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Recommendation for adoption of an Innovation Grant Spending Policy
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Submitted by:
John Ruggini
Department:
Finance Department
A. Issue
The City of Wauwatosa was awarded $22.8 million as an Innovation Grant in recognition of its merger of the Fire Department with the City of West Allis. The grant provides $4,563,070 annually for five years. As a significant one-time revenue, it is important to develop a spending plan.
B. Background/Options
The City has been awarded a state innovation grant that will provide $4,563,070 per year for the next five years (more than $22.8 million total) as an incentive for merging the City’s fire department with the City of West Allis into the Milwaukee Metro Fire and Rescue Corporation. Similar to when the City received American Rescue Plan funds in 2021, it is important for the City to develop a spending plan that prioritizes long-term financial sustainability and is consistent with the City’s One-time Revenue and Financial Resiliency policies.
The One-Time Revenue Policy establishes that, “One-time revenues will always be used for one-time expenditures as opposed for on-going operations”. The Financial Resiliency Policy calls for the City to add fire vehicles to the vehicle replacement fund as part of identifying strategies to limit expenditure growth for long-term financial health.
I recommend that the Common Council allocate these funds to three priorities consistent with these policies.
1. One-time Milwaukee Metro Fire and Rescue Corporation start-up costs.
The Innovation Grant was awarded for the City’s joint fire merger with West Allis. However, the full amount is not guaranteed. The amount Metro Fire charges the cities (its net cost) cannot exceed 115% over five years. There are one-time costs that will be incurred. In order to enable Metro Fire to remain within that cost restraint, it is financially advantageous for the City to utilize a portion of the innovation grant for one-time start-up costs.
In addition, our fire department employees are working through a significant amount of change to create a brand-new merged department. While this will provide exciting new opportunities, it is a challenging endeavor. The fire service is unique and special in many ways - one of which is the way firefighters live and work together. We are asking them to change a working and living tradition that has been established for over 100 years. We should provide them the resources needed, to the extent we can, to maximize the success for this change. However, since this is a one-time revenue it can not be used for compensation or play a role in union negotiations.
While these are still being identified, examples include:
• Branding the new department including new vehicle wraps, uniforms, patches etc. and making this change all at once as opposed to phased in over time.
• Capitalizing a worker compensation reserve so that Metro Fire can be self-insured and avoid an approximately $100,000 insurance premium increase.
• Implementation costs for a new records management electronic system that will provide a fire-specific system which will improve operational efficiency and also decrease cost.
• Remodeling needed to accommodate a larger command staff then any single fire station can currently accommodate which will improve developing a unified leadership culture and structure.
• Yet-to-be identified costs associated with a possible fire-only merged dispatch center.
• Training facility capital improvements
I recommend $5.0 million be set aside for one-time start-up costs.
2. “Solid Financial Footing” costs for Milwaukee Metro Fire and Rescue Corporation.
Levy limits have restricted the City’s ability to improve long-term financial resiliency of all City departments, but the Fire Department in particular, due to the limited levy reduction opportunities resulting from their personnel intensive operations and staffing structure. Consistent with the Financial Resiliency policy directive to consider foresight in our financial decision making, staff recommend reserving a portion of the Innovation Grant for initiatives that would strengthen the long-term financial position of Metro Fire. Possible examples include:
• Capitalizing a vehicle replacement fund so that Metro Fire doesn’t need to borrow and incur interest costs. This is a strategy specifically called for in our Financial Resiliency Policy
• Pre-funding retiree health obligations for current City of Wauwatosa fire employees
• Making capital improvements that reduce operational expenses
I recommend $5.0 million be set aside for solid financial footing initiatives.
3. Contribution towards Library remodel.
It should be recognized that just as our firefighters and command staff are being asked to transition to a new department, our community is also being asked to sacrifice an important source of home-town pride. While we believe Metro Fire will provide a higher level of service that is more financially resilient, a fire truck with the “Tosa Fire” logo will no longer appear in our 4th of July parade and firefighters with the “Tosa Fire” patch will no longer grace other community events. In order to recognize this sacrifice, staff recommend committing a portion of the innovation grant to the Library remodel. The library is also a source of pride for the community. It is one of the most joyful and inclusive gathering spots in the community with a similar proud history. It seems fitting that funds gained through community sacrifice be used to enhance another community asset that all community members can enjoy.
I recommend $12.8 million be set aside for the Library remodel project.
It is important to note the $22.3 million is not guaranteed. Metro Fire must annually renew its eligibility by remaining within 115% of the 2025 budget. While we fully expect to qualify for all 4 remaining payments, in the event the City does not receive the full $22.3 million, I recommend the priorities be funded in the order presented so any shortfall would first be deducted from the amount set-aside for the Library project.
Should the City not spend the full $10.0 million for the Metro Fire one-time startup and strong financial footing costs within 5 years, staff will return to the Common Council with further recommendations.
C. Strategic Plan (Area of Focus)
Priority Area Two: Public Safety
Priority Area Five: Quality of Life
D. Fiscal Impact
There is no negative fiscal impact. The funds set-aside for the Fire Department will likely reduce the annual cost charged to the City and the $12.8 million for the Library remodel will result in reducing the projected monthly property tax impact by approximately $1.44 as $8 million was already assumed in the financial modeling.
E. Recommendation
I recommend assigning $5.0 million of the Innovation Grant to Metro Fire one-time start-up costs, $5.0 million towards Metro Fire strong financial footing initiatives and $12.8 million towards the Library remodel project. Should less then $22.8 million be received, the amount dedicated to the Library remodel will be adjusted accordingly. After five years, should the amounts dedicated to Metro Fire not be spent or designated, staff will recommend alternate uses to the Common Council.