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					            CITY COUNCIL
            REPORT 2013- 08                                                       6A-2


January 29, 2013

TO:           MAYOR AND CITY COUNCIL

FROM:         BELINDA B. ESPINOSA, CITY MANAGER
              CHARLES HANLEY, FIRE CHIEF

SUBJECT:      RECEIVE REPORT AND PROVIDE DIRECTION TO STAFF ON THE
              FIRE SERVICES ALTERNATIVES


RECOMMENDATION

It is recommended that the City Council receive the report and provide direction to
the City Manager on the preferred fire service option.

BACKGROUND

For the last four years, the City Council has been exploring the feasibility of
alternative fire service models. The options that were and are still under
consideration include:

   •   Revert back to a separate standalone department with our own Fire Chief

   •   Continue to operate a Fire Department with a shared Fire Chief with another
       agency,

   •   Contracting with another district such as the Rodeo-Hercules Fire Protection
       District or Contra Costa County Fire Protection District.

   •   Develop Another Service Model

The City of Pinole Fire Department has changed over the last two years in that we
now contract out for a shared Chief with the Rodeo-Hercules Fire Protection District
and we also have had to close one of our two fire stations indefinitely. These
changes were made with the goal of maintaining fiscal responsibility and within the
fiscal constraints that the City was experiencing.

With the reduction in staffing and the need to continue to provide fire service to the
community, along with a response to the LAFCO Municipal Service Review, to
continue to seek partnerships to assist cities facing financial crisis during this time,
the City has been discussing shared or contracting out fire services. During this time,
the City has continued to provide and maintain community fire services.
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January 29, 2013                                                                         2


Several options have been reviewed over the last year with the City Council directing
Staff to seriously look at two alternatives for contracting out fire protection. The first
is contracting with the Rodeo-Hercules Fire Protection District and the other with the
Contra Costa County Fire Protection District (Con Fire). In both instances, the
contracting agencies will, in principal, absorb the current firefighting staff; therefore
they would no longer be City of Pinole employees. Dialogue on the mechanisms
and costs associated with absorbing the employees will be part of the negotiation
process, should the Council direct staff to move forward with contracting out the fire
services.

Discussion of this issue was temporarily placed on hold in light of the fact that the
City of Pinole and Con Fire had tax measures that were being placed on the
November 2012 ballot. The City of Pinole was awaiting the outcome of both
measures in order to ensure that there was sufficient revenue for the City of Pinole
to pay for contracted services and to ensure that Con Fire could sustain them as an
organization prior to entering into any type of contract with the City of Pinole.

If the City were to contract with Con Fire, the outcome of the failed ballot measure
would not affect the service contract as the City would be paying the actual costs of
operating the fire station in Pinole. Similar to Con Fire, the Rodeo-Hercules Fire
Protection District has also been considering placing a supplemental tax measure on
the ballot before the public. The date for that measure has been changing
depending upon the conclusion of a legal case involving tax measures statewide. It
is anticipated that the Rodeo-Hercules tax measure could be placed on a ballot as
early as Spring 2012 or as late as Fall 2013.

   •   CURRENT CONFIGURATION

The City of Pinole previously operated two fire stations in the city, including Fire
Station 73 located in Old Town and Fire Station 74 situated in Pinole Valley. In
2010, a limited brown out of Fire Station 74 was initially instituted; however in early
July 2011, due to continuing financial constraints, the City was forced to brown out
Fire Station 74. The station has been closed for 18 months and remains vacant at
the current time.

Prior to the current economic crisis, the Pinole Fire Department operated with 21
personnel, including a Fire Chief, an Assistant Fire Chief, an Administrative
Secretary and 18 line fire personnel. The Fire Department included staffing for both
fire stations, each with a 3 person Advanced Life Support-Paramedic (ALS) engine
company.


The City of Pinole Fire Department currently operates out of one station, Fire Station
73. We have a total of 15 sworn positions, excluding the Fire Chief. The City
currently contracts with Rodeo-Hercules for shared Chief and administrative support
at an amount of $160,000 a year. There are three shifts with a minimum of three
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firefighting personnel on duty at a time. This generally includes a Captain, Engineer
and a Firefighter. In addition, there is always a single Battalion Chief on duty from
one of three agencies (Pinole, RHFD or Con Fire). The Battalion Chief is on duty on
a rotating basis with the other Battalion Chiefs in Battalion 7.

