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Home My WebLink About04/26/1990 FC minutesFINANCE COMMISSION Minutes of the Meeting April 26, 1990 I Call to Order The meeting was called to order at 7:30 p.m. Commission members in attendance were Richard Bachhuber, Paul Davies, John Engel, Vince Grochocinski, Newt Hallman, Jim Morrison, John Mussar and Ann Smilanic. Also present were Finance Director David Jepson, Assistant Finance Director Carol Widmer, and William Leinheiser of Corporate Policyholders Counsel, Inc. II AARproval of Minutes The minutes of the March 21, 1990 meeting were accepted as presented. III Village's Insurance Program David Jepson introduced Wiliiaw Leinheiser of Corporate Policyhold'crs Counsel, Inc. (CPC). Corporate Policyholders Counsel, an independent insurance consulting firm, was retained by the Village to examine the Village's insurance program. Mr. Leinheiser reviewed a report of the Property and Liability Insurance and Self -Insurance Program of the Village of Mount Prospect which was prepared by his firm. Mr. Leinheiser explained that he first familiarized himself with the operations, services, and facilities of the Village. He then reviewed the Village's loss history for the past eight years, the Village's insurance history, and the Village's philosophy on risk management and insurance. Also, he examined various contracts and agreements and the insurance policies currently in force. The study contains an Executive Summary which highlights and summarizes several areas of the Village's overall program of insurance and self- insurance and includes specific recommendations for improvement. Property and Liability Insurance The first item in the summary concerned the property insurance policy from Arkwright Mutual Insurance Company. The policy gives the Village replacement coverage and is about as broad as any available in today's marketplace. Mr. Leinheiser stated that the Village's coverage in this area is well arranged. Another phase of the Village's Self -Insurance Program is protection against claims brought against the Village by members of the public alleging injury through some fault of the Village. Coverage for these claims is provided by a combination of self -funding and HELP (an inter -governmental self- insurance pool which provides coverage for liability claims in excess of $1,000,000). The pool will provide $5,000,000 of funds in any one year in excess of $1,000,000 per incident. Other insurance has been purchased on a selective basis to minimize the Village's self-insured exposure. CPC believes the $6,000,000 coverage is not enough and suggests the Village should either buy insurance, increase HELP coverage, or that HELP should buy excess coverage for all members. CPC recommends that the Village should have coverage for catastrophic type claims up to $20,000,000. Another potential area of exposure for the Village is for claims arising from those who provide services and products to the Village. CPC suggests that the Village require those companies and individuals to carry adequate amounts of insurance. They recommend a formal program be instituted requiring specific levels of insurance protection for contractors and that contractors not be permitted to begin work until adequate certificates of insurance are provided to the Village. Loss of Revenue One area of concern was the Village's possible loss as a result of damage to or destruction of properties that produce tax revenues to the Village. Of primary concern is a catastrophe at Randhurst Mall due to fire, explosion or some other casualty. CPC recommends that the Village purchase business interruption insurance for this possibility. Worker's Comvensation The Village's Worker's Compensation Program is also self-insured. The Village is responsible for the first $250,000 of each incident with excess insurance purchased for any amount in excess of $250,000. Mr. Leinheiser pointed out that the Village has never had workers compensation claims total $250,000 in any one year, let alone in any one incident. He then gave an example of the savings the Village has realized by being self-insured. If current losses total $200,000, the total cost of the worker's comp self- insured program (losses $200,000, reinsurance $33,000 and claims handling service $15,000) will be $248,000 or a savings to the Village of over $220,000 compared to a fully insured program. In conclusion, Mr. Leinheiser reported that the Village's overall program of insurance is conceptually well thought out and competitively priced. Also, the Village's Self -Insurance Fund should be adequate to cover unanticipated losses. Commissioner Bachhuber asked what action the Village would take to implement the recommendations in the report. Mr. Jepson stated that we will seek proposals for the additional insurance that was recommended and has asked CPC for a proposal for ongoing Risk Management Services. The Commissioners thanked Mr. Leinheiser for the report he presented. 2 IV Review of 1990/91 Budget Changes Finance Director David Jepson reviewed the changes to the 1990/91 budget which have been approved by the Village Board. Revenues In the General Fund, total revenues are expected to decrease from $20,479,500 to $19,489,500, a reduction of $990,000. One of the significant changes to revenues is the elimination of the Elk Grove Rural Fire Protection District Service Charge of $850,000. The Village has filed an appeal to the decision which invalidated the agreement, but it is not expected that anything will be resolved in this fiscal year. A recycling grant of $137,500 was also eliminated from the budget, as well as a reduction in estimates for sales tax revenue ($180,000) and the state income tax surcharge ($250,000). Noteworthy increases in revenues included an additional $325,000 due to the increase from $1 to $3 per $1,000 of the real estate transfer tax and a reimbursement of the $400,000 for the Schoenbeck Road Project. Total Village revenue shows an increase from $41,095,630 to $41,540,630, for an overall increase of $445,000. In addition to revenues for Village purposes, Library revenues of $2,546,920 have been added to the 90/91 budget. Expenditures Revised expenditures for 1990/91 are expected to be $40,404,385, an increase of $324,760 over the original amount of $40,079,625. Mr. Jepson pointed out that it is difficult to compare the total budget amounts because some budget items do not represent actual expenditures and some items represent duplications. For example, in the Police and Fire Pension Funds, the total amount budgeted as revenue is also budgeted as an expenditure but much of the amount will not be expended. In both the Risk Management Funds and the Motor Pool Funds, the amount each department contributes to those funds is counted as an expenditure in the respective department budgets and also in these funds. In effect the amounts are counted twice. The same holds true in the Bond Proceeds Fund. When these amounts are excluded from the 90/91 budget, the adjusted total for 1990/91 shows a decrease from $31,296,125 to $31,072,885, for a true reduction of $223,240. V Finance Director's Report David Jepson reviewed the Actuarial Valuation Reports prepared by Miller, Mason & Dickenson, Inc. for the Firemen's Pension Fund and the Police Pension Fund. These reports are as of May 1, 1989. The Forward in the report is similar to the audit opinion the Village receives in the Annual Audit each year. The reports indicate that both pension funds are funded over the 100% level (133.3% for Fire and 122.9% for Police). The recommended funding requirement for 1989/90 is zero for the Fire Pension 3 Fund and $54,220 for the Police Pension Fund. Mr. Jepson stated that no property tax had been levied for the Fire Pension Fund from 1984 - 1988. Miller Mason's reports also include trend information which gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. In the Fire Pension Fund, the percentage funded is 133.3% and for the Police Pension Fund the percentage funded is 122.9%. Although both pension funds have assets in excess of current requirements, the 1990 tax levy includes $100,000 for the Police Pension Fund and $50,000 for the Fire Pension Fund. Commissioner Smilanic asked how the costs of the Flood Control Program were going to be allocated to property owners. Mr. Jepson stated that the Village has contracted with RJN Environmental to perform a rate study for the Village. It is expected that the rate study will establish an equitable method for allocating costs. VI Adjournment CW/sm It was agreed that the meeting scheduled for May 31, 1990 would be cancelled and the next meeting will be June 28, 1990. The meeting was adjourned at 9:37 p.m. Respectfully Submitted, Carol Widmer, Assistant Finance Director 4