HomeMy WebLinkAbout1998 - MINUTES - 9/30/1998 CITY OF PALM SPRINGS
CITY COUNCIL MINUTES
SEPTEMBER 30, 1998
An Adjourned Regular Meeting of the City Council of the City of Palm Springs, California,
was called to order by Mayor Kleindienst, in Studio B, City Hall, 3200 Tahquitz Canyon
Way, on Wednesday, September 30, 1998, at 7:00 p.m.,
ROLL CALL: Present: Councilmembers Barnes, Oden, Reller-Spurgin, and Mayor '
Kleindienst
Absent: Councilmember Hodges
The meeting was opened with the Salute to the Flag.
REPORT OF POSTING OF AGENDA: City Clerk reported that the agenda was posted in
accordance with Council procedures on September 25, 1998.
PUBLIC COMMENTS:
a) Comments concerning Item 1:
Tom Kieley, 977 S. Riverside, expressed appreciation to the Council for its
review of the process, adding that it is complicated, but: there are only a few
issues: that the City received one of the best proposals from one of the best (096-
insurance companies, which would be best for the City and its employees; 001)
that it is for less than what has been spent for worker's compensation
coverage over any of the last six years, except one; that the City has an
opportunity to save money. He stated it was important for everyone to
understand that the benefits are as good, or better than, what employees are
now receiving, and that there is immediate access to medical approval.
Dick Sroda, resident, stated that he was disappointed in the report of the
Assistant City Manager, which he felt said to do nothing; that he (lid not
know of any companies that do business this way; that the City has no
medical staff to make the decisions, and that no one other than that type of
person should be deciding who should be able to file a claim; that the
insurance company has people who try to find ways of getting people back
to work; that the City does not have outside medical analysis whether
claims should be paid either upward or downward; and that these are
taxpayer dollars, and some claims are more than twenty-five years old.
COUNCIL COMMENTS/ANNOUNCEMENTS/INTERAGENCY REPORTS:
a) Mayor and Councilmembers reported on various civic and community
organizational meetings and events which they attended, subsequent to the
last regular meeting, and announced upcoming events of community
interest.
Mayor and Councilmember Barnes expressed appreciation for the work of
the Fire Department in combating a fire in the uptown area on September
28. Councilmember Oden expressed appreciation for the summer park
concerts, and the new tourism advertising signs.
b) Mayor reported on a new committee assignment he has accepted, i.e.,
MSRC (Mobile Source Reduction Committee) in developing a work
program - his focus to be at the forefront in obtaining grant funds for Palm
Springs to mitigate pollution; that Palm Springs was the only City which
had a staff person present, and that SunLine will be asked to join in,
possibly looking at moving from even CNG to hydrogen fueled vehicles.
He also requested information concerning the Super Shuttle, i.e., whether it
services local hotels; whether there are different regulations concerning
Council Minutes
9-30-98, Page 2
posting of rates for the taxicabs versus the shuttle; and how cities are
preparing to continue funding in terms of CMAQ current funding for street
sweeping..
' LEGISLATIVE ACTION:
1. CITY'S WORKER'S COMPENSATION INSURANCE PROGRAM REVIEW
City Manager stated that he supports privatizing when it make sense to do so, and
he was intrigued by the proposal and at looking at this possibility; that his concern
was whether it would cost the same, less or more than what the City is currently
experiencing; that he was concerned complicated discussions never seemed to lead
to any answer; and that there is no question as to the quality of the insurance
company.
Assistant City Manager reviewed details of his report, a copy of which was (096-
provided to the Council, noting the following points: 001)
a) Prior to January, 1995, the worker's compensation insurance rates were
established by the State on an annual basis; and that self-insured public
agencies were not required to comply with those established rates.
b) The law establishing those annual minimum rates was repealed in January,
1995.
c) Labor Code 4850 provides for a mandatory 100% salary continuation for
safety employees while on injury leave for up to one year.
