HomeMy WebLinkAboutItem 6h. Appropriation of Undesignated Insurance Fund Balance to pay Liability Claims costs for FY 2022-23 Item 6h
Department: Human Resources
Cost Center: 3050
For Agenda of: 3/21/2023
Placement: Consent
Estimated Time: N/A
FROM: Nickole Domini, Human Resources Director
Prepared By: Kate Auslen, Risk Manager
SUBJECT: APPROPRIATION OF UNDESIGNATED INSURANCE FUND BALANCE
TO PAY LIABILITY CLAIMS COSTS FOR FISCAL YEAR 2022-23
RECOMMENDATION
Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis
Obispo, California, approving an amendment to the 2022-23 Budget Allocation in the
Insurance Fund Fiscal Year 2022-23.”
POLICY CONTEXT
The 2021-23 Financial Plan was adopted by Council on June 1, 2021 and the 2022 -23
Supplemental Budget was adopted by Council on June 7, 2022. Amendments to the
annual budget are accomplished by Resolution, which is provided as Attachment A to this
report.
DISCUSSION
Background
The City of San Luis Obispo is a member of the California Joint Powers Insurance
Authority (CJPIA) which provides workers’ compensation and general liability insurance
for the City and other member agencies throughout the State. In 2016, the City entered
into an agreement with CJPIA and Carl Warren, a third-party administrator, to manage its
liability claims. Carl Warren provides intake of claims, legal counsel, investigation of
claims, and represents the City in mediations and court cases.
At the beginning of FY 2022-23, $500,000 was placed in the reserve for the Excess
Liability Insurance Program and was expected to be sufficient for anticipated expenses
in FY 2022-23. In December 2022, Council appropriated an additional $300,000 to cover
the anticipated cost of claims. However, the cost of claims and time to resolution
continues to fluctuate and is difficult to predict. Two high -cost claims were settled this
year, and several other claims that have not yet settled require third party legal expertise
and lengthier litigation, resulting in higher than anticipated costs.
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Item 6h
Staff therefore recommends appropriating $550,000 of the City’s Insurance Fund balance
to cover anticipated claims and related expenses for the remainder of FY 2022-23. This
number is based on the average monthly expenses to date and an analysis of claims
likely to settle during FY 2022-23. The Insurance Fund has a current fund balance of
about $1.5M.
PUBLIC ENGAGEMENT
Public comment on the item can be provided to the City Council through written
correspondence prior to the meeting and through public testimony at the meeting.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act does not apply to the recommend ed action in
this report, because the action does not constitute a “Project” under CEQA Guidelines
Sec. 15378.
FISCAL IMPACT
Budgeted: No Budget Year: 2022-23
Funding Identified: Yes
Fiscal Analysis:
Funding Sources
Total
Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost*
General Fund 1,500,000 550,000 950,000 N/A
State
Federal
Fees
Other:
Total 1,500,000 550,000 950,000 N/A
It is the City’s policy to maintain the Insurance Fund at 75% confidence level based on a
five-year average claims experience. The current balance of the Insurance Fund is about
$1.5M. If $550,000 is appropriated, the remaining balance of $950,000 will rem ain
available for future insurance and claims-related expenses.
If any funding appropriation remains at year-end, it will be returned to fund balance from
which it can be re-allocated with the 2023-25 Financial Plan.
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Item 6h
ALTERNATIVES
Do not approve the resolution for funding allocation. This alternative is not
recommended as the City has delegated authority to CJPIA and Carl Warren as third -
party administrators and this funding will cover claims-related costs both anticipated and
for work already in progress.
ATTACHMENTS
A - Draft Resolution adopting an amendment to the FY 2022-23 Budget Allocation in the
Insurance Fund
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Page 254 of 399
R ______
RESOLUTION NO. _____ (2023 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, APPROVING AN AMENDMENT TO THE 2022-
23 BUDGET ALLOCATION FOR FISCAL YEAR 2022-23
WHEREAS, in accordance with the San Luis Obispo City Charter Section 802, the
City Manager submitted the 2021-23 Financial Plan to Council for its review and
consideration on June 1, 2021; and
WHEREAS, on June 7, 2022, the Council approved and appropriated the 2022-23
budget allocation including operating expenditures, debt service, and capital
improvement plan budget (Resolution No. 11332, 2022 Series); and
WHEREAS, the City created an Insurance Fund which aggregates insurance -
related expenses including insurance premiums and payment of claims for workers’
compensation and excess liability and related costs; and
WHEREAS, the 2021-23 Financial Plan provides for the Insurance Fund to
manage the fluctuations in the insurance programs with a reserve for the Liability Excess
Insurance Program maintained at approximately 75% funded confidence level based on
the prior five-year average claims experience; and
WHEREAS, the funds within the reserve for the Liability Excess Insurance
Program are insufficient to cover anticipated claims and related expenses for the rest of
the 2022-23 fiscal year; and
WHEREAS, the Insurance Fund balance is sufficient to cover these costs so that
current transactions can take place in a timely manner.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
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Resolution No. _____ (2023 Series) Page 2
R ______
SECTION 1. The 2022-23 budget is hereby amended to appropriate $550,000 of
the City’s Insurance Fund balance to cover anticipated claims and related expenses for
the remainder of FY 2022-23.
Upon motion of _______________, seconded by _____________, and on the
following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _____ day of _____________________ 2023.
___________________________
Mayor Erica A. Stewart
ATTEST:
________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the
City of San Luis Obispo, California, on ______________________.
___________________________
Teresa Purrington
City Clerk
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