The current Memorandum of Understanding with the United Firefighters of Contra
Costa County (Local 1230 calls for minimum staffing so when there is less than
three available on a shift, another staff person is called in on overtime to backfill the
position. There are times, when there are four assigned to the Fire Station. This
additional firefighter allows for safer working conditions, flexible deployment in the
event of vacancies due to planned leave and illness or injury. Overtime is controlled
by an artificial “hard cap” that is used as an overtime cost containment method

The department is currently configured as follows:

       Fire Chief              1    Contracted and Shared with Rodeo-Hercules
       Battalion Chief         1
       Captains                3
       Engineer                5
       Firefighter             6
              Total            16   Including the contracted Chief position


Prior to the economic crisis, we were operating Fire Station 73 and Fire Station 74
with 21, Fire Chief, an Assistant Fire Chief, an Administrative Secretary and 18 line
fire personnel. The City was able to maintain services at both stations with minimum
staffing of three on a shift.

Due to the elimination of two administrative positions, a service retirement, two
service related disabilities and an involuntary separation, staffing was reduced to 15
total personnel. When Fire Station 74 was closed, the City of Pinole continued to
operate Fire Station 73 with 14 firefighters and a battalion chief. For comparative
purposes, the Rodeo-Hercules District is running one station with 12 firefighters and
a battalion chief. As previously discussed both agencies share a Fire Chief and an
Administrative Services Officer.

Proposals from Rodeo Hercules Fire District and Con Fire both include operating a
single fire station with 9 staff members.

   •   SAFER Grant

As previously stated, the City of Pinole was recently awarded a $1.239 million
SAFER Grant that will support the re-hiring of four firefighters to increase the
number of trained, certified, and competent firefighters capable of safely responding
to emergencies likely to occur within the department’s response area. The purpose
of the grant as outlined above is to hire firefighters that have been layed off from
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other agencies and to hire military veterans if possible and to determine the
feasibility of re-opening Fire Station 74 even on a limited time basis.

The grant funded positions can be extended by one additional year if we hire
qualified military veterans. This should be a focus of the recruitment process.

Staff has received proposals from both the Rodeo-Hercules Fire Protection District
and Con Fire. This report will provide a summary and a highlight of each proposal.

REVIEW AND ANALYSIS

After reviewing the proposals, the proposals differ primarily as follows:

                               Rodeo-Hercules                         Con Fire

   •   Cost                    $3,094,000                             $3,422,129
   •   Term                    10 yrs. plus successive 5 yr. terms    5 Years
   •   Cost Escalators         3%                                      4%
   •   Equipment               Assumes Ownership/Maintenance/         Will Do It at a
                               Replacement at District Expense        Neutral Cost to
                                                                      District
   •   Retirement              2% @ 50                                3% @ 50

COST

Staff has determined that the main reason for the costs difference between the
proposals is retirement and the cost of maintenance/replacement of
apparatus/equipment. A full discussion about the cost is under the Retirement and
Fiscal Impact section of this report.

TERM

The terms of a contract for fire service, is somewhat dependent upon whether or not
the agency will assume ownership and responsibility for apparatus. In general, if the
apparatus has significant value, that value may be negotiated as a reduction to the
contract cost thereby reducing the cost in the initial years of a long term contract.

However, the downside of selling the equipment is that should the City desire to re-
establish a new fire department at a later date the cost to purchase all new
equipment may be prohibitive. A proviso to furnish like apparatus at the termination
of the contract may be more attractive as this guarantees the City’s ability to rebuild
the Fire Department without the initial capital investment of new apparatus and
removable equipment.




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On the other hand, a short-term contract may be more appealing if the City Council
and the community are interested in reverting back to having its own Fire
Department at some time and having a direct impact on how the services are being
provided and the costs associated with doing so.

