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HomeMy WebLinkAbout3235_001Village of ML nt Prospect Mount Prospect, Illinois INTEROFFICE MEMORANDUM TO: Terrance L. Burghard, Village Manager FROM: John A. Hedstrom, Director of Management Services RE: Irma Membership Status DATE: September 10, 1982 IRMA's original five year term comes to an end on December 31, 1983 and discussion is now focusing on its continuation. Currently 33 communities make up its membership with an additional 5 approved for entry effective January 1, 1983. To help each member decide whether or not they should continue their association with the Agnecy, Mr. Ed Hansen, IRMA's Risk Manager, devised the attached worksheet which indicates the feasibility of membership. Summarizing the worksheet's data for years 1979 to 1982 results in the following for Mount Prospect: Year Premium Conventional IRMA Insurance Savings Savings 1979 $194,721 $221,376 $ 26,655 12.0 1980 342,071 448,881 106,810 23.8 1981 306,640 421,312 114,672 27.2 1982 297,597 397,399 99,802 25.1 Amounts shown under IRMA premium column include a provision to cover the unfunded pool liability (deficit) as well as a charge for prior years experience. As you can note, this summary indicates a substantial savings results from IRMA membership. Mr. Hansen has informed me that IRMA's total premiums are currently $4,300,000 while premiums via conventional coverage are estimated at $6,900,000 exclusive of civil rights liability protection. The worksheet does indicate that Mount Prospect is currently realizing a savings of better than 25% over coventional coverage. The premium used in the worksheet for conventional insurance includes protection for (1) property, (2) workers compensation, (3) Product liability (water system), and (4) normal liability such as public official, automobile, false arrest, professional and property. This rate includes those areas of exposure that are quantifiable and established; it does not include an amount for civil rights liability due to the newness of this risk. Costs for IRMA's coverage does include all liabilities. -- 2 - I realize IRMA's concept has been and still is controversial and questionable, not only in Mount Prospect but throughout all member communities. Facts and statistics are however starting to fall into place and do place the agency in a better light. - The agency is growing and new members are joining. Negotia- tions are currently underway regarding the feasibility of merging the state park districts into the pool. The five new members accepted for membership on January 1, 1983 made applications early this year in order to obtain better coverage at a considerably lower cost or premium. - The per incident loss value per $1,000 of revenue has de- clined from $20.03 in 1979 to $8.36 in 1981. This same trend should continue as additional members enter the agency. IRMA's Loss Analysis showing more details on this point is also attached. This analysis indicates that the aver- age claim for the 14 original communities forming the pool used $20.03 of each $1,000 in pool revenue in 1979. By 1981 this average amount had decreased to $8.36 of each $1,000 of pool revenue. -- The recent change in which multiple law firms specializ- ing in specific areas are going to be utilized, getting away from the former approach of one firm handling all the legal work should make for better results in completing claims settlements. - Private insurance companies are certainly not actively soliciting municipal business. No companies have called upon Mount Prospect to quote on coverage since I have been with the Village. - Village staff has found the agency easy to work with and in fact periodic reports developed by the administrator represent the first time members have been in the posi- tion of knowing how claims are settled. Since the original five year period comes to an end on December 31, 1983, each of the 33 members is being asked to signify their intentions to remain with the agency after 1983 or to obtain conventional coverage through regular sources. Those members wishing to remain with the agency after 1983 have been asked to have resolutions adopted and filed by November 1, 1982. It was decided that renewal would be binding for an additional four years thereby making the agency's life at least nine years. We have attached a sample resolution that could be used for this purpose. Because dates have a way of slipping by, we would appreciate some direction from your office before proceeding further. We could go to the market and obtain bids or quotes from private carriers, but from my know- ledge of this topic carriers are reluctant to incur expense developing bids for IRMA members and larger communities are placed in the assigned risk pool - 3 - for workers compensation coverage. Assuming the premium furnished by IRMA's Risk Manager for use in developing data shown on the attached worksheet, we have to