CITY OF GLENDALE, CALIFORNIA REPORT TO THE: Housing Authority D Successor Agency D Oversight Board D
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1 Joint D City Council C8l CITY OF GLENDALE, CALIFORNIA REPORT TO THE: Housing Authority D Successor Agency D Oversight Board D February 2, 2016 AGENDA ITEM Report: Alarm Administration Outsourcing 1) Motion to authorize the city manager to execute an agreement with PM AM for the administration of the Glendale Police Department's alarm program COUNCIL ACTION Public Hearing D Ordinance D Consent Calenda. Action Item ~ Report Only D Approved for February 2, 2016 calendar ADMINSTRATIVE ACTION Submitted by: Robert M. Castro, Chief of Police Prepared by: Jay Kreitz, Public Safety Business Administrator Approved by: Scott Ochoa, City Manager Reviewed by: Yasmin K. Beers, Assistant City Manager Michael J. Garcia, City Attorney Robert Elliot, Director of Finance 8 A
2 RECOMMENDATION It is respectfully recommended that the City Council authorize the City Manager to execute an agreement with PM AM to provide Alarm Management Services currently provided by Glendale Police Department (GPD) personnel. BACKGROUND/ANALYSIS Background Glendale Municipal Code provides for cost recovery of police and fire resources expended on three or more false alarms at the same address during a fiscal year. GPD responded with patrol and air support resources to more than 2,900 such false alarms during the calendar year One of GPD's departmental goals is to increase efficiencies to allow staff to concentrate on core services. One area identified is alarm administration through the outsourcing of the administration of GPD's alarm program. This initiative will allow patrol officers and air support resources more focus time on core services, by reducing time spent responding to false alarms. The reduction in false alarm calls is achieved through education of alarm owners in the proper operation of their alarm systems, comprehensive program administration and when appropriate, enforcement of alarm ordinances. Presently, the cost recovery function is performed by professional staff from the Police Department's Business Office. Outsourcing alarm administration will also allow staff to focus efforts on grant administration, and ensure compliance with purchasing and finance regulations. Our customer base will benefit from expanded customer service offerings provided alarm customers by dedicated alarm customer service representatives; and the City expects to realize increased revenues generated by the alarm program. Annual revenue is typically increased through improved collection rates by utilization of highly structured customer communication techniques including telephone, and the U.S. Mail. Due to competing time demands, City staff is only able to provide limited follow-up approaches. GPD staff arranged presentations by two established alarm administration outsource companies to educate Finance Department, Treasurer's Office and Internal Audit Management personnel on alarm outsourcing and familiarize GPD management of the nuances of each program. CryWolf provided a webinar showcasing their services, while PM AM gave a sales presentation to demonstrate their outsource program. Both presentations were well-received and all City departments saw the benefits and thus, endorsed GPD's plan to outsource this select function. In fact, the Treasurer's Office expects outsourcing will significantly lower their workload as the outsourcer would assume responsibility to process all alarm customer checks. Utilizing this positive feedback from the product demonstrations, Glendale's Purchasing Manager and GPD's Business Administrator prepared and distributed an RFP to prospective alarm outsource companies. Two firms, CryWolf and PM AM responded to the RFP. Review of the proposals by the City's Department of Finance Revenue Manager and GPD's Business Administrator determined both companies' proposals meet the criteria set forth in the RFP. Summary attached. Financial Considerations Both companies offer a no-cost approach to their services. Meaning, the City incurs no up-front or subsequent recurring costs to support either program. These companies generate income through an agreed upon sharing of monthly collected revenue. 2