COST ESCALATORS

As outlined above, Rodeo-Hercules is requesting an escalator of 4% and Con Fire is
requesting 3%. The cost difference is estimated at about $90,000 to $120,000 on a
$3 million contract. An alternative may be to negotiate a cap on the escalator or tie
increases to the Bay Area Consumer Price Index (CPI). These can be negotiable;
however our experience indicates that the vulnerability for increased costs is related
to overtime, salaries, health insurance and retirement costs which continuously
increase year after year. The fixed “smoothing” approach may result in lower overall
costs.

EQUIPMENT

The Rodeo-Hercules proposal includes the district assuming title and ownership for
all City owned apparatus. However, it also states that the District will assume the
financial responsibility for the maintenance, repair and replacement of the apparatus
and equipment. The cost of replacing the equipment, through a lease, is included in
the proposal and will not be reflected as a supplemental cost outside the proposal.

The original Con Fire proposal did not include taking ownership of the apparatus but
called for the City to provide the maintenance and replacement. Subsequent to that,
the District re-evaluated their proposal to include the District taking ownership for all
of the equipment as long as the cost was neutral to the distinct. Thus, Con Fire is
willing to match the Rodeo-Hercules model, but the City of Pinole would have to pay
for replacement costs. More evaluation is still needed in this area.

RETIREMENT

At the current time, the following retirement benefit plans are in place:

       Con Fire                CCCERA (County Program)          3% @ 50
       City of Pinole          CalPERS                          3% @ 55
       Rodeo-Hercules          CCCERA (County Program)          2% @ 50

When Staff initially reviewed contracting for services, many discussions took place
regarding the different types of plans, the retirement levels and how this would
impact the cost proposals. Both agencies were open to the idea of developing a
negotiated “second tier” retirement system of equal benefit to that of Pinole’s
retirement system and to hold down costs of assuming Pinole employees.


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January 29, 2013                                                                       6


Subsequently, pension reform (PEPRA) occurred and eliminated the feasibility of
establishing a negotiated second tier. In essence, whatever retirement plan an
agency had on December 31, 2012 must remain in place for “legacy” employees.

For Pinole employees, if we contracted with Con Fire, they can be absorbed by the
District however, it would be under a higher retirement formula or 3% @ 50 and at
our cost. That cost is already reflected in the Con Fire proposal which is now higher
than Rodeo-Hercules. In contrast, the Rodeo-Hercules proposal would call for
lowering the Pinole employees benefit formula from 3% @ 55 (City of Pinole) to 2%
@ 50 benefit formula (Rodeo-Hercules) at no additional cost to the City of Pinole.

As a result, the contract cost comparison reveals that the 3% @ 50 formula is much
more expensive to contract with Con Fire and thus eliminates them as an alternative
service provider.

   •   CONSIDERATION OF REOPENING FIRE STATION 74

The SAFER grant funds up to four positions and now provides an opportunity for the
City to consider the feasibility of reopening Fire Station 74 on a limited basis. While
the grant award is $1.239 million, these funds are not paid out in full in a lump sum.
The City must cash flow all of the expenses and await reimbursement on a quarterly
basis. However, there may be an opportunity to request an advance due to our
financial condition that would allow the City to recruit and hire based on advanced
payments.

The grant funds must be allocated for salaries and benefits over the two year grant
period. The grant funds do not provide for a reimbursement of overtime and some
other operating costs such as recruitment and pre-employment activities. This is
discussed in detail under the Fiscal Impact section of this report.

Should the City Council choose to contract with Rodeo-Hercules and intermittently
re-open Fire Station 74 using the SAFER grant, the model includes the Fire Chief’s
ability to deploy resources, including staff and equipment at any of the four fire
stations (two in Pinole, one in Hercules, and one in Rodeo) if they are open.

The intermittent re-opening of Fire Station 74, the model would include the following:



   •   Operational Impacts:

               Intermittent Staffing for Fire Station 74, for the next two fiscal years,
               limited if grant/local funding is available; and
               Firefighters from both Rodeo-Hercules and Pinole Fire would be
               deployed at any station.


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   •   Staffing Impacts:

               9 firefighters on a shift (3 captains 3 engineers 3 firefighters);
               Includes reassigning 5 positions from Fire Station 73 to Fire Station 74
               in addition to 4 grant funded positions for a total of 9; and
               Focus on Hiring qualified military veterans for the 4 grant funded
               positions so that the third year of operations is feasible.

