discuss the proposed reduction in force
prior to implementation
The City will provide the Union with the rationale for the reduction in force and
give the Union the supporting data
The Union has two weeks to use this data to develop alternative approaches to
achieving the same financial or organizational goals
If no feasible alternative is proposed by the Union that provides a comparable level of
benefits, the City must follow the reduction in force steps laid out in Article IV, Section
4.9 of the agreement.
City of Rockford
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Street Sweeping
Overview
The street sweeping group within the Streets Maintenance Division of the Department of Public Works has
responsibility for sweeping a minimum of approximately 1,760 lane miles of arterial and residential streets
multiple times per year, as well as streets in the central business district (CBD) on an ongoing basis. Primary
functions of the street sweeping group include:
Central Business District sweeping
Arterial & residential sweeping
Raised median cleaning
Disposal of debris collected via sweeping operations
In addition, the street sweeping group is occasionally called on to complete sweeping for special events, such
as parades and festivals, as well as debris and spill cleanup resulting from truck or vehicle accidents on City
roads.
To accomplish these functions, street sweeping staff are assigned to operate the City’s eight street sweeping
machines, including performing daily maintenance on these vehicles, and to haul debris collected during street
sweeping operations. During winter, street sweeping staff are re-assigned to other functions, including:
Participating in snow and ice removal during winter storm events (i.e. driving snow plow trucks on an
assigned plow route)
Performing maintenance on the City’s fleet of snow plow trucks in the winter
Working on pothole patching and related street maintenance
Performing tree and brush removal
Revenue and Expenditure Trends
For 2011, the Public Works Department began budgeting for the street sweeping function differently than in
years past. Specifically, the implementation of a new time reporting system allowed for an improved ability to
allocate staff time, resulting in a significant jump in the level of FTE allocated to the cost centers for city-wide
street sweeping, in general, and central business district (CBD) street sweeping. As a result, there is limited
utility in comparing revenue and expenditure trends for this function. In 2011, the total expenditures for street
sweeping were an estimated $960,204, or 12.4% of the Streets Division overall budget.
City expenditures for the Streets Division overall have decreased significantly over the past four years, as
shown in the figure on the following page. 2008 actual expenditures were $11.9 million, but the 2011 budget
appropriates a total of $7.7 million, a decrease of $4.2 million in just four years (35.0% reduction).
City of Rockford
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Streets Division Total Expenditures and Revenues
2008 Actual to 2011 Budget
2008 Actual 2009 Actual 2010 Budget
2011
Budget
Change over
2010
Expenditure
Personnel $3,257,810 $2,875,395 $2,885,436 $2,603,852 ($281,584)
Contractual 6,265,127 4,040,653 3,507,955 3,663,430 155,475
Supplies 1,910,021 1,214,106 1,384,000 1,384,000 0
Other 263,959 167,521 87,959 92,559 4,600
Capital 226,602 1,125 0 0 0
Total $11,923,519 $8,298,800 $7,865,350 $7,743,841 ($121,509)
Revenue 2008 Budget
2009
Budget 2010 Budget
2011
Budget
Change over
2010
Property Taxes $2,100,780 $2,166,100 $2,098,800 $2,098,800 0
Street & Bridge Reimb. 559,557 554,398 598,272 408,231 (190,041)
Other Governments 270,000 270,000 270,000 270,000 0
Transfers from other
Funds 1,183,900 925,400 718,825 957,300 238,475
General Revenues 5,939,678 3,756,353 4,179,453 4,009,510 (169,943)
Total $10,053,915 $7,672,251 $7,865,350 $7,743,841 $(121,509)
Level of resources/staff
As noted, the method by which the Streets Division accounts for staff assigned to the street sweeping unit
changed in 2011, resulting in an artificial increase in the number of FTE reported under the street sweeping
cost centers. However, in recent years, the amount of actual employees who perform street sweeping has not
changed. A total of seven operators and one maintenance worker spend time performing street sweeping
between April and November (depending on the weather). In 2011, the total FTE allocated (as a portion of
these eight employees’ time) was 6.2 FTE.
City of Rockford
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Budget Reduction Options/Decision Items
DDeecciissiioonn
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CCoonnttrraacctt ffoorr SSttrreeeett SSwweeeeppiinngg
Modification
This modification involves contracting out for the bulk of the City’s street sweeping
needs. Specifically, the City could contract for street sweeping on its system of arterial
and residential streets, and retain a much reduced level of resources to provide in-
house street sweeping services in the Central Business District (CBD). Contracting for
street sweeping is fairly common in Illinois, including both mid-sized cities such as
Naperville, and smaller municipalities such as Gurnee, Orland Park, Oak Park,
Glenview, and Downers Grove. The City of Naperville, with a population of
approximately 143,000, contracts out for street sweeping on its 488 centerline miles of
arterials and residential streets (an estimated 1,464 lane miles), but also maintains a
smaller in-house street sweeping unit for their central business district and in case of
emergency sweeping needs in other parts of the City.
Annual Service
Statistics
Between April and November, there are five operators assigned during the day shift to
operate street sweepers in various sections of City roads (which are aligned with the
City’s snow plow routes), supported by a maintenance worker for debris removal as
needed, and an additional two operators to perform street sweeping in the central
business district on the overnight shift.
As shown in the figure below, the street sweeping group averaged 486 centerline miles
of street sweeping per month. The Division’s performance target for this group is to
perform 350 centerline miles of street sweeping per month; it is apparent that the
group is currently sweeping considerably more miles per month than the targeted level
of performance.
Miles of Streets Swept
By Month, April – August 2010
April May June July August Average
455 369 422 616 568 486
As of the completion of street sweeping operations in November 2010, the street
sweeping unit swept a total of 3,609 centerline miles, or approximately 9,311 lane
miles. The targeted number of citywide cycles for 2010 was three (outside the central
business district).
FTE As shown in the figure below, the Division currently allocates 6.2 FTE to street
sweeping, which represents an allocation of a total of eight employees’ time in all.
Street Sweeping Staffing Level
2011
Street Sweeping 2011 Budgeted
FTE
City Arterials and Residential 6.2
Central Business District 0.0
Total 6.2
City of Rockford
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FTE
(cont.)
There are currently seven operators, and one maintenance worker who spend time at
various parts of the year on street sweeping operations.
From approximately April to November (depending on the weather), the operators are
assigned to drive the street sweepers on a staggered shift, ensuring 7-day a week
operations. Five of the operators work during the day shift, and two operators are
assigned to the night shift to sweep the Central Business District. During the winter,
four of these staff are assigned to the City yard to perform light maintenance on the
City’s fleet of 30 snow plow trucks.
The Maintenance worker is assigned to street sweeping during heavy periods of debris
removal.
Expenditures / Per
Customer Cost
Information
The 2011 street sweeping budget includes a significant percentage increase over 2010
expenditures. This is entirely due to a revised budget allocation of the level of
resources (staff time) actually spent operating the street sweeping program. In other
words, the 2011 budget better reflects actual City costs for street sweeping when
compared to past years. The estimated 2011 budget amount of $960,204 includes a
conservative estimate of $15,000 for street sweeping overtime, based on the 2010
actual overtime level (through November). Assuming that the total number of lane
miles swept is comparable to the 2010 output (9,162 lane miles), the projected cost per
lane mile for 2011 may be as high as an estimated $103.12.
Estimated Cost per Lane Mile
2010 and Projected 2011
Street Sweeping 2010 Budget 2011 Budget
City Arterials and Residential $637,697 $905,454
Central Business District 81,128 39,750
Subtotal Street Sweeping 718,825 945,204
Street Sweeping Overtime 12,894 15,000
Total $731,719 $960,204
Lane Miles 9,311 9,311
Cost Per Lane Mile $78.58 $103.12
Note: 2010 Expenditures likely understate the actual cost of the program.
The street sweeping expenditures presented above are funded via a transfer from the
Sanitation Fund, which is primarily funded through user fees (81.5%) and property
taxes (18.1%). Therefore, any potential savings would primarily impact the Sanitation
Fund, rather than the General Fund.
It should also be noted that the City’s current fleet of street sweepers is nearing the
end of its useful life. Within the next several years, five of the City’s nine street
sweeping vehicles will need to be replaced, with a total anticipated cost of between
$625,000 and $750,000. The current average age of fleet vehicles is nine years, with
an anticipated useful service life typically between ten and twelve years. We contacted
a vendor of street sweeping machines that serves the Northwest suburbs, and they
confirmed that the expected price range for a new street sweeper is roughly $125k-
$150k per unit.
City of Rockford
Page 36
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Revenues
There are currently no revenues specifically associated with street sweeping. The
Division has, in the past, discussed billing for special events, but to date has only
charged an outside entity once (specifically the 2010 Waterfront festival, labor costs
only).
Anticipated
Savings /
Impact on General
Fund
This item impacts a transfer from the Sanitation Fund. A review of the current
contract cost per lane mile currently being paid by medium and small municipalities in
Illinois suggests a market with an upper end price point of approximately $68 per lane
mile, or lower. There are no guarantees that Rockford will receive similar pricing were
it to contract for this service. However, given the City’s current estimated cost per lane
mile ($103.12), it appears that there is an opportunity for significant savings, were the
City to outsource sweeping for its arterials and residential streets. In 2010, sweeping
the central business district represented a total of 3,367 miles, or approximately 36.1%
of the total output of the street sweeping group, while the group swept 5,944 lane miles
(63.9%) of arterial and residential streets.
Potential Outsourced Street Sweeping Costs
Based on Current Level of Service for
Arterial & Residential Streets and High-End Market Price Point
Total
Lane
Miles
CBD
Lane
Miles
Arterial &
Residential Lane
Miles
Bid
Estimate
Estimated
Contract
Costs
9,311 3,367 5,944 $68 $404,214
Notes:
CBD lane miles provided by the Streets Division
The City of Naperville’s approach to outsourcing street sweeping (in house sweeping
in the CBD, outsourced for arterials and residential streets) offers a useful model for
the City to consider. There are several advantages to retaining an in-house street
sweeping function to service the central business district over the short- and medium
term:
Maximum accountability for street sweeping performance in the central
business district, which is important to the City’s economic development efforts
Operational flexibility to dispatch street sweeping assets without incurring
additional contract costs for special events such as parades and festivals, and
for emergency debris cleanup
Maintenance of street sweeping skill sets if outsourcing performance or cost
issues require the City to bring the function back in-house
Potentially lower contract costs
The potential savings presented on the following page will change significantly,
depending on the value of potential bids received and the scope of services desired by
the City. For example, the City could reduce contract costs by cutting the number of
cycles it wishes to complete each year. However, the figure below presents potential
contract costs, given current service levels and a higher-end market price point.
