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Home My WebLink AboutSS3 - Options for Legal Services & Office of the City Attorney Structure2EW PpRr CITY OF U.yg� S NEWPORT B CH �qoP City Council Staff Report Agenda Item No. SS3 June 28, 2011 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL TO: David R. Hunt, City Attorney FROM: Office of the City Attorney Ext 3131, dhunt @newportbeachca.gov PREPARED BY: David R. Hunt, City Attorney APPROVED: - v TITLE: DISCUSSION OF OPTIONS FOR PROVIDING OF LEGAL SERVICES TO THE CITY AND STRUCTURE OF THE OFFICE OF THE CITY ATTORNEY ABSTRACT: The Council requested a presentation on different options for the provision of legal services to the City that included substantially greater contracting out of services. RECOMMENDATION: Review different operational options for structuring the provision of legal services to the City and give direction. FUNDING REQUIREMENTS: Funding impact will depend upon direction given by Council. Please see the discussion below. Once direction is given, unless it is to proceed with the model proposed in the Fiscal Year 2011 -12 Budget, further information will need to be developed for presentation to the Council. DISCUSSION: There are multiple aspects to consider in determining what model you wish to choose for the provision of legal services to the City. Legal services fall generally into four categories, and the model you chose will depend on what aspects of those categories you wish to keep in -house and what the relative costs are in dividing the work between an in -house counsel component and an outside counsel component of the services. DISCUSSION OF OPTIONS FOR PROVIDING OF LEGAL SERVICES TO THE CITY AND STRUCTURE OF THE OFFICE OF THE CITY ATTORNEY June 28, 2011 Page 2 1. Nature of the Services. The nature of the services received from the Office of the City Attorney fall into four general categories: Advise on legal issues; Enforce as the Chief Prosecutor under the direction of the City Manager as Chief Code Enforcement Officer, the City Charter, ordinances, and policies; Represent the City in legal proceedings; and Administer the legal business of the City either through providing the necessary legal services with in -house resources or overseeing the services provided by outside counsel and managing their relationship with the City. Those functions can all be contracted out or not at your choosing, depending on the model for services you choose. The work performed by this office was presented in detail in our staff report for the January 25, 2011 meeting which is still available on line. 2. Spectrum of Models. There is, broadly speaking, a spectrum of models for the provision of legal services to cities, spanning from fully contracted out to fully in- house. One could say those models range from fully "on- demand" models for fully contracted out cities to fully "integrated" models for totally in -house operations. One major difference between the "contracted out" model and the "in- house' model is the primary contact between the City and the attorney. In both models the City Attorney is hired by, and responsible to, the City Council. In contract cities, however, it is typical to appoint the City Manager as the "representative" of the City under the contract. Usually in contract cities, the City Council Members do not have as much direct access to the City Attorney since it creates an extra cost to the City. Thus, the City Manager becomes the primary point of contact for the City Attorney, reducing the City Attorney's potential cost. If you choose to keep an in -house component of the City Attorney function, the decision of what model you want will revolve around what services you wish to keep in- house. There are two sets of functions in -house counsel can best perform in such a model, "core service" functions (General laws like Brown Act, Public Records Act, standard contracts, simple ordinances and resolutions, and some small role in risk management) DISCUSSION OF OPTIONS FOR PROVIDING OF LEGAL SERVICES TO THE CITY AND STRUCTURE OF THE OFFICE OF THE CITY ATTORNEY June 28, 2011 Page 3 and oversight of outside counsel. The more core services you keep in- house, the more attorneys and staff you will need. Examples of possible models are set out in the table below. From left to right, they span from fully contracted out to fully in- house. I have been pursuing at your direction and have proposed the "Modified Integrated Model' in the table below for FY 2011/12. While I believe that model is best for the City, any model you choose below can meet the needs of the City. The choice depends on what the Council wishes to achieve and cost factors. On Demand Model Modified On- Demand Balanced On- Demand Modified Integrated Fully Integrated Model Model Model and Integrated Model (Function Fully (Predominantly (Balance of (Predominantly In- (All or virtually all Contracted Out) Contracted out Contracted Out House with Limited functions In- House) with Minimal and In- House) tasks contracted out) In- House) Fully Contracted Out Oversight In- Oversight and All In -House Except All In -House House Only Core In -House Matters Beyond Only Expertise and /or Resources Examples: Irvine; Unknown Unknown Current Model and Anaheim; LA; San Mission Viejo; Lake Proposal; e.g. Orange Diego; Santa Ana Forest; Dana Point; Santa Barbara San Clemente No Internal One to two Three to four Proposed at 5.7 Not realistic in light Employees attorneys; one Attorneys; one attorneys; 1 paralegal; of size of City support staff to two support three support staff and maybe staff and one or one paralegal two paralegals As to the two extreme options depicted above, I would recommend against a full in- house City Attorney office. Newport Beach is simply not large enough to support that model for provision of legal services. Should you choose to fully contract out, you would need to conduct a request for proposals process and choose a law firm. That firm would then perform most, if not all, of the work for the City. DISCUSSION OF OPTIONS FOR PROVIDING OF LEGAL SERVICES TO THE CITY AND STRUCTURE OF THE OFFICE OF THE CITY ATTORNEY June 28, 2011 Page 4 If you choose one of the hybrid or balanced models, many defined tasks or functions can be contracted out. At present, we use outside counsel for those matters we lack the expertise to perform the services and for those matters that require too large of an investment of resources for our size of office. If you choose either the Balanced or Modified On- Demand model, many additional functions can be contracted out, including the following: m All litigation: Code Enforcement; Specialty Litigation; and Tort litigation. Code Enforcement as an advisory function can go with the Code Enforcement litigation. o Personnel /Human Resources work since there are many good law firms that handle HR matters, including CSB advice. o All Special Projects, e.g.: • Sunset Ridge Park NOV. • All Development Agreements. • All CEQA Documents. • Group Homes matters: certainly litigation, but also the administrative proceedings, code enforcement, and other functions. • Special harbor issues such as harbor fees, commercial harbor leases, permitting of complex harbor projects, and Coastal Commission issues. • JWA Settlement Agreement extension negotiations and ongoing assistance. 3. Cost of Services. There would be a substantial savings to the City in personnel costs should the Council choose to reduce the size of the in -house operations. There is also some resultant incremental cost increase to go from in -house services to outside services. The total amount of that cost increase depends upon the amount of work assigned to be performed outside of the in -house function. Assuming you choose to reduce the in -house component for provision of legal services to the City, I would recommend an in -house office of between three and four attorneys. In effect, the in -house attorneys would perform core services and outside counsel would perform the balance of services. Staffing costs for models such as this are set out in the table below. DISCUSSION OF OPTIONS FOR PROVIDING OF LEGAL SERVICES TO THE CITY AND STRUCTURE OF THE OFFICE OF THE CITY ATTORNEY June 28, 2011 Page 5 These savings could be offset to some amount, however, by some increase in cost through the use of outside services. We have analyzed the cost of in -house services and compared them to the hourly rate of outside counsel that the City uses. We have used the "fully burdened" total compensation rate for the positions within the City and compared them to similar positions in the outside counsel firms we use. A full spreadsheet comparing rates to internal costs has been prepared, but due to its size has not been attached. A copy is available upon request. A summary table using only averages of outside counsel rates is set out below for your ease of reference. When comparing costs one must recognize that not all internal service hours in the day are "productive" hours such that they would directly translate into "billable hours" from a contract attorney perspective. There are also the offsetting issues based upon the fact that the attorneys of the OCA work well over a forty hour week, and billable hours do not always reflect actual time invested. In the end, the comparison of costs to rates gives some assistance in evaluating relative expense. Pro osed Bud et Three Attorney Model Four AttorneV Model Position No. Costs No. Costs I Difference No. Costs Difference CA 1 290,946.9C 1 290, 946.90 1 290, 946.90 ACA 2 420,893.4E 2 420,893.46 3 629,307.20 208,413.74 DCA 2 368,700.9 0 368,700.96 0 368,700.96 PT DCA 0.7 112,451.1 0 112,451.15 0 112,451.15 Paralegal 1 109,467.42 1 1 109,467.42 1 109,467.42 dmin Asst 1 103,708.20 1 103,708.20 1 103,708.20 Dept sst s 2 150,380.6 1 65,587.8 (84,792,83) 1 65.587 84 8 92.83 Total 9-z .