Budget Committee Members and Citizens
Tualatin Valley Fire and Rescue
Washington, Clackamas and Multnomah Counties, Oregon 

In compliance with the state of Oregon Local Budget Law and District policies as authorized in Section 3 of the Board Policy Manual, the annual budget for Tualatin Valley Fire and Rescue for the fiscal year 2004-2005, beginning July 1, 2004, and ending June 30, 2005, is submitted for your approval. As prepared and submitted, the annual budget is intended to serve as:

4  A financial plan for the next fiscal year outlining the forecasted expenditure requirements and the proposed means for financing these requirements.

4  An operational plan for the use and deployment of personnel, materials and services and other resources during the 2004-2005 fiscal year.

4  An operations guide to program and department goals and objectives.

The budgetary and accounting policies contained in the proposed budget conform to generally accepted accounting principles as established by the Governmental Accounting Standards Board. The accounts of the District are organized on the basis of funds and account groups, each of which is considered a separate budgetary and accounting entity. Within the annual budget, the District's various funds are grouped into the fund types and account groups indicated below:

4    Governmental funds, which include the General Fund, the special revenue fund types; Apparatus Fund, Capital Improvements Fund, Emergency Management Fund, the Grants Fund, the Debt Service Fund, and the capital projects fund types; Property and Building Fund and Capital Projects Fund.

4  Proprietary fund, which includes the internal service fund type, the Insurance Fund.

4  Fiduciary funds, which include trust and agency funds, cover the Retiree Medical Insurance Stipend Fund, Pension Trust Fund, and Volunteer LOSAP Fund.

As previously noted, the proposed budget is prepared on the generally accepted accounting principles basis, with all governmental funds accounted for using the modified accrual basis of accounting, with revenues being recorded when measurable and available and expenditures being recorded when the goods or services are received. The District's internal service funds and trust and agency funds are maintained on the accrual basis of accounting. 

For pension trust funds, the measurement focus is on the determination of net income and capital maintenance. All fund assets and liabilities, current and non-current, are accounted for within the fund. 

We initiated the budget process by updating and reviewing our strategic plan and objectives in the fall of 2003, and updating and reviewing five-year financial forecasts under various economic models. We have continued to lower our assessed valuation growth forecasts against prior year experiences, as the local economy continues to be affected by lack of investment technology spending worldwide.  We have utilized an overall assessed value increase of 2.5% for most areas of the District due to the prior years actual experience of negative assessed value in the industrial and personal property components of our assessed value property classes and our expectation that will continue through the January 2004 valuation, which provides tax revenue for budget year 2004-2005. Capital planning and modeling is also performed and reviewed with the executive staff. During the next few months, District staff will continue to analyze capital infrastructure requirements as we continue our structural evaluations of the seismic strengths and weaknesses of our fire stations and divisions, as well as our ongoing apparatus requirements.  We are planning to renew our local option levy at the November 2004, election, and are planning a general obligation bond ballot request for capital needs in November 2006.  Our current bonds will be paid off in the 2009 fiscal year.  These models provide the foundation for communication of our overall budgetary goals to department managers. Department managers develop the budget after preparation and identification of key performance objectives for each department and program.  Overall guidance and philosophy are outlined by the Fire Chief and executive staff.  

The District prepares a budget for all funds which are subject to the budget requirements of state law. The budgeting process includes citizen input through various stages of preparation, public hearings, and approval of the original budget by the Board of Directors. 

The Board of Directors' resolution authorizing appropriations for each fund sets the level by which expenditures cannot exceed appropriations. Total personnel services, materials and services, capital outlay and other expenditures are the levels of control for each fund established by the resolution. Appropriations lapse at year-end. 

Additional resources not anticipated in the original budget may be added through the use of a supplemental budget. The Board of Directors may adopt supplemental budgets not exceeding 10% of a fund’s original appropriation at a regular Board meeting. Supplemental budgets in excess of 10% of original fund appropriations require hearings before the public, publications in newspapers, and approval by the Board of Directors. Original and supplemental budgets may be modified by the use of appropriation transfers between the expenditure categories; such transfers require approval by the Board of Directors.  The District utilized budget transfer resolutions during the year as more information was available in certain departments, such as in the Occupational Health Services program, where the volume of revenue and expenses far exceeded our expectations and allowed them to cover program expenses several years ahead of the business plan forecast. 

