CC 2017-10-24_11a Animal Services Shelter
MEMORANDUM
TO: CITY COUNCIL
FROM: JIM BERGMAN, CITY MANAGER
SUBJECT: RECONSIDERATION OF AGREEMENT WITH THE COUNTY OF SAN
LUIS OBISPO TO JOINTLY FINANCE AND CONSTRUCT A
REPLACEMENT ANIMAL SERVICES SHELTER
DATE: OCTOBER 24, 2017
SUMMARY OF ACTION:
Provide direction to staff regarding the City’s participation in the construction of a
replacement animal shelter, in light of potential withdrawal of participation by other
participating agencies.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
Significant costs could be incurred, depending on the number of agencies that
participate in constructing the replacement animal services shelter. The City has
previously estimated the cost of participating at $70,000 to $87,000 per year.
Depending on which agency/agencies withdraw from the agreement, the City’s costs
could increase to approximately $129,000 per year during the 25 year finance period for
the new shelter. This estimate does not include any increase in the City’s share of
annual payments for the operation of animal control services due to the withdraw of
participating cities.
RECOMMENDATION:
It is recommended the City Council: 1) Authorize the Mayor to send the attached letter
to the Cities of Atascadero and Paso Robles urging continued participation in the animal
shelter project; and 2) Consider authorizing staff to withdraw from the Agreement at a
specified threshold.
BACKGROUND:
In February 2017, the City entered into an Agreement with the County of San Luis
Obispo, and the Cities of Atascadero, Grover Beach, Morro Bay, Pismo Beach, Paso
Item 11.a. - Page 1
CITY COUNCIL
RECONSIDERATION OF AGREEMENT WITH THE COUNTY OF SAN LUIS OBISPO
TO JOINTLY FINANCE AND CONSTRUCT A REPLACEMENT ANIMAL SERVICES
SHELTER
OCTOBER 24, 2017
PAGE 2
Robles and San Luis Obispo to jointly finance and construct the replacement of an
animal services shelter.
Based on each of these entities participating, the City of Arroyo Grande’s apportioned
share of the $13.3 million estimated total costs was 8.4%. The Agreement contains
cost containment provisions with respect to actual costs and provides a mechanism to
reduce costs or allow a participating City to terminate the Agreement if costs exceed the
estimated capital budget of $13.3 million by 10% or more. In addition, the Agreement
identifies timeframes and consequences for any party to withdraw from the Agreement.
Essentially, if a City chooses not to participate in the shelter construction, the City is
allowed to withdraw from the Agreement and pay its proportionate share of all the costs
incurred up to the date of withdrawal. If this occurs, the allocation of each party’s share
of the total project costs is adjusted upward for the remaining parties. If a party
withdraws prior to October 31, 2017 they shall not be required to pay any portion of the
financing costs, but they would still have to pay their proportional share of other costs
incurred as of the withdrawal date. After the project is constructed, cities have the
option to withdraw from future participation in the animal shelter by providing a minimum
of one year’s written notice to all of the other parties and prepaying its entire allocation
of the total project costs by the effective date of the withdrawal. The County will
recalculate future payments of the remaining parties using revised percentages based
on shelter use.
It has come to the attention of City staff that the City of Paso Robles and the City of
Atascadero are considering their continued participation in the construction of the
shelter on October 30, 2017. If they withdraw from the Agreement, the remaining
parties (the County of San Luis Obispo, and the Cities of Grover Beach, Arroyo Grande,
Morro Bay, Pismo Beach, and San Luis Obispo) would need to absorb those future
costs attributed to Paso Robles and Atascadero. It is believed that the City of San Luis
Obispo may also reconsider continued participation depending on the outcome of the
decisions in Paso Robles and Atascadero.
ANALYSIS OF ISSUES:
Based on the allocation formula identified in the Agreement, the City of Paso Robles
comprises 18.81% of the total, with the City of Atascadero representing 14.37%.
Together, they represent approximately 33% of the total or $4.4 million of the $13.3
million construction project. Other than the unincorporated areas of the County (at
37.96%), these two Cities comprise the largest shares of the allocation. If either of
these cities withdrew from the Agreement, the resulting impact to the City of Arroyo
Grande would be an increase in total costs of $202,000 to $279,000. If both cities
withdraw, the City of Arroyo Grande’s total costs would increase by almost $600,000.