& 9944aamiao,244sQ Z 1357.531.20) These savings could be offset to some amount, however, by some increase in cost through the use of outside services. We have analyzed the cost of in -house services and compared them to the hourly rate of outside counsel that the City uses. We have used the "fully burdened" total compensation rate for the positions within the City and compared them to similar positions in the outside counsel firms we use. A full spreadsheet comparing rates to internal costs has been prepared, but due to its size has not been attached. A copy is available upon request. A summary table using only averages of outside counsel rates is set out below for your ease of reference. When comparing costs one must recognize that not all internal service hours in the day are "productive" hours such that they would directly translate into "billable hours" from a contract attorney perspective. There are also the offsetting issues based upon the fact that the attorneys of the OCA work well over a forty hour week, and billable hours do not always reflect actual time invested. In the end, the comparison of costs to rates gives some assistance in evaluating relative expense. DISCUSSION OF OPTIONS FOR PROVIDING OF LEGAL SERVICES TO THE CITY AND STRUCTURE OF THE OFFICE OF THE CITY ATTORNEY June 28, 2011 Page 6 HOURLY RATE COMPARISON TABLE Of course the actual cost of legal services depends in the end on what functions are performed by attorneys and which are not. You have the ultimate discretion on that issue, within the bounds of the legal practice of law of course. CONCLUSION I recommend the Council continue to pursue the Modified Integrated Model for legal services as proposed in the budget. The choice, however, is fully the Council's to CNB Outside Counsel Average Rate Outside Counsel Average Rate Types of Work Advisory and Litigation Advisory Litigation Sr. Partner (CA) $ 144.84 $ 346.42 $ 346.42 Partner (ACA) $ 105.39 $ 302.50 $ 244.33 Sr. Associate (ACA) $ 100.68 $ 263.54 $ 227.67 Associate (DCA) $ 87.89 $ 245.00 $ 227.67 Cumulative Attorney Rate Avers e 109.70 289.36 261.52 Paralegal Rates $ 52.06 $ 156.63 $ 153.67 Of course the actual cost of legal services depends in the end on what functions are performed by attorneys and which are not. You have the ultimate discretion on that issue, within the bounds of the legal practice of law of course. CONCLUSION I recommend the Council continue to pursue the Modified Integrated Model for legal services as proposed in the budget. The choice, however, is fully the Council's to DISCUSSION OF OPTIONS FOR PROVIDING OF LEGAL SERVICES TO THE CITY AND STRUCTURE OF THE OFFICE OF THE CITY ATTORNEY June 28, 2011 Page 7 CONCLUSION Please give direction on what model for the provision of legal services you wish to pursue. I continue to recommend the Council pursue the Modified Integrated Model for legal services as proposed in the budget. The choice, however, is fully the Council's to make. The decision will turn on what, if any, legal services the Council wishes to keep in -house and what the Council wishes to send to outside counsel. The financial impact will be decided by how the Council wishes to strike that balance. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Submitted by: Office of the City Attorney By David R. Hunt City Attorney [A08- 000361 - M&CC from DRH 0628.11 M OCA Strudwe Office of the City Attorney Internal Resources 2008/09 2010 & 2011/12 1 City Attorney 1 City Attorney 2 Assistant City Attorneys 2 Assistant City Attorneys 1.7 Deputy City Attorneys 2.7 Deputy City Attorneys .7 Paralegal 1 Paralegal 5.4 FTE Professional Employees 6.7 FTE Professional Employees Office of the City Attorney: Organizational Chart - Assignments /Structure CITY ATTORNEY David R. Hunt (Administrative Assistant to the City Attorney, Debbie Alcaraz) Mayor and Council City Manager City Clerk Oversee Office, Claims and Pre - Claims, Litigation, Code Enforcement and All Outside Counsel Assistant City Attorney Assistant City Attorney Leonie Mulvihill Mynette D. Beauchamp (Department Assistant, Cristal McDonald) (Office Assistant, Sharon Hall (Temp)) Administrative Services Fire Department (Including Revenue Division) Human Resources Department Municipal Operations Department (Including Risk Mgt Matters) (General Services and Utilities Divisions) Police Department Library Services Public Information Office Community Development Department Recreation and Senior Services Department (Planning and Building Divisions) Public Works Department (Including Harbor Resources Division) (Including first level oversight of Outside Counsel for (Including first level oversight