recommend Mount Prospect's continuation with the agency for four years beyond 1983 due to having better coverage at a lower cost. we do how- ever look forward to direction from the Manager's office prior to October 31, 1982. /`"?LLAGE OF MOUNT PROSPECT CASH AVAILABLE FOR V�ATER SYSTEM OPERATIONS (As of September 10, 1982) Cash Balance 4-30-82 $1,002,650 Excess Receipts over Disbursements-Year Ending 4-30-83 1,799,336 Cash Balance 4-30-83 $2,801,986 Excess Receipts over Disbursements -Year Ending 4-30-84 (1,055,623) Cash Balance 4-30-84 $1,746,363 Excess Receipts over Disbursements -Year Ending 4-30-85 392,733 Cash Balance 4-30-85 $2,139,096 Excess Receipts over Disbursements -Year Ending 4-30-86 (298,502) Cash Balance 4-30-86 $1,840,594 Excess Receipts over Disbursements -Year Ending 4-30-87 (575,565) Cash Balance 4-30-87 $1,265,029 Assumptions Used In Developing Water System Projections Dated September 10, 1982 Page 1 of 2 - $1,900,000 in General Obligation Debt is incurred during December, 1982 via formation of a Special Service District. Interest rate is a maximum of 12% and debt is retired during December, 1982 from Real Estate Taxes collected during July and August 1983. Costs increase at an 8% rate due to inflation. loo interest rates are obtained on investments through April 30, 1987. Water rates of $2.10 become effective with billings mailed on May 1, 1984. Quantity of water billed remains constant at 1,366,000,000 gallons annually. In 1974, average customer on system was billed for 139,700 gallons when rate was $.90 per 1,000 gallons. During 1982, average customer was billed for 131,300 gallons at a rate of $1.40 per 1,000 gallons. Most of 8,400 gallons annual average decrease is assumed to be due to maturing of Village requiring less watering of lawns and trees. Payments required to be made to agency are from John Nuveen & Company agency projections dated August 10, 1982. These projections assume Village will be on line with Lake Michigan Water during second half of fiscal year ending April 30, 1985. Page 2 VILLAGE OF MOUNT PROSPECT of 2 WATER SYSTEM PROJECTIONS (ALL SOURCES) AS OF SEPTEMBER 10, 1982 Actual Year Ending Projecti€ns for Years En€iinq April 30 April 30, 1982 1983 1984 1985 1986 1987 Gallons Billed (Billions) 1.366 1.366 1.366 1.366 1.366 1.366 Rate to Generate "Water Billings" 1.53 1.53 2.10 2.10 2.10 Revenues & Receiots Water Billings Meter Rentals Water & Sewer Taps Interest Income Real Estate Taxes - $1,900,000 Bond Issue Real Estate Taxes - Regular Bond Proceeds Other Total Revenues Operating Expenses Administration & Support Buildings & Grounds Well Pumpings, Maintenance & Repairs Water Distribution, Maintenance & Repairs Water Valve & Hydrant Maintenance Meter Installation, Replacement Equipment Maintenance & Operations Sanitary Sewer Maintenance Water System Improvements Purchased Water Interest - $1,900,000 Bond Issue Interest - Old Bonds Inflation Factor (8e) Extraordinary Main Repairs Total Expenses Debt Service Requirements Special Service Area Bonds Outstanding Bonds Venture Notes Total Debt Service Capital Expenjitures Venture Interface Other Total Capital Net Increase (Decrease) In Available Cash $1,924,513 $2,061,000 $2,090,000 $2,869,000 $2,869,000 $2,869,000 10,937 10,000 10,000 10,000 10,000 10,000 61,595 30,000 30,000 30,000 30,000 30,000 193,678 120,000 350,000 200,000 200,000 200,000 32,490 90,601 2,128,000 90,000 90,000 90,000 75,301 96,468 100,000 1,900,000 1,900,000, 1,900,000 140,211 1,900,000 200,000 200,000 200,000 200,000 410,161 42,800 50,000 50,000 50,000 50,000 $2,600,884 $4,163,801 $4,658,000 $5,059,000 $5,059,000 $5,059,000 $ 559,410 $ 506,027 $ 550,000 $ 550,000 $ 550,000 $ 550,000 46,104 65,171 60,000 60,000 60,000 60,000 749,655 742,018 750,000 553,000 400,000 400,000 89,741 195,185 200,000 200,000 200,000 200,000 32,490 90,601 90,000 90,000 90,000 90,000 75,301 96,468 100,000 100,000 100,000 100,000 140,211 198,147 200,000 200,000 200,000 200,000 42,403 57,345 60,000 60,000 60,000 60,000 2,693 164,382 250,000 250,000 250,000 250,000 2,307,392 3,035,252 3,255,940 228,000 25,575 16,725 7,875 5,250 2,625 167,000 163,000 332,000 391,000 50,000 $1,738,008 $2,140,919 $2,671,725 $4,591,267 $5,282,502 $5,559,565 $ $ $1,900,000 $ $ $ 175,000 175,000 175,000 75,000 75,000 75,000 48,545 $ 175,000 $ 223,545 $2,075,000 $ 75,000 $ 75,000 $ 75,000 $ $ $ 966,898 $ $ $ 677,074 $ 677,074 $ $ 966,898 $ $ $ $ 199,292 $1,799,336 $(1,055,623) $ 392,733 $ (298,502) $ (575,565) 8/10/82 [SAMPLE RESOLUTION] .RESOLUTION NO. A RESOLUTION EXPRESSING THE INTENT OF THIS MUNICIPALITY TO CONTINUE AS A ME14BER OF THE INTERGOVERNMENTAL RISK MANAGEMENT AGENCY. WHEREAS, this municipality is currently a Member of the Intergovernmental Risk Management Agency (IRMA); and, WHEREAS, the initial term of IRMA was established by Contract and By -Laws as being five (5) years; and, WHEREAS, the Corporate Authorities of this municipality believe that