actual cost of police, fire, and rescue services to bryant · pdf file ·...

Actual Cost of Police, Fire, and Rescue Services to Bryant University

February 25, 2014

Thomas M. Blake Allison Wiese Cavay IpVice President Associate Principal Senior Associate

Private and Confidential2

About CRA

Founded in 1965, Charles River Associates (“CRA”) is a leading consulting firm

that provides economic, financial, and business management expertise.

Headquartered in Boston, the firm has offices internationally. CRA has over 450

professionals, all of whom have advanced degrees or professional certifications

and experience.


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About Thomas M. Blake

Mr. Blake is a veteran of the United States Air Force, serving 4 years on active duty and 8 years on reserve. He is currently a Vice President of CRA and the head of the Financial Accounting & Valuation practice. Mr. Blake has testified in over 100 matters, including as the primary expert on Enron, Ponzi schemes, and the bank failures of 2008.

Prior to joining CRA, Mr. Blake was a senior managing partner with Ernst & Young LLP, the largest of the Big Four audit firms. His clients included global companies such as American Express and smaller clients like Ben & Jerry’s Homemade, Inc.

Mr. Blake was also the head of Ernst & Young’s governmental accounting practice for the Northeast region. His clients included over 20 cities and towns, including Providence, RI; Worcester, MA; New Bedford, MA; Manchester, NH; and Portland, ME.

Private and Confidential

Timeline of Smithfield Data Requests

Date Description11/6/2013 Sent initial data requests to Town of Smithfield11/13/2013 Received response from Town regarding financial data;

Revised request for Police, Fire, and Rescue data to make document gathering less burdensome

11/21/2013 Received Smithfield model12/2/2013 Received documents and call log from Smithfield Police12/17/2013 Received documents and call logs from Smithfield Fire12/19/2013 Received call log of Bryant Rescue runs from Smithfield

Fire1/10–1/27/2014 Communications with Smithfield Fire to determine

Rescue reimbursements

5


Agenda

• Background of Legislative Change

• Cost Model Proposed by Town of Smithfield

• CRA Review of Smithfield Model

• Calculation of “Actual Cost” of Police, Fire, and Rescue Services to Bryant

6


Background

• Per amended State of Rhode Island General Law Title 44, Chapter 44-3:

– “Smithfield shall bill the actual costs for police, fire, and rescue services supplied, unless otherwise reimbursed, to [Bryant University] commencing March 1, 2014”

• “Actual costs”

• “Police, fire, and rescue services supplied”

• “Unless otherwise reimbursed”

7


Agenda





8


Smithfield Cost Model: 1 Hour per Run

Hourly HourlyQTY Position/Item Rate Total QTY Position/Item Rate Total

1 Lieutenant $49.54 49.54 1 Captain $49.11 49.112 Patrol Officers $42.54 85.08 1 Lieutenant $45.60 45.603 Police Cruisers $20.00 60.00 2 Privates $41.92 83.84

1 Rescue Captain $50.72 50.72$194.62 1 Rescue Lieutenant $47.20 47.20

1 Fire Apparatus $250.00 250.001 Ambulance $250.00 250.00

$776.47

Fire

Total Per Run

Police

Total Per Run

9

Source: 11/21/2013 email from Randy Rossi (Finance Director, Town of Smithfield)


Smithfield Cost Model: 1 Hour per Run

Cost NumberPer Run of Runs

Police 194.62 144Fire 776.47 273Total Cost to Bryant

28,025.28211,976.31

$240,001.59

Total

10

Source: 11/21/2013 email from Randy Rossi (Finance Director, Town of Smithfield)


Agenda





11


CRA Review of Smithfield Model Personnel Costs

• Reviewed Smithfield Police and Fire personnel data– Personnel costs corroborated by comparison to salary data

per Smithfield 2013 operating budget• For purposes of this presentation, CRA accepted certain

