DATE: March 25, 2024
TO: Mayor and Members of the City Council President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
VIA: Stefan Chatwin, City/District Manager
FROM: Diane Pitman, Administrative Services Director
DEPARTMENT: Administrative Services
SUBJECT: FY 2024-25 SELF-INSURANCE FUND BUDGET
RECOMMENDATION
It is recommended that the City Council/EMID Board of Directors' ("City Council") receive and accept this report regarding the policy to maintain a minimum Self-Insurance Fund Reserve Balance of $1 million and provide direction to staff to prepare the FY 2024-2025 budget with department assessments in the table below.
BACKGROUND/ANALYSIS
Attachment 1 is the analysis of internal service charges and the preliminary proposed budget for FY 2024-2025 for the Self-Insurance Fund. The analysis shows the audited ending fund balance from FY 2022-2023 (June 30, 2023) as $973,000. With revenues and expenditures projected through June 30, 2024, the estimated fund balance beginning FY 2024-2025 will be $905,278 which is below the $1 million reserve target. While the general liability and property premium is projected higher than prior years, the City Council’s conservative approach to handling claims’ helps to keep the expenditures within budget.
Expenditures
Expenditures in this fund represent the Pooled Liability Assurance Network Joint Power’s Authority (PLAN JPA) premium and an allowance for expenses that may be incurred below the $100,000 liability Self-Insured Retention (SIR) and property and vehicle
damage deductibles.
For FY 2024-2025, the amount budgeted for premiums includes an increase of approximately 30% above the previous year which reflects ongoing volatility in insurance market that continues to experience considerable losses in natural disasters, cyber- attacks, and fires throughout the United States and in California. This volatility has also resulted in several insurance providers exiting the California market, resulting in fewer providers to provide competitive insurance quotes for the group. PLAN JPA currently uses a third-party claims administrator, Sedgwick, to assist with claims administration.
PLAN JPA may be increasing the goal of maintaining the pool’s funding. It is currently the 65% confidence level for liability and 75% for property. Higher premiums would be necessary to increase the confidence levels which is why the estimated increase is 30%.
The PLAN JPA Board preliminary budget review meeting is scheduled for March 28, 2024.
The actual PLAN JPA liability, property, and cyber premiums will not be finalized until around June 2024, so the figures may be adjusted, if needed, in the final FY 2024-2025 budget prior to adoption. Expenditures within the City’s SIR are estimated to be at or under $260,000, based on current experience.
Revenues/Internal Service Charges
Revenues are derived from internal service charges to the City General Fund, Vehicle Replacement Fund, Water Fund, and Wastewater Fund; interest earnings; and any rebates of the PLAN JPA premiums based on positive experience and PLAN JPA policy.
There are no anticipated rebates from PLAN JPA and there are expected additional expenses associated with premium increases, as well as costs associated with PLAN JPA’s administrative overhead and the goal to fund at a higher confidence level.
Based upon projected reserves at the end of FY 2023-2024 which are projected slightly below the $1 million reserve and the projected expenditures for FY 2024-2025, Self- Insurance internal service charges in the following budgets will reflect the assessments as shown below.
Budget Projected
FY2023-2024
Proposed
FY2024-2025
Increase
(Decrease)
Revenue
General Fund - City Manager's
Department $683,217 $936,775 $253,558
Vehicle Replacement Fund $197,374 $270,624 $73,250
Water Fund $318,835 $437,162 $118,327
Wastewater Fund $318,835 $437,162 $118,327
Interest $25,000 $20,000 ($5000)
Total $1,543,261 $2,101,723 $558,462
California Environmental Quality Act
Not Applicable
FISCAL IMPACT
As noted above, the increase to the Self-Insurance Fund Budget is currently projected to be $558,462. Staff will continue to monitor progress as PLAN JPA works to finalize the cost for FY 2024-2025 and will report back on any adjustments to the above projections.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Sustainability
ATTACHMENTS
Attachment 1 - FY 2024-2025 Self Insurance Fund Internal Service Charges Analysis and Proposed Budget
Attachment 2 - FY 2024-2025 Self Insurance Budget Narrative