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HomeMy WebLinkAboutReso 64-1979 RESOLUTION NO. 64-79 CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION AUTHORIZING EXECUTION OF A JOINT POWERS AGREEMENT FOR AND PARTICIPATION IN A SELF INSURANCE POOL WHEREAS, the City Council of the City of South San Francisco' has duly considered a report by Kindler & Laucci dated January 22, 1979, regarding the feasibility of a joint liability self insurance poOl, which report is presently on file with the Director of Finance, and a copy thereof is on file with the City Clerk, and WHEREAS, the City Council .of the City of South San Francisco duly considered the staff report dated March 21, 1979, subject' liability insurance - Joint Powers Agreement, a copy of which is attached hereto as Exhi bi t "A", and WHEREAS','-t~e City Council has duly. considered the staff report dated June 6, 1979, subject: liability insurance, Joint Powers Agreement, a copy of which is attached hereto as Exhibit "B", and WHEREAS, the City Council desires to aui~horize the execution of a ~ Joint Powers Agreement for and participation in a joint liability self insur- ance pool with the several jurisdictions therein designated, or by way of a joint powers'-authority created by said jurisdictions; NOW, THEREFORE, BE IT RESOLVED by the City CounCil of the City of South San Francisco that- 1. Authorization. Authorization to execute the Joint Powers Agree- ment for a joint liability self insurance pool and participation therein, as set forth in the Joint Powers Agreement dated the _ day of is h'ereby ordered. 1. 2. Signatures. The City Manager is authorized to execute the Joint Powers Agreement for and on behalf of the City of South San Francisco. 3. City's Representative. The City Manager is authorized to represent the City of South San Francisco as a member of the Board of Direct- ors of the Joint Powers Agency or Authority. 4. Self insurance Retention. The City Manager is authorized to select a self insurance retention~up to and including One hundred thousand dollars ($100,000) per occurrence. 5. Authorization to~settle Claims. The Claims Administrator desig- nated pursuant 'to the Joint Powers Agreement, or the Authority created pur- suant to said Agreement,shall be authorized to settle claims against the City in the amount of (1) Two thousand dollars or less with the advice and counsel of the City AttOrney, (2) Over Two thousand dollars ($2'000) but not exceed- ing Five thousand dollars ($5,000) upon the formal approval of the City Attorney, and (3) Over Five thousand dollars with the approval of the City Counci 1. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a regular meeting held on the 6th day of June ,1979, by the following vote: AYES: Councilmembers Ronald G. Acosta, William A. Borba, Emanuele N. Damonte, Terry J. Mirri and Roberta Cerri Teglia NOES: None ABSENT None City Clerk ~/ 0 March 21, 1979 EXHIBIT "A" TO RESOLUIION NO' 6~'79 · ' - 'ADOPTED :6'-/6.} 79: ' · . ,~ ,.,, . . To' The' Honorable City Counc"il 'i i ~i.! Subject: . · :,~?- .. ACTION' k/ RECOMMENDATION' · It is recommended that Council review this report and authorize Staff to continue to .pursue the feasibility of joining a Joint Powers Authority for liability insurance and risk management services. DISCUSSION- . ..- · . In May 1978 Council authorized Staff to join with other Cities of San Mateo County in a joint venture to determine the"feasibility-of creating ~ Joint Powers Authority for risk management services and general liability insurance. - . . - ~....~'~ii,~'iii~'; _-~:~ .. In January 19 9 the firm of Kindler & Laucci produced a report conc~rnin-~ the feasibility of a self-insurance pool which was sponsored by~ 14 cities. The report was based on risk characteristics for each city, current policy premium infomation~loss data and other pertinent information. ... _~,~-.. ~ For-these i4 cities the annual cost,' on an adjusted basis, approaches .two million dollars, Total cost estimated for the pool would ~pp~o~ch $1..25 million, a significant savings. The savings for each city would vary, .... of course,' and would ~e..dependent upon a number of variables such as . present coverage, recent loss history, premiums-paid, etc. For South San Francisco the savings are estimated to range-from $24,000 to $44 , 000 ' per .~... year or 12.5% to 23.5% of current cost. ..- ' .-.. .'- .. - . -., . ..'.. . . . . . . . . ; . - Staffs of the various cities have analyzed the report and have engaged in a series of meetings with Kindler & Laucci, and have generally concluded that the savings which would result from the JPA warrants continued action toward implementation of a Joint Powers Authority. The general consensus is that a JPA will be feasible, barring unforeseen events or exceptional insurance quotations. The timetable for implementation has been tenta- tively eStablished as follows' To': The Honorable City Counci i March 21, 1979 Page 2 July 1 - Operational 'Date of'the JPA - June 1 - Formal Comm. ibnent by' Cities :'/At this time-the final committment by each city is contingent upon a favorable cost comparison for itself. 