its membership in IRMA has been a benefit to its citizens, both in terms of financial savings and in terms of increasing the control of the municipality over the management and prevention of risks; and, WHEREAS, the end of the first five-year term of IRMA will take place on December 31; 1983 and the Board of Directors of IRMA has requested an expression of intent by each of the existing IRMA Members as to whether such communities are interested in participating in a continuation in the term of the AGENCY; and, WHEREAS, the future term of the AGENCY has been proposed to be a minimum of four (4) years and a maximum of seven (7) years; and, WHEREAS, the Corporate Authorities of this municipality desire to pass a resolution indicating the intent of the community to continue its participation as a Member of IRMA; and, WHEREAS, the passage of this Resolution, although expressing the intent of the municipality is contingent upon a final study and review of this matter and the passage of such ordinances or resolutions as are eventually deemed necessary to ormally continue membership in the organization, NOW, THEREFORE, BE IT RESOLVED BY THE OF COUNTY, ILLINOIS, as follows: SECTION 1: Having determined that the continued member -ship of this municipality in the Intergovernmental Risk Management Agency is in the best interests of the citizens of this community, we hereby express our intent to continue as a Member of that AGENCY after the termination of the initial five- year term on December 31, 1983. SECTION 2: The Corporate Authorities of this municipality pledge to promptly consider and review such materials as are submitted to it for the continuation of the AGENCY and to promptly act upon such documents. The Corporate Authorities commend those persons from this community and other Members of IRMA who have served as members and alternate members of the Board of Directors. Through the efforts of these public servants, each community which is a Member of IRMA has saved substantial amounts as against conventional insurance premiums and has enjoyed a new control over an important and potentially costly area of municipal operations. The effective manner in which more than 30 Illinois municipalities have worked together in the spirit of community and cooperation is a good indication of the feasibility and effectiveness of intergovernmental agencies as authorized by the Constitution and statutes of the State of Illinois. sa SECTION 3: This Resolution shall be in full force and effect from and after its passage and approval as provided by law. ATTEST: PASSED this day of , 1982• AYES: NAYS: ABSENT: APPROVED this day of 1982• Clerk -3- Mayor NOTES: 1. Figures based on reported claims 2. Includes reserve for W.C. fatality GALLAGHER BASSETT FEES PER $100 OF REVENUE 1979 .187 1980 .187 IRMA .184 1982 .175 $20.03 014 14.10 .012 8.36 .015 14.75 .013 LOSS ANALYSIS .011 7.84 FRE'. VALUE 14 Communities @ 12 months 1979 1250 $ 1, 273, 445. @ 12 months 1980 1050 1,046,368. @ 12 months 1981 1148 779,263. 22 Communities @ 12 months 1980 1873 1,830,187.(2) @ 12 months 1981 1793 1,222,416. 31 Communities @ 12 months 1981 2171 1,562,705. NOTES: 1. Figures based on reported claims 2. Includes reserve for W.C. fatality GALLAGHER BASSETT FEES PER $100 OF REVENUE 1979 .187 1980 .187 1981 .184 1982 .175 ANNUALIZED PER $1000 OF REV. FREQ. VALUE .019 $20.03 014 14.10 .012 8.36 .015 14.75 .013 8.96 .011 7.84 12. Estimated Savings Over Conventional Insurance 26,655 106,807 114,672 (line 11 minus line 9) 13. Percent Savings Over Conventional Insurance Cost (line 12 divided by line 11) 12. at. 23.81'6 27.2 % Q, ()nn r,.(, c:stimatc dor tul gear 99,802 25.1 Al -t. SUPPLEMENTAL WORK SHEET (IRMA) Municipality of Mount Prospect Ulinois Membership in IRMA effective July 1y 79' 1979 1980 1981 1982 Total 1. Revenue Base $ 6,307,000 $12,066,616 $11,386,801 $ 11,386,801 $11,386,801 2. Membership Contribution - Rate per $100 1.81 of Revenue Base - as of 7/28/82 1.998 1.84 1.875 3. Membership Contribution as of 7/28/82 126,014 1 222,026 213,503 206,101 (line 1 times line 2) r 4. Unfunded Pool Liability - Rate per $100 4 � of Revenue Base • 83 0 '7 I .22 .18 S. Unfunded Pool Liability (line 4 times line 1) 52,348 84,467 25,051 20,496 6. Total Net Pool Cost 178,362 306,493 238,554 226,597 (line 3 plus line S) 7, Losses Udder $1,000 (from Gallagher Bassett reports) 16,359 35,577 36,000 36,000 8. Debit (or credit) Based on Prior 0 I 0 32,086 35,000 Year's Experience 9. Total Program Cost (line 6 plus line 7 plus line 8) 194,721 342,071 306,640 297,597 10. Estimated Conventional Insurance Cost 3.51 3.72 3.70 3.49 Rate per $100 of Revenue J-- 11. Estimated Conventional Insurance Cost 221,376 448,878 421,312 397,399 (line 10 times line 1) 12. Estimated Savings Over Conventional Insurance 26,655 106,807 114,672 (line 11 minus line 9) 13. Percent Savings Over Conventional Insurance Cost (line 12 divided by line 11) 12. at. 23.81'6 27.2 % Q, ()nn r,.