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09/27/1991 CITY COMMISSION SPECIAL MEETING September 27, 1991 The City Commission of the City of Clearwater met at City Hall with the following members present: Rita Garvey Mayor/Commissioner Sue Berfield Vice-Mayor/Commissioner Lee Regulski Commissioner William Nunamaker Commissioner Richard Fitzgerald Commissioner Also present were: Michael J. Wright City Manager M. A. Galbraith, Jr. City Attorney Cynthia E. Goudeau City Clerk The meeting was called to order at 9:00 a.m. for the purpose of discussing insurance issues and adopting the 1990/91 third quarter budget amendments. ITEM #2 - Employee Life Insurance Currently the City provides a $1,000 term life insurance policy for employees on a contributory basis. The policy requires a contribution of 25 cents per pay to be matched by a contribution of 27 cents from the City for employees selecting this benefit. Approximately 905 employees have elected to participate in this plan. Approximately 185 retirees also participate, but pay the entire cost of their plan with no contribution from the City. These contributions equate to a total cost of $1.13 per $1,000 per month. The proposed plan would provide $2,500 term life insurance coverage on a non-contributory basis for all current employees and $1,000 term on a non-contributory basis for retirees on City pension who are currently participating in the plan. The City would pay the entire cost of 47 cents per $1,000 per month. Assuming 1400 employees and 185 retirees participated, the total annual cost for the City would be $20,783 with no return of dividend. Elizabeth Deptula, Assistant City Manager, indicated converting to the new plan will provide a better value per thousand dollars. She indicated there have been some unfortunate circumstances where city employees have died and had no insurance to help cover their expenses. In response to a question, it was indicated this benefit would be available to all employees upon hire. Discussion ensued regarding the insurance stabilization fund and Ms. Deptula provided the history of the establishment of this fund. She stated the City currently has over $1 million in the fund and we add $400,000 a year. In response to a question, she indicated the interest generated by this fund will more than pay for this insurance policy. It was indicated those not currently participating in the 25 cent plan will be eligible to participate in this. In response to a question regarding whether or not there would be a physical or waiting period, it was indicated there would be none for people to participate in this plan due to the fact it is a minimal benefit. It was stated there are additional life insurance packages available to employees. Commissioner Fitzgerald moved to approve the conversion of the current Prudential Insurance Company $1,000 term employee contributory life insurance plan to a $2,500 non-contributory life insurance plan effective January 1, 1992 and the appropriate officials be authorized to execute same. The motion was duly seconded and carried unanimously. ITEM #3 - Health Insurance Contract Renewal An insurance committee composed of representatives of the four unions representing City employees, members of the Human Resources Department, Risk Management, Payroll and Finance Divisions of Administrative Services Department, and the City Manager's Office has been meeting for several months to consider medical cost and premium cost containment strategies that would benefit the employees and the City. Through the joint efforts of the Insurance Committee and two consultants, Wittner and Company and J. L. Plotz and Company, Inc., the City has received a policy renewal quote from CIGNA, the current medical insurance provider, with no change in premiums and only minor changes in the benefit structure. Ms. Deptula reiterated the formation of the insurance committee, stating they worked with the consultants, Tom Risharme, of Wittner and Company, and Judy Plotz of J. L. Plotz and Company, to formulate the best health insurance plan they could. They all worked with CIGNA, the provider, who originally came in with an increase in the rates, but through negotiation, there is now no increase proposed. Ms. Deptula indicated CIGNA and Equicor are merging and they will now have two plans, the health access plan, in which an employee can go to a doctor of their choice and be reimbursed in the traditional major medical manner, or the HMO plan, where they have to stay within the network of doctors for the plan. The City pays the employees cost, depending on which coverage the employee chooses, the health access plan costs $11.60 more per pay period than the HMO plan. Those people with dependent coverage choosing the HMO plan would have the difference in the individual cost applied to their dependent coverage. In response to a question regarding emergencies where an employee may find it necessary to go outside of the network, Mr. Risharme indicated there are provisions for this. She indicated this is the first step toward the City's Self-Insurance Program and requested the Commission consider minimum premium financing. Mr. Risharme explained the minimum premium financing stating there is only a certain percentage of the premium the City must pay each month. Paying the full premium each month, the insurance company takes the total risk and may profit or lose in any given month, depending on claims experience. With the minimum premium method, the City would pay only that portion of the premium which is necessary. If the City's claims are greater in a particular month, the City would pay the total premium and those months in which claims experience is less, the City would keep those funds. It was stated there is a maximum annual premium that could be charged to the City. The City Manager indicated he has had experience with these programs in the past and that generally, the City saved money. He stated the bottom line is that if the City has good claims experience the City will save money, if there are bad claims experience, the City will only pay what has been budgeted for a particular year and the insurance rates will likely increase the next year. Questions were raised regarding physical requirements and it was stated that no physical is required other than the employment physical. If a person is