Report Prepared by: Jeff Bennyhoff, Director of Information Technology
Title
SUBJECT: Authorization to Increase the Expenditure Authority Utilizing the State of California’s CALNET 4 Agreement with AT&T Corporation Providing Telecommunication Services From $300,000 to a Total not to Exceed Amount of $475,000
REPORT IN BRIEF
Considers authorizing to increase the expenditure authority utilizing the State of California’s CALNET 4 Agreement Category 16, Long Distance Calling, Category 17, Toll Free Voice Calling, Category 18, Analog Service, Category 20, MPLS Data Network Services, Category 22, Cloud Hosted VoIP Services, Category 23, Metropolitan Area Network (MAN) Ethernet Services and Features, Category 24, Flat Rate Internet Services, Category 25, Sustained Bandwidth Internet Services and Features, Category 30, broadband with internet services, with AT&T Corporation providing telecommunication services from $300,000 to a total not to exceed amount of $475,000.
RECOMMENDATION
City Council - Adopt a motion authorizing to increase the expenditures authority utilizing the State of California’s CALNET 4 Agreement with AT&T Corporation providing telecommunication services from $300,000 to a total not to exceed amount of $475,000 through Fiscal Year 2027-2028.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Deny the request; or,
3. Refer back to staff for reconsideration of specific items as requested by Council.
AUTHORITY
Charter of the City of Merced, Section 3.04.120 of the Merced Municipal Code.
CITY COUNCIL PRIORITIES
As provided for in the 2024-2025 Adopted Budget
DISCUSSION
In July 2021, the City of Merced executed an agreement with AT&T Corporation for telecommunications services under the State of California’s competitively bid CALNET 4 Agreement. This agreement provides the City with access to a broad range of telecommunications services at State-negotiated rates. Cellular phone and mobile data services are excluded from this agreement and are instead procured under separate contracts with AT&T and Verizon Wireless.
Services obtained through the CALNET 4 agreement include Long Distance Calling, Toll Free Voice Calling, Analog Service, MPLS Data Network Services, Cloud Hosted VoIP Services, Metropolitan Area Network (MAN) Ethernet Services, Flat Rate Internet Services, Sustained Bandwidth Internet Services, and Broadband with Internet Services. At the time of the original approval, the City Council authorized total expenditures not to exceed $300,000. In February of 2025, the California Department of Technology executed Amendment 23 to the CALNET 4 contract, exercising the State’s option to extend the terms of several services for an additional three (3) years. As a result, the contract periods for many categories now extend through June 30, 2028.
This item does not seek City Council authorization to execute or amend the existing agreement with AT&T under the State’s CALNET 4 master contract, as such authority was previously granted by the City Council in 2021. That action included delegating authority to the City Manager, or designee, to execute all necessary documents and future amendments in accordance with the provisions of the State agreement. This request is solely to seek City Council authorization to increase the City’s expenditure authority in order to accommodate anticipated telecommunications needs over the extended term of the agreement.
To align with the extended contract term and anticipated service needs, staff recommends increasing the City’s total expenditure authority under the CALNET 4 agreement with AT&T from $300,000 to an amount not to exceed $475,000 through the end of Fiscal Year 2027-2028. The table below provides a summary of actual, estimated, and projected expenditures for the full contract term. The increase in costs beginning in Fiscal Year 2025-2026 is primarily attributable to the addition of a telecommunications circuit required to support public safety two-way radio coverage across the UC Merced campus, which became necessary following the annexation of the campus into the City’s jurisdiction. Additionally, a 5% increase in costs is projected in Fiscal Years 2026-2027 and 2027-2028 to account for potential fluctuations in service demand and unforeseen telecommunications needs.