(, c:stimatc dor tul gear 99,802 25.1 Al -t. MINUTES COMMITTEE OF THE WHOLE AUGUST 24, 1982 I. ROLL CALL Mayor Krause called the meeting to order at 7:30 p.m., in the Public Safety Building, 112 East Northwest Highway. Present at the meeting; were: Mayor Carolyn Krause, Trustees Ralph Arthur, Theodore Wattenberg, Norma J. Murauskis, Edward Miller, and Leo Floros. Absent from the meeting was Trustee Gerald Farley. Also present at, the meeting were: Village Manager Terrance Burghard, Assistant Village Manager Jay Hedges, Police Chief Ronald'Pavlock, Fire Chief Lawrence Pairitz, Director of Public Works Herbert L. Weeks, Director of Management Services John Hedstrom. There were approximately 8 persons, in the audience. II. MINUTES The minutes of the Committee of the Whole meeting of August 10, 1982 were reviewed and filed. III. CITIZENS TO BE HEARD There being no citizens in the, audience desiring to address the Committee of the Whole at that time, the Village Manager introduced Deputy Chief Robert Doran. Mr. DQran had been 'appointed effective August 24, 1982 by Chief Pavlock as Deputy Chief for: Administrative Services. Mr. Doran has a"Masters Degree from Roosevelt University and an Undergraduate Degree in criminology as well as an Associate of Arts Degree. Mr. Doran worked previously as a Police Officer in the Village of Skokie, Executive Director of the Crescent Regional Criminal Justice System, as a consultant to the Illinois Law Enforcement Commission and as a senior advisor to the Public Administration System of Chicago. The Committee of the Whole welcomed Deputy Chief DQran to the staff, IV. CONTINUATION OF REVENUE „DISCUSSION Mayor Krause indicated that the matter of developing additional revenue sources needs further discussion on the part of the elected officials. Regardless of the decision made at the prior board meeting to reject the food and beverage sales tax there remains a requirement that the Village will need, at the minimum, $500,000 in additional General Fund revenues next fiscal year. Mayor Krause pointed out that the Village, in establishing its policy to protect homeowners through stabilization of the Municipal Property Tax Levy, has not taken advantage of the growth and the assessed value of the community and, in fact, according to tax bills available from Elk Grove Township there were reductions over the years in the amount of tax payable to the municipality. Mayor Krause asked that the Committee of the Whole give serious discussion to finding alternative revenue sources and to avoid the necessity of interfund borrowing within the municipality. Interfund borrowing could°again jeopardize the Villages bond rating as it did in the early 1970's. The Village Manager then reviewed the financial needs of`the General F d, explaining that the primary purposes for the additional revenues included the establishment of sufficient working cash and cash flows, `,nece siy, to overcome one time revenues that are onrrently balancing 'this, fiscal year budget, and to anticipate ; some r:easona le growth of expenditures for next fi $428,000,000 in 1981; During that same period, however, the Property Tax Levy, ie, dollars coming to the Village, were $ 1,483,000 in 1977 and $ 1,500,000 in 1982. Thus, the Village has not taken benefit of the new construction and growth in assessed value. Expenditures for the General Fund are largely within 5 areas: Personnel 68%, Garbage 12%, Insurance 5.7%, Utilities 3%, and Central Dispatch 2.3%. These 5 components constitute 91% of the expenditures of the General Fund. While it may appear that Personnel consumes a large portion of the General Fund budget, the Village of Mount Prospe,ct's percentage is substantially less than other communit les., generally. At this point in time, the starting salaries for police officers and fire officers are well below 'the general market and need improvement. The garbage contract has had an annual average increase of only 6% over a 6 year period and similiarly, we have seen some moderate increases in utilities, although our telephone bill is less today than it was three years ago. In the area of insurance the Village is currently saving between $200,,000 to $250,000 over prior years through its self insurance programs., Central Dispatch expenditure, while sizeable, is still cheaper than if the Village were to try to duplicate these services itself. In fact, Central Dispatch expense declined last fiscal year. The Village Manager then pointed out that'the State Financial Health Audit reported that overall in'the municipality, operating expenditures have declined in'the past five years,the number of employees per capita has declined, the expenditure for capital outlay has declined, the debt of the community'has declined, and only the fixed costs of the municipality have increased during that period. In terms of operating revenue, the Stat* report shows that over that