' d) Fifteen insurance firms were surveyed in 1995 to provide worker's
compensation quotes, of which only one quoted a one-year premium of
$1,157,531, which did not include "4850" pay, nor any claims costs of
cases which had occurred prior to the date of the coverage - referred as the
"tail".
e) Eighteen insurance firms were surveyed in 1998, of which 8 responded, and
only one was a fully-insured w/c program, i.e., State Compensation
Insurance Fund, for $1,989,235 without "4850" and $2,450,910 including
"4850" pay. Seven quoted excess coverage only.
t) Dodge, Warren & Peters, an insurance brokerage firm, submitted its own
survey of ten carriers, of which four responded, and of which Wausau
provided the lowest quote of$1,356,000 which included $56,000 for claims
handling and costs. It was this proposal which was presented to the
Council, which led to the September 9 study session, which further led to
request for additional information and analysis by the city staff.
g) The City's Human Resource Manager is a Certified Worker's Compensation
Administrator, having received that from the Department of Self-Insurance
Plans in 1980, otherwise the City could not administer its own program;
' that the City purchases excess coverage insurance through a joint powers
authority, which is audited biennially. He highlighted aspects of the audit,
which indicated that the case load is within the state-recommended limits,
and giving a "good" rating in terms of "Quality of the Claims Staff" and
"Effectiveness of Program". HR Manager added that a medical billing
review consultant is also used to review claims.
Council Minutes
9-30-98, Page 3
h) The Risk Management Fund budget includes the following cost centers:
employee benefits, worker's compensation, liability, property and
unemployment insurance, for which amounts are estimated each year; that
there is generally an overall surplus in the fund each year, and not unusual
if one cost center might exceed its estimated allocation; and that OMB is '
authorized to move funds within the individual allocations, but a change in
the scope of use of the funds would require Council action.
Michael Harrison, partner of Conrad & Associates, the City's external auditors,
stated that he was asked to review the video tape of the September 9 study session,
which he did twice; that there were statements made about what was or was not
audited; that one statement made by a representative of D.W.P. was that the Public
Self-insurers Report was audited and signed by the Risk Manager; that such a ireport
is a document that is certified and filed by the HR Manager, and there is no
requirement that it be audited by an outside auditor; that it is not an audited form,
and he was not aware that anyone, unless an internal audit at the State level, audits
it; that it is filed on a different basis than what the outside audit is conducted on.
He stated that a second statement was made that the figure $1,545,000 came off of (096-
one of the reports which goes to the State; that the amount was incorrect, and the 001)
actual amount is $1,442,000, which is also the number on the audited financial
statements for the year ended June 30, 1997; that Mr. Kieley made a statement that
this amount was about one-fourth of what it should be, which he considered to be
irresponsible; that the independent auditor obtains a listing of the incurred claims as
reported by the Claims Administrator, as of the balance sheet date, to look to see if
there are any problems; that in the most recent report in 1997, the excess insurance
carrier, which make the biennial report, indicated that claims were deemed to be
adequate and those were the claims in the same incurred and reported claims in
outstanding list ; that Conrad follows generally acceptable accounting principles of '
self-insurance funds; that Gasby (?) #10 for the audit of self-insured programs of
local governmental agencies is also followed, and both incurred and reported as
well as incurred but not reported are covered. He explained the difference between
the accrual adjustments made by staff, and the basis for the report to the State; that
he was asked by staff to validate the numbers as to factualness; and he reviewed
each of the exhibits - those in his letter which he provided a copy of, and those in
the Assistant City Manager's report of this date, and that the numbers were
"agreed."
Assistant City Manager stated that former Mayor Lloyd Maryanov, a CPA, was
asked to also look at the schedules and he confirmed that they are correct as to a
cash basis, but might be different on an accrual basis; and that the excess of the
minimum $490 per week salary continuation is charged to the individual department
salary accounts.
Councilmember Reller-Spurgin stated that the exhibits and information show that
these are not just worker's compensation budget numbers, rather it is many funds in
each variable.
HR Manager stated that the oldest case involved a police officer with a heart
condition, and which involved a litigation award for future: medical care; that
medical professionals were used to try to settle the case, but that did not occur; that '
the person died six weeks ago; that most of the older cases are safety unit members,
and were difficult, litigated settlements; that there are 26 open cases prior to 1994,
not all of which have activity or costs associated with them; that an annuity was
purchased a year ago for life pensions on older cases; that three cases may go back
to the 1970s, but most are in the 1990s. .
Councilmember Oden stated that he was concerned that the "tail" costs will become
unmanageable, and perhaps the Council should make a decision before getting to
that point, while it has people who can assist it before reaching that point.