   •   Financial Impacts:

               Salaries and Benefits for the 4 grant funded positions will be lower due
               to entry level (first step) pay;
               Employees entitled to Sick Leave and Vacation accrual is at entry level
               step ;
               Continue a Hard Cap on Overtime of $226,800;
               Overtime/backfill costs will be controlled by temporary brownouts to
               assure the overtime budget is not exceed; and
               Additional costs such as recruitment, hiring training, and promotions
               are not included in the proposal costs

In order to restore the Pinole Fire Department to previous staffing levels with Fire
Station 74 re-opened on a ongoing basis 365 days per year, a new (at least
$226,800/year) additional source of revenue would be required after future, and
replacement funding for the second or third year. This would include backfilling, at a
minimum, the lost of the SAFER grant in the amount of $632,000 year in addition
federal grant after two years or three years must be identified. Absence an ongoing
funding source to $226,000. These costs would be in addition to the $3,000,000 plus
contract price. backfill the federal grant funding the long-term Staffing of two Fire
Stations in Pinole is not financially possible, regardless of the contracting-out
decision.

FISCAL IMPACT

As mentioned previously, Staff began dialogue on fire service alternatives several
years ago. In fact, the last fire services workshops were in January and March
2012. It is important to review the current operating financials of the department
prior to discussing the financial impacts of the proposals.

The primary funding source of the Pinole Fire Department is unrestricted revenue
from the General Fund of the City of Pinole. At the current time, the FY 2012-13
budget for the Fire Department including Measure S funds that specifically provides
the funding of the Fire Chief contract ($160,000), some vehicle maintenance
($65,000) and for overtime ($226,800) is $ 451,800.

An outline of the Pinole Fire Department’s FY 2012-13 budget is below:

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       Fire Operations/Maintenance          General Fund          $2,513,200
       Fire Chief Services/Overtime         Measure S             $ 451,800
       2010 SAFER Match *                   General Fund          $ 81,844
                                                        Total     $3,046,844

*Provides for six months of General Fund funding the Battalion Chief in FY 2012-13
(January 1 - June 30 2013).

   •   REVIEW OF THE PROPOSALS

The original proposals offered a five year contract period beginning with FY 2011-12
(see Attachment A and B). However, Staff is now looking towards beginning service
in FY 2013-14; therefore we have included the cost estimates for that fiscal year.

For comparison purposes, Staff reviewed the proposals for the following:

   •   Operating One Station in Pinole*
   •   9 Member Crew (Minimum of 3 Paramedics per station)
   •   Advanced Life Support**
   •   One Battalion Chief
   •   Fire Prevention Services
   •   Training
   •   Administration
   •   Maintenance/Replacement of Equipment

*Con Fire also proposed a cost estimate for two stations
**Con Fire also proposed a cost estimate for Basic Life Support

Based on this, we are outlining the total costs as presented in the original proposals
by both agencies for FY 2013-14. When reviewing the proposals, it is important to
ensure that we are comparing “apples to apples”. The two significant factors are the
replacement/maintenance of apparatus and equipment and the cost of retirement.

In the Rodeo-Hercules proposal they made the assumption that our
apparatus/equipment will be transfer to them and assume that the City of Pinole
apparatus/equipment will have no value. If the City Council desires to retain
ownership of the apparatus and equipment, then we would have to provide the
funding for maintenance/repair and/or replacement separately.

Based on this, the cost estimates provided to the City for contract fire service for one
station is as follows:

               Con Fire                     $3,422,129
               Rodeo-Hercules               $3,094,000

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                               Difference   $ 328,129

The reason for the difference between the two proposals is the Retirement Benefit
formula costs. If you recall, Con Fire has a 3% @ 50 benefit formula and Rodeo-
Hercules has 2% @ 50 benefit formula. Our employees would be placed in the
Rodeo-Hercules benefit formula, which costs significantly less than the Con Fire
benefit formula.

In contrast, the City of Pinole is running one station with a FY 2012-13 budget of
$3,046,844 with a shared Chief and administrative support. We have not budgeted
for any replacement of apparatus and have relied on grant funding to replace
essential firefighting equipment such as turnouts, breathing apparatus and hose.