determined eligible to be hired, they would then go into the plan. Commissioner Berfield moved to approve the extension of the medical insurance contract with CIGNA Healthplan of Florida under a minimum premium funding arrangement for the period January 1, 1992 through December 31, 1992, with no change in premium costs and benefits as outlined by staff and the contribution of the premium savings for individual coverage under the HMO option toward the employee's dependent coverage cost and the appropriate officials be authorized to execute same. The motion was duly seconded and carried unanimously. The City Manager complimented staff and indicated that labor and management worked well on this. He stated it was significant that CIGNA had originally come in with a 15% increase proposed and that through negotiations, there was no change in the fees. The Mayor thanked staff for all their hard work in being able to bring this recommendation to the Commission. ITEM #4 - Authority to reimburse various city funds an additional $243,269 for storm damages occurring April 25, 1991 On April 25, 1991, a sudden and violent storm with high winds and rain moved through the Tampa Bay area causing considerable property damage in the City. Losses included damaged roofs, stadium lights, fences, windows, trees, street lights, traffic signals, motor vehicles, computers, sheds, doors, and signs. This proposal will authorize payment of up to another $243,269 (from the City's Central Insurance Fund) for damage arising from the storm. The Commission previously authorized payment of $125,000 in July. The initial sum authorized in July has been inadequate to pay all claims that have been submitted. The City Manager indicated approval of this request would wrap up the cost of damages from this storm. In response to a question, he indicated the total costs are $442,269. A question was raised regarding whether everyone had been paid and it was indicated all outside agencies had been paid, there may some internal transfers still to be made. Commissioner Regulski moved to authorize reimbursement of an additional $243,269 from the Central Insurance Fund to various city funds for damage to city property, property loss, equipment rental, employee overtime pay, meals, etc. occasioned by the storm on April 25, 1991 and the appropriate officials be authorized to execute same. The motion was duly seconded and carried unanimously. Commissioner Regulski commented this type of event emphasizes the need to have a self-insurance fund as a lot of these costs would not have been covered by an outside insurance policy. ITEM #5 - Purchase of Property and Casualty Insurance coverages for 1991/92 For the past several years the City has purchased its property and casualty insurance through Arthur J. Gallagher and Company. In July 1991, the City issued a Request for Property/Liability/Workers Compensation Insurance/Self Insurance Proposals. Leo Schrader, Risk Manager, stated he has been reviewing the proposals for the last few months. He reviewed the recommended coverages which include: Layer 1 property with International Insurance Company which will provide $5 million of coverage for a $75,000 premium and Layer 2 property with Hartford Insurance which will provide $100,000,000 of coverage for a premium of $47,750. He stated the City currently has two property coverages for $70 million but through the Hartford proposal, for $5,000 more, the City can obtain $100 million coverage. In response to a question, he indicated the City's total property value is approximately $153 million. In response to a question regarding the difference between the property layers and an umbrella policy, Mr. Schrader indicated the umbrella policy would be for excess liability, not property damage. Mr. Schrader indicated there is also an optional proposal for a London package through Rodgers and Commings Insurance Company which would provide coverage for all property with only a $75,000 deductible unless it is from flood or wind, in which case the deductible will be $250,000. This package would also contain $1 million coverage for the Clearwater Pass Bridge. Another option is for Clearwater Pass Bridge coverage through A. J. Gallagher which would provide $5 million coverage for a fee of $100,000. Discussion ensued regarding the deductibles and it was indicated these would apply to each occurrence, not each individual building. Discussion ensued regarding whether or not insurance coverage was needed for Clearwater Pass Bridge. Michael Wright, City Manager, indicated the City has just finished repair to 7 or 8 more bents which should protect the bridge unless there is a hurricane in which case there are no guarantees the bridge would remain standing. Further discussion ensued regarding the need for coverage for the bridge and the deductible. It was indicated that with one event, a $250,000 deductible with property layers one and two would cover all sites. Purchase of Rodgers and Commings London package would reduce the deductible to $75,000 and would provide $1 million coverage for the bridge. The bridge coverage, through A. J. Gallagher, is a stand alone policy which would provide $5 million coverage for a premium of $100,000. Further discussion ensued regarding the need to provide coverage for Clearwater Pass Bridge. It was indicated that if there were a catastrophic event and the bridge blew down, a new bridge would be built and plans are already underway for the new bridge. It was stated that $1 million coverage would pay for one major repair on the bridge. The meeting recessed from 10:14 a.m. to 10:30 a.m. Hayden Knowlton, the City's insurance consultant, stated the City has three choices: Option A is base coverage which does not include a London package or a Clearwater Pass Bridge package and would have a total premium of $122,250; Option B is for the base package plus the bridge premium which would provide $5 million coverage for the bridge and total premium would then be $222,750 and Option C is to have the base coverage plus the London package offered by Rodgers and Commings which would reduce the deductible to $75,000 and provide $1 million coverage for the bridge and the total cost for those premiums would be $240,750. A question was raised regarding what the premium would be for the bridge package if the City only wanted $1 million coverage