1 - Deadline or Tentative Co~itment']by.Cities' s provides a basis for Kindler & Laucci t~ Obtain. excess" insU' ~,~.~.-:~' quotations based upon the 'cities' backg~unds. , · . ,.~..,: . - At the present time each of the cities are apprising their councils of the status of the JPA and obtaining approval to continue toward implementation pending compilation of the final cost figures, A draft of the Joint Powers Agreement has been forwarded to the respective City Attorneys for their review and approval. Subcommittees of city. representatives are developing contracts for the first year s services in obtaining excess insurance and'management services and _ for providing claims administration. ._~: . The operation of the JPA as presently conceived would Consist Of the following characteristics: ...-. · :... - ~;...... . : -." ..- , l- There would be a loss retention level of $100,000. "A city, of which there presently are several, could self-insure for this first $100,000 loss per occurrence. On the other hand, a city could select any. level from $1,000 upwards which they self-insure and the JPA would issue a certificate up to the · .-~- $100,000 level -.- . .~' ......... · ,~ .,~'~'..?~ 2 Thj "]PA wil 1 obtain excess insuranCe: ' ..... '" "~' ...... -'?~:' ......... ~'"" ':'" ...... - · . ' from one Or more ~nsurance ~' . carriers which will cover the risk from $100,000 to $5,000,000 ~,.ii21?.,.~.!~-, per occurrence. Those. cities of which there are several ..... '"?i? ..... ' -presently,s5,000,000 maYleveli.f they. wish o~tain excess,, insurance-. · . ~..~ab°ve the · ~- .. ,,, ~ '%.. _'.' .. 3. ,, Direct. ion of the Author~.ity wou.td rest with a~Board of Directors:,'~- composed.of one member:~ from each participating city. - -.' 4. This representative would be the Manager, Finance Director or other individual currently handling the City's liability insurance. · _ 5. Administration of the Authority would rest with a General Manager, selected by the Board of Directors, who is experienced in risk management, insurance and the area of loss control. 6. Claims administration would be centralized with a claims admin- istration firm with the ability to provide computerized loss reports and which is highly experienced in the field. .. To' The Honorabl ity council .~ · 7. In the initial stage excess insurance, the costs of claims administration and management of the Authority would · distributed on the basis of each City's operating budget. As experience was gained this criteria could be changed by the Board to one more directly related to the cost Of each l. Agreement that the Claims Administrator Can settle any claim up to $1,000.~ . >~.i~?~i~...~,> i¥~..~.~ 2, Agreement that the Claims Administrator, with the approval of the City Attorney', may approve settlements up to a given figure, such as $5,000. Advantages of the Joint Powers Authority 3. Select a level of loss retention (i.e., a deductible paid by the City) of not less than $1,000 and not more than $100,000. 4. Agree to remain a member of the Authority for a minimum of 3 years .. ..... ~ ~ ~. . '. 1. A net cost savings realized through a retention of losses~ which can be absorbed by the City, mass buying power Of excess -insurance, and improved loss control. -- -'~.. '~.],~"~!!~!~¥~f~. ~,~ 2. 'Availability~ of the Services of a' risk, manager Wh~Ch~"~smaii'~'~r' '~. 3. ~mproved reporting' of losses for-the purpose of preventing ~or '.' of reserves b~ the City'to"pay'potential claims as compared to insurance companies maintaining and invest- ing Such-reserves ..... ;~..~<.~?-~. r.~ B. 'Cri~ria and control of settiement lies primarily With the cities'-- rather than with the insurance companies._- Disadvantages of the Joint Powers Authority 1.The ~oint Powers Agreement provides that each City Co,it itself to. membership for a minimum of three years. -.. 2. A City, by increasing the level of loss retention, would incur some additional risk of increased cost should there be an unexpected ~increase in the numbermof occurrences of which the City would be responsible ~ ~ . ~ .J~.. ~..- ~ ~ '. ,~ - To: 'The Honorable City March 21, 1979 Page 4' South San Francisco's Situation' . : . Staff has reviewed the report prepared by Kindler & Laucci, has` attended the several meetings of the San Mateo County Cities re-' · '. resentatives,'and have analyzed the insurances and the losses '-,.'