News

Palo Alto, Stanford clash over fire services

After more than two years of fruitless negotiations, two sides head to mediation

Nearly four decades after the Palo Alto Fire Department and Stanford University entered into a partnership for fire-protection services, the two sides have hit a rocky patch in their relationship and are preparing for possible litigation.

At the heart of the conflict is the May 2012 closure of Station 7, which was located on Sand Hill Road and serviced SLAC National Accelerator Laboratory. Since then, Stanford and the city have been at odds over how the closure should impact the long-standing financial arrangement between them. Earlier this year, Stanford accused the city of breaching its agreement and overcharging the school, according to documents obtained by the Weekly. On Monday night, the City Council is scheduled to go into a closed session to discuss "anticipated litigation" involving Stanford.

The relationship between the City of Palo Alto and Stanford goes back to 1976, when they merged their respective fire departments. The move came four years after a giant fire destroyed a wing at Encina Hall. The goal was to both save Stanford money and increase its firefighting capacity. In exchange, the university has been footing the bill for about 30 percent of the Palo Alto Fire Department costs, or about $7.44 million annually.

Today, the only fire station on Stanford property is Station 6, on Serra Road, and Stanford has been arguing that its proportion of the fire department cost should drop from 30 to 15 percent. Stanford has also accused the city of not turning over to the university requested documents detailing the service costs (accusations that the city has denied). The university is also demanding refunds of charges for the past three years, based on the revised formula.

Craig Bristol, senior counsel at Stanford, made the case for the smaller amount in a June 26 letter to Palo Alto City Manager James Keene. The letter also notified Keene that Stanford is pursuing a claim against Palo Alto for overcharging the university.

"In direct discussions, Stanford has communicated to the city that it believes it is being significantly overcharged for fire protection services," Bristol wrote. "The discussions to date have not produced any meaningful movement from the city or resolution of the disputes described below."

The protracted dispute has, until now, remained largely out of the public eye. Despite threats of litigation, Palo Alto firefighters have continued to serve the university, and Fire Chief Eric Nickel said that won't change. Stanford, for its part, said it has no issue with the fire department's service or staffing levels — only the costs.

Yet the two-and-a-half-year-old dispute continues to fester, at one point pushing Stanford to shop around for a new fire-protection service. In October 2013, Stanford notified the city that it wanted to get out of the contract. The following month, Stanford put out a "request for proposals" for fire-protection agencies in Santa Clara County and San Mateo County. Palo Alto was the only respondent, Nickel said.

Now, the two sides are trying to avoid a court battle by seeking mediation. According to letters exchanged by the two sides earlier this year, a significant gap remains between Stanford's "final" offer of about $5 million per year and the city's latest proposal of $6.5 million.

In explaining Stanford's position, Bristol wrote that not only is Stanford's share of the cost "excessive" but the city's calculation of the actual cost of serving Stanford in fiscal years 2013 and 2014 was "inaccurate."

The existing agreement, he noted, specifically states that Stanford's share will be based on the "extent of fire protection services provided to the Stanford campus" in comparison to the extent of such services provided within the city limits of Palo Alto.

Bristol noted that in 2004-05, when the city and Stanford reviewed the 1976 agreement, the city took the position that the percentage being paid by Stanford was "appropriate based upon the number of stations located on Stanford property."

"The closing of the SLAC station was a significant event that, as actual experience has demonstrated, resulted in the city providing substantially less fire-protection services to Stanford," Bristol wrote.

Stanford's share, he argued, should be adjusted down to 15.4 percent or less, retroactive to 2012.

Jean McCown, Stanford's assistant vice president for government and community relations, made the point concisely.

"We had two fire stations," McCown told the Weekly. "Now we have one."

The university, she noted, has offered to pay the full costs of the single station, including all the overhead costs — despite the fact that the station, in addition to serving Stanford, also serves parts of the city. McCown said data shows that Station 6 personnel respond to Palo Alto calls about twice as often as other stations respond to Stanford.

"We feel paying fully for that station, which is maybe more service than we need for the number of calls, is a fair allocation," McCown told the Weekly.

City officials have agreed that the charge can be reduced, but they have taken issue with the numbers offered by Stanford. A June letter from Keene to Debra Zumwalt, Stanford's vice president and general counsel, alludes to an April conference call in which a consultant for Stanford characterized the discussions as "approximately $500,000 apart."

"From that understanding, Stanford appears to have taken a nearly $1,000,000 step backwards," Keene wrote.

The letter from Keene argued that there have been reductions in costs to Stanford through system efficiencies as well as the elimination of a rescue company and cuts in overhead personnel, even though there have also been increases in pension costs and a large expenditure (a new ladder truck).

