The Issues Raised By A Potential Merger Of Fire Departments

Two years ago, the retirement of longtime Springfield Fire Chief Dennis Murphy gave city leaders in Eugene and Springfield an opening to try what they hope will be a money-saving merger of their fire departments.

That long-discussed and partially accomplished consolidation now has entered a critical stage.

Work on perhaps the biggest challenge of becoming one department — agreeing on a single labor union contract for an assimilated work force of firefighters from both cities — lies in the weeks ahead.

Negotiators for the cities and the two separate firefighters’ unions — both locals of the International Association of Fire Fighters — have been meeting to hammer out a single contract for Eugene and Springfield firefighters, or two very similar contracts that could become one later.

Labor contracts between both cities and their firefighters are set to expire on June 30, but they will roll over until new agreements are reached. Merging the contracts is not easy, says Randy Groves, fire chief for Eugene and Springfield, because while the cities sit side by side, the two contracts are “remarkably different” in base pay scale, incentive pay, health benefits and how overtime pay is calculated — a key component given firefighters’ unusual work schedules.

City officials acknowledge that for the cities to win a single contract, they are going to have to pay more in total labor costs per employee. But they are banking that the merger-related savings they will realize in other areas — eliminating administrative positions and gaining operational efficiencies — will more than balance out the additional costs.

In any event, the merger won’t reduce the net amount either city spends on fire services. Instead, it will at best slow the growth of that spending, which is driven largely by rising firefighter pay and benefit costs.

And if the cities try to back away from a full work force merger, they also face some financial pain. Officials warn that administrative positions eliminated in the last couple of years in anticipation of the merger would need to be restored and refilled.

Potentially complicating the matter is the unions’ goal, beyond the merger, to create a Eugene-Springfield fire district with its own taxing authority, essentially breaking the fire departments away from both municipal governments.

The bottom line in the experiment thus far: A fully merged fire department with its promised cost savings and improved service for Eugene and Springfield residents is still a distant — if not illusory — goal.

10 jobs eliminated

So far under the merger, the cities have eliminated some administrative positions. Six jobs in Springfield’s department and four in Eugene’s have been cut, all by way of attrition, not layoffs.

For example, Springfield is no longer on the hook for $157,952 in annual salary and benefits for a fire chief, and Eugene doesn’t have to pay a fire marshal $128,081 in annual salary and benefits.

By merging some positions, Springfield saved $286,952 and Eugene $320,047 in the 2010-11 fiscal year. In the 2011-12 fiscal year, which ends June 30, the cities are expecting to save a combined $876,239.

But Groves says the smaller combined administration can’t manage two distinct fire departments in the long-term. Without a merger of the two work forces, eliminated positions would have to be added back, he says.

And despite elimination of the positions, Eugene’s fire department personnel costs overall rose from $24.8 million in the 2009-10 fiscal year to a projected $26.2 million in the 2011-12 fiscal year, while Springfield’s rose from $12.3 million to a projected $13 million over the same period.

Both cities’ costs rose because of salary step increases, greater fringe benefits and rising medical costs, including health insurance. Also, for Eugene, a change in how firefighters are paid for overtime increased the city’s labor costs, while Springfield gave its firefighters the equivalent of a retroactive 2 percent cost of living increase for the 2011-12 fiscal year in a lump sum payment this spring.

Coming to terms

It appears likely that a successful merging of the contracts would undo some of the savings the cities hope to achieve.

That’s because, to win firefighter approval, the cities likely would have to boost Eugene firefighters to match the costliest elements in the Springfield contract, and boost the Springfield firefighters to the costliest elements in the Eugene contract.

In Eugene, the city currently pays into firefighter pension accounts an amount equal to 6 percent of annual salary that firefighters technically should be paying in themselves, but that the city previously agreed to pick up for them.

It’s a practice known statewide as the “PERS pickup,” and it’s in addition to the standard 6 percent retirement amount that the city already pays into their account.

In contract negotiations, Eugene firefighters are pushing that the city cease making the PERS pickup and instead give firefighters a 6 percent pay increase. That’s a contract choice Springfield firefighters made years ago.