same period our revenues are down in constant dollars. Likewise, the Property Tax is down, Sales Tax is down, Income Tax is down, and all local revenue is down. The only revenue that has increased in that same time frame are the Villages one time revenues. Studies by other municipalities, such as Park Ridge, Des Plaines, have pointed out�that in their surveys revenue per family ranges from $980 per year to a low of $508 per year. That low number, $508 per year, is the Mount Prospect figure. The direct local payments, exclusive of Intergovernmental revenues, ranges from a high of $853 per year to a low of $230 per year. Mount Prospects' figure of direct local payments is $317 and in that survey the Village was 14th out of the 17 communities surveyed. In summary the Manager indicated that from his assessment of the data and information, he concludes that the residents and businesses of our community are getting bargain services; that our revenue system does not take benefit of growth nor do we tap all sources; that the municipality has substantial problem as it relates to cash flow, utilization of one time revenues,I and the need to anticipate growth for next fiscal year. The Committee of the Whole then entertained general discussion in regarding the data and information provided and potential sources for additional revenue. Trustee Wattenberg was of the opinion that if people want services then they must be willing to pay for it and from his conversation with his neighbors they are willing to do so. Trustee Wattenberg suggested the Village double its present $10 per year Vehicle License Fee and also double the present $7.50 per year Dog License Fee. Trustee Arthur agreed with Trustee Wattenberg that the Village currently has good services and that the residents are willing to pay for them but it was his opinion, that this should be done through the Property Tax. Trustee Arthur pointed out that if we have a cash flow problem none of the revenue suggestions, so far presented, would solve that problem on an immediate bagis. There would still be the need for the Village to issue either Tax Anticipation Warrants and subsequently raise the Property Tax. Trustee Miller suggested that the Property Taxes, regressive in nature, being more of a burden on seniors and younger home buyers. An increase in the Property Tax coupled with our anticipated utilization of the SpecialService District to pay for lake water will be burdensome to the entire community but even more so upon seniors and first time ho' me buyers. Aptording to Mr. Miller the Village should reconsider" 'the food and beverage tax or some other source of revenue that would tax non-re.'sidents that 'use our services when they are in our municipality. Trustee Floros agreedtha ' t that vehiclo sticker ought to be increased and suggested that t,he, food, and beverage tax would not produce sufficient money on a timely 'basis to solve the cash flow problern and that, the, Village may have to look at an ,increase in the propertly tax. Trustee Floros suggested that we iii,,drease the vehicle tax frova its present $10 per year to $20 per year and double the tax for late paymont. Trustee Murauskis indicated that $20 for a -vehicle license was too high, and that many, families in our community find that an automobile tomobilO., is a, ",,ce;ssity and may have several automobi"Ies, in order for older cbIldren, living at home to reach, their ,,obs or plaaes, of educatiob- Truttee Murauskis also pointed out', that if the fee is raised too high that peOp le won ' t buy them andve Will not realize therevenue - gain ally anticipated. Trustee Miller suggested that pillage oonsider an increase of $5.00 to, the' vehicle tax !,"A n rp &ryti A'.Ldara'tion of, the food and, beverage tax pacXage to secure T-ne nelcebbazy Lzv=&L-,- gently compromise their initial position. 'I ,maintained his position that the Village, dot tax,, dotible the dog license but that he soul food, and beverage tax if it were put, togetho A V. Further general discussion ensued as to the benefits, costs, and likely revenues for the sources mentioned previously as well as the potential for increasing the business licenses, liquor licenses', and other miscellaneous `fees. Trustee Arthur suggested that the Village attempt to 'find a gray to establish a surcharge upon its residents either through the refuse billing, water billing, or some other convenient format that would include the entire Village. The Village Manager pointed out that the Village authorities have the power under state statute to levy taxes, collect licenses, establish fees, or establish user charges.. Any surcharge passed on to the community residents or businesses must have proper justification and basis in law to be legally applicable. The Village Manager was requested to check with the Village Attorney to see how this matter might be resolved. After some further general discussion the Village Manager was instructed to place the revenue discussion item on the September 7, Village 'Board Agenda. MANAGER'S REPORT The Village Manager,reported that Weller Creek contract was progressing well and that while some sod had turned brown temporarily the 'contractor is responsible for making the situation correct and he will not be paid until that has been accomplished. The Village Manager p that there is a need to replace some concrete aprons int'he front of Fire 'Station #2 and #3 and that the staff is currently bidding this project and it will be brought to the boards attention at a subsuquent date. The Committee of the Whole reviewed 3 items regarding IRMA di.