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Presentation of the Metro Fire and Rescue 5-year Forecast
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Submitted by:
John Ruggini
Department:
Finance
A. Issue
To support on-going union contract negotiations and the development of Metro Fire and Rescue’s organizational structure it is helpful to understand long-term revenue and expenditure trends especially as they impact the Cities of Wauwatosa and West Allis’ ability to continue to qualify for Innovation Grant payments.
B. Background/Options
Revenues and expenditures from both cities’ fire departments were grouped into like-categories (e.g. wages, overtime, health insurance, state shared taxes, ambulance revenue, etc) and forecast assumptions were developed for each category based on historical data or known information such as the state budget. Those assumptions are applied to the 2026 Budget figures. The 2026 Budget was adjusted to include overhead charges allowed by the Department of Revenue as part of Metro Fire’s base budget for Innovation Grant purposes. It is important to emphasize that the forecast is policy neutral as it assumes the same services are provided with the same number of personnel in the same positions and delivered in the same manner. In other words, it assumes both cities fire departments would continue to operate exactly the same as today, just with a combined budget. It assumes no change in current union and non-represented salary levels other than cost of living adjustments.
This model is for planning purposes. It is not meant to suggest that the Board will not make any service changes, compensation adjustments through negotiations, organizational restructuring or other changes necessary to qualify for all five Innovation Grant payments.
Below is an overview of key assumptions and sources for forecasted information.
Base Assumptions
• The model backs into the municipal charges as the net cost (Operating Expenditures - Departmental Revenues).
• Inflation assumed to be 2.4% in 2027 and remains at 2.3% thereafter based on Congressional Budget Office forecasts of the Consumer Price Index.
• Normally the annual cost of living increase would be based on inflation and current labor agreements. However, due to the Innovation Grant restraints and the fact that a brand new contract with a new union is being negotiated, a 2.83% increase is assumed in each year for represented employees to remain below 115% of the 2025 base. However, a 5% increase is assumed in 2031 based on the likelihood we will fall behind comparable communities during the innovation grant period. A 4.0% increase is assumed in 2027 for non-represented employees based on a City of Wauwatosa compensation review and then based on CPI thereafter.
• Pension contributions remain at the 2027 announced rate of 19.1% for sworn and 7.25% for general employees.
• Innovation Grant funds are used for all capital improvements by the Cities so no expense is included.
• Energy and fuel increases based on Department of Energy’s 2026-2040 forecast assuming 2026 budgeted consumption and 2027 WE Energy announced rate increases. The forecast assumes that the heightened fuel prices currently experienced return to normal by year’s end.
• Assume 10,526 billable ambulance runs in 2027 based on 2024-2025 activity and a 1.8% increase in 2026, a 2.8% increase in 2027 and a 1.5% increase thereafter. Also assumed a 2% increase over 2025 average reimbursement rate per trip and an annual 2% increase thereafter. Assumed 2025 GEMT reimbursement amounts with a 2% annual increase beginning in 2028.
The five year-forecast demonstrates that without changes, Metro Fire and Rescue would only receive 1 more Innovation Grant payment as net cost (Operating Expenditures - Departmental Revenues) would exceed 115% of the 2025 base beginning in 2028 and continuing through 2031.
Figure 1
Over the five-year period, expenditures grow on average 3.9% while departmental revenues are flat (actually decreasing 0.05%) resulting in a 3.8% percentage point differential as shown in Figure 2. While a five-year period is shown here, the gap would continue if additional years were shown. The only way to permanently fix the gap is to change the trend lines themselves - increase revenue growth, limit expenditure increases or preferably, a combination of both.
Figure 2
It is imperative that net cost growth is slowed, especially in the 2027 and 2028 budget years when the expenditure and revenue growth differential is greatest. This must be done through structural changes (as opposed to one-time fixes). A balanced approach is recommended that focuses on expenditure reductions, efficiency gains and revenue increases.
It is illustrative to look at the 2027 gap between expenses and revenues to understand the main drivers of the structural deficit which are described in the attached presentation (will be provided).
C. Fiscal Impact
This report is for informational purposes only
D. Recommendation
While this report is for informational purposes only, it is important that the Metro Fire and Rescue Board take the long-range projections into account when making decisions related to union negotiations, organizational restructuring and apparatus deployment.
Metro’s goal should be to focus on strategic budgetary changes as opposed to indiscriminate line-item adjustments, that ensure net cost growth remains below 115% through 2030 as compared to 2025 in order to qualify for all five Innovation Grant payments and ensure the long-term financial resiliency of the organization.
Attachment A. Sources and Uses