Expenditure Summary Table
|
Fiscal Year |
Expenditures |
Expenditure Type |
|
21-22 |
$ 67,219 |
Actual |
|
22-23 |
$ 62,530 |
Actual |
|
23-24 |
$ 66,650 |
Actual |
|
24-25 |
$ 66,000 |
Estimated |
|
25-26 |
$ 76,650 |
Projected |
|
26-27 |
$ 80,483 |
Projected |
|
27-28 |
$ 84,507 |
Projected |
|
|
|
|
|
|
$ 474,032 |
Estimated Contract Total |
Contract Term Details by Category
|
Category |
Description |
Award Date |
Initial End Date |
Extensions |
|
16 |
Long Distance Calling |
01/03/2019 |
01/02/2024 |
5 x 1-year extensions |
|
17 |
Toll Free Voice Calling |
01/03/2019 |
01/02/2024 |
5 x 1-year extensions |
|
18 |
Analog Service |
01/03/2019 |
01/02/2024 |
5 x 1-year extensions |
|
20 |
MPLS Data Network Services |
04/15/2020 |
06/30/2025 |
3 x 1-year extensions (to 2028) |
|
20 |
MPLS Data Network Services |
04/15/2020 |
06/30/2025 |
3 x 1-year extensions (to 2028) |
|
22 |
Cloud Hosted VoIP Services |
04/15/2020 |
06/30/2025 |
3 x 1-year extensions (to 2028) |
|
24 |
Flat Rate Internet Services |
04/15/2020 |
06/30/2025 |
3 x 1-year extensions (to 2028) |
|
25 |
Sustained Bandwidth Internet Services |
04/15/2020 |
06/30/2025 |
3 x 1-year extensions (to 2028) |
|
30 |
Broadband with Internet Services |
04/15/2020 |
06/30/2025 |
3 x 1-year extensions (to 2028) |
Impacts of Not Approving the Increase in Expenditure Authority
If the City Council does not approve the proposed increase in expenditure authority, the City will reach the $300,000 expenditure limit previously authorized under the CALNET 4 agreement during Fiscal Year 2025-2026. Upon reaching this threshold, the City would no longer be able to continue utilizing AT&T’s telecommunications services without initiating a separate competitive procurement process. This would result in the City losing access to the favorable pricing, terms, and conditions negotiated under the State’s master agreement. Consequently, the City may be required to procure services at prevailing commercial or tariffed rates, which are generally higher, potentially leading to increases in costs for essential telecommunications services and possible delays in service delivery. These outcomes could negatively affect the City’s critical operations.
AT&T’s Role as Carrier of Last Resort (COLR) and Eligible Telecommunications Carrier (ETC)
AT&T, as the Incumbent Local Exchange Carrier (ILEC) for the City of Merced and surrounding areas, holds the designations of Carrier of Last Resort (COLR) and Eligible Telecommunications Carrier (ETC) from the California Public Utilities Commission (CPUC). These regulatory obligations require AT&T to provide essential telecommunications services within its designated service area, even in regions where other providers, generally Competitive Local Exchange Carriers (CLECs), may not be willing or able to offer services. As a result, AT&T is uniquely positioned to provide certain critical services that CLECs, which may focus on more profitable or select services, are unlikely to offer.
If the City is to move away from the CALNET 4 agreement and initiate a new competitive procurement process, it is likely that CLECs would only bid for specific services that align with their business interests, rather than offering a comprehensive solution for the full range of services AT&T is legally obligated to provide as the COLR. CLECs typically prioritize services that are more profitable and may not bid on those that are less commercially viable. Consequently, the City may face difficulties in securing bids for all necessary services, leading to potential issues with service availability, prioritization, and support for vital infrastructure.
Additionally, should the City be forced to seek services outside the CALNET 4 framework, AT&T may be unwilling to provide certain legacy services at reasonable pricing terms outside the agreement. As the ILEC, AT&T is the primary provider for many of these services, and other CLECs may not have the capacity or inclination to fulfill these obligations. This could result in a limited pool of service providers, higher costs, and service gaps, potentially undermining the City’s ability to support critical operations, particularly in areas like public safety and emergency response.
Use of Telecommunications Providers
While the City uses a variety of telecommunications providers, including Verizon, Comcast, Vast, Cal.Net, Starlink, and Pure IP, for different services, it has exclusively utilized the CALNET 4 agreement for procurements involving AT&T. This agreement provides access to pre-negotiated pricing and terms. The City selects the service providers based on the specific requirements and pricing for each type of service, ensuring the most effective and cost-efficient solutions are implemented.
IMPACT ON CITY RESOURCES
The funding will be included in the budget process under each departments telephone account line as determined by the department’s telecommunication needs.
ATTACHMENTS
1. Calnet 4 Agreement
2. 2021 Administrative Report