Budgetary control is maintained at the Division program level through monitoring of the following cost categories at that level: 

§       Personnel Services - includes the salaries and fringe benefits of full-time and part-time employees.

§     Materials and Services - includes supplies, maintenance and repair, rent, utilities, and contracts for professional services, such as for our supervising physician, contract instructors for CPR, legal counsel, audits, and insurance.

§    Capital Outlay - includes the costs of land, buildings and improvements, furniture and equipment.

§    Other Expenditures - includes special appropriations not included in the above categories such as inter-fund operating transfers, debt service, and contingency funds.

The District’s operations are generally accounted for as departments within the General Fund. The District accounts for its program operations under cost centers, which range from individual stations to support departments. The cost centers related to Emergency Operations are all combined into one operations division for overview budget presentation purposes.  However, supplementing the Emergency Operations Administration department, the division is managed on a day-to-day basis from two geographic divisions, North and South, which are responsible for the individual stations and their division operations. The individual cost centers included in the jurisdiction of each division are included in the following pages for day-to-day management by the individual captains and program managers, who are responsible for their assigned budget. 

Each manager will also manage capital requests from the capital funds ranging from the Apparatus Fund to the Capital Projects Fund. The summary of requirements from these funds is shown in the cost center line item budget, but the budget document explains the capital utilization in the specific fund area of the budget. 

The District operates under Oregon Revised Statutes Chapter 478 as a separate municipal corporation and is managed by a Board of Directors composed of a President and four Directors, who include a Vice-President and a Secretary-Treasurer.  The Board hires a Fire Chief/Administrator to manage the day-to-day operations of the District.  The governing board appoints members of the community to serve on boards and commissions, which include the Budget Committee and the Civil Service Commission. 

The District was formed in 1989, through the merger of Washington County Fire Protection District No. 1 and Tualatin Rural Fire Protection District.  The District has subsequently expanded its service area through the annexation of the City of Beaverton Fire Department, Valley View Water District, Rosemont Fire District, and the mergers of Multnomah County Fire Protection Districts No. 4 and No. 20.  The District’s most recent annexation will be the City of West Linn, effective

July 1, 2004. The District’s total service area is approximately 210 square miles in 2004-2005, including the City of West Linn. The City of West Linn preceding fire protection contract, in place since July 1, 1998, called for the conditional transfer of all fire department employees to the District and accordingly, the annexation does not add any new employees or stations. Under the prior fire protection contract, the City retained ownership of its assets, including apparatus and facilities, but the District utilized and operated the City fire departments with their equipment and facilities.  

The District provides services to northeast Washington County, northwest Clackamas County, and the western edge of Multnomah County.  The District is a special service district supported by the property owners within its boundaries.  The District serves an estimated population of approximately 417,646, including the City of West Linn.

The District will have approximately 396 employees supplemented by over 125 volunteer firefighters.  Fire and rescue services are provided from 22 career and volunteer fire stations, 30 fire engines, two ladder trucks, three telesqurts, four squad units, eight water tenders, and several other pieces of equipment, including 10 brush rigs and a large reserve fleet utilized to supplement response needs.  

The area served, which includes the cities of Beaverton, Durham, King City, Sherwood, Tigard, Tualatin, Rivergrove, West Linn, and Wilsonville lies within one of the fastest growing regions of the state of Oregon.  It is an area encompassing densely populated suburbs, rural farmlands, retail and commercial establishments, and growing industrial complexes. 

Fire stations are strategically placed throughout the District to protect high property value and population densities. Our two operating division headquarters are also placed strategically in the District so that citizens of an individual geographic area have a local source for burn permits and other interactions with their fire marshals and community liaisons for community fire and safety information.   

As a result of the high quality of services provided, training standards, equipment, staffing, and related support functions, the District is among the leaders in the state of Oregon in obtaining a favorable insurance classification and carries a rating of 2 out of a scale of 1-10 (1 being the most favorable, according to the standards set forth by the Insurance Services of Oregon). To the homeowner in the District, this classification results in a very low premium rate for fire insurance. 

The District is a multi-service district with services and programs tailored to meet the needs of the community. The District provides fire prevention, fire education, and emergency services operations, which include fire suppression, emergency medical services, water rescue, high angle, and heavy rescue to the primary community, and to other contiguous communities on a contracted basis. The District also serves as a Hazardous Materials Response provider for the state of Oregon with a service response area ranging from the City of Portland boundary on the east to the Pacific Ocean on the west and from the District's northern boundary in Multnomah County southwest to Marion County. 

