Loading...
FY 2013 Amended City Health Insurance ContributionTHE CITY OF DUB E Masterpiece an the Mississippi TO: FROM: SUBJECT: DATE: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager Fiscal Year 2013 Amended City Health Insurance Contribution February 25, 2013 Dubuque recoup 2012 Budget Director Jennifer Larson is recommending an increase in the City health insurance contribution per contract for Fiscal Year 2013, subject to a future budget amendment. In Fiscal Years 2012 and 2011, the City had to transfer funds into the health insurance reserve due to health insurance claims being higher than anticipated. The one -time General Fund operating reserve of one million dollars that was implemented in FY 2010 and FY 2011 was partially used in FY 2011 to boost the health insurance reserve due to unexpected claims in the amount of $475,000. In FY 2012, health insurance claims were higher than anticipated and the one -time General Fund operating reserve of one million dollars that was implemented in FY 2012 was transferred to the health insurance reserve. In addition, $1,111,912 in industrial park land sales was transferred to the health insurance reserve to fund the reserve in FY 2012. It is a best practice to fund the health insurance obligations through regular contributions making the health insurance reserve self - supporting without the need for transfers from the General Fund. This best practice is supported by the Moody's Investors Service review of the City's bond rating and helps to support the current Aa1 bond rating. At the time the Fiscal Year 2013 budget was recommended, projections based on actual claims through February 2012 indicated that the City would meet the minimum reserve requirement with a City health insurance contribution of $835 per month per contract based on 553 contracts. Actual claims through January 2013 have exceeded the projections used for the Fiscal Year 2013 budget. It is necessary to increase the Health Insurance Reserve revenue in order to have an ending reserve balance that will meet the minimum reserve requirement. Based on the actual claims received through January, to meet the minimum health insurance reserve requirement the City must increase the City health insurance contribution of $835 per month per contract to $1,105 per month per contract for the rest of the fiscal year. The major impact will be to the General Fund, where most employees are budgeted. The General Fund has a one -time operating reserve of one million dollars that was budgeted in FY 2013 to boost the health insurance reserve in case health insurance claims were higher than anticipated. The City would use $429,885 of this one -time reserve to fund the increased health insurance contribution. I concur with the recommendation to increase the Fiscal Year 2013 City health insurance contribution for the remainder of the fiscal year from $835 per month per contract to $1,105 per month per contract, and respectfully recommend Mayor and City Council approval. Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Randy Peck, Personnel Manager Ken TeKippe, Finance Director THE CITY OF Dui Masterpiece on the Mississippi TO: Michael C. Van Milligen, City Manager FROM: Jennifer Larson, Budget Director SUBJECT: Fiscal Year 2013 Amended City Health Insurance Contribution DATE: February 25, 2013 Dubuque '111' 2012 INTRODUCTION The purpose of this memorandum is to recommend increasing the City health insurance contribution per contract for Fiscal Year 2013, subject to a future budget amendment. BACKGROUND In Fiscal Years 2012 and 2011, the City had to transfer funds into the health insurance reserve due to health insurance claims being higher than anticipated. The one -time General Fund operating reserve of one million dollars that was implemented in FY 2010 and FY 2011 was partially used in FY 2011 to boost the health insurance reserve due to unexpected claims in the amount of $475,000. In FY 2012, health insurance claims were higher than anticipated and the one -time General Fund operating reserve of one million dollars that was implemented in FY 2012 was transferred to the health insurance reserve. In addition, $1,111,912 in industrial park land sales was transferred to the health insurance reserve to fund the reserve in FY 2012. It is a best practice to fund the health insurance obligations through regular contributions making the health insurance reserve self - supporting without the need for transfers from the General Fund. This best practice is supported by the Moody's Investors Service review of the City's bond rating and helps to support the current Aa1 bond rating. DISCUSSION At the time the Fiscal Year 2013 budget was recommended, projections based on actual claims through February 2012 indicated that the City would meet the minimum reserve requirement with a City health insurance contribution of $835 per month per contract based on 553 contracts. Actual claims through January 2013 have exceeded the projections used for the Fiscal Year 2013 budget. It is necessary to increase the Health Insurance Reserve revenue in order to have an ending reserve balance that will meet the minimum reserve requirement. Based on the actual claims received through January, to meet the minimum health insurance reserve requirement the City must increase the City health insurance contribution of $835 per month per contract to $1,105 per month per contract for the rest of the fiscal year. The health insurance reserve projections based on the $1,105 per month per contract for the remainder of Fiscal Year 2013 is attached (Attachment I). The impact of the City Health Insurance increase by fund is as follows: Water Fund $ 28,080 Sanitary Sewer Fund $ 28,284 Solid Waste Fund $ 21,600 