3 Based upon GPO's current annual alarm revenue estimates of $500,000, and differences in the sharing percentages offered by each company, the City would realize additional revenue by outsourcing alarm administration. Comparative Analysis PMAM Varying Estimated Annual Revenue Annual Revenue $400,000 $500,000 $600,000 Net Revenue $400,000 $500,000 $600,000 Revenue sharing $0-250,000 14% $(35,000) $(35,000) $ (35,000) > $250, /o $(27,000) $(45,000) $ (63,000) $(62,000) $(80,000) $ (98,000) Net Revenue $338,000 $420,000 $502,000 CRYWOLF Annual Revenue $400,000 $500,000 $600,000 (less bank fees, 3.5%) $(14,000) $(17,500) $(21,000) Net Revenue $386,000 $482,500 $579,000 Revenue sharing $0-100, /o $(19,000) $(19,000) $ (19,000) $100, ,000 18% $(18,000) $(18,000) $ (18,000) > $200,000 16% $(32,000) $(48,000) $ (64,000) $(69,000) $(85,000) $(101,000) Net Revenue $317,000 $397,500 $478,000 Both companies utilize systems that employ proactive outreach programs including telephone, and US mail to solicit payment from customers with past due accounts. Currently, GPO does not have the personnel resources to provide this type of follow-up to ensure payments are remitted. Thus, these revenues are not always realized. Cities that have contracted with both vendors have seen revenues increase between 15-30% because of these methods. Service Model Both companies' service models are very similar and basic services are comparable. Each company offers website setup, that when accessed from either the GPO webpage or the City of Glendale website, looks and feels like an extension of Glendale's e services. Alarm customers are able to access their accounts to update personal information, view any charges for responses, determine their permit renewal date and submit payments. Both companies have U.S. based, dedicated customer service call centers to assist alarm customers. In addition, both offer access to a "live" person (Monday - Friday) and the ability to access account information online 24/7. 3
4 Each vendor utilizes a "lockbox" system of payment, administered by Bank of America, in which payments made by check are mailed to a Post Office Box in Los Angeles. Funds are processed and deposited to a joint account by Bank of America. Each month, the vendor prepares a financial report detailing all activity for the month, including permits, alarm responses billed for, payments received, total revenue collected (less any refunds), and the revenue sharing calculation. In a Glendale scenario, the City's apportionment will be wired by the bank to Glendale's Bank of America account with notice of the deposit sent to directly to the Glendale City Treasurer's Office. GPO personnel will review the reports for accuracy. PM AM includes the lock box cost in their cost sharing percentages. CryWolf's proposal deducts the cost from Glendale's portion of the shared revenue. Both firms report reduced alarm responses as a major benefit of their service achieved through increased customer service availability via their fully staffed call centers, 24/7 web-based access and telephonic/ /us Mail correspondence, which includes educational topics on the proper use of an alarm combine to lower false alarm calls. To validate this assertion, cities using outsource services report 10-20% reductions in false alarm calls. User Agency Feedback GPD's Business Administrator contacted personnel managing the alarm outsourcing programs at cities partnering with the responding companies. Staff inquired regarding the other agencies' experience with reduction in alarm responses and customer service satisfaction. Additionally, the vendor's responsiveness to the alarm administrator's service needs; accounting standards compliance, banking and reporting processes; and the timeliness and effectiveness of project start-up were considered. With one notable exception, each client city is very pleased with the services provided by its respective partner. The exception is the City of Morgan Hill. Morgan Hill severed ties with CryWolf approximately three years ago. The basis cited for the contract termination included incorrect alarm customer invoices, alarm customers outside the city limits being billed for permits and alarm responses, and customers double billed for the same response. Additionally, the alarm administrator reported repeated errors with accounting and revenue sharing were experienced, and the supporting reports were difficult to decipher. Subsequently, Morgan Hill engaged PM AM as their replacement vendor. Their alarm administrator reports they are very satisfied with PM AM's overall services and particularly pleased with report and accounting accuracy. Furthermore, the number of customer initiated "hearings" to contest a billing has dramatically decreased, signifying to Morgan Hill their client base is also more satisfied. Morgan Hill aside, each city contacted responded that they would select the same vendor if they were to select again. CryWolf client cities, Arcadia, Hayward and Westminster were contacted along with PM AM clients Beverly Hills, Chula Vista, Covina and Morgan Hill. Although all of PM AM's clients reported they expected 9-12 month delay in realizing a decrease in false alarm activations due to the roll-out of the educational component, they all experienced increased revenue, and an eventual decrease in false alarm activations. Importantly, they are pleased with customer service both to customers and the agency served. The City of Hayward's CryWolf data conversion is in its seventh month so billing services have yet to begin however the alarms administrator feels the cause for the delay is shared by the city and CryWolf. Westminster commented that CryWolf's proposal was more professional than PM AM's. 4