�ehe Xi_llage,' s self insurance coverage. The Manager reported that IRMA is now operating with the principle of using; different law firms for different types of cases and we no longer have just one .law firm representing all of our interests. The IRMA Board of Directors has asked for an indication on the part of each member`municipaLity as to whether or not they would like to continue after next calendar year in its participation with IRMA. IRMA now has 30 members and the previous agreement will expire in December of 1983`. The Village Manager asked as to how the board would like to go about, making this.decision as to whether or not continuation with IRMA is to'bepursued. After some general discussion the Committee of the Whole instructed the Village Manager to prepare a staff report that would be reviewed by the Mayor and Board of Trustees and the Finance Co `fission. The Village Manager presented proposals from 3 auditing firms who would attempt to provide the necessary claim: audits of IRMA as requested by the Mayor and the Board of Trustees previously. After some general discussion the Village Manager was instructed to have copies of the proposals distributed to the Mayor and the Board and to schedule the matter for the September 7th agenda. 1 1 Assistant Village Manager Hedges report that the Speeial Service District' while somewhat-behind in time sohedtule, is still anticipated tp be completed, this. calendar year. The'Village Manager indicated that the Executive Committee is recommending to the Board of Directors of the Joint Action Water Agency that each community participate in paying its proportionate share of interest during construction in order that the interest does not have to be refunded with bonds at the end of construction. These costs will range from $300`,000 during the calendar year 1983 for the Village of Mount Prospect to some $1,990,000 in the second year. Anticipating the utilization of the Special Service District all these debt costs would be payable through the Special Service District and the remaining operating expenses would be placed on the water bilis. It is anticipated at this early date that the Village would have to increase its water and sewer rate by some .84 to .85, which is 44% of the cost'. The fixedcost ie, debt retirement, is some 56% of the total. bill. VI.. ADJOURNMENT The meeting was adjourned at 9:47 p.'.. Respectfully submitted, TERRANCE L. BURGHARD Village Manager TLB/mr Village of Mc. it Prospect Mount Prospect, Illinois INTEROFFICE MEMORANDUM TO: Terrance L. Burghard, Village Manager FROM: John A. Hedstrom, Director of Management Services RE: Irma Membership Status DATE: September 10, 1982 IRMA's original five year term comes to an end on December 31, 1983 and discussion is now focusing on its continuation. Currently 33 communities make up its membership with an additional 5 approved for entry effective January 1, 1983. To help each member decide whether or not they should continue their association with the Agnecy, Mr. Ed Hansen, IRMA's Risk Manager, devised the attached worksheet which indicates the feasibility of membership. Summarizing the worksheet's data for years 1979 to 1982 results in the following for Mount Prospect: Amounts shown under IRMA premium column include a provision to cover the unfunded pool liability (deficit) as well as a charge for prior years experience. As you can note, this summary indicates a substantial savings results from IRMA membership. Mr. Hansen has informed me that IRMA's total premiums are currently $4,300,000 while premiums via conventional coverage are estimated at $6,900,000 exclusive of civil rights liability protection. The worksheet does indicate that Mount Prospect is currently realizing a savings of better than 250 over coventional coverage. The premium used in the worksheet for conventional insurance includes protection for (1) property, (2) workers compensation, (3) Product liability (water system), and (4) normal liability such as public official, automobile, false arrest, professional and property. This rate includes those areas of exposure that are quantifiable and established; it does not include an amount for civil rights liability due to the newness of this risk. Costs for IRMA's coverage does include