The figure on the next page compares the estimated five year costs to operate the
street sweeping program with the five year costs for outsourcing sweeping for arterials
and residential streets (but retaining two operators to sweep the central business
district, and for special events such as parades and festivals, and for emergency
debris cleanup).
City of Rockford
Page 37
Prepared by: Baker Tilly Virchow Krause, LLP
Anticipated
Savings /
Impact on General
Fund
(cont.)
Five-Year Cost Comparison
Annual Detail, FY2012 to FY2016
For the purposes of determining the impact of the hybrid outsourcing approach on the
City’s ongoing operating cost to keep CBD street sweeping in-house, we assumed that
the City would reduce the number of operator positions assigned to the street
sweeping function by five, resulting in a net FTE reduction in force of 4.2 FTE. We
made the following assumptions:
The number of positions allocated to the street sweeping function would be
reduced from 6.2 FTE to 2.0 FTE, resulting in personnel costs of 32.3%
compared to the 2011 budget
Personnel costs would be reduced by 68.7%
Expenditures for vehicle repair, fuel, and garbage disposal would be approximately
36.1% of the FY2011 budget (representing the 2010 percentage of CBD lane miles
compared to total lane miles swept).
Given these assumptions, it appears that the City has the potential to realize $1.9
million in potential savings over five years, as shown in the summary figure below. It
should be noted that if the vendors’ bid price or the City’s operating costs differ from
these estimates, the actual savings will vary significantly.
5-Year Summary Comparison
Current Street Sweeping Approach vs. Hybrid Outsourcing Model
FY2012 FY2013 FY2014 FY2015 FY2016 Total
No Change
Operational Cost
Est 989,010$ 1,018,680$ 1,049,241$ 1,080,718$ 1,113,140$ 5,250,789$
Capital Costs Est 150,000$ 150,000$ 150,000$ 150,000$ 150,000$ 750,000$
Surplus Auction Est (5,000)$ (5,000)$ (5,000)$ (5,000)$ (5,000)$ (25,000)$
Total No Change 1,134,010$ 1,163,680$ 1,194,241$ 1,225,718$ 1,258,140$ 5,975,789$
Hybrid Contract /
In House
Operational Cost
Est 317,770$ 327,303$ 337,122$ 347,236$ 357,653$ 1,687,085$
Capital Cost Est 150,000$ 150,000$ -$ -$ -$ 300,000$
Surplus Auction Est (30,000)$ (5,000)$ -$ -$ -$ (35,000)$
Contract Cost Est 404,214$ 416,340$ 428,830$ 441,695$ 454,946$ 2,146,026$
Total Hybrid
Contract / In House 841,984$ 888,643$ 765,953$ 788,931$ 812,599$ 4,098,111$
Expenditure Type No Change Hybrid
Savings
Estimate
Operational Cost 5,250,789$ 1,687,085$ 3,563,704$
Capital Costs 750,000$ 300,000$ 450,000$
Surplus Auction (25,000)$ (35,000)$ 10,000$
Contract Cost -$ 2,146,026$ (2,146,026)$
Total 5,975,789$ 4,098,111$ 1,877,678$
City of Rockford
Page 38
Prepared by: Baker Tilly Virchow Krause, LLP
Anticipated
Savings /
Impact on General
Fund
(cont.)
The assumptions used in calculating these potential savings are conservative.
Specifically, we assumed:
No change to the level of service
High-end costs for contractor bid per lane mile and sweeper capital
replacement cost
Comparable annual rates of increase in both City and contract costs (3%)
Service Impact
In the central business district, there should be no change in the current level of
service experienced by businesses, shoppers, and residents. Relative to arterial and
residential streets, the hybrid outsourcing model presented above assumes a directly
comparable level of service provided under contract. If the City wishes to realize
greater savings, it could reduce the level of street sweeping service provided on
arterial and residential streets, as is discussed in a separate decision item.
Staff Impact
If the City chooses the hybrid outsourcing model, and reduces expenditures by
eliminating 4.2 FTE positions, the current position incumbents will have “bumping”
rights under the collective bargaining agreement. This means that staff with less
seniority will most likely be impacted by this modification.
Other Impacts There will be several impacts of reducing the overall number of operators in the streets
division. In terms of current staff resources, the total amount of staff time recorded by
these staff on non-street sweeping functions is an estimated (combined) 1.8 FTE. The
other functions include:
The Division will need to re-assign some staff to perform light maintenance
duties on the City’s fleet of snow plow trucks, thereby reducing output in other
Streets functions (such as pothole patching and tree removal)
Potential for increased overtime during snow events, because operators from
the street sweeping group currently are assigned to snow plow routes in the
winter. With fewer operators available to assign, the Division may need to hire
back staff from within the Division and other units of the Department on an
overtime basis
Two of the street sweeping operators currently assist with the pothole patching
function in the winter. Eliminating these positions will potentially result in an
increase in the existing backlog of potholes (131 pending as of October 2010)
One of the street sweeping operators currently assists with tree removal in the
winter. Eliminating this position will potentially result in an increase in the
existing forestry backlog (559 pending as of October 2010)
City of Rockford
Page 39
Prepared by: Baker Tilly Virchow Krause, LLP
Market / Vendor
Considerations
A review of the current market for contract street sweeping services suggests that
there are several qualified vendors that have bid on municipal street sweeping
contracts in the Chicagoland region within the past two years. These include:
Waste Management of Illinois, Inc., Chicago
Elgin Sweeping Services Inc., Chicago
K. Hoving Clean Sweep, LLC, West Chicago
Diamond Coring Company, Chicago
Illinois Central Sweeping LLC, Blue Island
The expected cost of contracted street sweeping services will vary by:
Vendor rate structure
Size of the City’s road system
Preferred number of cycles (i.e. number of times each year all city streets are
swept)
There is some publicly available contract cost and service information relative to the
current market for contract street sweeping services, which is shown in the figure
below. The data presented below are high-level in nature, and should not be
considered as direct comparisons of what eventual bids might be for an RFB issued by
the City of Rockford. For example, Naperville contracts for arterials and residential
streets, and performs central business district (CBD) sweeping on an in-house basis.
Further, these cost data may or may not include specific items like sweeping services
following parades or festivals – in other words, the details of each contract are specific
to that municipality, requiring caution in interpretation. However, they do provide a
general reference point relative to what other municipalities are currently paying for
outsourced street sweeping.
Illinois Municipal Street Sweeping Contract Market Snapshot
2010 Contract Cost and Service Levels
Lane Miles
Estimate
Number of
Cycles
Bid
Information
Cost per
Lane Mile
Downers Grove 329 6 $104,500 $52.94
Park Forest1 181 5 45,325 50.19
Naperville2 1259 2 114,240 45.37
Glenview 3 351 varies 120,299 67.81
Notes:
1Lane miles estimated using centerline miles shown on Village website (70) * 2.58
2Number of cycles refers to residentials; arterials swept 3x/annum; City does street
sweeping for CBD in-house; centerline miles shown on City's website (53 arterial, 435
residential); lane miles estimated by 488 * 2.58
3Lane miles estimated using centerline miles from Village website (133) * 2.58
City of Rockford
Page 40
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Shared Service
Options /
Discussion of
Redundancies
There are no redundancies or duplicative operating groups relative to street sweeping
within other parts of City government.
As an alternative to this modification, the City could consider serving as a contract
street sweeping provider for neighboring municipalities. However, several significant
barriers would need to be addressed, including:
The City’s current cost per lane mile does not appear market competitive when
compared to other recent bids received by other municipalities in the
Chicagoland area
Under any contracting arrangement, the City would need to pass on the costs
associated with its capital replacement needs, which will increase its total cost
per mile
Providing contract street sweeping service to its neighbors would require the
City to determine whether it would be willing to accept a lower level of service
in terms of lane miles swept, or if it would be cost effective to add additional
staff and equipment to provide these services outside the City
Risk Factors
Key risk factors to the successful adoption of a hybrid approach to outsourcing street
sweeping as described above include:
Cost of the contract in terms of bids received
Performance of the contractor in sweeping the arterial and residential streets
at a level consistent with resident expectations
Ensuring that sufficiently robust contract language is in place to protect the
City’s financial and service delivery interests relative to the vendor’s
performance
Collective
Bargaining Impacts
Article II, Section 2.2(H) of the most recent collective bargaining agreement specifies
that the City has the right to:
“Change methods of operations, equipment or facilities, including contracting and
subcontracting.”
Per Article IV, Section 4.8 of the agreement, if the City seeks to implement this
modification and attempt to realize the potential savings outlined in this decision item,
which includes a reduction in force, the following is required:
The City will meet with the Union to discuss the proposed reduction in force
prior to implementation
The City will provide the Union with the rationale for the reduction in force and
give the Union the supporting data
The Union has two weeks to use this data to develop alternative approaches to
achieving the same financial or organizational goals
If no feasible alternative is proposed by the Union that provides a comparable level of
benefits, the City must follow the reduction in force steps laid out in Article IV, Section
4.9 of the agreement.
City of Rockford
Page 41
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DDeecciissiioonn
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RReedduuccee SSwweeeeppiinngg SSeerrvviiccee LLeevveellss OOuuttssiiddee tthhee CCeennttrraall BBuussiinneessss DDiissttrriicctt
Modification
This modification involves reducing the number of street sweeping needs in the arterial
and residential areas of the City. If the City is willing to tolerate a lower level of street
sweeping service in these areas, this would create the opportunity to either:
Maintain the current level of staffing and re-allocate staff resources towards
existing backlogs in other Streets functions
Realize ongoing annual operating savings through reduced personnel costs
following a reduction in force
Given the importance of the central business district (CBD) to the City’s economic
development strategy, this modification does not envision a reduction of street
sweeping services in the CBD.
Annual Service
Statistics
As of the completion of street sweeping operations in November 2010, the street
sweeping unit swept a total of 3,609 centerline miles, or approximately 9,311 lane
miles. The targeted number of citywide cycles for 2010 was three (outside the central
business district).
The figure below estimates the number of sweeping cycles completed in 2010 for the
CBD, arterials, and residential streets maintained by the Streets Division. The Streets
Division maintains performance data on the number of centerline miles swept for the
CBD and for the other street types. We estimated the total number of lane miles swept
for the various categories using a factor of 1 centerline mile = 2.58 lane miles, which is
the current factor used by the Streets Division. We estimate that the street sweeping
group performed approximately 76.8 cycles in 2010; an estimated 3.5 cycles were
completed for the arterial and residential streets.