Within the Fire Marshal’s office, the District coordinates all of the state mandates concerning the investigation of fires, inspection of commercial and retail occupancies, and education of the citizens within its boundaries.  All Deputy Fire Marshals are assigned to a division and have certain defined areas of responsibility.  To deal with emergencies, both fire and medical, the District’s Emergency Operations division staffs a team of professional firefighters and paramedics 24 hours a day with skills and equipment necessary to deal with a wide variety of emergencies.  Approximately 164 professional firefighters are certified as advanced life support (ALS) paramedics, while 100% of the remaining fire suppression personnel are certified at the basic life support (BLS) level. Under the guidance of physician advisors, emergency medical service personnel (all of whom are firefighters) maintain a highly certified skill level through several specialized programs. 

The usage of modern training facilities, including a six-story training tower, a burn building for live fire training, a 19-acre Regional Training and Simulation Center, and a live TV studio, provide personnel with constant training to keep their skills at the highest level. The Regional Training and Simulation Center, which was constructed in several phases using public funding and private donations, provides advanced training opportunities in flammable liquids and gases with the usage of live props, including a tanker truck, driving ranges, propane rail cars, a bridge, and excavation tunnels. We completed the construction of a sophisticated burn structure and tower at the site through local option levy proceeds during the summer of 2002, which allows improved live fire training in interior attack and other areas of firefighting.  The project included extensive foundation work to support the tower, as well as water recycling and reclamation components to support extensive water usage in firefighting tactics training. Due to the loss of a major industry contract and instructor pay issues, we will wind down the operations of the external training operations in fiscal year 2004-2005, while still offering training in areas for employees and cost sharing with other employers in specialized areas, such as USAR training.  

Debt outstanding consists of 1999 General Obligation Bonds in the remaining amount of $2,965,000, and a remaining balance of $3,465,000 of Series 2000 General Obligation Bonds.  

The District’s legal debt limit is approximately $436,000,000. Until the 1997 passage of Measure 50, a property tax limitation measure that severely reduced 1997-1998 tax revenues and generally restricted future property tax growth to 3% a year, the District’s general philosophy had been to set aside reserves for capital replacement of its ongoing capital needs as much as possible and avoid debt issuances. However, we have concluded we must continue to periodically supplement our capital funding through general obligation debt issues. We received overwhelming voter support in the November 1998 election for issuance of up to $10,000,000 in two phases to construct fire stations and purchase fire apparatus.  We intend to ask our voters for additional general obligation bond approval in the November 2006 general election to fund continued seismic station enhancement and emergency response apparatus replacement.  We utilize capital planning in conjunction with financial forecasting to determine what level of capital funding we can continue to make while managing our resources under our legal tax base. Our largest future variables will be the siting and possible relocation of our stations.  Because station siting and relocation planning are dependent upon factors such as road construction by the State Highway Department, other neighboring jurisdictions’ station siting, and population and development growth, we are continuing to work extensively on a regional basis to ensure the best service to our citizens.  The District has spent considerable staff hours developing and finalizing station location studies considering neighboring city stations, changing demographics, forecasted population densities, and future traffic and roads. Our goal is to locate stations for the most effective emergency response and allow continued alternative staffing configurations depending on the region’s call types and run volumes.  

The proposed budget requirements for fiscal year 2004-2005 for all funds totals $89,574,005, which is $4,550,801, higher than the $85,023,204 in the current year.

Personnel expenditures increased by $2,340,579 or 5.11% across all funds.  The General Fund’s personnel services increased $2,280,467 or 5.09%.  Because of the unsettled labor contract for the year beginning July 1, 2004, no union or non-union range increases were included in the budget at the time of the budget committee meeting in May 2004. Subsequent settlement of negotiations allowed the budget to be adjusted and adopted by the Board of Directors reflecting the results of actions to approve the new labor contract and to provide a range adjustment for non-union personnel. The District generally hires its non-union employees at mid-range or below and allows merit increases within the range based upon performance.  Since the budget committee meeting approving the budget, an additional $1,713,208 or 3.8% was added to the budget for personnel services. Heath insurance premiums were increased $517,914 as part of the labor contract negotiations, providing 1.2% of the total change. Salary ranges were increased 2%. The labor contract will extend through June 30, 2005.