of Outside Counsel for Advisory Matters Arising From Assigned Departments) Advisory Matters Arising From Assigned Departments) Deputy City Attorney Deputy City Attorney (0.7 FTE) Deputy City Attorney Michael Torres Catherine M. Wolcott Kyle E. Rowen (Department Assistant Cristal (Administrative Assistant to the City (Office Assistant, Sharon McDonald) Attorney, Debbie Alcaraz) Hall(Temp)) Assist and support ACA Assist and Support City Attorney Assist and support ACA Mulvihill and ACA Beauchamp Beauchamp Projects and Assignments as Group Homes Administrative Projects and Assignments as Directed Matters Directed' Assist and Support on Code Assist and Support City Assist and Support City Enforcement and Litigation Matters Attorney with Code Attorney with City Clerk Projects and Assignments as Enforcement and Litigation Matters Directed' Matters Paralegal Kristy Asklinz Litigation Support and Calendaring Code Enforcement including Dog Bites Liaison to Outside Counsel Projects and Assignments as Directed [A09- 00423] —0" Assignments — Structure (03.04.2011) (Rev March 4, 2011) Resources By Task i Advise ■ Enforce 6% 13.4% 6% Represent 0 Administer 74.6% Paradigm Options Modified Balanced On Demand Model On- Demand Model On- Demand and Modified Integrated Model Fully Integrated Model Integrated Model (Function Fully Contracted Out) (Predominantly (Balance of Contracted (Predominantly In -House with (All or virtually all functions Contracted out with Out and In- House) Limited tasks contracted out) In- House) Minimal In-House) Fully Contracted Out Oversight In -House Oversight and Core In- All In -House Except Matters All In -House Only House Only Beyond Expertise and /or Resources Examples: Irvine; Mission Unknown Unknown Current Model and Proposal; Anaheim; LA; San Diego; Viejo; Lake Forest; Dana Point; e.g. Orange; Santa Barbara Santa Ana San Clemente No Internal Employees One to two attorneys; Three to four Attorneys; Proposed at 5.7 attorneys; 1 Not realistic in light of size of one support staff and one to two support staff paralegal; three support staff City maybe one paralegal and one or two paralegals Paradigm options: Assigned out Tasks All litigation: Code Enforcement; Specialty Litigation; and Tort litigation. Code Enforcement as an advisory function can go with the Code Enforcement litigation. Personnel /Human Resources work since there are many good law firms that handle HR matters, including CSB advice. Paradigm Options: Assigned Out Tasks All Special Projects, e.g.: Sunset Ridge Park NOV. All Development Agreements. All CEQA Documents. Group Homes matters: certainly litigation, but also the administrative proceedings, code enforcement, and other functions. Special harbor issues such as harbor fees, commercial harbor leases, permitting of complex harbor projects, and Coastal Commission issues. .JWA Settlement Agreement extension negotiations and ongoing assistance. Staff Cost Reduction Proposed Budget Three Attorne Model Four Attorney Model Position No. Costs No. Costs Difference No. Costs Difference CA 1 290,946.90 1 290,946.90 - 1 290 946.90 ACA 2 420 893.46 2 420,893.46 - 3 629,307.20 208,413.74 DCA 2 368,700.96 0 - 368 700.96 0 368 700.96 PT DCA 0.7 112,451.15 0 - 112,451.15 0 112 451.15 Paralegal 1 109,467.42 1 109,467.42 - 1 109,467.42 Admin Asst 1 103,708.20 1 103 708.20 - 1 103 708.20 Dept Assts 2 150 380.67 1 65 587.84 84 792.83 1 65 587.84 84 792.83 Total 9-7 Z Summary ®f Dourly Rate Comparison Table CNB Outside Counsel Average Rate Outside Counsel Average Rate Types of Work Advisory and Litigation Advisory Litigation Sr. Partner (CA) $ 144.84 $ 346.42 $ 346.42 Partner (ACA) $ 105.39 $ 302.50 $ 244.33 Sr. Associate (ACA) $ 100.68 $ 263.54 $ 227.67 Associate (DCA) $ 87.89 $ 245.00 $ 227.67 Cumulative Attorney Rate I—W&M $ 2$4.36 $-261M 9Yerra a Paralegal Rates $ 52.06 $ 156.63 $ 153.67 Paradigm Options Modified Balanced On Demand Model On- Demand Model On- Demand and Modified Integrated Model Fully Integrated Model Integrated Model (Function Fully Contracted Out) (Predominantly (Balance of Contracted (Predominantly In -House with (All or virtually all functions Contracted out with Out and In- House) Limited tasks contracted out) In- House) Minimal In-House) Fully Contracted Out Oversight In -House Oversight and Core In- All In -House Except Matters All In -House Only House Only Beyond Expertise and /or Resources Examples: Irvine; Mission Unknown Unknown Current Model and Proposal; Anaheim; LA; San Diego; Viejo; Lake Forest; Dana Point; e.g. Orange; Santa Barbara Santa Ana San Clemente No Internal Employees One to two attorneys; Three to four Attorneys; Proposed at 5.7 attorneys; 1 Not realistic in light of size of one support staff and one to two support staff paralegal; three support staff City maybe one paralegal and one or two paralegals The End M\\\