and it was indicated there would be a 10 to 20 thousand dollar reduction at the most. Discussion ensued regarding the differences between the packages and it was indicated that with Option C, the City's deductible is reduced from $250,000 to $75,000 and that $1 million is provided for the bridge. The City Manager indicated Option A provides a package that places more risk on the City while Option C has the least amount of risk however, the difference in the premium is $100,000. In response to a question, Elizabeth Deptula, Assistant City Manager, indicated there was over $4 million in the City's Self-Insurance Fund. The City Manager recommended the Commission go with Option A. In response to a question, Mr. Schrader indicated an additional $5,000 could be saved if the Commission desired to reduce the layer two property coverage from $100 million to $70 million. Commission consensus was to reduce the coverage to $70 million. Mr. Schrader indicated the total savings would be $5,250. Mr. Schrader reviewed the additional coverages as follows: 1) Crime and Dishonesty covers $775,000 for theft by employees or forgery by non-employees, there is a $25,000 deductible, this would cover all employees and do away with the need for additional bonding of certain employees. 2) Boiler and Machinery coverage provides coverage if there is damage to machinery through mechanical failure. The original proposal was to cover for $30 million dollars at a premium of $7,256. The recommendation now is to reduce that coverage to $10 million for a premium of $5,912 3) Coverage for marina operators would cover marina liability, including damage to boats that are being ushered in and out of the marina as well as boats being provided gasoline. This protects the City for damage to boats left in its custody if the City should be found legally liable. It provides $2 million coverage with a $10,000 deductible. The premium would be $10,500. 4) Protection, indemnity and hull would provide protection for operations at the marina, there is no deductible and it provides $1 million coverage. It also provides coverage for the Jones Act which provides liability payments to crew members who may be injured. It was indicated this was not carried last year, only hull insurance was covered. The proposed premium for this coverage is $11,300. 5) Protection for statutory death of Police and Fire employees. The City is required by law to pay certain reparations for police and fire employees that die in the line of duty. This coverage will pay for those events for a premium of $9,145. 6) Excess Workers Compensation will be through the Florida League of Cities for a premium of $70,942. There will be no deductible and unlimited coverage. Mr. Schrader indicated with the Florida League of Cities there will be annual discounts based on the time we are covered through their program. Discussion ensued regarding the need for the marine operator and protection, indemnity and hull coverage. The City Manager recommended keeping the marine operator coverage but deleting the protection, indemnity and hull. It was stated the Jones Act was included in the protection, indemnity and hull. It was stated these could be paid from the City's insurance fund. Mr. Schrader indicated staff is continuing to negotiate for excess liability coverage and will come to the Commission at a later date with those recommendations. Commissioner Regulski moved to approve the following 1991/92 property and casualty insurance program: Layer one property insurance with International Insurance Company for a premium of $75,000; Layer two property coverage with Hartford Insurance Company, reducing the coverage from $100 million to $70 million, reducing the premium to $42,500; Crime and Dishonesty coverage through Hartford for a premium of $6,301; Boiler and Machinery coverage through Kemper for a premium of $5,912; marina operators coverage through Hartford for a premium of $10,500; protection, indemnity and hull coverage being deleted; statutory death police and fire through AIG Life Insurance for a premium of $9,145; excess workers compensation through the Florida League of Cities for a premium of $70,942 for a total premium of $220,300 and there be no London package or bridge coverage. The motion was duly seconded and carried unanimously. ITEM #6 - Purchase of Claims Service from Johns Eastern Company, Inc. For the past several years, Gallagher Bassett Services, Inc., a subsidiary of Arthur J. Gallagher and Company, has provided claims services to the City as an integral part of the City's insurance program with Arthur J. Gallagher and Company. These services include claims administration, claims adjusting (investigation and settlement) and loss prevention and loss control services. Mr. Schrader indicated he is recommending Johns Eastern as they are a Florida based company with offices in Clearwater and Tampa. The fee of $68,225 is based on an estimate of claims. The company will also provide a computer access service which can provide claims data when requested. The City Manager indicated the Commission needs to be aware that Gallagher Bassett will need to finish what is already on their books and this will cost approximately another $23,000. Commissioner Regulski moved to authorize the purchase of claims services (Workers' Compensation and Liability) from Johns Eastern Company, Inc., for FY 10/1/91-9/30/92 at an estimated cost of $68,225. The motion was duly seconded and carried unanimously. ITEM #7 - 1990/91 Third Quarter Budget Review a. Public Hearing & Second Reading Ordinance #5140-91 - Operating Budget The City Attorney presented Ordinance #5140-91 for second reading and read it by title only. Commissioner Regulski moved to pass and adopt Ordinance #5140-91 on second and final reading. The motion was duly seconded. Upon roll call, the vote was: "Ayes": Regulski, Nunamaker, Fitzgerald, Berfield and Garvey. "Nays": None. b. Public Hearing & Second Reading Ordinance #5141-91 - Capital Improvement Budget The City Attorney presented Ordinance #5141-91 for second reading and read it by title only. Commissioner Nunamaker moved to pass and adopt Ordinance #5141-91 on second and final reading. The motion was duly seconded. Upon roll call, the vote was: "Ayes": Regulski, Nunamaker, Fitzgerald, Berfield and Garvey. "Nays": None. The meeting adjourned at 11:08 a.m.