., ' "~ experienCed by the City in recent years. Based upon all Of thes. h~a '"~*~":'i:!:9]~ii:~i':i!~ii~'~ii"~!~s' basically three choices from which to sele~t~..e . ~: !!:i ,~?..~ ... '. ' ' 1,.. R~main'~;~ith~:-the preS'end-:status. Barring' an Unusu'~i "~ ' ' ":; :'2~ ~ccessful claims'against the City, this would be the m~'..,. ''~' ' '~ ~ 'g st"~cost OperatiOn at'approximately $191,650 per Year,~ . ..,....~.~. provides no professional risk management Services, and .... · ~ - provides essentially-no loss control services.. --~ 2 - Membership in a Joint Powers Authority. This option would provide annual cost savings estimated to range from $24,000 to $44,000, would provide professional risk management services, and provide loss control services. ./, 3. Self-insure similar to, but independent of, the JPA' This ~'- option would probably provide savings similar to the pool --. in. that there would be additional savings by not utilizing professional management, but Such savings would probably be offset by the higher cost of excess insurance which would result from the City's lone bid. Conclusion" '~' ""' '-' '. ?'?-'''"m.. ' ~ ' ~"~:?:~?~];-~?~,~ ..... ' Based 'upon all of the information which Staff has been able t° obtain and to evaluate, it is clearly in the City's best interest to continue - toward the goal of a Joint Powers Authority for liability insurance. This conclusion is concurred in by the Staff of the other San Mateo ~"' ~- ~: County Cities involved in this .study.., · '. ' - -. '; Staff and a?rePre~sjn~ati'va~;j~"Kindler & LaUcJi will e prepared to -.-:.i":~.:' discuss';;lny details,;'associated with the report. At the meeting of .. .~[': April 18 Council will be requested to execute a Joint Powers Agreement ' for insurance coverage. This action will be necessary prior'to May 1 in order that the quotations for excess insurance coverage will be based on the cities who have indicated a willingness to be a party to the agreement ..... .., ,~ii~,~,~??~ By the first week of June a final co~itment will be presented to all ' of the cities in the pool. At that time the quotations for insurance will be available, reliable cost figures will be set forth, and each City at that time will determine to move fo~ard or will have the option to drop out of 'the pool. . . . To' The Honorable City Council Ma.~ch:~!21, 1979 Page 5 . Unless Council directs'otherwise, Staff will continue to 'meet?~ith other San Mateo County Cities with the objective of implementing· · the pool July l, 1979 providing the final comparison in early June --' will sustain the present opinion that it will be in the City's..best · C,~.iWalter Birkelo..~?j~.<~.'.~=;~' .... '~<~ ~ < ..... ~ '~.~-William R. Anderson - :!i~"'i Director· of F. inance . CWB/WRA/bab ~ , . .... . - -- June 6, 1979 64-'79 EXHIBIT "B" TO RESOLUTION NO. ADOPTED 6/6/79 To' The Honorable City Council ~ . ~ : . . · . Subject- liability Insurance - Joint powers Agreement ACIION:., Int'r~3uce and adopt two resolutions. It is recomended that the CountS1- l. 'Adopt a resolution authorizing the City Manager to execute a Joint --.- Exercise of Powers Agreement for insurance coverage; and. · · ~2. 'Adopt a resolution establishing a self-insurance fund ,.~ · DISCUSSION ..-.- ~. .. ,. ....,._ . .,.-..,,;... .... . . . .,- ... At its' meeting of March 21 Council reviewed a status report of a joint venture with other San Mateo Counties cities to detemine the feasibility of creating a Joint Powers Authority for'risk management services and liability insurance coverage. Staff was authorized to continue the study.. ' :':'""':'!~i/-',', ' ~ ".', ~'!u;:~iul~' . i .-'..-..-. iu,.." ' .... . . On May'25 the fire of Kindler and Laucci, Who had been engaged to produce the feasibility report, provided the cost allocation infomation which was to be':;.~the final determining factor on membership in the JPA.. This-final repomt?~;indicates a saving of at least $23,000 'annually Or 12i. In order to:be~;~:truly comparable to the current cost of insurance it is necessa~.to acCou~t'"for two valuable features in the J.P,A,; $9,000'for risk management and--"~dministration,~ and $4,000. to increase the overall coverage from??i'~ $5,000,000 to $10,000,000. -Thus the overall value to the City of joining the~Auth6rity is in the area of $36,000 exclusive of interest which will- be earned on the reserves held by the City. Exhibit A portrays the cost comparison. - ..... . At this writing it is likely that 14 or 15 of the 19 cities in San Ma~e° County will execute the J.P.A. and the overall savings will approach $1,000,000 annually. It must be recognized, of course, that in embracing the self insured concept the City will be assuming certain risks which at the present time are assumed by the insurance company. The experience of many cities and counties throughout the State has been that this is a worthwhile risk and .. -._ . , . .June 6. 