Completed Sweeping Cycles Estimate
2010, By Area / Type of Street
Area / Type of Street
Centerline
Miles
Est.
Lane
Miles
Estimated 2010
Lane Miles Swept
Estimated
Cycles
Central Business
District 17 44 3,367 76.8
Arterial 219 565 1,962 3.5
Residential 444 1,146 3,983 3.5
Total 680 1,754 9,311
Note: Centerline miles estimated per the Streets Division, lane miles estimated by a factor of
1 : 2.58
The estimated Lane Miles Swept equates to a total of 3,609 centerline miles swept in
2010. The Streets Division was the data source for the number of centerline miles
swept, the total number of centerline miles for the City overall, the CBD centerline
miles, the proportion of arterial to residential streets, and the lane miles factor.
City of Rockford
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FTE As shown in the figure below, the Division currently employs 6.2 FTE. This 6.2 FTE
represents an allocation of a total of eight employees’ time in all.
Street Sweeping Staffing Level
2010 - 2011
Street Sweeping 2011 Budgeted
FTE
City Arterials and Residential 6.2
Central Business District 0.0
Total 6.2
There are currently seven operators, and one maintenance worker who spend time at
various parts of the year on street sweeping operations.
From approximately April to November (depending on the weather), the operators are
assigned to drive the street sweepers on a staggered shift, ensuring 7-day a week
operations. Five of the operators work during the day shift, and 2 operators are
assigned to the night shift to sweep the Central Business District. During the winter,
four of these staff are assigned to the City yard to perform light maintenance on the
City’s fleet of 30 snow plow trucks.
The Maintenance worker is assigned to street sweeping during heavy periods of debris
removal.
Expenditures/Per
Customer Cost
Information
As discussed in the previous decision item, the 2011 street sweeping cost per lane
mile is an estimated $103.12 without capital costs. Assuming a comparable level of
service in 2011 when compared to the previous year, we estimate that the Streets
Division will spend an estimated $347,195 to sweep the CBD, $410,695 to sweep
residential streets, and $202,283 to sweep arterials.
Estimated Street Sweeping Cost
2011, by Area or Type of Street
Area / Type of Street
Estimated 2010
Lane Miles
Swept
Estimated
Cost
Central Business District 3,367 $347,195
Arterial 1,962 $202,283
Residential 3,983 $410,695
Total 9,311 $960,173
It should be noted that these are estimated operating costs; increased future outlays,
such as capital replacement of aging street sweeping equipment, are not included.
However, given the change in budget allocation adopted for 2011, we believe these
cost estimates represent the best accounting to date for street sweeping.
City of Rockford
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Revenues
There are currently no revenues specifically associated with street sweeping. The
Division has, in the past, discussed billing for special events, but to date has only
charged an outside entity once (specifically the 2010 Waterfront festival, labor costs
only).
Anticipated
Savings/Impact on
General Fund
As shown in the figure below, reducing the number of sweeping cycles to two on
arterial and residential streets should result in a workload reduction equating to
approximately 0.65 FTE.
Workload Reduction Estimate
Two Cycles compared to 3.5 for Arterial and Residential Streets
2010
Cycles
Estimated
2010 Lane
Miles
Revised
Cycles
Revised
Lane
Miles
Lane
Miles
Reduction
Hours
Reduction
FTE
Reduction
Estimate
CBD 76.8 3,367 76.8 3,367 0 0 0
Arterials 3.5 1,962 2.0 1,130 832 448 0.215
Resid. 3.5 3,983 2.0 2,291 1,692 911 0.438
Total
9,311
6,788
2,523 1,358
0.653
Note: Lane miles reduction based on Streets Division per-operator productivity estimate of
0.72 centerline miles per man hour, or 1.8576 lane miles per man hour.
Assuming a one-to-one reduction in staff hours, a reduction in force of 0.65 FTE would
equate to an estimated annual savings of $39,164 in salary and fringe benefits at the
midpoint of AFSCME Pay Range 23 (Equipment Operator).
Service Impact
A reduction in the number of street sweeping cycles may potentially result in an
increased number of complaints from City residents regarding the level of service.
Additionally, fewer street sweeping cycles would result in increased levels of debris
accumulation on and near City streets. This would mean that it will likely take longer to
complete a street sweeping cycle.
Alternative to a reduction in force to reflect fewer street sweeping cycles, the City could
choose to re-allocate the estimated 0.65 FTE to address other backlogs in the Streets
Division. These backlogs include:
2010 Streets Division Service Backlogs
Total
Requests Completed Pending
Pothole Patching 2,004 1,873 131
Forestry / Tree Removal 2,453 1,894 559
Various Other 1,143 1,045 98
Note: 'Various Other' includes mowing, right of way issues not related to
patching or forestry, storm sewer and drainage items, sweeping, etc.
Staff Impact
If the City chooses the hybrid outsourcing model, and reduces expenditures by
eliminating 0.65 FTE positions, the current position incumbents will have “bumping”
rights under the collective bargaining agreement. This means that staff with less
seniority will most likely be impacted by this modification.
City of Rockford
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Other Impacts Increased debris accumulation due to fewer sweeping cycles could potentially affect
urban runoff in storm water. However, it is difficult to estimate the potential impact of
such. The City is required to comply with federal regulations regarding water quality,
and an important factor in maintaining water quality in an urbanized environment is the
extent to which the Streets Division is able to control urban runoff via abatement efforts
such as street sweeping.
Market/Vendor
Considerations
There are none related to this decision item.
Shared Service
Options/Discussion
of Redundancies
There are none related to this decision item.
Risk Factors
Key risk factors to the successful reduction of street sweeping cycles for arterial and
residential streets as described above include:
Potential for increased resident complaints
Potential for storm water / water quality impacts
Need to determine whether a re-allocation of staff time or a reduction in force
best suits the interest of the City
Collective
Bargaining Impacts
Article II, Section 2.2(H) of the most recent collective bargaining agreement specifies
that the City has the right to:
“Change methods of operations, equipment or facilities, including contracting and
subcontracting.”
Per Article IV, Section 4.8 of the agreement, if the City seeks to implement this
modification and attempt to realize the potential savings outlined in this decision item,
which includes a reduction in force, the following is required:
The City will meet with the Union to discuss the proposed reduction in force
prior to implementation
The City will provide the Union with the rationale for the reduction in force and
give the Union the supporting data
The Union has two weeks to use this data to develop alternative approaches to
achieving the same financial or organizational goals
If no feasible alternative is proposed by the Union that provides a comparable level of
benefits, the City must follow the reduction in force steps laid out in Article IV, Section
4.9 of the agreement.
City of Rockford
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Emergency Medical Services
Overview
Emergency Medical Services (EMS) in the City are primarily provided by the Rockford Fire Department (RFD),
with four private ambulance vendors supplementing the RFD’s EMS on an occasional, as-needed basis. Similar
to other fire departments throughout the country, the vast majority of RFD emergency calls for service involve
EMS/Rescue incidents. In 2008, EMS/Rescue calls represented 71.2% of all calls, and in 2009, this figure was
77.7%.
Revenue and Expenditure Trends
City expenditures for the RFD increased significantly under the 2011 budget, as shown on the figure below. The
majority of the increase was in personnel, which was primarily due to the elimination of 2010 temporary salary
savings, as well as significant increases due to step and longevity salary adjustments and in the health
insurance fringe benefit category.
Relative to the EMS function, the 2010 budget for the EMS cost center included a total of $5.6 million, including
salary and fringe benefits for 42 personnel, pension contribution, supplies and services, and two ambulances
purchased used from the Byron Fire Department for approximately $125,000. EMS expenditures in 2010
represent an estimated 15.2% of the total RFD for that year.
City of Rockford
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Fire Department Total Expenditures and Revenues
2008 Actual to 2011 Budget
2008 Actual 2009 Actual 2010 Budget 2011 Budget
Change over
2010
Expenditure
Personnel $32,637,296 $33,000,120 $33,975,117 $35,126,087 $ 1,150,970
Contractual 2,659,440 2,613,105 2,399,542 2,513,085 $ 113,543
Supplies 1,258,928 759,805 680,447 680,447 $ -
Other 0 67,961 0 0 $ -
Capital 1,328,136 0 0 0 $ -
Total $37,883,800 $36,440,991 $37,055,106 $38,319,619 $ 1,264,513
Revenue
2008
Budget 2009 Budget 2010 Budget 2011 Budget
Change over
2010
Property Taxes
Fire Protection $8,403,100 $8,752,000 $9,858,000 $9,021,000 $ (837,000)
Fire Pension 3,742,621 4,273,748 5,975,691 5,881,090 $ (94,601)
Fringe Benefit Reimb. 1,220,835 1,354,229 1,259,855 1,312,218 $ 52,363
911 Fringe Reimb. 91,742 99,365 99,365 121,872 $ 22,507
Replacement Tax 1,344,000 1,360,800 1,035,100 931,600 $ (103,500)
Ambulance Charges 2,970,000 3,915,000 4,380,000 4,400,000 $ 20,000
Foreign Fire Insurance 170,000 0 0 0 $ -
Other Charges 90,000 90,000 90,000 630,000 $ 540,000
Airport Reimbursement 650,000 650,000 877,000 905,800 $ 28,800
General Revenues 18,893,094 16,277,085 13,480,095 15,116,039 $ 1,635,944
Total $37,575,392 $36,772,227 $37,055,106 $38,319,619 $ 1,264,513
In 2010, ambulance revenues amounted to $4.4 million, resulting in a net cost to the City to operate the EMS
program of $1.2 million.
Level of resources/staff
All RFD firefighters have EMT certification; in addition, 186 are trained as Paramedics / Advanced Life Support
(ALS). The RFD operates five ambulance units, or “companies,” at its eleven fire stations. 39.0 FTE staff are
assigned to these five companies, with an additional three staff providing administrative or support functions
related to EMS. There was no reported change in the EMS staffing level between 2010 and 2011.
City of Rockford
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Budget Reduction Options and Decision Items
DDeecciissiioonn
IItteemm ##66
OOuuttssoouurrccee EEMMSS
Modification
This modification involves a reduction in force equivalent to the level of staffing
currently needed to operate the RFD’s five ambulance companies, using one of two
general approaches:
Immediate reduction in force for the entire EMS complement (39.0 FTE) and
replacement with contract staff
Gradually replace current RFD positions assigned to the ambulance
companies with contract staff as normal attrition occurs
There does not appear to be an immediate business case for this modification due to
an October 2010 arbitration decision affecting minimum shift staffing levels for the
duration of the current contract. At the earliest, it would be 2013 before the City would
realize the fiscal benefits of such a change. In other words, until the City successfully
negotiates with the firefighters’ union (IAFF Local 413) to remove the minimum shift
staffing/company strength requirement language (64 firefighters) from the collective
bargaining agreement, it appears to make little financial sense to pursue this option.