Of the total personnel increase in the General Fund, $237,797 of the personnel increase reflected the full year effect of the last negotiated union wage increase on January 1, 2004.  In addition, union overtime was increased $59,834, primarily in the Fire Marshal’s Office budget.  This was due to the under-budgeted 2004 experience of at least $30,000, and implementation of quality improvement and night inspection programs and code enforcement, among other areas.  PERS taxes, account 5201, increased $221,335, commensurately with the aforementioned budgeted increase in union and non-union salaries.  The significant increase in workers’ compensation insurance costs in 2004 is expected to continue into 2005.  Rates for non-union medical insurance have been budgeted to increase 6%, with the employee funding the remainder of the increase through employee co-pay.

Materials and Services increased $484,851 or 6.19%. The General Fund reflects an overall decrease of $6,224 and the grant fund accounts for $474,230 of the increase.  Within the General Fund, dispatch fees, account 5420, were budgeted to increase and include both cost increases from our primary dispatch agency, Washington County Consolidated Communications Agency (WCCCA), and a new contract with Lake Oswego Communications (LOCOM), for purposes of dispatching the City of West Linn.  Laundry expense, account 5575, increased to $52,746 to allow for two professional cleanings a year of firefighter turnouts in order to meet regulatory standards for toxic materials decontamination.  The decreases in accounts 5321, firefighting supplies, and account 5572, advertising/public notice, reflects 2004 grant activity specific to awarded grants not recurring in 2005.  The Grant Fund reflects specific reimbursement grant projects that have been awarded. 

Capital Outlay increased $1,840,315 or approximately 29.3%. Grants in the amount of $951,082 account for the majority of the change.  In addition, we continued our planned local option levy funded improved response aids program in the Capital Improvement Fund, and station seismic enhancement for construction projects and apparatus purchases.  We carried forward from the 2004 budget year, final payments on two trucks and also budgeted for capital replacement of three pumper units in 2005. We carried forward portions of our response aid technology program from the 2004 budget year in the Capital Improvement Fund and the phase of the purchase of the on-board mounted mobile data computers to receive the response aid maps through wireless technologies. The seismic retrofits of Stations 66 in Beaverton, Station 58 in West Linn; and the Elligsen Road station and former administration complex of the Tualatin Rural Fire Department, in order to house the South Division upon lease expiration of the current facility, have been planned for 2005.  We also have carried forward station land purchases as we negotiate for the sale of the leased land under our Progress fire station and identify the best locations for future stations. 

Total debt service expenditures increased $3,828 or 0.21% in the 2004-2005 fiscal year.  This is due to regular debt service schedules of existing debt. 

Transfers are increased by $298,438.  The proposed budget transfer reflects the planned level of transfers, in addition to local option levy transfers. The Capital Improvements Fund receives $1,068,268 of transfer from the General Fund.  The Apparatus Fund and Property and Building Fund receive $1,276,561 and $1,512,000, respectively.  

The majority of amounts for Ending Fund Balance are related to the General Fund ($11,230,384), the Bonded Debt Service Fund ($760,725), the Property and Building Fund ($1,627,199), and the Pension Trust Fund ($1,666,142). The District seeks a stable General Fund balance and conservatively forecasts the actual ending fund balance to be slightly under $19 million dollars, or slightly lower than the beginning fund balance. 

Total revenues for all funds for the current budget year and the ensuing fiscal year are shown below: 

Beginning Fund Balance 

General operating property taxes are based upon the District’s assigned “permanent tax rate” of $1.5252 multiplied by the assessed valuation within the District and supplemented by a local option levy. This local option levy will be levied for the fourth year of a four year levy at the approved rate of $0.25 per $1,000 of assessed valuation. Measure 50 also reduced assessed valuation for existing and future properties from the method prior to 1998. In years prior to Measure 50, which was implemented in the 1998 fiscal year, assessed valuation was effectively the market value of the property. Under current law, assessed value is generally significantly less than market value and is based upon the relationship of other similar properties as well.  For 2003-2004, the Washington County Assessor estimated the Average Maximum Assessed Value of the Average Real Market Value for residential property at 77%[1]. 

For purposes of our budget, we assumed a lower 2.5% assessed valuation increase for property in our service area based on economic concerns regarding the high-tech industry and local economy, and a similar increase in projected tax collections with a projected collection rate of 94.1%. Tax levies for general obligation bonds are exempt from the property tax limitation measures and accordingly, the District levies the total dollar amount necessary for payment of the general obligation bonds.  The increase in property taxes over prior year reflects an additional estimated collection amount of $3,517,002 on a projected assessed value for the City of West Linn of $2,105,405,132.