Keene's letter also noted that the City Council has a longstanding policy that city-funded services will not be offered at below cost to surrounding communities. This includes the fire department's ambulance services, which Keene wrote have substantially better levels of service and faster response than other providers in the county. The cost of this service, Keene wrote, is about $400,000 more than the revenue recovered from users.

"Stanford's unwillingness to contribute to this gap presents Palo Alto with a dilemma," Keene wrote. "Is the university asking that the city's general fund subsidize service to the campus, or is Stanford requesting a lower service level than provided in the city and historically at Stanford?"

Keene wrote that while the city does not desire for Stanford to pursue other options, it is "nonetheless obligated to ensure that the risks and consequences of these decisions are fully understood."

The two sides do agree on one thing: The university has been receiving good service from the Palo Alto Fire Department. Stanford also had consultants look into existing staffing levels, and McCown said the independent analysis concurred with the Fire Department's methodology for allocating staff. Though Stanford rejected the city's response to the request for proposals (effectively extending the existing agreement), Nickel said, "Their issue is not the level of service. Their issue is cost."

McCown concurred that it was the service costs that drove the university to consider other options in 2013.

To resolve the impasse, Stanford has proposed mediation. In late June, the two sides signed a "tolling agreement," which suspends the statute of limitations that would normally apply to Stanford's claim against the city. According to the agreement, the parties "deem it in their mutual benefit to determine whether or not it may be possible to resolve Stanford's claim through negotiations without resort to litigation." McCown said the mediator has not yet been picked, though some names have been proposed.

Nickel said the goal of the upcoming City Council closed session, which will follow the regular Oct. 26 meeting, is to get council direction before heading into the talks with the mediator. Nickel called it "a good sign" that Stanford asked for mediation.

"Both parties have been negotiating to try to find some mutually beneficial resolution," Nickel said. "We think we found it with a mediated process."

Comments

1 person likes this
Posted by Wayne Martin
a resident of Fairmeadow
on Oct 22, 2015 at 5:00 pm

It would be interesting to know if there was ever a cost/benefit/pricing model that was built into the original contract between SU and PA. For instance, was there any long term equipment/building replacement costs included? Or pension obligations? The funding level of 30% was based on a 1976 budget, which was about $28M at the time. SU’s bill for the next ten years of service at $6.5M (plus inflation) comes to over $70M. The SU budget office has to be asking if that can be pared down.

> We now have only one fire station

Presumably PA’s commitment to SU involves as many resources that it can muster to fight fires on the SU campus—including PA’s mutual aid agreements with nearby Cities/Fire Districts. The loss of one fire station on/near the campus might result in a slower response for one, or two, rigs—but in the grand scheme of things, all of the PA resources are available.

> We have the fastest ambulances

With most transports going to the Stanford Hospitals, not clear how much faster the PA ambulances might be than other services. Moreover, if there were a significant event—like an airplane crash, or a bombing, on the campus—PA would not be able to service more than a handful of victims. Private/other services would no doubt need to be called.

Hopefully the City will come up with a model that tracks all of the costs associated with this contract—so that a reasonable price can be negotiated with SU.


3 people like this
Posted by El Palo Alto
a resident of Crescent Park
on Oct 22, 2015 at 7:47 pm

30% of PA FD costs, including the bloated pensions, overtime, etc.?

Go Cardinal!!!


2 people like this
Posted by El Palo Alto
a resident of Crescent Park
on Oct 22, 2015 at 7:50 pm

Stanford should continue to pay 30% of PA FD costs, including bloated pensions, overtime, etc.?? Is PA kidding?

Go Cardinal!


1 person likes this
Posted by Resident
a resident of Stanford
on Oct 22, 2015 at 8:18 pm

"The following month, Stanford put out a "request for proposals" for fire-protection agencies in Santa Clara County and San Mateo County. Palo Alto was the only respondent, Nickel said."

Not one Fire protection agency responded to the R.F.P.


6 people like this
Posted by Guy_Fawkes
a resident of Old Palo Alto
on Oct 22, 2015 at 8:57 pm

Guy_Fawkes is a registered user.

Fire service (which is mostly emergency medical service) is insurance. You don't pay based on the number of stations or on the number of fires you have. You pay to insure there is a high quality service available in the event you have an emergency.

Stanford should pay based on what is costs the rest of the community. Other neighborhoods can't opt out and say "we want only a 10 minute response time in Fairmeadow, so tax us less then the rest of the service area". If we did it based on acerage, Stanford is probably under-charged.

Do we charge enough for services related to police, fire and emergency prep for large Stanford events, like home football games?


3 people like this
Posted by Who owes whom
a resident of Another Palo Alto neighborhood
on Oct 22, 2015 at 11:52 pm

Hmmm. This reminds me of that parable in the Boble in which a man is forgiven a great debt and goes out and immediately shakes down some poor schmuck who owes him some small debt, and then gets it for being such a jerk.