This is because the arbitration decision requires the City to staff 64 posts on all three
shifts each day, regardless of duty assignment (with the exception that 2 posts must be
assigned to the airport).
We believe that reaching such an agreement will be difficult; in order to remove the
minimum shift staffing requirement language, the City will likely be required to make
significant concessions in other areas of the contract. Even if it is successful in doing
so, the union could still potentially challenge any change to minimum staffing based on
past practice. If, however, such a revision to the contract can be achieved, this
modification could present an opportunity for the City to realize significant annual
savings. The current collective bargaining agreement is set to expire on December 31,
2011.
Other mid-sized and smaller Illinois municipalities currently contract out their EMS
services. For example, the Town of Cicero (est. population of 109,400) currently is
served by a private EMS service, which operates a total four ambulance companies for
Cicero. Other communities that contract for EMS include Carol Stream, Bartlett, St.
Charles, and Batavia, as well as others.
In addition, the City currently contracts with four private ambulance companies to serve
as backup when the RFD experiences a higher volume of EMS calls than it is able to
respond to with its five in-house ambulance companies.
The analysis included in this decision item assumes that there would be an immediate
reduction in force for the entire EMS function to demonstrate the total potential fiscal
impact.
City of Rockford
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Annual Service
Statistics
The RFD’s five ambulance companies respond to a significant number of calls each
day. As shown in the figure below, ambulance Charlie 29 (operating from Fire Station
#3 on South Main) responded to an average of 12.5 calls per day during this two-year
period. Ambulance company Charlie 12 (Station #4 on Shaw Woods Dr.) responded to
an average of 8.5 calls per day.
Ambulance Company Average Calls for Service
2008 and 2009
2008 2009
Avg. Annual
Responses
Avg. Responses
per Day
Charlie 12 3,125 3,103 3,114 8.5
Charlie 16 3,648 3,663 3,656 10.0
Charlie 27 4,478 4,340 4,409 12.1
Charlie 28 3,831 3,734 3,783 10.4
Charlie 29 4,662 4,462 4,562 12.5
Total 19,744 19,302 19,523 53.5
FTE There are currently 39.0 FTE firefighters assigned to operate the RFD’s five
ambulance companies. The current complement for each ambulance companies is two
firefighters per shift. Given the current contract hours for Firefighters of 2,652 hours per
year (51 hours per week, with 24 hours on, 48 hours off), the estimated average
availability of staff is 84.7%, as shown in the figure below.
Current EMS Staffing Profile
Estimated EMS Regular Staff Hours
Ambulance
Companies
Est. Annual
Work Hours
Needed
Current
EMS
Staff
Est. Regular
Contract
Hours
(39.0 FTE)
EMS Staff
Availability
Estimate
5 87,600 39.0 103,428 84.70%
This estimate excludes leave or other time off that leads to overtime, and may
overstate availability accordingly. .
City of Rockford
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Expenditures/Per
Customer Cost
Information
The estimated 2011 total cost for the EMS program is $5.4 million. As shown in the
figure below, after adding in planned capital costs for ambulance replacement and
subtracting out medical billing revenues, the net cost to the City is approximately
$1.0 million per year.
2011 EMS Budget
Most, but not all, of these expenditures would be avoided by the City if it were to
outsource the EMS function. However, current expenditures such as the amortized
pension payments on the future liability, operation of the Public Safety Answering
Point/911 Center, and facility costs would continue to be incurred by the City and
would need to be re-allocated to other cost centers in the budget. We estimate that the
amount of non-avoidable costs is approximately $929,000 per year, or 17.0% of the
current budget.
Revenues
The RFD receives a significant revenue stream from ambulance billing associated with
its EMS service, but it is currently not sufficient to cover the full costs of operating the
EMS program. Estimated 2011 revenues from ambulance billing are $4.4 million,
which represents an estimated 83.8% of the City’s total EMS costs. The RFD contracts
for medical billing administration and collection, at a 2011 budgeted cost of $276,370.
The Department changed providers in 2008, and revenues have increased over the
past three years, increasing from $2.4 million in 2008 to the current budgeted amount
of $4.4 million.
In spite of these improvements, it will be challenging to close the current gap between
expenditures and revenues received, given Rockford’s current resident demographics,
which tend towards the lower end of the socioeconomic scale. Per the RFD’s current
medical billing vendor, in 2009 the City collected 38.7% of its billed revenues (gross),
compared to the industry average collection rate of 68% (combined resident and non-
resident collections). This average is based on a recent benchmarking survey on
ambulance fees and collections completed by the Naperville Fire Department, a copy
of which was provided to us by the RFD. ). The authors of the survey (Naperville Fire
Department) indicate that this rate may be a combination of both gross and net
revenues. Therefore, while not a perfect comparison, these data represent the best
information currently available.
2011 Budget
EMS Salaries 2,735,357$
Current Pension Payments 347,000
Amortized Pension 598,000
All Other Fringe Benefits 882,531
Medical Billing Contract 276,370
911 Internal Chargeback 320,000
All other contracts and supplies 79,115
Building Rental Chargeback 11,000
Ambulance Capital Replacement* 200,000
Total Expenditures 5,449,373$
Medical Billing Revenues** 4,400,000$
Estimated Net Cost 1,049,373$
** Projected
Note: Avoidable costs under an outsourced approach
are highlighted
*Estimated (not part of approved budget)
City of Rockford
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Anticipated
Savings/Impact on
General Fund
As noted, approximately 11.6% of current costs to operate the function would continue
regardless of whether the City was successful in outsourcing this function. The total
estimated avoidable costs, as shown in the figure below, would be approximately
$4.0 million per year.
Avoidable Annual EMS Program Costs
Estimated
2011 Budget
Avoidable
Costs
EMS Salaries $2,735,357 $2,735,357
Current Pension Payments 347,000 347,000
All Other Fringe Benefits 882,531 882,531
All other contracts and supplies 79,115 79,115
Non-avoidable costs 1,205,370 0
Total Expenditures $5,249,373 4,044,003
Non-avoidable costs include expenditures for amortized pension, medical billing
contract, 911 Center Internal chargeback, and building rental. The medical billing
contract is considered to be non-avoidable in order for the City to continue receiving
the projected $4.4 million in ambulance billing revenue.
Potential savings will be driven by three factors:
Level of staffing required by the private vendor to operate five ambulance
companies
The bid amount per FTE equivalent and required certification level of the
contract staff
Additional contract requirements by the City
Absent a formal RFP process, it is difficult to determine what the actual number of
contract hours per EMT will be offered by vendors, which directly affects potential
contract costs. According to publicly available information, the outsourced EMS
operation in the Town of Cicero consists of four ambulance companies staffed by a
total of 24 contract staff, who work a 24 hours on, 48 hours off schedule. Given
minimum ambulance company staffing of two Paramedics, the total number of hours of
coverage provided by these staff equates to 70,080 working hours annually. In other
words, the effective staff hours on a per FTE basis for the Town of Cicero’s EMS
operation are 2,920 hours per employee per year. In comparison, assuming 84.7%
availability under the RFD’s current staffing profile for its five companies, the RFD’s
effective staff hours per FTE is an estimated 2,246 per year, as shown in the figure
below.
Staffing Level Comparison
Current RFD vs. Estimated Contract
Provider
Ambulance
Companies
Est. Annual
Work Hours
Needed
Effective
Staff
Hours
Staff
Needed
Rockford 5 87,600 2,246.15 39.0
Vendor 5 87,600 2,920.00 30.0
Note: Vendor effective staff hours estimate based on reported data for the Town of
Cicero (4 ambulance companies, 24 total contract staff on a 24 hours on, 48 hours
off schedule)
City of Rockford
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Anticipated
Savings/Impact on
General Fund
(cont.)
As noted, the City’s revenue collection rate is 38.7%. This reported rate is lower than in
previous years, when the RFD used a different vendor of billing services. The previous
vendor billed for residents receiving public assistance at the approved state
reimbursement rate, whereas the current vendor bills at the City’s rate regardless,
which results in a lower reported rate of collection. Companion data may include
vendors that follow either approach. Actual revenues have increased in recent years.
The City is currently challenged to increase its level of revenue collection over the
current rate. This is due to the fact that the City has challenging socioeconomic
characteristics and, as will be discussed further below, current fee rates for the RFD
tend to be on the high end of comparable municipalities, limiting the advisability of
increasing rates further.
As noted, approximately 17.0% of current costs to operate the function would continue
regardless of whether the City was successful in outsourcing this function. The total
estimated avoidable costs, as shown in the figure below, would be approximately
$4.2 million per year if the City retains medical billing, and $4.5 million if the vendor
performs billing.
Avoidable Annual EMS Program Costs
Estimated
2011
Budget
Avoidable Costs
–
City Retains
Billing
Avoidable Costs
–
Vendor Retains
Billing
EMS Salaries $2,735,357 $2,735,357 $2,735,357
Current Pension Payments 347,000 347,000 347,000
All Other Fringe Benefits 882,531 882,531 882,531
Medical Billing Contract 276,370 0 276,370
All other contracts and supplies 279,115 279,115 279,115
Non-avoidable costs 929,000 929,000 929,000
Total Expenditures $5,449,373 $4,244,003 $4,520,373
Non-avoidable costs include expenditures for amortized pension, 911 Center Internal
chargeback, and building rental. The medical billing contract expenditure is non-
avoidable if the City wishes to continue receiving the projected $4.4 million in
ambulance billing revenue. The Town of Cicero, for example, currently retains the
revenues from the medical billing, which helps offset the cost of the EMS contract. On
the other hand, medical billing would be an avoidable cost if the potential vendor (not
the City) performs medical billing and receives the associated revenues (projected:
$4.4 million).
Potential savings will be driven by four factors:
Whether the EMS contract envisions zero payments to the vendor, in
exchange for allowing the vendor to retain the medical billing revenues
Level of staffing required by the private vendor to operate five ambulance
companies
The bid amount per FTE equivalent and required certification level of the
contract staff
Additional contract requirements by the City
City of Rockford
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Anticipated
Savings/Impact on
General Fund
(cont.)