Smithfield allocated costs as reasonable even though they were not “actual costs” related to delivery of Police, Fire, and Rescue services to Bryant– Holiday– Clothing– Cleaning and maintenance– Retirement

12


CRA Review of Smithfield Model Vehicle Costs

• No “actual” cost accounting maintained by Smithfield for Police or Fire vehicles for each run

• Smithfield vehicle hourly costs were based on estimates– Hourly cost of $250 per Fire and Rescue vehicle was based

on RI Association of Fire Chiefs fee schedule– Hourly cost of $20 per Police vehicle was based on rate

charged for private details

13

Sources: 11/21/2013 email from Randy Rossi (Finance Director, Town of Smithfield); 12/2/2013 response from Smithfield Police Department



• CRA reviewed Smithfield Town Council meeting minutes for vehicle acquisition data– Vehicle costs and useful lives

• CRA reviewed Smithfield department budgets– Gas & oil budget– Vehicle maintenance budget– Capital improvement budget

• CRA considered mileage between stations and Bryant, the cost of fuel, depreciation, and maintenance of vehicles

• CRA utilized other scenarios to assess reasonableness, including 24 hours per day for 365 days per year and 40 hours/week

14



• $250/hour per Fire & Rescue vehicle x 273 runs to Bryant = $68,250 per year

• Bryant comprised only 6% of all Fire & Rescue runs in 2013– 6% = 273 Bryant runs divided by 4,452 total Fire & Rescue runs

15

Sources: Smithfield Town Council meeting minutes; Smithfield Fire Department website.

Service VehiclePurchase Cost

Divided by Fire & Rescue cost per year

Payoff in Years of Bryant-only usage

Vehicle Useful Life

Fire Engine $500,000 / $68,250 = 7.33 years 15 years

Fire Ladder $800,000 / $68,250 = 11.72 years 15 years

Rescue Ambulance

$200,000 / $68,250 = 2.93 years 5 – 7 years



• Smithfield’s Fire department budget for FY 2013-2014 was $4.8 million, including personnel costs and other operating costs– CRA accepted Fire personnel

costs as part of the hourly cost per run

– Remaining non-personnel costs of $451,500

• Allocating $451,500 in non-personnel Fire costs across 4,452 total annual calls results in $101 per run

• CRA rounded the per-run cost up to $125 per vehicle (for a total of $250 per run) for alternative calculation of “actual cost”

16

Fire Department Original BudgetElectricity $22,000Telephone $36,000Heating Fuel $18,000Water $1,500Fire Prevention $5,000Vehicle Maintenance $97,500Gas & Oil $65,000Radio $15,000Fire Alarm $5,000Fire/Rescue Supplies & Equip $29,500Building Maint & Supplies $25,000Office Supplies $6,000Dues & Conferences $1,000Capital Expenditures $125,000Total Non-Personnel Costs $451,500

# of Fire & Rescue Runs 4,452

Total Non-Personnel Costs per Run $101

Source: Smithfield 2013-2014 Original Budget



• Results of reasonableness tests show that Smithfield model vehicle costs per run were not supportable

• Detailed review and analysis by Smithfield is necessary in order to determine true “actual cost” per vehicle per run

• Nevertheless, for the purposes of this presentation, CRA accepted Smithfield estimated vehicle hourly costs even though they were not “actual cost”

17


CRA Review of Smithfield Police Call Logs

• CRA reviewed Smithfield Police call logs for 2012 and 2013

Smithfield Model Assumption

Per Smithfield Model

Actual Results per 2012 Log


Number of runs 144 119 107Number of responders

3 2 2

Average durationper run

1 hour or 1.5 hours

Approximately 54 minutes

Approximately 56 minutes

18


CRA Review of Bryant Tracking of Police Responses

• CRA reviewed Bryant weekly logs for 18 weeks during the period September 2013 through February 2014


Per Smithfield Model Bryant Actual(18 weeks–annualized)