Item 11.a. - Page 2
CITY COUNCIL
RECONSIDERATION OF AGREEMENT WITH THE COUNTY OF SAN LUIS OBISPO
TO JOINTLY FINANCE AND CONSTRUCT A REPLACEMENT ANIMAL SERVICES
SHELTER
OCTOBER 24, 2017
PAGE 3
As reflected on the following page, the City’s proportional share of cost increases
dramatically if Atascadero, Paso Robles or San Luis Obispo (or a combination thereof)
withdraws from the Agreement. The City’s proportional share could grow from the
current 8.39% to 15.33% if all three cities chose to withdraw from the Agreement.
Party Current
If Atascadero
withdraws
If Paso Robles
withdraws
If both Paso
Robles &
Atascadero
withdraw
If SLO
withdraws
If Paso Robles,
Atascadero &
SLO all
withdraw
Arroyo Grande 8.39% 9.80% 10.34% 12.56% 9.55% 15.33%
Atascadero 14.37%0.00%17.70%0.00%16.34%0.00%
Grover Beach 3.71% 4.33% 4.57% 5.55% 4.22% 6.78%
Morro Bay 3.23% 3.78% 3.98% 4.84% 3.68% 5.91%
Paso Robles 18.81% 21.96%0.00% 0.00%21.39%0.00%
Pismo Beach 1.44% 1.68% 1.77% 2.15% 1.64% 2.63%
SLO City 12.09% 14.12% 14.90% 18.10%0.00% 0.00%
County 37.96% 44.32% 46.75% 56.80% 43.18% 69.35%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Est. Cost 14,362,385$
AG's Share 1,205,269$ 1,407,500$ 1,484,438$ 1,803,607$ 1,371,098$ 2,202,174$
Increase (Total)202,231$ 279,170$ 598,338$ 165,829$ 996,905$
Annual Pmts 70,640$ 82,511$ 87,021$ 105,731$ 80,377$ 129,096$
Incr (annual)11,871$ 16,381$ 35,091$ 9,737$ 58,456$
If other agencies decide to withdraw their participation in the shelter, the City of Arroyo
Grande will need to determine a course of action. The City could continue to participate
at a higher cost, along with all other remaining parties. Or the City could identify
another provider for animal control and shelter services, which could include contracting
with another public agency, a private entity or directly providing the service by
constructing, staffing and operating a City owned animal shelter.
Staff has previously estimated that the cost for the City to provide its own animal field
services or shelter services and build its own facility would exceed $225,000 per year.
Therefore, other alternatives such as contracting with another public agency like Santa
Barbara County or private entity would likely be more cost effective than providing the
services directly. Staff has not explored the possibilities of contracting with any other
party at this point.
The City Council could consider authorizing staff to withdraw from the Agreement if
certain conditions occur or estimated costs exceed a particular threshold. The City
Council could consider a withdrawal threshold based on proportional share or a specific
Item 11.a. - Page 3
CITY COUNCIL
RECONSIDERATION OF AGREEMENT WITH THE COUNTY OF SAN LUIS OBISPO
TO JOINTLY FINANCE AND CONSTRUCT A REPLACEMENT ANIMAL SERVICES
SHELTER
OCTOBER 24, 2017
PAGE 4
dollar amount. The criteria may not be met immediately, even if another participating
party withdrew from the Agreement.
For example, if the City Council used a threshold of 15% of total cost, then the
withdrawal of Atascadero and Paso Robles would still result in the City’s participation
because the allocated percentages would be 12.56% However, the withdrawal of both
parties and the City of San Luis Obispo would exceed the 15% threshold and the City
Council would authorize staff to withdraw from the Agreement.
It should be noted that the current allocation formula is based on shelter use during a
rolling three year period. If a particular agency experiences dramatic increases or
decreases in shelter use, the percentage allocations will be adjusted annually. For
example, if a city were able to reduce the number of animals utilizing shelter services
substantially, their proportional share would decrease in future years. Therefore,
changes in behaviors, animal populations or other operations could result in the City of
Arroyo Grande’s proportional share increasing beyond a threshold, even if all parties
continue to participate.