Absent a formal RFP process, it is difficult to determine what the actual number of
contract hours per EMT will be offered by vendors, which directly affects potential
contract costs. According to publicly available information, the outsourced EMS
operation in the Town of Cicero consists of four ambulance companies staffed by a
total of 24 contract staff, who work a 24 hours on, 48 hours off schedule. Given
minimum ambulance company staffing of two Paramedics, the total number of hours of
coverage provided by these staff equates to 70,080 working hours annually. In other
words, the effective staff hours on a per FTE basis for the Town of Cicero’s EMS
operation are 2,920 hours per employee per year. In comparison, assuming 84.7%
availability under the RFD’s current staffing profile for its five companies, the RFD’s
effective staff hours per FTE is an estimated 2,246 per year, as shown in the figure
below.
Staffing Level Comparison
Current RFD vs. Estimated Contract
Provider
Ambulance
Companies
Est. Annual
Work Hours
Needed
Effective
Staff
Hours
Staff
Needed
Rockford 5 87,600 2,246.15 39.0
Vendor 5 87,600 2,920.00 30.0
Note: Vendor effective staff hours estimate based on reported data for the Town of
Cicero (4 ambulance companies, 24 total contract staff on a 24 hours on, 48 hours
off schedule)
Assuming a comparable number of effective staff hours per FTE as is the case in
Cicero, a vendor could potentially operate five ambulance companies with an
estimated 30.0 FTE, or 9.0 FTE fewer than the RFD.
The next critical assumption relates to fully-loaded per-FTE contract cost. Oak Brook
Illinois also contracts for EMS services, and has a contract for six Paramedic staff,
which is a comparable certification level to the RFD’s current EMS program. Per Oak
Brook’s 2011 budget book, the contract for EMS services is estimated to be $400,000
in the upcoming year, or approximately $66,667 per staff. We were unable to
determine, using publicly available information, the number of effective staff hours
provided under Oak Brook’s contract.
In order to better estimate the potential business case for outsourcing this
function, it is recommended that an RFI is completed by the City for outsourced
EMS services, including detailed bid specifications. This is due to the potential
scope of the contract.
In this decision item, we provide an estimate of the potential savings at a given
contract price point, using publicly available information, and assume that the City
retains the revenues from medical billings.
If the City were to receive bids for outsourced EMS services that are comparable to the
ones presented above, the difference between the estimated EMS contract plus non-
avoidable costs and the current net cost is a positive swing of $1.8 million annually.
Specifically, assuming a contract cost of $2.4 million, and a consistent level of medical
billing revenues, the City could potentially realize a net surplus of just under $800k,
rather than a program deficit of $850k.
City of Rockford
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Anticipated
Savings/Impact on
General Fund
(cont.)
There appear to be two options relative to this Decision Item:
Option A: The City contracts for EMS services, and retains the medical billing
revenue (and associated medical billing contract arrangement) to pay for the
EMS contract; or
Option B; In exchange for providing EMS services free of charge to the City,
the vendor retains medical billing revenues.
Anticipated Fiscal Impacts from Outsourcing EMS
Comparison between City Retaining Medical Billing Revenue vs.
Allowing Vendor to Retain Billings
Option A:
City Retains
Medical Billing
Option B:
Vendor Retains
Medical Billing
Number of Contract Staff Provided 30.0 30.0
Per-Staff Contract Estimate $66,667 $0
Estimated Contract Personnel Cost $2,000,000 $0
Estimated Overhead Percentage 20% $0
Estimated Overhead $400,000 $0
Total Estimated Contract Cost $2,400,000 $0
City Non-avoidable costs $929,000 $929,000
Medical Billing Contract $276,370 $0
Estimated EMS Cost per year $3,605,370 $929,000
Estimated Billing Revenues $4,400,000 $0
Outsourced Net Cost / (Revenue) $ (794,630) $929,000
Current Net Cost $1,049,373 $1,049,373
Net Fiscal Impact / (Improvement) $(1,844,003) $(120,373)
The potential contract cost for Option A was estimated assuming a winning vendor bid
of $2.4 million per year, with the following assumptions:
Five ambulance companies
30 contract Paramedic staff
$66,667 fee per staff
20% overhead charge
The City will experience a positive fiscal impact under Option A even if the winning
vendor bid reaches a maximum of approximately $4.1 million per year. The estimated
contract “break even” point, at which the City would realize no savings if it were to
contract for EMS services, is estimated to be roughly $4.25 million. In other words, a
contract cost of any amount less than $4.25 million would result in some degree of
savings, up to a projected potential of $1.8 million per year at the $2.4 million contract
price point, as shown in the Figure above.
Option B assumes that, in exchange for retaining the medical billing revenue
(projected $4.4 million annually); the winning vendor would provide an equivalent level
of EMS services at no charge to the City. Option B features a positive fiscal impact of
$120,373 annually for the City.
There are no potential savings to be realized if the City were to turn over medical
billing revenues to a vendor and pay any significant contract fees for EMS services.
City of Rockford
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Anticipated
Savings/Impact on
General Fund
(cont.)
A final variable that could potentially influence the fiscal impacts associated with this
decision item relates to the level of ambulance fees currently being charged by the
City. The City must carefully consider the level of fees currently being charged against
two primary criteria:
What are the reasonable and customary fees being charged by other Fire
Departments and private ambulance companies to provide this service?
What are the RFD’s actual costs to provide the service, and what is the City’s
cost recovery policy (percentage)?
Fee information provided by the RFD suggests that the City currently has some of the
highest ambulance fees among larger Illinois municipalities (excluding Chicago). As
shown in the figure below, Rockford’s resident fees are well above average for all three
categories of EMS service.
Comparison of Ambulance Fees
Larger Illinois Municipalities, 2009, Ranked by ALS-1 Fee
Among this comparison group, the City currently has:
The highest fee for resident ALS-1 calls
The third-highest fee for ALS-2 calls
The second highest fee for BLS
Moving forward, if the City determines that it is in the interest of the City’s residents to
alter the current fee structure, the preceding business case will be altered accordingly.
Specifically, the level of medical billing revenues will most likely decline, resulting in:
A higher annual operating deficit if the City does not outsource EMS
Reduced net revenues if the City implements this decision item
The impacts of on the ultimate business case for this decision item will vary, based on
the size of the change in fees.
Department Population
ALS-1
(Resident)
ALS-2
(Resident)
BLS
(Resident)
Rockford FD 156,596 $625.00 $725.00 $575.00
Tri-City Ambulance (Kane Co) 108,500 $600.00 $700.00 $500.00
Naperville FD 149,695 $575.00 $790.00 $470.00
Elgin FD 104,000 $429.05 $0.00 $361.31
Aurora FD 175,000 $425.64 $616.06 $358.44
Average (Exc. Rockford) 129,325 $405.94 $571.21 $537.95
Cicero FD 109,429 $0.00 $750.00 $1,000.00
Source: Naperville FD 2009 Ambulance Fee Survey
City of Rockford
Page 55
Prepared by: Baker Tilly Virchow Krause, LLP
Service Impact
Contract staff turnover is one of the most important service impacts, as identified by
other communities that outsource their EMS service. Staff that work for contract EMS
providers often, although not always, are seeking to build work experience necessary
to compete for scarce opportunities in the Fire service.
The RFD would not have to deal with the indirect impacts of contract staff turnover,
specifically the administrative tasks associated with posting the position, recruiting,
hiring, and training. Nevertheless, high contract staff turnover could result in the EMS
function being performed by less-experienced personnel, which could impact service
delivery.
Staff Impact
It is very likely that a decision to outsource EMS will result in strident opposition from
RFD staff. Morale of current RFD staff will also likely be negatively affected to a
significant extent. High performing public sector organizations are characterized by a
high degree of agreement, if not consensus, about strategy, direction, and purpose
throughout all levels of the organization. Thus, low morale and employee opposition
may result in a reduction in overall organizational performance.
If the City is able to change the terms of the collective bargaining agreement, and
reduce expenditures by eliminating 39.0 FTE positions, the current position
incumbents will have “bumping” rights under the collective bargaining agreement.
However, given that RFD personnel assigned to the ambulances on the basis of
having the least seniority, there will likely be little impact on other staff in the
Department.
Other Impacts If the City is able to outsource its EMS services, it will be able to transfer the risk of
medical malpractice lawsuits from the RFD and the City to the vendor. The fiscal value
of transferring the liability to an outside party is not known, but could be substantial in
the case of a significant award for damages.
In addition, in outsourcing its EMS function, the City would potentially eliminate the
need for resolving future workers compensation claims associated with the current
39.0 FTE EMS staff. EMS staff work in a challenging environment, and injuries do
occur.
Market/Vendor
Considerations
In addition to the four contract ambulance services currently supplementing the RFD’s
EMS operations on an as needed basis, there are other potential vendors who may be
interested in submitting a bid to provide EMS services to the City. For example, Public
Safety Services, Inc., of Rosemont, recently inquired about opportunities to submit a
bid.
Other vendors that provide contract EMS services include:
Paramedic Services of IL
ATS Medical Services
Tri-City Ambulance
Superior Ambulance
Lifeline Ambulance
Shared Service
Options/Discussion
of Redundancies
There are none related to this decision item.
City of Rockford
Page 56
Prepared by: Baker Tilly Virchow Krause, LLP
Risk Factors
Key risk factors to the successful adoption outsourced EMS as described above
include:
Cost of the contract in terms of bids received
Performance of the contractor in responding to EMS calls, both in terms of
response time as well as delivery of quality EMT/Paramedic services on scene
Ensuring that sufficiently robust contract language is in place to protect the
City’s financial and service delivery interests relative to the vendor’s
performance
Collective
Bargaining Impacts
Under Article I, Section 1.2 “Management Rights” of the current collective bargaining
agreement, the City has retained the power to outsource functions currently performed
by the Fire Department, specifically to:
“…change methods of operations, equipment, or facilities, including contracting and
subcontracting provided, however, that the exercise of any of the above rights shall not
conflict with any of the provisions of this Agreement.”
In other words, the City could contract out all or a portion of the EMS function, but
would still be required to staff 64 firefighters regardless. As previously discussed, until
the City is able to eliminate the minimum shift staffing language from the collective
bargaining agreement (Article IV, section 4.1), implementing this modification does not
make financial sense.
Article IV, Section 4.1 of the most recent collective bargaining agreement specifies
that:
“In accordance with the total complement authorized by the City Council, the number
of stations to be manned, and the manpower available, the City will continue to
distribute men and officers to achieve the highest efficiency of operations and the
greatest protection, and in the interest of fire fighter safety. The parties mutually agree
this section shall mean that the current level of manpower will be continued, with no
fewer than sixty-two (62) personnel working per shift (A, B. C), who are assigned to a
maximum of fifteen (15) companies and five (5) ambulances. Plus two (2) airport
personnel, so long as an Intergovernmental Agreement between the Airport Authority
and the City of Rockford for fire services at the airport is in effect.”