Overtime Costs

The Fire Department operating budget is currently utilizing a “smoothing” technique
in an effort to control personnel costs, specifically overtime and to continue to
provide desired safe staffing levels during peak demands. In an effort to keep
overtime as low as possible, we established a baseline budget for overtime at
$226,800 through negotiation with Fire Local 1230. This serves as the cap and this
is the guiding principle on whether we staff three or four on an engine at any given
time. However, it is essential to understand that an overtime funding allocation at
this time is only sufficient to guarantee “constant staffing” of one engine company, at
the accepted battalion – 7 standard minimum 3-person staffing level.

This number will not be increased with the exception of an annual inflationary
increase established by the City’s Finance Director each budget year. This is
needed in order to maintain the added costs for increases in salaries (payroll step
advance), Health insurance and retirement program cost increases.

Additional Costs of the SAFER Grant

As with any new program, it is anticipated that there may be some additional impacts
to the Fire Department Budget by adding these positions to the department. The
grant does not cover these expenses but there may be other alternatives that could
cover these costs.

While new employees have limited sick leave or vacation accrual and generally do
not use excess time, they may generate overtime costs in the latter part of the
second/third year of employment through the use of scheduled leave. This however
may be offset by using these positions to backfill paid absences for current
employees at the lower entry level firefighter rate.

Specialized training, physicals and other department needs may require overtime or
taking a unit out of service temporarily. There are also start-up costs including:


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January 29, 2013                                                                     10


background investigations, new employment physicals, psychological examinations,
instructional manuals and materials and personal protective equipment.

Outlined below is an estimate of the potential costs outside of the grant funding that
the General Fund may have to cash flow over time.

Activity                                                             Cost
Pre-employment Physical                                              $500
Live Scan (Digitized Finger Prints)                                  $150
Comprehensive Pre-Employment Screening                               $950
Polygraph (Optional)                                                 $350
Psychological Profile                                                $400
Instructional Manuals & Materials                                    $250
Unreimbursed Training Costs (Opting out of CFFJAC and VOW)           $2,500*
Promotional Costs/Acting Pay                                         $7,500
Personal Protective Ensemble                                         $3,000
Incidental Overtime                                                  $2,500
                                                TOTAL                $18,100

*Includes training costs without reimbursement.

One other relevant factor when considering this grant award is that the City will have
to provide an initial outlay of payroll expenses. The grant will reimburse the City for
these expenses every quarter and is processed through automatic deposit unless
prefunding is requested.

Facility Maintenance Costs

Neither proposal included anything above basic maintenance of the fire station(s).
The City would still be responsible for the maintenance and capital improvements
unless this item is negotiated under the proposed contract.


OTHER ALTERNATIVES EXPLORED

As mentioned in the beginning of this report, the City essentially looked at a variety
of alternatives. As time went on, most of those alternatives were eliminated based
on cost, availability and desire of the agency to participate or provide the service.

Outlined below are the alternatives that were seriously taken into consideration and
the costs related to each alternative.

   •   Remain a Standalone Department                         $326,000



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The City is currently supporting on e forestation at a cost of $3 million a year. As
previously mentioned, the majority of the cost is being absorbed by the General
Fund.

If the City Council desired to remain a standalone fire department under the current
service model, it would be necessary to add back into the budget at a minimum, a
full time Chief and at least a part time clerical support person. This is estimated at
$326,000; however we can subtract the $160,000 which we are currently paying
Rodeo-Hercules for a shared chief and administrative support for a net effect of
$166,000.

                               Salary           Benefits                Total

Fire Chief                $150,000              $ 78,369            $228,369
Administrative Secretary $ 60,000               $ 37,206            $ 97,206
                    Total $210,000              $115,575            $325,575


With the SAFER grant, the City would have the ability to re-open Fire Station 74
albeit for two years. Moreover, the City would maintain the ability and the discretion
to consider other models that may be of value to the community as well as be
financially sustainable over the long term. Should the City Council desire to stay on
our own, the City would be able to maintain control over costs and the level of
service being provided.

The City would still have to contract out for fire prevention or hire an additional
position to handle this essential function. Fire Inspections are handled on a
contractual basis and is generally cost recoverable.