ALTERNATIVES:
The following alternative is provided for the Council’s consideration:
- Provide direction to staff regarding the continued participation in the Agreement
ADVANTAGES:
Providing direction to staff on the threshold at which point the City opts to withdraw from
the Agreement will allow City staff to submit a notice of withdrawal prior to the October
31, 2017 deadline for the payment of the proportional cost of financing, should the
threshold be reached.
DISADVANTAGES:
If the City withdraws from the Agreement, animal control and shelter services will need
to be provided by another method. The cost of providing the services through
alternative means has not been fully identified or explored at this time.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Attachments:
1. Draft letter to the Cities of Paso Robles and Atascadero
2. Sample letter of conditional withdraw
Item 11.a. - Page 4
October 25, 2017
Atascadero Mayor and City Council
City Hall
6500 Palma Avenue
Atascadero, CA 93422
Paso Robles Mayor and City Council
City Hall
1000 Spring Street
Paso Robles, CA 93446
Dear Mayor O’Malley, Mayor Martin and Council Members,
After an extensive series of discussions and negotiations spanning the course of over two years,
the County of San Luis Obispo and cities of Atascadero, Arroyo Grande, Grover Beach, Morro
Bay, Paso Robles, Pismo Beach, and San Luis Obispo were successful in developing an
agreement dated February1, 2017 (the “Agreement”) for the allocation of construction and
financing costs for a new animal shelter to be located at 865 Oklahoma Avenue in San Luis
Obispo.
This Agreement represents a significant collaborative and joint effort to ensure the construction
of a new shelter. The new shelter would provide animal care and control services to residents of
the seven cities and the County in a facility that would be consistent with current humane
standards and public expectations. By agreeing to work together to construct the shelter, all of
the agencies benefit from the economies of scale of sharing both capital and service costs for a
new facility, which would not be feasible for most of the individual agencies.
Under the Agreement, each agency is apportioned a percentage of the estimated costs to
construct the shelter based on the average use of the existing shelter from 2012-2015 by each
agency. Therefore, the City of Arroyo Grande is troubled and concerned to hear that the cities of
Paso Robles and Atascadero are reconsidering their continued participation in the construction of
the shelter. If the cities of Paso Robles and Atascadero withdraw from the Agreement, the
portion of the costs attributed to the withdrawing parties will be spread among the remaining
agencies. Based on the allocation formula set forth in the Agreement, the City of Paso Robles’s
share comprises 18.81% of the total cost and the City of Atascadero’s is 14.3%. Together, they
represent approximately 33% of the total cost of the $13.3 million construction project or $4.4
million. Other than the unincorporated areas of the County (at 37.96%), these two cities bear the
largest shares of the allocation. If Paso Robles and Atascadero withdraw from the Agreement,
the resulting impact to the City of Arroyo Grande’s total costs would be an increase of almost
$600,000.
ATTACHMENT 1
Item 11.a. - Page 5
October 25, 2017
Page 2
Your potential last minute decision to withdraw after two years of honest and fair negotiations is
damaging to your fellow cities in the following ways:
1. Withdrawal by Paso Robles and Atascadero may force the City of Arroyo Grande and
other cities to also withdraw from the Agreement due to an inability to absorb the
increase in costs. Such a decision could threaten the viability of the entire project. Thus
diminishing the ability of all citizens of the County to receive this important service.
Sharing the costs of construction ensures a shelter meeting current industry standards will
be built, which will benefit all of the communities involved. As was pointed out by the
Executive Director of Woods Humane Society in her letter to the San Luis Obispo
Tribune dated October 6, 2017, “[t]his economy of scale allows the shared usage of a
sheltering facility, field officer response and the assurance that resources are available to
respond to disasters and large-scale seizures. It gives the public a single point of contact
for response and relieves local municipalities from the call volume, concerns and
complaints that can arise related to animal issues.”
2. Your fellow cities now have to make last minute and speculative choices as opposed to
well-reasoned decisions that can identify, analyze, and compare alternatives and find
solutions that improve all the communities in this County.
3. This last minute change of course may also be damaging to future collaborative regional
and countywide efforts. Why should regional partners believe in the future that your
cities will negotiate fairly and not use this tactic in the future? If your quick decision to
withdraw turns out not to be in the best interest of your community, why would the
remaining partners want to let you rejoin the project later?