Council Minutes
9-30-98, Page 4
Councilmember Reller-Spurgin stated that, without jeopardizing what is provided to
the employees, her goal in this matter is to reduce City costs; that everyone agrees
that the City is very proud of its safety employees and the work they do, but her
' concern is when will the City stop the "bleed"; that the Council has wrestled with
this, and there is no guarantee that the rates will be raised at the end of the three
years; that the City could again become self-insured; that the Council would be able
to tell if it was ahead or behind; that conversely, there could be a bad year, and the
"tail" from that would have to be carried forever; that she did not know what the
right thing to do is, but felt that it would not be right to do nothing; and she made a
motion to make a change, from self-insured to the Wausau proposal; said motion (096-
failed for lack of a second.
001)
Councilmember Oden stated that he would like to see the City get out of the risk
management business, and did not know if this is the time or the group to do so;
that he did not have a problem with the proposal, but once out of the business for
three years, it is not certain that the City could just get right back into it, and have
an employee in place who knows the business; that he did not know if three years
gave the ability to make the decision.
City Manager stated that getting out of the risk business would require many hours
to look at all of the components of the Risk Fund, and the worker's compensation
aspect was comparatively easy to understand, and suggested that workshops, in
which many hours could be dedicated to examine the various categories, could be
set up.
In response to question by Council, Assistant City Manager stated that Wausau does
t not currently have worker's compensation coverage experience. City Manager
noted that it is a very large company; and that if the Council wished to seek
proposals again, he would want Procurement to become involved to get a
comprehensive package for bidding.
Councilmember Oden stated he appreciated the report that was given, noting that
there was a lot about the budget process that was not understood, therefore, it was
helpful; that it would have been helpful to have explored everything at one time.
City Manager stated that it would have taken the same amount of staff time simply
to arrive at the report to make the issue understandable; that if it was further
complicated by adding other risk areas, it would have been more confusing, since
the areas are different specialties.
Councilmember Reller-Spurgin stated that the Council committed to looking at
anything and everything to reduce costs, and if it is going to do that, it must be
objective and not defensive.
Councilmember Barnes stated that he concentrated on the numbers, and felt he had
a good understanding of them; that the "tail" of$465,000 will be a cost whether the
City stays self-insured, or goes with an insurance carrier; that he questioned if there
is some point at which the insurer would pick up those costs; that he did not see
' any way to dispute the numbers, which he believed to be true, nor how it could be
justified to spend that much money for less risk.
OMB Manager stated that the "crossover" point would be between 5-7 years, in
terms of the City's "tail" and that of a carrier.
Councilmember Oden stated that if there were more time and the crossover point
were nearer, it would be easier to make a decision.
Council Minutes
9-30-98, Page 5
Mayor stated that faith must be placed in the numbers at some point; that he (lid not
see anything presented at this time to persuade him to deviate from the current
practice; that the education process has been enlightening, although excessive to
find out that it is all right where it is at; that in the future he hoped this would be
rectified so that neither the Council, staff or community would have to wrestle with ,
something for twelve months; that the Council has stated that it will continue to
review and investigate everything; that in terms of self-insurance, there would need
to be improved claims services and control over the way the City does it; that there
are potentially improved labor relations because the City handles its own worker's
compensation, with added controls in terms of medical and litigation; and that the
self-insured program is "contained cost reducing" by its function; that a third party
insurer is profit-motive driven; that any interest the City incurs in the fund is folded
back to make the reserves stronger; that the status quo is acceptable, because: there
is not enough impetus to move from that point; and that the analysis has been
thorough and complete.
Councilmember Barnes stated that one set of numbers can affect another at any
given point, e.g., the stock market investors experiences; and that the Council must
think about the next 3-5 years, and there is still the two-year gap.
No further motions were made, and no specific action was taken..
ADDITIONAL LEGISLATIVE ITEMS: (Satisfies agenda posting requirement; materials
provided at meeting) None
ADDED STARTERS: (Determine eligibility for consideration) None
ADJOURNMENT '
There being no further business at 9:30 p.m., the Mayor declared the meeting adjourned;
Council remained in study session.
JUDITH SUMD;H
City Clerk
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