Taxes levied at $1.5252 for general operations against an estimated $30.3 billion in assessed valuation are expected to provide approximately $43,557,717 in collections.  The local option levy of $.25 per thousand dollars of assessed valuation is expected to provide collections of $7,139,673.  We will also levy $1,574,767 for our general obligation bonds.  This bond levy is expected to result in a levy rate of 5.1 cents per thousand dollars of assessed valuation and approximately $1,481,856 in collections. 

Total taxes outstanding totaled $1,956,395 at the fiscal year ended June 30, 2003.  At the beginning of the previous fiscal year that amount totaled $1,937,221.  Of the June 30, 2003 amount, $1,288,660 was for taxes levied during that fiscal year, while $667,735 was related to prior years' tax levies. Delinquent tax collections are estimated on an average collection rate based upon the forecasted June 30, 2004 receivables.

Interest on short-term investments has been budgeted to reflect short-term interest rates projected at an estimated 1 to 1.2%.  The governmental fund types and capital funds are largely invested in the Oregon Local Government Investment Pool and short-term United States Government Agency securities. Investments are regulated by Board of Director Policy, and permitted investment products include the Oregon Local Government Investment Pool, which is a diversified portfolio, commercial paper, bankers’ acceptances, and United States Government Treasury and Agency securities, among others.  Certain funds are designated for longer term investing by the Board of Directors and may be invested for terms up to 18 months. Oregon law does not allow leveraged investing and the Oregon Local Government Investment Pool does not use derivative securities. The Pension Trust Fund and Volunteer LOSAP Funds are managed as separate trust funds and each has its own investment policy, including the above investments and additional permissible investments in equity investments appropriate for long-term pension funding. Their investments are actuarially expected to earn between 7 and 8% annually by investment policy.  However, due to the turbulent equity market, short term investment projections for 2005 are significantly lower than the actuarial projections. 

Transfers into and out of pool accounts are made by telephone prior to 11:00 a.m. on a two day ahead basis. This provides a flexible mode for keeping surplus cash invested and is reinforced by a cash management program with our designated banking institution. 

The service contract with the City of West Linn expires June 30, 2004, and accordingly, the revenue for serving this city upon the July 1, 2004 annexation is reflected in Property Taxes - Current Year. The Occupational Health Services program is scheduled for $113,371 in contract revenues with other agencies. 

Tualatin Valley Fire and Rescue District performs accounting services for another entity, the Washington County Consolidated Communications Agency (WCCCA).

These revenues are primarily from apparatus maintenance ($60,900) and the Occupational Health Services program ($101,820).  Fees are collected from several governmental agencies for providing preventive and corrective maintenance to firefighting apparatus and automobiles.  The Occupational Health Services program for District employees also contracts with other governmental agencies to provide occupational health services, which serves to reduce the District’s costs of providing these required services to our own employees. 

The District has been awarded sizeable grants in 2004 and 2005 in the areas of disaster preparedness and technical response, communications, and other areas.  The District will also manage two grants on behalf of other agencies, WCCCA and a state communications committee.  The District intends to continue to actively pursue increased grant funding in the future years and further develop this new source of revenue.

A major revenue source for seven funds is correspondingly, also a major requirement for another fund. In the Non-Organizational category section in the General Fund, transfers are listed as a requirement. Monies are transferred from this fund to seven funds where they are listed as a resource. These transfers provide operating resources to the Apparatus Fund, Capital Improvements Fund, the Emergency Management Fund, the Grants Fund, the Property and Building Fund, the Retiree Medical Insurance Stipend Fund, and the Volunteer LOSAP Fund.

Training Center revenues have been reduced to reflect an anticipated reduction in external training.

Leases for surplus space are reflected in the revenue in rental income, as well as new leases made on our microwave towers to cellular phone companies for tower leases.

Revenues include receipts from miscellaneous sources and $500,000 from the City of West Linn that is upon annexation and was previously dedicated towards station land purchases and station reconstruction.

The proposed budget for fiscal year 2004-2005 continues to afford the District a high level of service to our community while continuing to meet our long-term performance statements.  The year 2004-2005 promises to be a year of many challenges to the organization with the implementation of a new labor contract, passage of our local option levy, and meeting our diverse workforce goals.

Sincerely, 

Debra L. Guzman, CPA

Budget Officer and Chief Financial Officer