all liabilities. Premium Conventional Year IRMA Insurance Savings Savings 1979 $194,721 $221,376 $ 26,655 12.0 1980 342,071 448,881 106,810 23.8 1981 306,640 421,312 114,672 27.2 1982 297,597 397,399 99,802 25.1 Amounts shown under IRMA premium column include a provision to cover the unfunded pool liability (deficit) as well as a charge for prior years experience. As you can note, this summary indicates a substantial savings results from IRMA membership. Mr. Hansen has informed me that IRMA's total premiums are currently $4,300,000 while premiums via conventional coverage are estimated at $6,900,000 exclusive of civil rights liability protection. The worksheet does indicate that Mount Prospect is currently realizing a savings of better than 250 over coventional coverage. The premium used in the worksheet for conventional insurance includes protection for (1) property, (2) workers compensation, (3) Product liability (water system), and (4) normal liability such as public official, automobile, false arrest, professional and property. This rate includes those areas of exposure that are quantifiable and established; it does not include an amount for civil rights liability due to the newness of this risk. Costs for IRMA's coverage does include all liabilities. - 2 I realize IRMA's concept has been and still is controversial and questionable, not only in Mount Prospect but throughout all member communities. Facts and statistics are however starting to fall into place and do place the agency in a better light. - The agency is growing and new members are joining. Negotia- tions are currently underway regarding the feasibility of merging the state park districts into the pool. The five new members accepted for membership on January 1, 1983 made applications early this year in order to obtain better coverage at a considerably lower cost or premium. - The per incident loss value per $1,000 of revenue has de- clined from $20.03 in 1979 to $8.36 in 1981. This same trend should continue as additional members enter the agency. IRMA's Loss Analysis showing more details on this point is also attached_ This analysis indicates that the aver- age claim for the 14 original communities forming the pool used $20.03 of each $1,000 in pool revenue in 1979. By 1981 this average amount had decreased to $8.36 of each $1,000 of pool revenue. - The recent change in which multiple law firms specializ- ing in specific areas are going to be utilized, getting away from the former approach of one firm handling all the legal work should make for better results in completing claims settlements. - Private insurance companies are certainly not actively soliciting municipal business. No companies have called upon Mount Prospect to quote on coverage since I have been with the Village. - Village staff has found the agency easy to work with and in fact periodic reports developed by the administrator represent the first time members have been in the posi- tion of knowing how claims are settled. Since the original five year period comes to an end on December 31, 1983, each of the 33 members is being asked to signify their intentions to remain with the agency after 1983 or to obtain conventional coverage through regular sources. Those members wishing to remain with the agency after 1983 have been asked to have resolutions adopted and filed by November 1, 1982. It was decided that renewal would be binding for an additional four years thereby making the agency's life at least nine years. We have attached a sample resolution that could be used for this purpose. Because dates have a way of slipping by, we would appreciate some direction from your office before proceeding further. We could go to the market and obtain bids or quotes from private carriers, but from my know- ledge of this topic carriers are reluctant to incur expense developing bids for IRMA members and larger communities are placed in the assigned risk pool 3 for workers compensation coverage. Assuming the premium furnished by IRMA's Risk Manager for use in developing data shown on the attached worksheet, we have to recommend Mount Prospect's continuation with the agency for four years beyond 1983 due to having better coverage at a lower cost. We do how- ever look forward to direction from the Manager's Office prior to October 31, 1982. Assumptions Used In Developing Water System Projections Dated September 10, 1982 $1,900,000 in General Obligation Debt is incurred during December, 1982 via formation of a Special Service District. Interest rate is a maximum of 120 and debt is retired during December, 1982 from Real Estate Taxes collected during March, July and August 1983. Early receipt of taxes in March, 1983 will earmark approximately $660,000 for this debt retirement, - Costs increase at an 8% rate due to inflation. loo interest rates are obtained on investments through April 30, 1987. Water rates of $2.10 become effective with billings mailed on May 1, 1984. Quantity of water billed remains constant at 1,366,000,000 gallons annually. In 1974, average customer on system was billed for 139,700 gallons when rate was $.90 per 1,000 gallons. During 1982, average customer was billed for 131,300 gallons at a rate of $1.40 per 1,000 gallons. Most of 8,400 gallons annual average decrease is assumed to be due to maturing of Village requiring less watering of lawns and trees. Payments required to be made to agency are from John Nuveen & Company agency projections dated August 10, 1982. These projections assume Village will be on line with Lake Michigan Water during second half of fiscal year ending April 30, 1985. !