5 Recommendation Based upon the RFP responses, the estimated $22,500 in additional revenue sharing percentages, the more favorable customer service experience ratings, and the outsourcers ability to expand and enhance services, staff recommends City Council authorize the City Manager or his designee to execute an agreement with PM AM for the administration of the Glendale Police Department's Alarm program. FISCAL IMPACT GPO expects to see an increase in alarm revenue of approximately 5% ($22,500) based upon the experience of other similar size cities. The outsource contract includes no out of pocket cost to Glendale and ISO will see a decrease in direct costs of $6,500 associated with the software currently used to administer the alarm program in house. Anticipated Increased Revenue Anticipated Decreased Software Cost Net Benefit to Glendale $22,500 $ 6,500 $29,000 CAMPAIGN DISCLOSURE In accordance with the City Campaign Finance Ordinance No. 5744, the following are the names and business addresses of the members of the board of directors, the chairperson, CEO, COO, CFO, Subcontractors and any person or entity with more than 10% interest in the company proposed for contract in this Agenda Item Report: 5430 LBJ Freewa, Suite 370 Dallas 5430 LBJ Freewa, Suite 370 Dallas ALTERNATIVES Alternative 1: Approve as requested by the Police Department. Alternative 2: Not approve as requested by the Police Department. Alternative 3: The City Council may consider any other alternative not proposed by staff. EXHIBITS RFP Review Comparison 5
6 RFP REVIEW COMPARISON Item CrvWolf! PMAM Customer Service Positive feedback from Arcadia, Positive feedback from Beverly Westminster, Bakersfield, Hills, Covina, Morgan Hill, Chula negative feedback from Morgan Vista Hill (left CryWolf for PM AM) Dedicated, multilingual call center, 9AM-5PM, M-F Call center Info System enables instant access to all customer/ alarm info/history On-line or DVD alarm use training video (reduce false alarms) Hearing & appeals process Payment options - check, credit card, on-line, drop at PD Customer able to update alarm I personal information on-line Dedicated, multilingual call center, 9AM-5PM, M-F Call center Info System enables instant access to all customer/ alarm info/history On-line or DVD alarm use training video (reduce false alarms) Hearing & appeals process Payment options - check, credit card, on-line, drop at PD Customer able to update alarm I personal information on-line Cost Zero start-up I ongoing costs Zero start-up I ongoing costs Revenue sharing highlights in Revenue sharing highlights in Memo on page 2 Memo on page 2 Qualifications Extensive experience with Extensive experience with multiple So. Calif agencies (16 multiple So. Calif agencies (11 years) years) Technology RFP reviewed by ISD. No RFP reviewed by ISD. No problems noted with data problems noted with data storage, confidentiality, etc. storage, confidentiality, etc. Successful interface experience with Tiburon (both pulling data and bi-directional) Successful data conversion experience. Hayward conversion has taken 6 months - not CryWolf fault Successful interface experience with Tiburon {both pulling data and bi-directional) Successful data conversion experience Financial Management Finance/Internal Audit/city Finance/Internal Audit/city Treasurer reviewed and Treasurer reviewed and approved approved 6
7 Financial Management Local (Los Angeles) 3rd party Local (Los Angeles) 3rd party lockbox (Bank of America), cost lockbox (Bank of America) reduces gross revenue (see revenue sharing in memo) Single monthly wire transfer vs. current multiple deposits with multiple checks Real-time access to all alarm records including billing, amount paid, balance due, notes on communication with customer Single monthly wire transfer vs. current multiple deposits with multiple checks Real-time access to all alarm records including billing, amount paid, balance due, notes on communication with customer 7
8 MOI!ON Moved by Council Member seconded by Council Member ' to authorize the City Manager, or his designee, to enter into a professional services agreement with PM AM to administer the Glendale Police Department's Alarm Program as more specifically discussed in Chief of Police's report to City Council dated February 2, The agreement shall be approved as to form by the City Attorney. Vote as follows: Ayes: Noes: Absent: Date:_M!_-~ ;;...Z'--~/ b~-- J:\FILES\DOCFILES\MTN\PM AM Alarm Outsourcing Authorization.docx 8 A 1
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