Amid questions, cities stick with Rural/Metro

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Amid questions, cities stick with Rural/Metro

By Clements

The Daily News

Published December 30, 2001

TEXAS CITY — After Texas City commissioners approved a plan to

increase the subsidy paid to Rural/Metro Corp. for ambulance service, one

commissioner questioned bids the company has submitted in Galveston County and

elsewhere.

“Does it not concern us that these guys blow bids like they did (in

Pasadena)?” Commissioner Matt Doyle asked. “There’s a big disparity in those

Pasadena bids. When do we become concerned about this?”

The question of bids was one of several concerns officials have

acknowledged about the ambulance company, its business practices and its

financial condition.

Rural/Metro recently won a contract to provide ambulance service in

Pasadena by submitting a bid that was less than half the amount of the next

lowest bid. In 1998 it won its contract in Galveston County with a similar bid.

The ambulance company now is renegotiating that contract with

Galveston County, Texas City, La Marque, Dickinson, Hitchcock, Bayou Vista and

Tiki Island.

In April the company asked for a 190-percent increase in the subsidy

— from $216,500 to $635,000.

Each local government pays a percentage of the subsidy. The local

governing bodies have been considering the contract. Bayou Vista is expected to

be the last city to vote — on Jan. 16.

The group has settled on an increase to $500,000, a reduction in the

standards on the time to answer calls, a loosening of the insurance requirements

and an increase in the amount of subsidy the company can ask for over the next

two years.

City and county officials said they could have solicited new bids

for the contract. But going by recent bids in other communities, including

Pasadena, they said they believe Rural/Metro’s request was reasonable.

Curtiss Brown, Galveston County’s director of community services,

said the probable cost increase and prospect of changing companies encouraged

officials to work with Rural/Metro rather than look for a new provider.

“The fear was that bidding would result in a reduction in the levels

of service and increased expenses,” Brown said.

The bid Rural/Metro submitted in Pasadena was similar to other bids

it has submitted around the state.

In Pasadena, Rural/Metro bid $425,000 to provide 911 and ambulance

services. The next lowest bid was $1.5 million.

In 1998 the company bid $216,500 on the Galveston County contract.

The next lowest bid was more than $400,000. The highest bid submitted for that

contract was around $900,000.

The situation concerning Rural/Metro and the Montgomery County

Hospital District in Conroe was similar.

In 1995, Rural/Metro won the contract there by submitting a bid of

$750,000. Less than three years later, after being accused of not living up to

requirements in its contract, Rural/Metro officials told the hospital district

board the company would need $7.9 million and a reduction in levels of service

to be successful.

Eventually, the district took over the contract, and Rural/Metro

left Montgomery County.

Texas City Mayor Garza said Rural/Metro officials told him

they could bid so low in Pasadena because that city’s proximity to Galveston

County made it possible to consolidate some operations, such as dispatch

service.

“They say this could save them about $125,000 per year,” Garza said.

Mike , vice-president over Rural/Metro’s Texas operations,

said he couldn’t explain why his company’s bids were so much lower than its

competitors’ without knowing how they formulated their bids.

“Without knowing how their operations work, I can’t venture a guess

as to how their bids work,” he said.

said he and his staff get as much information as they can on

each contract. They then tailor the bid to the data.

He said his company planned to be as competitive as possible.

acknowledged that the company had asked clients for more money, but said

those requests were because of factors beyond the company’s control.

pointed out that Rural/Metro completed three years of its

five-year contract in Galveston County at the lower subsidy.

He said the reason for the request was that changes in reimbursement

policies by Medicare and private insurance providers had made it more difficult

for the company to be profitable.

“We have provided a very good service,” he said.

How long it can continue to provide that service might be in

question. The company has posted losses for the past two fiscal years and is

negotiating what would be its seventh waiver from its creditors.

Rural/Metro’s stock is in danger of being de-listed from Nasdaq

because its price has dropped to less than $1 per share. At one time the

company’s stock traded for around $35 a share.

said the company had been undergoing restructuring and much

of the losses were attributable to that. He pointed out that the company posted

a loss of $1.2 million for the last quarter of fiscal 2001. This is an

improvement over the $4 million loss posted the year before.

said company officials were confident they would keep the

operation afloat and would be able to honor the contract in Galveston County.

When asked if there was a possibility the company may go under,

said there is no way to be certain of any company’s future.

“I’d like to think not, but I can’t see the future,” he said.

Brown said the Galveston County governments that signed the contract

were aware of Rural/Metro’s financial condition.

Brown said Texas City’s finance director, Tom Pedersen, reviewed the

company’s financial statements and gave them an honest evaluation.

“He couldn’t tell us they were a solid gold company,” Brown said.

However, he said that Rural/Metro had done more than the other

companies offered to do while receiving less money. Brown pointed out that even

with the increase, Rural/Metro’s price is lower than the other bids the group

received.

“What we knew about (Rural/Metro) was that, although they had

financial problems, they were doing the job,” Brown said.

Doyle said he is also aware of the problems facing Rural/Metro. He

said Rural/Metro had honored its contract and deserved the chance to work

through its financial struggles. He also said the signatories were more

committed to providing ambulance service than helping Rural/Metro.

“If (Rural/Metro can’t fulfill its agreement), we’ll get service

provided,” he said.

Garza said he believed Rural/Metro would continue to provide service

in Galveston County. He said the company had been dealing with its financial

challenges since it entered the contract and he though it would continue to do

so.

“I believe this agreement will help Rural/Metro to save enough money

to stay in operation,” he said.

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