The change would protect Eugene firefighters from a potential statewide elimination or reduction of the “PERS pickup” by the Legislature. It also would increase the city of Eugene’s Social Security/Medicare tax liability by $270,000 a year, because the city would have to pay those taxes on the pay increase to firefighters.

Meanwhile, Springfield faces the prospect of having to pay its firefighters more to be on par with Eugene’s contract — which is the more expensive of the two overall. Applying Eugene’s contract to Springfield firefighters would increase the city’s labor costs by almost $310,000 annually.

One reason is that Eugene’s department has slightly higher base salaries.

A senior Eugene firefighter makes $69,582 a year in base wages — when the elimination of city-paid PERS pickup and corresponding 6 percent raise are factored in — while a senior Springfield firefighter makes $67,156.

A senior fire engineer in Eugene makes $73,283 a year in base wages, while the same employee in Springfield makes $72,249.

And a senior paramedic in Eugene makes $74,453 a year in base wages, while one in Springfield makes $73,554.

A second reason is that the cities pay for overtime differently, and Springfield’s overtime costs would increase in order to match Eugene’s.

During their last contract negotiations, Eugene firefighters traded a scheduled cost-of-living increase for the implementation of so-called “Kelly Days.”

Under the agreement, firefighters receive a paid day off every 18th shift, known as a Kelly Day, outside of their normal vacation schedule. Kelly Days are used nationwide by some fire departments as a way to keep firefighter work weeks less than 53 hours, after which cities must pay overtime rates.

Springfield doesn’t have Kelly Days for its firefighters and simply pays overtime on a regular basis, with its firefighters working a 56-hour week (Those overtime hours are not accounted for in their base salaries).

But because Kelly Days mean more firefighters are off work on any given day, adding Kelly Days to Springfield’s contract — even though it would reduce some overtime costs — would increase the city’s labor costs overall by approximately $215,000 annually, according to finance director Bob Duey.

A larger “market”

Another potential driver of costs is that a merged department would serve a much larger population base, or “market,” of about 215,000 people.

That is important because state law bans firefighters from going on strike, and if they reach impasse with city management in contract negotiations, the case goes to binding arbitration. Arbitrators typically determine firefighter compensation based on what other in-state departments serving similar markets pay.

Groves says he doesn’t think that combining the markets of Springfield and Eugene will have much effect on labor costs, in part because state law prevents Portland — the only market that would be larger than Eugene-Springfield — from being used for comparison in cases of arbitration.

Eugene’s contract is already in line with what firefighters are paid in cities such as Salem, Gresham, Hillsboro and Beaverton, Groves says.

But Mike Barnebey , president of IAFF Local 851, Eugene’s firefighters union, says a merged department would give more weight to the union’s desire to be compared in arbitration cases with Beaverton or Clackamas, two Portland suburbs with comparatively high firefighter pay.

Beaverton fire’s services — under the regional Tualatin Valley Fire & Rescue department — cost more than $146,000 a year per full-time employee in pay and benefits, while Clackamas’ fire services cost close to $156,000 annually per full-time employee.

Eugene and Springfield’s costs are much lower: currently, both cities pay about $125,000 per year per full-time employee in pay and benefits.

Barnebey acknowledged, however, that “with arbitration, it can go either way. … It’s always up for grabs.”

Long-term savings?

While going to one contract likely will lead to higher labor costs for both cities, a merged work force could provide better service for residents, as well as greater savings down the road, Groves says.

Groves hopes to permanently combine training programs for firefighters of both cities, an experiment first tried in 2010 that resulted in a one-time savings of $14,000.

Making supplies and equipment purchases as one larger organization would allow the department to get better prices, Groves says.

And having a single work force would allow Groves to move firefighters around, from city to city if necessary, to meet staffing needs, thereby curtailing the amount of money that both cities spend on overtime pay, he adds.

None of those “economies of scale” have been factored into the potential savings Groves has presented so far to both the Eugene and Springfield city councils.

“I’d rather under-promise and over-deliver,” he says.