This language means that, even if the City chose to contract for EMS services, it would
still have to employ sufficient personnel to staff these 64 posts on a 24/7/365 basis,
likely resulting in significantly higher expenditures for the RFD overall. However, if the
City is able to eliminate this language and implement this modification, any reduction in
force must follow the process laid out in Article X, Sections 1 and 2 of the agreement.
City of Rockford
Page 57
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Modification
While not strictly related to potential outsourcing, in reviewing the EMS function it
became apparent that the current level of EMS service provided by the Rockford Fire
Department (RFD) could benefit from additional resources. This modification is
included due to the fact that the RFD is currently approaching, but not meeting,
industry standards for response times relative to its EMS program, which represents
the vast majority of the RFD’s calls for service.
One potential approach to freeing up additional resources is to reduce the minimum
apparatus staffing policy of the RFD relative to its engine and quint companies, and re-
allocate existing resources. The fire engine company is the backbone of the RFD’s
firefighting force, and the RFD also deploys quints, which is a combination firefighting
apparatus that can operate either as a fire engine (“pumper”) or as a ladder truck in
certain situations when needed. Almost all Illinois Fire Departments currently operate
with three staff on a fire engine or quint. To our knowledge, the exceptions are few,
and include the City of Chicago, and the Villages of Bedford Park, and Oak Lawn.
This modification involves reducing the minimum apparatus staffing policy for the City’s
engine companies from the current four firefighters to three, and reducing staffing that
is currently needed to cover the 4th position, accompanied by either:
A re-allocation of existing firefighter resources to add a sixth ambulance
company to improve service levels in terms of response time, and realize
ongoing fiscal savings through a reduction in force of the difference; or
Defer investment in the EMS program and implement reduction in force equal
to the total staffing needed to fill the 4th position on engine and quint
companies.
Any potential reduction must account for the necessary staffing relief factor needed to
ensure that the RFD can staff each engine company with three firefighters without
generating excessive levels of overtime.
There does not appear to be an immediate business case for this modification due to
an October 2010 arbitration decision affecting minimum shift staffing levels for the
duration of the current contract. In other words, until the City successfully negotiates
with the firefighters’ union (IAFF Local 413) to remove the minimum shift staffing
language (64 firefighters) from the collective bargaining agreement, it appears to make
little financial sense to pursue this option. This is because the arbitration decision
requires the City to staff 64 posts on all three shifts each day, regardless of duty
assignment (with the exception that two posts must be assigned to the airport).
We believe that reaching such an agreement will be difficult; in order to remove the
minimum shift staffing requirement language, the City will likely be required to make
significant concessions in other areas of the contract. Even if it is successful in doing
so, the union could still potentially challenge any change to minimum staffing.
If, however, such a revision to the contract can be achieved, this modification could
present an opportunity for the City to realize significant annual savings. The current
collective bargaining agreement is set to expire on December 31, 2011.
City of Rockford
Page 58
Prepared by: Baker Tilly Virchow Krause, LLP
Annual Service
Statistics
It is the standard operating practice of the RFD to dispatch an engine company on
many types of emergency calls for service, depending on the nature of the call and the
current disposition of other assets at the time of the call. Thus, engine and quint
companies respond to many more calls than working fires (there were 814 total
working fires in 2009). There were significant variances in the average number of
responses among engine and quint companies.
As shown in the figure below, the average number of responses to calls for service
varied from a low of 4.7 per day by Engine 4 (Station #4 on Shaw Woods Drive) to a
high of 8.6 per day by both Engine 2 (Station #2 on Seventh Street) and Engine 1
(Station #1 on Woodlawn).
Engine and Quint Company Responses
2008 and 2009
2008 2009
Avg. Annual
Responses
Avg. Responses
per Day
Engine 1 3,178 3,078 3,128 8.6
Engine 2 3,301 2,968 3,135 8.6
Engine 3 2,086 1,900 1,993 5.5
Engine 4 1,693 1,750 1,722 4.7
Engine 6 2,002 2,070 2,036 5.6
Engine 8 1,782 1,753 1,768 4.8
Engine 10 2,285 2,328 2,307 6.3
Engine 11 2,557 2,585 2,571 7.0
Quint 5 1,997 2,014 2,006 5.5
Quint 7 1,812 1,682 1,747 4.8
Quint 9 2,238 2,294 2,266 6.2
Total
24,931
24,422 24,677 67.6
Per the Department’s recent “Standards of Cover” Assessment (2009), the EMS
program currently approaches, but does not meet National Fire Protection Association
(NFPA) standards relative to response time for either EMS or Fire operations. The
NFPA standard calls for an ambulance to arrive at the scene within 4:00 minutes, 90%
of the time. Currently, the City’s five ambulance companies are averaging 5:16
minutes. Given that the vast majority of RFD calls for service are EMS-related, the City
may wish to seriously consider options to increase the level of resources allocated to
the EMS function, even during the current challenging budget environment.
FTE There are currently 45.0 FTE Driver Engineers and 126.0 FTE firefighters assigned to
operate the RFD’s five ambulance companies. The current complement for each
engine or quint company is one officer, one Driver Engineer and two firefighters per
company on each shift.
Expenditures/Per
Customer Cost
Information
Total RFD Expenditures in 2011 are budgeted at $38.3 million, inclusive of all major
programs.
Revenues There are none related to this decision item.
City of Rockford
Page 59
Prepared by: Baker Tilly Virchow Krause, LLP
Anticipated
Savings/Impact on
General Fund
As shown in the figure below, the estimated staffing impact of reducing firefighter
staffing on each engine or quint company is 61.6 FTE. A critical factor in establishing
the staffing need on an annual basis is the average availability of personnel in that
position class; for the purposes of this estimate, we assumed an average availability of
75%. Further, this modification envisions a change to the apparatus minimum staffing
policy for firefighters only; each apparatus would continue with the current complement
of one officer and one Driver Engineer.
Potential Impact of Reduced Engine Company Staffing
Annual Staffing Need Comparison
Current
FF Posts
Est. Annual
Staffing Need
(3 shifts)
Revised
FF Posts
Est. Annual
Staffing Need
(3 shifts)
Engine 1 2 11.2 1 5.6
Engine 2 2 11.2 1 5.6
Engine 3 2 11.2 1 5.6
Engine 4 2 11.2 1 5.6
Engine 6 2 11.2 1 5.6
Engine 8 2 11.2 1 5.6
Engine 10 2 11.2 1 5.6
Engine 11 2 11.2 1 5.6
Quint 5 2 11.2 1 5.6
Quint 7 2 11.2 1 5.6
Quint 9 2 11.2 1 5.6
Total 22 123.2 11 61.6
Notes: Assumes that there will continue to be one officer and one Driver Engineer
per company. Annual Staffing Need assumes an average staff availability shift of
75% / Shift relief of 1.25
The potential savings associated with a reduction in force of 61.6 FTE firefighters is
approximately $5.1 million annually. This assumes a Firefighter salary at 2 years’
experience, with ALS add-on (estimated total salary of $54,170), plus estimated fringe
benefits at 52%.
The total number of staff required to operate an ambulance company is an estimated
11.2 FTE, given the annual staffing (coverage) need, and an estimated availability of
75%. Thus, if the City wishes to add an ambulance company and fully staff it, it could
reduce the engine and quint company staffing to three, allocate 11.2 FTE to a new
ambulance, and still realize significant savings via a reduction in force of 50.4 FTE.
The figure on the following page presents the estimated savings from both options.
Estimated Savings Associated with Reducing Apparatus Minimum Staffing
Option 1: Eliminate
All 4th Engine
Positions
Option 2: Staff 1 New
Ambulance, Eliminate
Difference
FTE Impact -61.6 -50.4
Per-FTE Savings
Estimate $ (5,072,045)$ (4,149,855)
New Ambulance Capital $200,000
Estimated Total Savings $ (5,072,045)$ (3,949,855)
City of Rockford
Page 60
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Service Impact
A number of fire departments at our other municipal clients currently have company
minimum apparatus staffing of three personnel, in various configurations. The RFD
may strongly object to this modification, potentially citing National Fire Protection
Association (NFPA) standards. A critical NFPA standard that we focus on is the ability
to establish an effective firefighting force at a working fire within a specific time frame.
Those fire departments that staff their engine companies with three personnel must
dispatch more units to establish an effective firefighting force than those that staff with
four.
However, in our experience, other fire departments in municipalities facing similar
challenging fiscal environments have made this approach work.
Staff Impact
If the City is able to change the terms of the collective bargaining agreement, and
reduce expenditures by eliminating 39.0 FTE positions, the current position
incumbents will have “bumping” rights under the collective bargaining agreement.
However, given that RFD personnel are assigned to the ambulances on the basis of
having the least seniority, there will likely be little impact on other staff in the
Department.
Other Impacts Reduced engine and quint company staffing may result in increased utilization of
apparatus in the case of fire calls, due to the RFD needing to dispatch additional
companies to ensure a sufficient number of firefighters are present at the fire ground.
Market/Vendor
Considerations
In addition to the four contract ambulance services currently supplementing the RFD’s
EMS operations on an as-needed basis, there are other potential vendors who may be
interested in submitting a bid to provide EMS services to the City.
Shared Service
Options/Discussion
of Redundancies
There are none related to this decision item.
Risk Factors
The primary risk associated with this modification involves limiting the ability of the
RFD to establish an effective firefighting force within the timeline specified under NFPA
standards.
City of Rockford
Page 61
Prepared by: Baker Tilly Virchow Krause, LLP
Collective
Bargaining Impacts
As previously discussed, until the City is able to eliminate the minimum shift staffing
language from the collective bargaining agreement (Article IV, section 4.1),
implementing this modification does not make financial sense.
Article IV, Section 4.1 of the most recent collective bargaining agreement specifies
that:
“In accordance with the total complement authorized by the City Council, the number
of stations to be manned, and the manpower available, the City will continue to
distribute men and officers to achieve the highest efficiency of operations and the
greatest protection, and in the interest of fire fighter safety.
The parties mutually agree this section shall mean that the current level of manpower
will be continued, with no fewer than sixty-two (62) personnel working per shift (A, B.
C), who are assigned to a maximum of fifteen (15) companies and five (5)
ambulances. Plus two (2) airport personnel, so long as an Intergovernmental
Agreement between the Airport Authority and the City of Rockford for fire services at
the airport is in effect.”
