Loading...
HomeMy WebLinkAboutApproved Minutes - October 18, 2018Finance Committee Meeting Minutes October 18, 2018 Page 1 of 7 CITY OF NEWPORT BEACH FINANCE COMMITTEE OCTOBER 18, 2018 MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:02 p.m. in the Crystal Cove Conference Room, Bay 2D, 100 Civic Center Drive, Newport Beach, California 92660. II. ROLL CALL PRESENT: Mayor Pro Tem/Chair Will O’Neill, Council Member Diane Dixon, Committee Member William Collopy, Committee Member Joe Stapleton, and Committee Member Larry Tucker ABSENT: Council Member Scott Peotter (excused), Committee Member (VACANT POSITION) STAFF PRESENT: City Manager Grace K. Leung, Finance Director/Treasurer Dan Matusiewicz, Deputy Director/Finance Steve Montano, Administrative Specialist to the Finance Director Marlene Burns, Human Resources Director/Risk Manager Barbara Salvini, Finance/Administrative Manager Jamie Copeland, Administrative Manager Angela Crespi, Accounting Manager Rukshana Virany , and Budget Manager Susan Giangrande OTHER ENTITIES: Eric Small and Nina Gau (via teleconference) of Bickmore MEMBERS OF THE PUBLIC: Jim Mosher, Carl Cassidy, and Jennifer McDonald III. PUBLIC COMMENTS Chair O’Neill opened public comments. Jim Mosher expressed concerns with City contract procedures and lack of clarity regarding the city- wide budget line items. He inquired as to the Charter provision that requires the City Clerk to maintain a list of contracts approved by the City, the Merchants Association contribution made by the City, the pension agenda discussion item requested by the Finance Committee, and the City’s defined benefit program. He expressed support for a defined contribution program, which functions similar to a 401(k). He referenced a recent California Supreme Court case and inquired whether options for the City to address pension liability have changed due to the case. Chair O’Neill mentioned a detailed discussion regarding the City’s pension options will take place at the November meeting. Staff confirmed the recent Supreme Court case and noted it addressed the pension plan for the City of San Diego, which is different from the City of Newport Beach plan. Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments. IV. CONSENT CALENDAR A. MINUTES OF SEPTEMBER 6, 2018 Recommended Action: Approve and file. Finance Committee Meeting Minutes October 18, 2018 Page 2 of 7 MOTION: Chair O’Neill moved, and Committee Member Tucker seconded, to approve the minutes, as amended. The motion carried 4 – 0, 1 excused absence (Peotter), 1 vacancy, 1 abstention (Stapleton). V. CURRENT BUSINESS A. STATUS OF INSURANCE RESERVE (GENERAL LIABILITY AND WORKERS’ COMPENSATION) FUND Summary: The Insurance Reserve Fund was established to account for costs associated with the General Liability and Workers’ Compensation programs. The City employs an actuary to estimate the liabilities and recommend a range of funding options associated with each program. The actuary will provide a high-level review of the actuarial valuations and key trends. Staff has identified preliminary recommendations that should be considered in the proposed 2019-2020 Budget. Recommended Action: Receive and file. Finance Director Matusiewicz opened the item and introduced Eric Small, Senior Actuarial Analyst. He noted there is a preliminary staff recommendation to increase the annual contribution to the Workers’ Compensation reserve by $900,000 and infuse a one-time $3 million. There are no projected changes to the contribution toward General Liability at this time. Staff is recommending a disciplined approach, which assesses all liability needs prior to committing funds towards the budget. Committee Member Collopy inquired regarding the addition of $900,000 toward Workers’ Compensation, and the one-time $3 million infusion, and staff confirmed the recommendation. Mr. Small displayed a PowerPoint Presentation entitled, Discussion of Actuarial Analyses as of June 30, 2018, and reviewed the actuarial methodology applied in conducting the analysis. He noted all losses are reviewed separately for Workers’ Compensation and General Liability. He stated the City of Newport Beach commenced its self-insured Workers’ Compensation program in 1980. The current report is based upon data evaluated through June 30, 2018. Council Member Dixon inquired as to the self-insured retention amount per single occurrence, and Mr. Small responded the amount was $500,000 and the City should expect to recover the excess. Discussion ensued among the Committee members, Mr. Small, and City staff regarding the definitions of incurred loss, actual loss, paid expected loss, and ultimate loss. Mr. Small confirmed the amount paid out by the City in a current year may apply to incidents that occurred in previous years. It was confirmed that incurred expected loss is the amount that triggers City staff as to the amount to accrue. Finance Director Matusiewicz stated the total expected liability for Workers’ Compensation is $16 million. Mr. Small noted he receives raw data on every City claim retention (limited to the $500,000), conducts a comparison based upon the previous year’s incidents, reviews other historic data and assesses trends. Human Resources Director/Risk Manager Barbara Salvini provided context as to the City’s process in evaluating claims, including constant contact with the various parties involved in the claim, consultation with legal counsel, the impacted employee, and medical personnel as required and appropriate. Discussion ensued as to the involvement