Number of runs 144 81Number of responders 3 2Average duration per run 1 hour or 1.5 hours Approximately 51

minutes on campus

19


CRA Conclusion on Smithfield Police Cost per Run


1 Lieutenant $49.54 49.54 1 Lieutenant $49.54 49.542 Patrol Officers $42.54 85.08 1 Patrol Officers $42.54 42.543 Police Cruisers $20.00 60.00 2 Police Cruisers $20.00 40.00

$194.62 $132.08


Total Per Run

Per CRA Review

Total Per Run

20

• Accepted 1 hour duration per run according to Smithfield model• Did not accept Smithfield model number of responders based on

review of call logs and Bryant tracking data


CRA Conclusion on Smithfield Police Number of Runs

21

Total Cost Per Run (1-Hour)

Number of Actual Runs to Bryant in

2013Total 2013 Police

CostPer CRA Review 132$ 107 14,133$ Per Smithfield Model 28,025$

CRA Result greater/(less) than Smithfield Model (13,893)$ On a percentage basis -50%

• Did not accept Smithfield model number of runs or Bryant logs• Accepted 2013 Smithfield Police call logs as most reliable data

source for number of runs


CRA Review of Smithfield Fire & Rescue Call Logs

• CRA reviewed Smithfield Fire and Rescue call logs for 2012 and 2013

• Actual number of responders and duration of responses do not appear to be tracked per review of Fire and Rescue call logs– Fire and Rescue call logs do not have time stamps of responses,

unlike Police call logs





Number of runs 273 for Fire and Rescue

282 for Fire andRescue

286 for Fire andRescue

Number of responders

4 for Fire;2 for Rescue

Not tracked by Smithfield


Average durationper run

1 hour or 1.5 hours Not tracked by Smithfield


22


CRA Review of Bryant Tracking of Fire & Rescue Responses

• CRA reviewed Bryant weekly logs for 18 weeks during the period September 2013 through February 2014

• Duration of responses may be low due to Fire responses for false alarms and minor incidents

• Bryant logs do not track leaving of Fire station and hospital trips


Per Smithfield Model Bryant Actual(18 weeks – annualized)

Number of runs 273 for Fire and Rescue 295 for Fire and RescueNumber of responders 4 for Fire; 2 for Rescue Not tracked by BryantAverage duration per run

1 hour or 1.5 hours Approximately 23 minutes on campus

23


CRA Conclusion on Smithfield Fire & Rescue Cost per Run


1 Captain $49.11 49.11 1 Captain $49.11 49.111 Lieutenant $45.60 45.60 1 Lieutenant $45.60 45.602 Privates $41.92 83.84 2 Privates $41.92 83.841 Rescue Captain $50.72 50.72 1 Rescue Captain $50.72 50.721 Rescue Lieutenant $47.20 47.20 1 Rescue Lieutenant $47.20 47.201 Fire Apparatus $250.00 250.00 1 Fire Apparatus $250.00 250.001 Ambulance $250.00 250.00 1 Ambulance $250.00 250.00

$776.47 $776.47


Total Per Run

Per CRA Review

Total Per Run

24

• Accepted 1 hour duration per run and number of responders per Smithfield model because “actual” duration data was not available

• 64% of Fire & Rescue hourly cost per run related to vehicle costs, which were not supportable as “actual cost”


CRA Conclusion on Smithfield Fire & Rescue Number of Runs

25



2013Total 2013 Fire &

Rescue CostPer CRA Review 776$ 286 222,070$ Per Smithfield Model 211,976$

CRA Result greater/(less) than Smithfield Model 10,094$ On a percentage basis 5%

• Accepted 2013 Smithfield Fire & Rescue call logs as most reliable data source for number of runs


Agenda





26


“Actual Cost” for 2013 Before Reimbursements

27


Number of Actual Runs to Bryant

Total Cost for 2013

Police Department 132$ 107 14,133$ Fire & Rescue Services 776$ 286 222,070$

Total Gross Cost 236,203$

Assuming Fire & Rescue vehicle costs of $250 per hour:


Insurance Reimbursements for Rescue Services

• Insurance reimbursements for Rescue are applicable to transport to hospital

• Total actual Rescue reimbursements for FY 2012 – 2013 were $113,650 per Smithfield Fire Department

– Associated with 203 Rescue transports from Bryant to hospital

• CRA estimated annual insurance reimbursements as half of the two-year figure provided, or $56,825

28

Sources: Emails received on 12/19/2013, 1/10/2014, and 1/17/2014 from Carolyn Dorazio (Administrative Assistant to Dennis Finlay, Smithfield Town Manager); email received on 1/27/2014 from Robert Seltzer (Fire Chief, Town of Smithfield)


“Actual Cost” for 2013 Reflecting Insurance Reimbursements

29



2013Total Cost for

2013Police Department 132$ 107 14,133$ Fire & Rescue Services 776$ 286 222,070$


(56,825)$

Total 179,378$

Less: Insurance Reimbursements



False Alarm Payments Made by Bryant to Smithfield

30

• Smithfield model for Fire runs include runs for false alarms

• Bryant currently pays Smithfield for these false alarms

– Bryant paid $17,600 in 2013 for false alarms1

– False alarm payments made by Bryant should reduce the “actual cost” of Fire runs for false alarms

1 Bryant made payments for false fire alarms based on bills from Smithfield Fire Department dated 10/1/2012; 12/11/2012; 2/4/2013; 3/21/2013; and 5/9/2013.




2013Total Cost for



(56,825)$

Less: False Alarm Payments by Bryant (17,600)$

Total 161,778$


“Actual Cost” for 2013 Reflecting Insurance Reimbursements and False Alarm Payments



PILOT Reimbursements

• Smithfield receives a payment-in-lieu-of-taxes (“PILOT”) from the State of Rhode Island

• State PILOT is to “reimburse cities and towns for property taxes that would have been due on certain types of real property that are exempted from taxation by state law. This includes property owned by nonprofit educational institutions, nonprofit hospitals, or any state owned hospital, veteran's facility, or correctional facility.”1

• State PILOT is “intended to cover some portion of the cost of core city services – police, fire, and public works.”2

• Smithfield received PILOT of $522,049 from the State in 20133

1 Governor’s Proposed FY 2013 Budget Relating to Municipal Government, State of Rhode Island: RIDE and Division of Municipal Finance, Appendix C, page C-1.

2 A Call to Build the Capital City Partnership for Economic Growth, Report to the Providence City Council from the Commission to Study Tax-Exempt Institutions, November 2010, page 9.3 Town of Smithfield Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2013, page 75.

32




Total Cost for 2013



(56,825)$

Less: False Alarm Payments to Bryant (17,600)$

(522,049)$

Total Actual Cost for 2013 nil


Less: State PILOT

“Actual Cost” for 2013 Reflecting All Reimbursements



CRA Conclusions on “Actual Cost”

• Town of Smithfield does not currently have a system in place to track “actual costs” incurred by Smithfield for Police, Fire, and Rescue services to Bryant

• Smithfield would have to implement a system for tracking “actual costs” in order to bill Bryant per amended RI statute

• Solely for purposes of this presentation, CRA made judgments and estimates when necessary where “actual cost” data were not available

• Most important judgment estimate was CRA’s acceptance of Smithfield Fire & Rescue vehicle hourly cost of $250, which constituted 64% of the cost per Fire & Rescue run

34




2013Total Cost for



(56,825)$

Less: False Alarm Payments by Bryant (17,600)$

Total 90,278$


Alternative: “Actual Cost” for 2013 Reflecting Insurance Reimbursements and False Alarm Payments





Total Cost for 2013



(56,825)$

Less: False Alarm Payments to Bryant (17,600)$

(522,049)$

Total Actual Cost for 2013 nil


Less: State PILOT

Alternative: “Actual Cost” for 2013 Reflecting All Reimbursements


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