This language means that, even if the City chose to reduce engine and quint company
minimum staffing, it would still have to employ sufficient personnel to staff these 64
posts on a 24/7/365 basis, resulting in a zero net gain. However, if the City is able to
eliminate this language and implement this modification, any reduction in force must
follow the process laid out in Article X, Sections 1 and 2 of the agreement.
City of Rockford
Page 62
Prepared by: Baker Tilly Virchow Krause, LLP
Head Start
Overview
The City’s Human Services Department provides a variety of programs. The primary program categories or
divisions are Energy and Weatherization, Community Services, and Head Start. According to published city
budget documents, the later is the largest division, both in terms of staffing (roughly 60 percent of the
department) and total budget (roughly 40 percent of the department). It is also the focus of this section of the
report.
The Head Start program aims to promote school readiness by enhancing the social and cognitive development
of economically disadvantaged children by providing educational, health, nutritional, social and other services to
these children and their families. The program receives federal funding to provide comprehensive child
development services to enrolled children and families, with a special focus on helping preschoolers develop
the early reading and math skills they need to be successful in school.
Of the 46 entities currently managing Head Start programs in Illinois, only four are government agencies. The
City of Rockford is one of these.
The City’s Head Start program serves families across Winnebago County. According to the 2010 Fiscal Report
for the Human Services Department, the Head Start funding has generally trended upward over time. This is
likely a product of increased enrollment figures.
2004 2005 2006 2007 2008 2009 2010
Human
Services
Expenditures
$10,054,451 $13,954,383 $16,136,074 $14,735,302 $15,578,567 $18,953,384 $13,294,581
Head Start
Expenditures $4,459,852 $4,803,323 $4,726,527 $4,692,348 $5,354,285 $5,298,919 $5,317,848
Head Start
Percentage 44.4% 34.4% 29.3% 31.8% 34.4% 28.0% 40.0%
Head Start
Enrollment 653 665 649 669 653 624 722
Dollar Per
Student $6,830 $7,223 $7,283 $7,014 $8,200 $8,492 $7,365
Note: 2010 expenditures are budgeted rather than actuals. Human Services expenditures and Head Start enrollment
figures are from budget document actuals. Head Start expenditures are from the 2010 Human Services Fiscal Report.
The City is also in its second year of providing an Early Head Start program. As the continuation of this
program is uncertain, it has been excluded from our analysis.
Agency Type Number in Illinois
Community Action Agencies 21
Non-Profit Organizations 17
Public School Systems 4
Government Agencies*4
*Rockford's program is counted in this category
Source: Illinois Head Start Association
City of Rockford
Page 63
Prepared by: Baker Tilly Virchow Krause, LLP
Funding
The Head Start program is funded almost exclusively with federal funds. The federal funding requires a 1:4
match; however the City’s Head Start program typically utilizes match in kind, such as volunteer time or
donations, to meet this requirement. Occasionally, small amounts from the Human Service Department’s
general fund allocation have been used to fill matching shortfalls. The Department’s total general fund
allocation, used to support multiple programs within the Department, has averaged just over $200,000 per year
in recent years. (See table below.) For the past three years, the City’s Head Start program has requested and
received a waiver from the federal government for the matching requirement, so a draw on these general funds
has not been necessary.
2008 2009 2010 Average
Human Services Department General Fund Allotment $ 280,000 $170,000 $ 170,000 $206,667
The expenditure process for the Head Start program is similar to the process for other programs funded by
federal grants. As expenditures are made from City general fund, federal funds are drawn down electronically to
cover the expenditures. The city “floats” expenditures with general fund resources only until reimbursements
are requested and processed. Each float is typically less than one month. This is not the case for floats to other
divisions and other programs, which are not able to drown down funds electronically, and may take up to 6
months to repay a float amount from the general fund. The following chart shows the monthly float amount for
the Head Start program as compared to the Human Services Department as a whole.
Month
Ending
Head Start
Program Float
Human
Services
Department
Float
Head Start
Share of
Department
Float
1/31/2009 $320,357 $1,088,128 29%
2/28/2009 $373,081 $1,553,730 24%
3/31/2009 $377,555 $1,607,515 23%
4/30/2009 $346,907 $709,007 49%
5/31/2009 $325,108 $1,140,203 29%
6/30/2009 $99,452 $793,495 13%
7/31/2009 $99,683 -$117,658 85%
8/31/2009 $340,672 $764,924 45%
9/30/2009 $238,450 $1,282,976 19%
10/31/2009 $658,562 $1,773,521 37%
11/30/2009 $587,995 $2,900,412 20%
12/31/2009 $980,485 $3,471,176 28%
1/31/2010 $180,921 $1,965,282 9%
2/28/2010 $597,035 $2,620,309 23%
3/31/2010 $729,492 $2,088,693 35%
4/30/2010 $1,035,222 $2,051,809 50%
5/31/2010 $1,501,054 $2,814,246 53%
6/30/2010 $1,832,896 $3,836,522 48%
7/31/2010 $1,731,943 $2,766,358 63%
8/31/2010 $937,600 $3,014,772 31%
9/30/2010 $733,251 $2,350,554 31%
Average $667,987 $1,927,427 35%
City of Rockford
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It is important to note that any measures taken to reduce Head Start program expenditures would only relieve
pressure on the monthly general fund balance liquidity, but as 100 percent of costs incurred are directly
reimbursed with federal funds, there are no actual savings to the general fund. Though the reduction measures
would increase the liquidity of the general fund each month, it would not impact the total annual balance of the
fund.
City of Rockford
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Budget Reduction Options and Decision Items
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Modification
The Head Start teachers in Rockford are city employees. As such, their compensation
rates are typically higher than Head Start teachers in other areas of the state.
Rockford
Head
Start
Champaign
County
Head Start
Peoria
Head
Start
Danville
Head
Start
Average
Comparison
Program
Head Teacher $ 31,168 $ 21,154 $19,921 $19,188 $ 20,085
Asst. Teacher $ 23,962 $ 18,205 $14,274 $16,583 $ 16,354
Note: Head Start programs listed are comparable in size to the Rockford Program, comparison data from
2009.
For further market comparison, we used current Economic Research Institute (ERI)
data on preschool and day care teachers’ salaries. The ERI data does not have a
separate category for Head Start teachers, so preschool and day care teachers were
selected as proxy positions. It is important to note that those teachers in the ERI data
sets all hold a minimum of a bachelor’s degree in education. When the salaries of
Head Start teachers in Rockford are compared to these private day care and preschool
teacher salaries in comparable communities, they are slightly lower.
Rockford
Head
Start
Naperville
Private
Preschool
Aurora
Private
Preschool
Naperville
Day Care
Aurora
Day Care
Head
Teacher $ 31,168 $ 33,576 $ 33,926 $ 33,304 $ 33,654
Asst.
Teacher $ 23,962 $ 25,108 $ 25,436 $ 25,075 $ 25,404
Note: Comparison cities have median household incomes similar to those of Rockford The median of all
incumbent teachers was used as a proxy for Head Teacher salary and the 25th percentile wage for teachers
with one year of experience was used as a proxy for the Assistant Teacher salary.
Likewise, when the salaries of Head Start teachers in Rockford are compared to public
and private preschool teacher salaries in Rockford, they also appear lower. Again, the
minimum level of education required for the preschool teachers in comparison groups
is a bachelor’s degree, which likely explains the disparity.
Head Start Public
Preschool
Private
Preschool
Preschool
Average
Head Teacher $ 31,168 $44,663 $44,767 $44,715
Asst. Teacher $ 23,962 $35,604 $35,479 $35,542
Note: The median of teachers with 5 or more years of experience was used as a proxy for Head Teacher
salary and the 25th percentile wage for teachers with one year of experience was used as a proxy for the
Assistant Teacher salary.
The 2009 Illinois Salary and Staffing Survey of Licensed Child Care Facilities provides
another measuring stick for the compensation of Head Start teachers in Rockford.
This survey profiles the qualifications, salary and benefits, and turnover rates from a
sample of 13,953 licensed child care programs operating in Illinois as of July 24, 2009.
City of Rockford
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Modification (cont.) Though the survey does not provide details by metro area, it does offer statewide
averages that are helpful. The table below demonstrates the difference between the
compensation for Rockford Head Start teachers and the statewide averages for
compensation of early childhood teachers in Illinois. Specifically, the statewide
averages below include only early childhood teachers at child care centers and
exclude family child care home providers.
Teacher
Salary
Asst.
Teacher
Salary
Percent Offered
Health
Insurance
Percent
Provided Paid
Time Off
Rockford Head
Start $31,168 $23,962 100.0% 100.0%
IL Child Care
Centers $22,880 $18,096 34.6% 76.5%
While it could be argued that the city is able to be more selective in teacher recruitment
than other Head Start providers, given a higher than average wage rate, it could also
be argued that the current rates could be adjusted to reduce overall program
expenditures.
If current pay rates are reduced, the program may be able to expand the number of
students served through the hiring additional teachers. This would require federal
approval by HHS. It is also possible that the program would instead be required by
HHS to return the savings. Given the federal focus has been on raising teacher
salaries and increasing quality outcomes, expanding the Rockford program is not a
guaranteed possibility.
If current pay rates are reduced, the program may be able to expand the number of
students served through the hiring additional teachers. This would require federal
approval by HHS. It is also possible that the program would instead be required by
HHS to return the savings. Given the federal focus has been on raising teacher
salaries and increasing quality outcomes, expanding the Rockford program is not a
guaranteed possibility.
Annual Service
Statistics
The Head Start program is currently at capacity with a waiting list. The number of
children served per year is as follows:
2007 2008 2009 2010 2011
Students 669 653 624 632 658
FTE Currently, the City of Rockford Head Start Program employs 67.38 FTE. Of these,
12.59 FTE are classified as Head Teachers and 12.27 FTE are classified as Assistant
Teachers. The remaining staff are Family Resource Workers, Bus Drivers, and other
support and administrative program staff.
Expenditures/Per
Customer Cost
Information
With a total program budget of $5,317,848 in 2010 and 632 students served, the cost
per student is roughly $8,414 per year. As a point of comparison, the cost per student
in Champaign County is roughly $6,594 per year. It is possible that a substantial
portion of this difference is attributable to salary disparities.
City of Rockford
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Revenues
Per federal guidelines, up to 15 percent of Head Start grant funds may be directed to
administrative costs, rather than direct program service provision. In a manner of
speaking, these are revenues to the city, as they are generally used to pay the city for
administrative services provided.