   •   Continue to Share a Chief with Another Agency                $160,000

The City is currently paying the Rodeo-Hercules Fire Protection District $ 160,000 a
year for a shared Chief and administrative support services. This amount would
continue into the future. The current contract expires June 30, 2013. Negotiating
another contract with Rodeo-Hercules and may result in a cost change based on
inflationary increases and costs related to personnel benefits.

Should Rodeo-Hercules not be interested in a continued contract, the City would
have to find another agency to contract with.

   •   Contracting with Another District                            $3,094,000

As previously mentioned contracting with Con Fire is no longer a financially feasible
alternative due to the retirement costs. Therefore Rodeo-Hercules is the only viable
option. The proposed amount for providing this service is $3,094,000 for FY 2013-
14. This cost would be inflated by 3% each year and does not include facility
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maintenance or future liability costs. The proposal is not firm as continued
negotiations will have to occur before a final cost proposal is achieved.

The cost estimate included in the Rodeo-Hercules and Con Fire proposal is a
beginning point for discussion and negotiation. The agreement deal points are yet to
be determined. This just serves as a framework under which to begin a dialogue
should the City Council desire to pursue contracted services.

   •   Development of Another Service Model

At one time, Staff also explored the idea of a two person “medical only” unit at Fire
Station 74. We contacted AMR, the advanced life support provider for the entire
county and determined that it would cost the city about $460,000 a year (based on
2009-10 dollars) for a two person “Quick Response Vehicle”. Through a recent
telephone conversation with AMR, AMR indicated that in today’s dollars, a two
person medical response unit including 1 paramedic and 1 Emergency Medical
Technician operating 24/7 is about $600,000 a year.

We are still trying to get a more detailed update on the cost at the time of this report,
but we do know that if we were to consider having our own firefighter/paramedics
serve as a two person medical response unit, then we would have to coordinate
through AMR as the County’s EMS Coordinators to determine if this is feasible.

In addition to the above, attached for your information is a recent report by the Santa
Clara County Civil Grand Jury Report entitled. “Fighting Fire or fighting Change?
Rethinking Fire Department Response Protocol and Consolidation Opportunities”
(see Attachment C).

CONCLUDING COMMENTS

There are still a number of issues that need to be addressed and are outside of the
scope of the proposals received which may have a monetary impact. These will be
discussed at a later date should the Council decide to go forward with contracting
out fire services.

Perhaps the most complex unresolved issue is the City’s ability to “transfer”
responsibility and administration of the SAFER grant under a “contract for service”
model. Staff is trying to confirm the feasibility of this at the current time.

However, it is important not to lose focus on the long term effort to maintain Battalion
7. This should continue to be a focus in order to preserve our ability to participate
with surrounding agencies and adequately respond to emergency fire services such
as structural events in the community. We currently do have automatic aid with the
agencies (Rodeo-Hercules Fire Protection District and Contra Costa County Fire
Protection District) through a cooperative agreement to maintain the Battalion 7
concept.
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However, with the recent closures of two stations, one by the City of Pinole and one
by the Rodeo-Hercules Fire Protection District, maintaining an automatic response
of five units for every structural fire is not easily accomplished. With the closures of
two stations in West County as outlined above, and the recent financial woes of the
Contra Costa County Fire Protection District, the fate of Battalion 7 and the ability to
provide coverage at no cost during multiple incidents is in jeopardy over the long
term.

If Pinole Fire had to operate as a single station within our boundaries only and could
not rely on Battalion 7 to respond to support out incidents, then Pinole would have to
call in firefighters on an overtime basis to respond. Not including the concept that
most of the firefighters do not live within the city of Pinole, the rough cost estimate
for a full crew to respond on a unit is $ 600 per call (three firefighters at $50 an hour
with a four hour minimum is $600).

Traditional alternatives which were previously in place in the City of Pinole are no
longer viable due in part to:

       Increased service demand
       Employees moving away from the area
       Limited career opportunities
       Availability of citizens to respond to incidents and training on a long term
       volunteer basis

ATTACHMENTS

Attachment A           Contra Costa County Fire Protection District Proposal
Attachment B           Rodeo-Hercules Fire Protection District Proposal
Attachment C           “Fighting Fire or fighting Change? Rethinking Fire Department
                       Response Protocol and Consolidation Opportunities”




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