``T.LLAGE OF MOUNT PROSPECT Page 1 CASH AVAILABLE FOR of 2 RATER SYSTEM OPERATIONS (As of September 10, 1982) Cash Balance 4-30-82 $1,002,650 Excess Receipts over Disbursements -Year Ending 4-30-83 1,799,336 Cash Balance 4-30-83 $2,801,986 Excess Receipts over Disbursements -Year Ending 4-30-84 (1,055,6_23) Cash Balance 4-30-84 $1,746,363 Excess Receipts over Disbursements -Year Ending 4-30-85 392,733 Cash Balance 4-30-85 $2,139,096 Excess Receipts over Disbursements -Year Ending 4-30-86 (298,502) Cash Balance 4-30-86 $1,840,594 Excess Receipts over Disbursements -Year Ending 4-30-87 (57 56,x) Cash Balance 4-30-87 $1,265,029 Assumptions Used In Developing Water System Projections Dated September 10, 1982 $1,900,000 in General Obligation Debt is incurred during December, 1982 via formation of a Special Service District. Interest rate is a maximum of 120 and debt is retired during December, 1982 from Real Estate Taxes collected during March, July and August 1983. Early receipt of taxes in March, 1983 will earmark approximately $660,000 for this debt retirement, - Costs increase at an 8% rate due to inflation. loo interest rates are obtained on investments through April 30, 1987. Water rates of $2.10 become effective with billings mailed on May 1, 1984. Quantity of water billed remains constant at 1,366,000,000 gallons annually. In 1974, average customer on system was billed for 139,700 gallons when rate was $.90 per 1,000 gallons. During 1982, average customer was billed for 131,300 gallons at a rate of $1.40 per 1,000 gallons. Most of 8,400 gallons annual average decrease is assumed to be due to maturing of Village requiring less watering of lawns and trees. Payments required to be made to agency are from John Nuveen & Company agency projections dated August 10, 1982. These projections assume Village will be on line with Lake Michigan Water during second half of fiscal year ending April 30, 1985. Page 2 VILLAGE OF MOUNT PROSPECT of 2 WATER SYSTEM PROJECTIONS (ALL SOURCES) AS OF SEPTEMBER 10, 1982 Actual Year Ending Projections for _Years Ending April 30 April 30, 1982 1983 1984 1985 1986 1987 Gallons Billed (Billions) 1.366 1.366 1.366 1.366 1.366 1.366 Rate to Generate "Water Billings" 1.53 1.53 2.10 2.10 2.10 Revenues & Receipts Water Billings $1,924,513 $2,061,000 $2,090,000 $2,869,000 $2,869,000 $2,869,000 Meter Rentals 10,937 10,000 10,000 10,000 10,000 10,000 Water & Sewer Taps 61,595 30,000 30,000 30,000 30,000 30,000 Interest Income 193,678 120,000 350,000 200,000 200,000 200,000 Real Estate Taxes - $1,900,000 Bond Issue 1,900,000 Real Estate Taxes - Regular 1,900,000 1,900,000 1,900,000 Bond Proceeds 1,900,000 Other 410,161 42,800 50,000 50,000 50,000 50,000 Total Revenues $2,600,884 $4,163,801 $4,658,000 $5,059,000 $5,059,000 $5,059,000 ratinq Exper:se� Administration & Support $ 559,410 $ 506,027 $ 550,000 $ 550,000 $ 550,000 $ 550,000 Buildings & Grounds 46,104 65,171 60,000 60,000 60,000 60,000 Well Pumpings, Maintenance & Repairs 749,655 742,018 750,000 553,000 400,000 400,000 Water Distribution, Maintenance & Repairs 89,741 195,185 200,000 200,000 200,000 200,000 Water Valve & Hydrant Maintenance 32,490 90,601 90,000 90,000 90,000 90,000 Meter Installation, Replacement 75,301 96,468 100,000 100,000 100,000 100,000 Equipment Maintenance & Operations 140,211 198,147 200,000 200,000 200,000 200,000 Sanitary Sewer Maintenance 42,403 57,345 60,000 60,000 60,000 60,000 Water System Improvements 2,693 164,382 250,000 250,000 250,000 250,000 Purchased Water 2,307,392 3,035,252 3,255,940 Interest - $1,900,000 Bond Issue 228,000 Interest - Old Bonds 25,575 16,725 7,875 5,250 2,625 Inflation Factor (86) 167,000 163,000 332,000 391,000 Extraordinary Main Repairs 50,000 Total Expenses $1,738,008 $2,140,919 $2,671,725 $4,591,267 $5,282,502 $5,559,565 Debt Service Recuirements Special Service Area Bonds $ $ $1,900,000 $ $ $ Outstanding Bonds 175,000 175,000 175,000 75,000 75,000 75,000 Venture Notes 48,545 Total Debt Service $ 175,000 $ 223,545 $2,075,000 $ 75,000 $ 75,000 $ 75,000 Capital Expenditures Venture Interface $ $ $ 966,898 $ $ $ Other 677,074 Total Capital $ 677,074 $ $ 966,898 $ $ $ Net Increase (Decrease) In Available Cash $ 199,292 $1,799,336 $(1,055,623) $ 392,733 $ (298,502) $ (575,565)