Anticipated
Savings/Impact on
General Fund
It is important to note that the Head Start program is almost exclusively operated with
federal funds. As expenditures are made from city funds, federal funds are drawn
down electronically to cover the expenditures. The city “floats” expenditures only until
reimbursements are requested and processed. Each float is typically less than one
month.
The float for the Head Start Program, averaging $668,000 per month, represents
roughly a third of the total float for the Human Services Department, averaging $1.93
million per month. As a point of reference, the float provided for the Community
Development Department averages $1.02 million per month.
A reduction in overall Head Start program expenditures should proportionately reduce
the amount of the float from the city’s general fund each month.
One approach for lowering the city’s general fund float to the Head Start program
would be lowering expenditures on teacher salaries. The city would need to negotiate
new market based compensation rates for teachers and assistant teachers. If the
current salary was reduced to the market based comparison salary, the annual savings
would be just under $300,000 per year.
If teacher salaries were reduced, the annual cost savings is estimated to be $232,852.
Dividing this amount equally over 12 months, the monthly float would be reduced by
$19,404. This represents less than 3 percent of the monthly float amount. If the 33
percent reduction was applied to all Head Start salaries, not just teacher salaries, the
annual savings would be $607,739, or $50,645 per month, roughly 7.6 percent of the
monthly float amount for the Head Start Program. (This assumes teaching staff
salaries are annualized over 9 months and other staff salaries are annualized over 12
months.
It is important to note that reducing program expenditures would only relieve pressure
on the monthly general fund balance liquidity, but as 100 percent of costs incurred are
directly reimbursed with federal funds, there are no actual savings to the general
fund. Though the measure would increase the liquidity of the general fund each
month, it would not impact the total annual balance of the fund.
Low High Low High Low High
Head
Teacher 31,168$ 20,088$ 44,572$ (3,936)$ 11,080$ 12.59 $0 139,502$
Asst.
Teacher 23,962$ 16,354$ 35,725$ (3,684)$ 7,608$ 12.27 $0 93,350$
$0 to $232,852
Total SavingsSavings/ FTEComparison Salary Current
FTE
Current
Salary/
FTE
Total Salary Savings Per Year After Reduction Measure:
City of Rockford
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Service Impact Assuming staff response to the salary reduction measure is negative, staff retention,
and consequently service continuity may be affected. Less experienced staff may need
to be hired to balance any attrition. This could impact the quality of service to the
students and parents served by the Head Start Program.
Staff Impact It is reasonable to assume that implementation of a salary reduction measure will be
met by opposition and will be likely to affect staff morale. No reduction in the total
number of staff is anticipated.
Other Impacts It is possible that this measure will be politically unpopular and likely that it will be met
by union resistance. Changes to this program also could create tension with the
population groups most served by the program.
Market/Vendor
Considerations
Given the high unemployment rate in the Rockford area, any openings created by
attrition of current teaching staff are likely to be pursued by numerous applicants.
Shared Service
Options/Discussion
of Redundancies
There are none related to this decision item.
Risk Factors As discussed in the impact sections, loss of experienced staff, political unpopularity
and strong union resistance are risk factors to be considered.
Collective
Bargaining Impacts
The current collective bargaining agreement, which expires on December 31, 2010,
would need to be renegotiated.
City of Rockford
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Prepared by: Baker Tilly Virchow Krause, LLP
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Modification
The City of Rockford is one of the only government entities in the State of Illinois
managing a Head Start Program. It has been doing so since 1975. According to the
U.S. Department of Health and Humans Services (HHS), the city may not redesignate
the operation of the Head Start program to a third party. Likewise, the city may not
elect to outsource or delegate operations to another entity without prior federal
approval. It may, however, choose to wholly discontinue its operation of the Head
Start program.
Therefore, there appear to be two distinct options for the City to explore should it wish
to discontinue operating the Head Start Program:
1. Wholly discontinue its operation of the Head Start program.
2. Enter into delegation negotiations with HHS
According to staff at the Midwestern Regional Head Start Office, covering Illinois,
Indiana, Michigan, Minnesota, Ohio and Wisconsin, the Rockford program is welcome
to initiate a preliminary discussion regarding becoming an approved delegating grantee
with them. Some of the barriers to obtaining federal approval for delegation of
operations are as follows:
HHS has become leery of programs that delegate all operations, serving only
as a pass through, since this does not seem to be an efficient use of funds
The grantee (Rockford) would need to identify and select agencies to provide
services through a competitive process, then manage that contract
Though delegating, grantees maintain ultimate responsibility for quality of
services and must monitor for compliance issues
The 15 percent administrative limit, which Rockford already has difficulty
remaining within, would need to be split with between the grantee (Rockford)
and the agency delegated to provide services
There are also multiple options to be considered when developing a plan for the scope
and implementation details related to applying for delegation authority. With that in
mind, it is premature to attempt quantification of costs and benefits related to a
delegation scenario. Instead, this modification focuses on the wholesale
discontinuation of the City’s grantee status and operational responsibilities for Head
Start.
Annual Service
Statistics
The Head Start program is currently at capacity with a waiting list. The number of
children served per year is as follows:
Note: 2010-2011 figures are estimates from the Human Serviced Department Budget
FTE Currently, the City of Rockford Head Start Program employs 67.38 FTE. Of these,
12.59 FTE are Head Teachers, 12.27 FTE are Assistant Teachers, 8.35 FTE are bus
drivers, 8.48 FTE are Resource Workers, and the remaining staff serve in various
supportive or administrative roles.
2007 2008 2009 2010 2011
Students 669 653 624 724 750
City of Rockford
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Prepared by: Baker Tilly Virchow Krause, LLP
Expenditures/Per
Customer Cost
Information
With total a total program budget of $5,317,848 in 2010 and 724 students served, the
cost per student is roughly $7,345 per year. As a point of comparison, the cost per
student in Champaign County is roughly $6,594 per year.
Revenues Per federal guidelines, up to 15% of Head Start grant funds may be directed to
administrative costs, rather than direct program service provision. In a manner of
speaking these are revenues to the city, as they are generally used to pay the city for
administrative services provided to the program. Additional federal grant funds are
occasionally awarded to the city for capital purchases such as busses and building
upgrades.
Anticipated
Savings/Impact on
General Fund
The Head Start program is almost exclusively supported with federal funds. Thus, no
staff expenditure impact will be realized. As expenditures are made from city funds,
federal funds are drawn down electronically to cover the expenditures. The city “floats”
expenditures only until reimbursements are requested and processed. Each float is
typically less than one month. Eliminating the program and thus, all program related
expenditures should reduce the amount of the float from the city’s general fund by
$668,000 per month.
The city also provides a small amount of general fund resources each year to the
Human Services Department, a portion of which is allocated to the Head Start
program, depending on the needs of the various programs within the Department.
Eliminating the city’s operation of Head Start, could reduce the city’s annual
contribution to the Human Services Department. The figure below shows the recent
general fund support of the Department as a whole.
There are also some potential one time revenue opportunities associated with the
discontinuation of the city’s operation of Head Start. Some existing capital, originally
purchased with federal funds, could be liquidated. Specifically the city could consider
selling the buses currently used by the program. As part of this process, the city would
need to apply the federal fiscal standards to determine “federal interest” in existing
capital. If any residual value is determined, the city would need to satisfy the federal
interest by paying that amount to HHS. The federal threshold for recovery related to a
capital asset is $25,000. The value of most buses used by the program is likely to fall
below this threshold given their age; however a few of the newer buses may be above
this threshold and require reimbursement of funds to HHS. Current fleet inventory
shows that the Human Services Department owns 19 buses, of which 15 are at least
10 years old. Of the four remaining buses, two are 2007 models and two are 2009
models. It is unclear if all four of the newer buses are exclusively for Head Start.
Similarly, the city owns the Henrietta School building, which is currently used by the
program. This asset could also be liquidated. Though federal funds were used to make
updates to the building, they were not categorized as “major renovation” by HHS, and
therefore, no federal interest would need to be satisfied upon sale of the building. It is
important to note that if the building is not sold or rented, the maintenance and utility
costs, currently born by Head Start, would need a new source of funding.
2008 2009 2010
280,000$ 170,000$ 170,000$ General Fund Contribution
City of Rockford
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Prepared by: Baker Tilly Virchow Krause, LLP
Anticipated
Savings/Impact on
General Fund
(cont.)
The on-going maintenance and utility costs for the Henrietta School are just one
example of costs the city may bare upon the discontinuation of Head Start operation.
The Head Start program also contributes funds to the city for overhead expenses such
as information technology, risk management, auditing services and other service
contracts. While some of these areas of overhead will be easy to scale back in direct
proportion to their use, other recurring costs may require another funding source.
According to city staff, the continuing costs that Rockford would need to absorb if it
discontinued operation of Head Start would be $255,145 per year. This assumes an
immediate sale of the Henrietta School. If the school is retained, over $20,000 more
would need to be absorbed, a total of $275,643 per year. City accounting staff
estimates roughly 75 percent of these costs would be charged to the general fund.
Service Impact
It is likely that the transition to an interim provider and the subsequent transition to a
newly selected grantee will be difficult for those currently served by the program. The
students and parents are likely to experience logistical changes.
Staff Impact
The city would likely eliminate all 67.38 FTE positions currently funded by federal grant
funds from the Head Start program
Market/Vendor
Considerations
Other possible grant applicants in the area may include the YWCA, the Salvation Army
or the School District, though the likelihood of these groups applying to be Head Start
providers is unknown.
Shared Service
Options/Discussion
of Redundancies
The city may not independently redesignate operation of Head Start to a third party,
though it may choose to discontinue its role as a grantee.
Grantees wishing to no longer function as Head Start providers must inform HHS, at
which point HHS provides an interim grantee and initiates a formal bid process for new
grant applicants. Community Development Institute (CDI) has a national contract with
HHS to serve as interim provider. According to staff at the Head Start Regional Office,
CDI aims to maintain the status quo of an existing program and avoid disruption in
service provision. It often hires the existing Head Start staff for program services,
though CDI tends to primarily use its own administrative staff. A recent example of a
relinquished grantee in Illinois is Lifelink in Du Page County, if the City wishes to
investigate this option further.
The selection of a new permanent provider by HHS could take up to two years, which
may delay any fiscal impact on the City. If the city wishes to pursue this option,
numerous impacts must be considered
Risk Factors It could be politically unpopular for the city to discontinue its involvement with Head
Start, particularly given its long history. Transitioning out of managing this program
could also create tension with the population groups most served by Head Start.
Collective
Bargaining Impacts
There is likely to be resistance from the union representing the teachers concerning
the discontinuation of the city’s role in operating Head Start, however, it is within the
city’s purview to make this decision.