of the City and various parties to the claim. Finance Committee Meeting Minutes October 18, 2018 Page 3 of 7 Mr. Small indicated the City could earn interest on its fund balances, and any projected earned interest is discounted from the overall amount. He did affirmatively state the City must make the contribution to have an amount on which to earn interest. Discussion ensued regarding loss control methods and staff confirmed the City is actively administering the City’s overall risk management program to mitigate losses. Finance Director Matusiewicz noted public safety Workers’ Compensation claims are presumptive. Mr. Small acknowledged Workers’ Compensation claims have a longer tail for closure. Committee Member Collopy inquired whether various Departments are assessed a different rate for Workers’ Compensation. Finance Director Matusiewicz stated City staff and the actuary review the cost allocation plan based upon payroll and claim experience per Department and adjust accordingly depending on the results. Mr. Small noted the City overall is experiencing less claim activity; however, the amounts per claim were increasing. Claim amounts are assessed per $100 of payroll. Discussion ensued among the Committee, staff, and Mr. Small regarding the methods for controlling Workers’ Compensation costs and loss prevention. Mr. Small noted the City’s overall trend in relation to losses is favorable, the average case reserves per open claim have decreased by 11%, the number of open claims has decreased by 1.7%, there is a 5.4% decrease in the outstanding liabilities as of June 30, 2018, as compared with the June 30, 2017, estimate, and loss and LAE funding for 2019-2020 is 1.8% lower than funding for 2018-2019. Finance Director Matusiewicz confirmed at a 75% confidence level rate, there will be a shortfall of approximately $3 million in the Workers’ Compensation fund and recommends the infusion of $3 million to off-set the deficit. Discussion ensued regarding the City’s long-term liability funding process and utilizing other investment instruments and strategies. Finance Director Matusiewicz mentioned there are certain Government Code sections that restrict the type and term of investments that local agencies are able to purchase. He also noted that the City Council could elect to make certain exceptions that would allow the City to buy treasury and agency bonds up to a maximum term of ten years that may be appropriate for Worker’s Compensation reserves. In response to a Committee Member inquiry, Mr. Small noted the payroll metric is commonly utilized as an exposure measure, which allows for comparison against other agencies in relation to liability. Chair O’Neill opened public comments. Jim Mosher referred to a Charter provision related to claim information presented at City Council meetings and inquired as to the extent of City claim information that is within the public’s right to know. Staff directed Mr. Mosher to the City Clerk’s Office in regarding to public record requests and also noted there are specific restrictions related to privacy that may render certain information non-disclosable. Carl Cassidy inquired regarding the legal costs as related to liability, claim information as related to City Council closed session items, the City Attorney’s role in representing the City Council as related to claims, and the amount paid regarding liability as compared to other surrounding cities. Finance Committee Meeting Minutes October 18, 2018 Page 4 of 7 Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments. The item was unanimously received and filed by the Committee. There was no further action taken on this item. B. FUNDING STATUS OF KEY RESERVES Summary: Prudent financial management requires that some portion of available funds be reserved for future use. Council Reserve Policy F-2 establishes reserve requirements and funding policies associated with key reserves. Staff has prepared a summary of the funding status of the City’s key reserves for the Committee’s review. Recommended Action: Receive and file. Committee Member Collopy noted this item has been reviewed by the Committee for almost one year and he is personally satisfied with the City’s policy related to 25% of General Fund. He did express there are several other accounts throughout the City that operate as reserves, and suggested an annual review of the General Fund reserve and other accrued liability accounts. He did not require any further staff presentation at this time. Council Member Dixon inquired as to the various classifications for reserves and how they are reviewed. Chair O’Neill stated he would like to have a longer discussion related to water infrastructure reserve methods and will have a preliminary meeting with the Public Works Director in that regard. There was consensus among the Committee members to continue with the City’s current 25% of General Fund reserve policy. Discussion ensued regarding how to address water infrastructure reserves, the upcoming completion of the water master plan, infrastructure replacement, and set-asides. Further discussion ensued regarding water infrastructure funding needs, including depreciation of assets and anticipated wear and tear. Finance Director Matusiewicz confirmed the GFOA reserve study scope included an opportunity for review of the water and wastewater reserves, although it was not conducted at this time. It was noted there will be further discussion and input from the Director of Public Works, review of outside agencies and their approach to various water infrastructure and wastewater needs, including engineering items. Chair O’Neill opened public comments. Carl Cassidy noted he would like to see the Finance Committee and the City address water infrastructure and include engineering as part of the discussion. Jim Mosher inquired regarding the status of water infrastructure reserve and expressed concern regarding the small amount of wastewater reserve. Chair O’Neill confirmed the wastewater matters will be addressed as part of the larger water infrastructure presentation. Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments. Finance Committee Meeting Minutes October 18, 2018 Page 5 of 7 The item was unanimously received and filed by the Committee. There was no further action taken on this item. C. FISCAL SUSTAINABILITY PLAN REVIEW Summary: The Finance Committee periodically reviews the Fiscal Sustainability Plan to align its ongoing work with the Plan and to consider any changes deemed necessary. Many of the elements contained in the plan are incorporated in Council policies that are reviewed by the Finance Committee on an ongoing basis. Recommended Action: Review the Fiscal Sustainability Plan, suggest and recommend changes as needed for submittal to the City Council for final approval. Chair O’Neill stated he wanted to add this item periodically to ensure the Committee and public can review this item. He would like to include an annual review of the City’s reserves and Finance Director Matusiewicz suggested the review of City Council Policy F-2, as well. Discussion ensued in regard to Item No. 5, requiring the City to establish appropriate cash reserves. Chair O’Neill opened public comments. Jim Mosher stated City Council Policy F-2 is confusing and inquired whether – the Fiscal Sustainability Plan is incorporated into other policies. He would like a review to clarify the Plan’s function and purpose. There was consensus among the Committee that City Council Policy F-14 along with others would be reviewed in December. Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments. The item was unanimously received and filed by the Committee. There was no further action taken on this item. D. FISCAL YEAR 2017-2018 YEAR END SURPLUS Summary: The Finance Department has prepared a preliminary 2017-2018 fiscal year-end General Fund surplus estimate. Recommended Action: Receive and file. Chair O’Neill noted Council Member Dixon had requested a review of the Fiscal Year 2017- 2018 surplus. Discussion ensued regarding the Charter requirement to split surpluses 50/50 and the process for the City Manager to request an alternative to this surplus allocation method. Council Member Dixon expressed confidence in the City’s work to achieve a surplus and was encouraged by the overall economic improvement. She would like the City to continually approach any surpluses with a planned approach and to include options for applying surpluses to the pension obligations. Chair O’Neill opened public comments. Noting there were no members of the public who elected to speak on this item, Chair O’Neill closed public comments. Finance Committee Meeting Minutes October 18, 2018 Page 6 of 7 The item was unanimously received and filed by the Committee. There was no further action taken on this item. E. BUDGET AMENDMENTS (QUARTER ENDED SEPTEMBER 30, 2018) Summary: Receive and file a staff report on the budget amendments for the prior quarter. Recommended Action: Receive and file. Chair O’Neill introduced the matter and noted this is a review and file item. Staff noted there was a grant coming in that accounted for information provided in the agenda report. Chair O’Neill opened public comments. Jim Mosher inquired whether the final budget document, which includes all corrected items, is available and on-line. Staff confirmed the final budget, with corrections, is available and on- line. Noting there were no further members of the public who elected to speak, Chair O’Neill closed public comments. There was no further action taken on this item. F. WORK PLAN REVIEW Summary: Staff has provided the Committee agenda topics scheduled for the remainder of the calendar year. Recommended Action: Receive and file. Chair O’Neill introduced this matter and stated a major goal to discuss CalPERS and City Council Policy F-14. He noted it is complicated to get all the Departments to “mesh together” on this item and plans a full discussion at the November Finance Committee meeting. He preferred not to include other items due to the time required to address CalPERS and Council Policy F-14. Chair O’ Neill inquired if any of the subcommittees were prepared to discuss their policy review at the January meeting. Council Member Dixon confirmed Bartel and Associates would be making a presentation at an upcoming Finance Committee meeting. Discussion ensued regarding a primer, documents, or other media, which can be utilized to provide training to future Finance Committee members on the various topics, which have been discussed thus far including pending funding options, investment horizons, Section 115 trusts, and other information. Suggestions included a glossary of terms, video links, and building a library of agenda reports and PowerPoint Presentations. Chair O’Neill opened public comments. Carl Cassidy mentioned the future City Council vetting of potential Finance Committee members, ensuring future members have requisite expertise in the matters considered by the Finance Committee, and expressed support to leave politics out of the selection process.