4. This action is wasteful to taxpayers in general. Two years of staff time, involvement of
lawyers to make the agreement, and hours of public testimony may be jeopardized by
changing course. This potential action is not an example of good governance but just the
opposite.
Your last minute reconsideration of the Agreement leaves us asking, what do you want that was
not addressed in the long process of negotiating this agreement? Is it the price of the building? Is
it that your citizens have to travel too far? If these are the reasons, we believe that your cities will
fare much better staying in the Agreement and working to find cooperative solutions and not
forcing your fellow communities to make quick decisions and be penalized by cost increases.
The City of Arroyo Grande asks the cities of Paso Robles and Atascadero to stay the course and
not withdraw from the Agreement. The Agreement is the result of significant efforts by eight
public agencies coming together with the common goal of providing a new animal shelter to
replace the current shelter, which is in poor condition, outdated and no longer meets current
industry standards for sheltering animals. To withdraw at this point in time will leave the
remaining agencies in jeopardy of being unable to move forward with the project.
Item 11.a. - Page 6
October 25, 2017
Page 3
Sincerely,
Jim Hill
Mayor, City of Arroyo Grande
c: County of San Luis Obispo
City of Grover Beach
City of Morro Bay
City of Paso Robles
City of Pismo Beach
City of San Luis Obispo
Item 11.a. - Page 7
NOTICE OF WITHDRAWAL
Re: Agreement for Construction of an Animal Services Shelter
Dear Mssrs. and Mesdames:
It has come to the attention of the City of Arroyo Grande that the Cities of Atascadero and Paso
Robles are meeting in the mid to late afternoon on October 30, 2017 to consider withdrawing
from the Agreement for Allocation of Construction and Financing Costs for an Animal Services
Shelter at 865 Oklahoma Avenue in San Luis Obispo, California, Between the Cities of
Atascadero, Arroyo Grande, Grover Beach, Morro Bay, Paso Robles, Pismo Beach, and San Luis
Obispo and the County of San Luis Obispo dated February 1, 2017 (the Agreement”).
Based upon email correspondence from Tom Frutchey, Paso Robles City Manager, their intent is
to be able to “...enable both Councils to be able to make their decisions and provide the results
from both cities to the County prior to 5p.m. on October 30th.” It has also come to our attention
that other entities may also be considering withdrawing if Atascadero and Paso Robles withdraw.
County of San Luis Obispo
Guy Savage, Assistant Chief Administrative
Officer
Rita Neal, County Counsel
County Government Center
1055 Monterey Street
San Luis Obispo, CA 93408
City of Paso Robles
Tom Frutchey, City Manager
Iris Yang, City Attorney
1000 Spring Street
Paso Robles, CA 93446
City of Atascasdero
Rachelle Rickard, City Manager
Brian Pierik, City Attorney
6500 Palma Avenue
Atascadero, CA 93422
City of Pismo Beach
James R. Lewis, City Manager
Dave Fleishman, City Attorney
760 Mattie Road
Pismo Beach, CA 93449
City of Grover Beach
Matthew Bronson, City Manager
David Hale, City Attorney
154 S. Eighth Street
Grover Beach, CA 93433
City of San Luis Obispo
Derek Johnson, City Manager
Christine Dietrick, City Attorney
990 Palm Street
San Luis Obispo, CA 93401
City of Morro Bay
Scott Collins, City Manager
Joseph Pannone, City Attorney
595 Harbor Street
Morro Bay, CA 93442
ATTACHMENT 2
Page 2
Should the cities of Atascadero and Paso Robles or any other cities that are a party to the
Agreement decide to withdraw from the Agreement, the City of Arroyo Grande has determined it
may not be feasible for the City of Arroyo Grande to continue with the Agreement based on the
additional costs that would be incurred due to the re-allocation of costs attributable to the
withdrawing parties.
In order to effectuate timely notice of withdrawal prior to October 31, 2017 as set forth in
Section 8(a)(i) of the Agreement, the City of Arroyo Grande finds it necessary to submit this
Notice of Withdrawal should any combination of cities decide to withdraw from the Agreement
such that their withdrawal results in an increase to 15% or more of the total costs allocated to the
City of Arroyo Grande after project modifications that may result in savings due to the withdraw
of major partners.
Sincerely,
James A. Bergman
City Manager
Item 11.a. - Page 9
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Item 11.a. - Page 10