Stanford: seriously, we can understand you not wanting to be overbilled, but if you collect this from the City, how about the citizens of Palo Alto band together and collectively ask you back for all the medical overcharges for the last 20 or 30 years? Want to let us have all your books and insurance contracts? I dont know about you,but I'd like to add to that all the time of my life flushed for medical billing processing and errors. (On balance, methinks Stanford should consider the bigger debt they've been forgiven.)


1 person likes this
Posted by Bob Wenzlau
a resident of Crescent Park
on Oct 23, 2015 at 12:05 am

Our firefighters are amazing, and there should be no doubt that Stanford and Palo Alto would agree to that. Thanks for your service!

Equally, I urge Stanford (as an alum) and Palo Alto (as resident) to resolve the issue -- keep this one integrated system. Stanford should step up and pay the bill as I too must pay the Stanford bill for our daughter's tuition. I do groan, but I know the university is unrivaled and has an important outcome.

The concern about the loss of a station is misplaced, as the fire departments seem to shift to efficient mutual aide models.


2 people like this
Posted by taxpayer
a resident of Community Center
on Oct 23, 2015 at 3:53 pm

Bob, I'm curious what you find "amazing" about the PAFD union employees. From what I can tell they are OK, but not any more amazing than the gardeners, file clerks, waitresses etc working in Palo Alto. In other words the other worker types who weren't stellar students and chose labor oriented jobs vs professional careers. I respect any one who works for a living but I'm not sure what you find "amazing" about the union PAFD folks that would justify Stanford paying more than their fair share of the costs.

What I find amazing about the union fire safety employees is how overcompensated and under worked they are. And how early they can retire and live off the taxpayer's dime. The root of the problem here is that the union fire employees are not worth the a amount Palo Alto is trying to bill Stanford, so STanford is pushing back. I am glad to see this topic getting visibility. If the unions weren't so effective at filling the coffers of the politicians, who in turn give the unions excessive compensation packages, we would let market forces determine the cost of fire safety services. Were this to actually happen the cost of the City of PA fire services would decrease by 50%.


Like this comment
Posted by Annette
a resident of College Terrace
on Oct 23, 2015 at 4:11 pm

Presumably it will be a relatively simple matter for a mediator to determine Stanford's fair share and Palo Alto's fair share. If the facts in this article are accurate, Stanford's offer to pay fully for Station 6 is reasonable. What's critical is that there be NO REDUCTION in required response times for fire suppression or EMS transport for calls on campus or in the city.


2 people like this
Posted by Neighbor
a resident of Woodland Ave. area (East Palo Alto)
on Oct 24, 2015 at 9:28 pm

@ Taxpayer

"If the unions weren't so effective at filling the coffers of the politicians, who in turn give the unions excessive compensation packages."

The politicians needed to find a new way to pay for these compensation programs, one needs to look no further than to the "Zero Waste Programs." If you think a lot of this is payed out of property taxes, think again, take a close look at these new programs. It is just another tax.


3 people like this
Posted by SteveU
a resident of Barron Park
on Oct 25, 2015 at 11:22 am

SteveU is a registered user.

Is it time for Palo Alto to follow Sunnyvale's Public Safety model?
More Patrol cars on the road when there are not fires or cats in trees


1 person likes this
Posted by Ahem
a resident of Another Palo Alto neighborhood
on Oct 25, 2015 at 5:41 pm

The amount that Palo Alto charges Stanford for providing fire protection services should not be based on the cost of providing the service, it should be based on the price the market will bear.

The fact the Palo Alto was the only entity that responded to Stanford's RFP indicates that the amount Palo Alto is charging Stanford is not too high, but too LOW.

Since Palo Alto was the only entity to respond to Stanford's RFP, Stanford's only option is to accept Palo Alto's proposal or build, and maintain their own fire department, and participate in the regional mutual-aid agreement.

There is little risk Stanford would elect to build and run there own fire department. Stanford is really two entities... an academic institution, and a land management & development company. The land management & development company's only core competency is negotiating outsourcing contracts. The hacks that run the land management & development company couldn't run a fire department if their lives depended on it.

Palo Alto should withdraw their current proposal, and submit a new RFP for $13M/yr. If Stanford doesn't like it, Palo Alto should tell them to go ahead and learn how to provide their own fire protection services.

Is Stanford's tuition based on the cost of providing the service, or the price the global market will bear?


2 people like this
Posted by Mark
a resident of Another Palo Alto neighborhood
on Oct 26, 2015 at 2:29 pm

Palo Alto was the only bid because there is a "unwritten rule" in the fire service that fire departments don't bid on other fire department contracts.


Sorry, but further commenting on this topic has been closed.

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