A full merger might also make the elimination of more administrative and support positions possible, Groves says, although it wouldn’t mean any rank-and-file firefighter or paramedic positions could be cut.

In that area, “We’re right-sized at the moment,” he says.

Springfield City Manager Gino Grimaldi says more avenues to savings could be explored.

“We’re just scratching the surface so far,” he says.

One Springfield-specific savings possibility, Grimaldi says, is changing the city’s firefighters’ health insurance plan. Eugene’s fire department is self-insured, meaning that the department covers its own liability through a fund that fire department staff and the city pay their insurance premiums directly into.

If Springfield adopted a similar model, it potentially could save the city several hundred thousand dollars a year, Grimaldi says.

Eugene and Springfield also have commissioned an actuarial study to see if going in together on a single self-insured health plan would reduce costs for both cities.

Taxing district a tough sell

Groves says he would like to see a contract agreement reached before June 30, but he knows negotiations can often drag on. Back in April, Springfield ratified a new one-year contract with its firefighters, nine months after the previous contract was up.

Eugene’s union President Barnebey says he wants to agree to a new contract soon as well, but that his primary goal “is to get the contract right” for his members.

Similarly, Groves says that while the cities and the unions want “the same outcome” of a merged department, the cities “aren’t willing to do so at any cost.”

Another complication is that, if the merger goes through, both unions strongly support creating an independent taxing district eventually to support the single department. That would give the department a much more stable funding stream, Barnebey says.

Barnebey also argues that it would protect Eugene and Springfield’s budgets from occasional large expenditures related to replacing costly firefighting equipment.

But cutting fire departments out of Eugene and Springfield’s general fund budgets could be a tough sell with the cities, as it would reduce their revenue streams and spending flexibility.

Fire department spending constitutes 32 percent of Springfield’s and 14 percent of Eugene’s general fund expenditures. Both Grimaldi and Groves agree that creating an independent taxing district isn’t part of the current negotiations.

Should negotiators reach agreements with both unions, both city councils then would have to vote on them at a public meeting.

An unrealistic goal?

The idea of nearby cities merging services to cut costs is hardly new. Many cities across the nation have analyzed the costs and potential benefits of merging their fire departments specifically. But few actual mergers have come to fruition.

Stewart Gary is a former fire chief who, in the mid-1990s, negotiated the merger of the Pleasanton and Livermore fire departments in California. He now works for a Sacramento-based consulting firm that helps cities look into potential fire department mergers.

Such mergers “fail more often than they succeed,” Gary told the Orange County Register newspaper last year. “If these were easy to do, we would have 200 fewer fire departments in California.”

But people on both sides of the negotiating table in Lane County remain optimistic.

“I’d like to think this is more than just an experiment,” Groves says. “We’re putting our heart and soul into this.”

Adds Grimaldi: “Typically, when you try to do something like this, you have people come forward with a million reasons it can’t happen. That hasn’t been the case.”

Barnebey says local firefighters support the merger concept.

While mergers in other places haven’t got off the ground, Barnebey says “the level of communication” between the two cities and the two unions gives this merger a much higher chance of success.

“Everyone can see why it makes sense,” he says. “Now, we have to reach an agreement that is good for the taxpayers and for our members….

“What the timeline is on that is really hard to say.”

FIRE DEPARTMENT BUDGETS BY THE NUMBERS:

Eugene

Fiscal year 2009- 10

Total expenditures: $28.9 million

Personnel costs: $24.8 million

Number of full-time employees: 217.5

Personnel expense per employee: $114,000

Fiscal year 2011- 12 (projected)

Total expenditures: $31.9 million

Personnel costs: $26.2 million

Number of full-time employees: 212

Personnel expense per employee: $124,000

Springfield

Fiscal year 2009-10

Total expenditures: $15.6 million

Personnel costs: $12.3 million

Number of full-time employees: 108

Personnel expense per employee: $114,000

Fiscal year 2011-12 (projected)

Total expenditures: $16.4 million

Personnel costs: $13 million

Number of full-time employees: 103

Personnel expense per employee: $126,000