1979 To: The Honorable City Council Subject: Liability Insurance - Joint Powers Agreement Page 2 --~ "' the~San Mateo County cities have in their deliberations concluded is a reasonable risk. The major factors contributing to this conclusion . ~.c. ~ ...... - ' 1. A cost savings through mass buyi ' ~" ng power of excess i nsurance-'and. .~...~,,~ improved~ loss control ,-.'"~,..,': · ~. -" ~ . - ' ~'~':'~,~ a risk manager which could"not ~:~..'~'~-;' no.ally.be afforded : '' ........ - 3. improved loss reports for the purpose of prevention or~ cont~lling ., ,, . - _~. . .." .-. · . ,-~ - . 4. ~etenti'on' and inves~en~ of reserves by the cities rather than by the insurance companies, and . . - 5.criteria and control of settlement lies primarily with. the c~ties rather than the.insurance companies. - . In-order for the City to avail itself of the cost savings'and other , ~ ..... advantages of the J.P,A. it is necessary that Council approve two resolutions. . , . ... The first resolution will- ~. - .-- . ......... .' .. a) Authorize the City Manager to execute the joint exercise of .?.~.. powers agreement for insurance coverages ..... '..~,'?~,~..~. b.) Appoint']the City Manager as the City's member on the Board of .~ ~.~.,,~:~..Directors of the Authority. .. '. ~ ~,~,~,~+,.~','~-~-~",.,~h~"~% ..., .' c) ete tion' (SIR) up to ' ] ,~,~,,~._ AUthorize the City Manager to select the self insurance. .~,~'~ $100,000 per occurrence...~ ~ L.',.?~.~,~'"'~:"'."'? ...~.~,~?~,~...~.,,~--'-',~%'-.~-~'~'~'~'~'~?.~, ~,~,~,, .,., d ) A~ t~jri ze,~¥~,~`~,-~,,~,,~,~..,.~,~,~`,~,,,,,,,,~,~he,.,~l,a'i .... mS?~'~"'?~'?'?~'~' ' ~ ~amin istr ator .... '~"~'"'~' ' 0 f the Autho~ rity" ~6~?'~ '~"~'""~"~" ' "in the amount of: -' ,'.".~ ,':~,~ , ~,'~ ,~.~-.~,. claimS,of the City '" '~' .1')'.'~.'". $2j O0orO less "ith' the' advi ce' and courtS el of the'tity .... . ... ,~ Attorney, and - 2) Over $2,000 but not over $5,000 upon the focal approval -. of the City Attorney- . · ,',:.- , . ~ . 3) Over $5,000 with the formal approval, of the City Council. Upon approval of the J.P.A., Council should recognize that the City also became self-insured for Workers Compensation Insurance on January l..1977. June 6, 1979 To- The Honorable City Council Subject: Liability Insuranc~_ Joint Powers Agreement 'Page 3 in recognition of these related activities of self-insurance, it would' seem most appropriate that the Council should formally adopt a Resolution outlining the basis under which .the plans must operate. The second r~,sol uti on will serve the following purposes' ~,.~]~ t. .... a) Di~e~~ the establishment of.a "self-insurance fund" which is m ~'~ ~ ~& to. be maintained for insurance plans which the City ma~~ choose ...... .. b) ApPropriate and transfer?the balance in the Liability Contingency - ~ Fund app~ximately $600,000, to the self-insurance fund to be ~ ~. assigned as a reserve for unreported claims and catastrophic losses c)Direct that the present Workers Compensation Self-Insurance Fund be incorporated in the new self-insurance fund, ~ . d) D(rect that ~he income~ eXpense, reserves for reported lossJs and for unreported losses shall be maintained separately for each type ~'~. ~--m' 6f i~urance and in accordance with sound insurance and accounting : -. p~acti ces, · -: CONCLUSION .. .,~ ~ Based upon all of the info~ation which Staff has been able to gather and evaluate, it is clearly in the City's best interest to join with other cities of San Mateo County in a Joint Powers Agreement for insurance purposes. It ~s"."~ecognized~ that the City will accept a greater risk through the self-~ insurance retention but based on the City's past perfomance and based on the reportS ~. of other cities in similar ventures it is a favorable calculated risk which~should prove 'to be of .significant benefit.. ~-~?~ staff~'~d a ~preSentatiVe of Kindler and Laucci will be prepared to' r6sp°nd to an~.~questions of Council ~ .~ .......... It is reco~ended that the Council introduce and adopt the two resolutions ~]'- which would provide for membership in the Joint Powers Authority and p~vide foF the ~ppropriate accounting for self-insurance. ~ .~.~. ~ ~i 1 ] ~ am R. gnderson ~rector of F~nance CWB/WRA/bab Enclosure - Exhibit A COVERAGE .~Liability $2,000 PRESENT .~.-..:..:-. PROJECTED COST ....m....-. ~?:~ :, JPA COST SAVINGS Est~ma.ed Cost of Deductible Auto Liability $500,000 Self-Insured Retention $1.00,000 Estimated Annual Cost Excess Insurance to $5,000,000 Sub-Total of Equivalent Costs -. Excess Znsurance to $10,000,000 Risk Management and Administration - Total Net Cost 81,000 49; 000 , . · ?:.$191,650 74,491 $155',491 4,154 $36,159 ,