Cutting Through Complexity: A Fiscal Roadmap for District Consolidation

Nestled in the scenic hills of California’s Bay Area, the community of Kensington is home to 5,400 residents. Known for its breathtaking views of the San Francisco Bay, tree-lined streets, temperate weather, Kensington is a quiet neighborhood with a high quality of life.

The community’s municipal services are split between two overlapping special districts, each with its own management, budget, and board of directors:

• The Kensington Fire Protection District provides fire and emergency response services.
• The Kensington Police Protection and Community Services District oversees public safety, parks and recreation, and waste collection and recycling.

While this arrangement ensures high-quality services, it also comes with higher administrative costs, duplication of work, segregation of community’s taxes, and challenges for residents having to keep up with two boards.

For years, community members and district leaders discussed consolidating these two agencies to streamline governance and reduce costs. The districts turned to Ridgeline Municipal Strategies to prepare a comprehensive fiscal study to evaluate the financial and operational feasibility of consolidation.

The Fiscal Study Process

The legal framework for special district consolidation and other forms of reorganization of local governments in California is laid out in the Cortese-Knox-Hertzberg Government Reorganization Act of 2000. The implementation of this act falls under the jurisdiction of the Local Agency Formation Commissions, with each county having its own commission.

Among other things, the act mandates that a consolidation cannot lead to higher public service costs and must promote greater public access and accountability for community service needs and financial resources.

Step 1: Financial Review and Interviews

Ridgeline studied financial statements, budgets, and other documents and interviewed staff and board members to gain insights into the districts’ priorities and challenges. Particular attention was given to key financial considerations:

• Capital assets and facility needs.
• Debt obligations.
• CalPERS pension liabilities and other post-employment benefits.

Step 2: Cash Flow Modeling and Long-Term Financial Forecasts

To provide a clear financial picture, Ridgeline developed detailed staffing and cash flow models and 10-year financial forecasts for each district. These models and forecasts aligned financial resources with strategic goals and tested for potential financial weaknesses and risks. We evaluated each district’s ability to fund key initiatives, address unfunded liabilities, and maintain fiscal sustainability.

Borrowing capacity was assessed for each district to understand what funding resources are available to each organization.

Step 3: Consolidation Analysis

Once individual forecasts were reviewed in public meetings, we worked with the districts to analyze a hypothetical consolidated organization. This involved:

• Drafting a joint organizational chart.
• Assessing potential cost savings and additional funding needs.
• Creating a unified budget and forecast that accounted for both districts’ services.

Ridgeline presented the fiscal study comparing the financial implications of consolidation versus maintaining separate agencies. The analysis was shared with the boards and the community in a joint public meeting, ensuring transparency and engagement.

Key Fiscal Study Findings

The fiscal study demonstrated that consolidation could deliver significant benefits:

• Annual Operating Surplus: A unified district is expected to generate fiscal surplus, strengthening reserve balances.
• Cost-Effective Staffing: Consolidation would streamline staffing, reducing administrative redundancy.
• Higher Operational Efficiency: Merging operations would improve service delivery and resource allocation.
• Simplified Governance and Funding: A single board would provide clearer oversight for the community and community resources could be directed where they are needed most.

That said, the study also highlighted potential consolidation costs and the increased responsibility of a single board. Successful implementation would require continued fiscal discipline and a focus on funding all services equitably.

Community Impact

The fiscal study provided both districts and the community with the tools to make informed decisions. Whether they choose to consolidate or remain independent, the detailed analysis clarified financial challenges and opportunities.

As a result of the process, the districts have a clearer understanding of their financial health and the long-term implications of their governance structure.

Our Clients Speak:

“It felt very much like a partnership. I very much appreciated Ridgeline's emphasis on detail and willingness to take the time to understand the nuances of our finances.”
      - David Spath, Board President, Kensington Police Protection and Community Services District

“Ridgeline's thoroughness and attention to detail ensured a final work product that no one could quibble with, even if they did not like the political implications it led to.”
      -Daniel Levine, Board President, Kensington Fire Protection District

“Great communication, constant follow through, responsive to our needs and requests.”
      - David Aranda, General Manager, Kensington Police Protection and Community Services District

About Ridgeline Municipal Strategies

Ridgeline is a municipal advisory and financial consulting firm. We help California’s special districts and cities with financial planning, fiscal studies, and funding for infrastructure and facilities.

Are you looking to better understand your agency’s financial situation or to see if consolidation is the right move for your community?