Parking Fund $ 8,640 Stormwater Fund $ 7,312 Road Use Tax Fund $ 28,080 CDBG Fund $ 8,813 UDAG Fund $ 1,080 Lead Paint Fund $ 3,240 Section 8 Fund $ 10,670 Cable TV Fund $ 4,136 Internal Service Fund $ 13,143 Garage Service Fund $ 12,960 Landfill Fund $ 10,800 General Fund $410,402 Total $597,240 The Water Fund has uncommitted debt service savings of $29,187 in FY 2013 due to a portion of planned debt not being issued and savings from refunding a prior debt issuance which could be used to fund the increased health insurance contribution per contract. The Sanitary Sewer Fund has uncommitted debt service savings of $71,031 in FY 2013 due to a portion of planned debt not being issued which could be used to fund the increased health insurance contribution per contract. The Solid Waste Fund has uncommitted cash balance available in FY 2013 to fund the increased health insurance contribution per contract. The Parking Fund has uncommitted debt service savings of $80,811 in FY 2013 due to refunding existing debt in FY 2013 which could be used to fund the increased health insurance contribution per contract. The Stormwater Fund has uncommitted debt service savings of $586,578 in FY 2013 due to a portion of planned debt not being issued which could be used to fund the increased health insurance contribution per contract. The Road Use Tax Fund has uncommitted cash balance available in FY 2013 to fund the increased health insurance contribution per contract. Due to the public administration cap in the CDBG Fund and limited administrative revenue in the Section 8 Fund, the $19,483 of increased health insurance contribution per contract for these funds will need to be funded by the General Fund. The UDAG Fund has cash balance available in FY 2013 to fund the increased health insurance contribution per contract. The Lead Paint Fund has uncommitted grant funds available in FY 2013 to fund the increased health insurance contribution per contract. The Cable TV Fund has cash balance available in FY 2013 to fund the increased health insurance contribution per contract. The Internal Service Funds will recharge the increased health insurance contribution per contract to capital improvement projects. The Garage Service Fund has cash balance available in FY 2013 to fund the increased health insurance contribution per contract. The Landfill Fund has cash balance available in FY 2013 to fund the increased health insurance contribution per contract. The General Fund has a one -time operating reserve of one million dollars that was budgeted in FY 2013 to boost the health insurance reserve in case health insurance claims were higher than anticipated. The City could use $429,885 of this one -time reserve to fund the increased health insurance contribution per contract for the General Fund, CDBG Fund and Section 8 Fund. RECOMMENDATION I respectfully recommend amending the City health insurance contribution of $835 per month per contract to $1,105 per month per contract effective immediately, subject to a future budget amendment. The increase per contract is recommended to be funded as follows: • $28,080 Water Fund from uncommitted debt service savings. • $28,284 Sanitary Sewer Fund from uncommitted debt service savings. • $21,600 Solid Waste Fund from available cash balance. • $8,640 Parking Fund from the uncommitted debt service savings from bond refundings completed in FY 2013. • $7,312 Stormwater Fund from uncommitted debt service savings. • $28,080 Road Use Tax Fund from available cash balance. • $1,080 UDAG from available cash balance. • $3,240 Lead Paint Fund from uncommitted grant funds. • $4,136 Cable TV Fund from available cash balance. • $13,143 Internal Service Fund recharged to capital improvement projects. • $12,960 Garage Service Fund from available cash balance. • $10,800 Landfill Fund from available cash balance. • $429,885 General Fund, CDBG Fund and Section 8 Fund from the one -time operating reserve of one million dollars that was budgeted in Fiscal Year 2013. JML Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Randy Peck, Personnel Manager Ken TeKippe, Finance Director Fiscal Year 2009 Operating Expense $5,862,664 2010 $6,457,506 2011 $7,228,094 Cir Payments $4,541,732 $4,281,096 $4,741,500 2012 $7,029,892 $7,184,672 2013 $7,803,652 $6,138,300 (estimate) 2014 $8,076,780 1 $6,735,540 (estimate) Heakh Insurance Program Funding ATTACHMENT! as of January 31, 2013 Cobra and Employee Retiree Investment Payments Payments Earnings $490,036 $208,236 $144,068 $490,000 $245,853 $64,261 $540,000 $246,000 $30,000 $576,410 $348,033 $15,458 $648,000 $350,000 $15,000 $648,000 $350,000 $15,000 Reserve Requirements as of: June 30, 2009 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 1 June 30, 2014 1 $816,498 to $1,900,718 $890,233 to $2,072,858 $1,040,421 to $2,330,789 $1,015,919 to $2,358,830 $1,051,476 to $2,500,154 - Estimate $1,088,278 to $2,587,658 - Estimate The reserve as of 2/26/13 is $1,264,804 Reserves Without Total Income Amendment $5,384,072 $3,545,902 $5,081,210 $2,169,607 $5,557,500 $1,018,642 $8,124,573 $2,113,323 $7,151,300 $863,731 $7,748,540 $535,491 Fiscal Year 2010 budgeted amount of $665 /month /contract - 534 contracts Fiscal Year 2011 budgeted amount of $725 /month /contract - 545 contracts (9.0% increase) Fiscal Year 2012 budgeted amount of $770 /month /contract - 549 contracts (6.2% increase) Fiscal Year 2013 budgeted amount of $835 /month /contract - 553 contracts (8.5% increase) from 7/1/12 - 02/28/13 Fiscal Year 2013 budgeted amount of $1,105 /month /contract - 553 contracts from 03/1/13 - 06/30/13 Fiscal Year 2014 budgeted amount of $1,015 /month /contract - 553 contracts (21.5% increase over FY13 Adopted) 1 Based on a 3.5% increase Reserves With Amendment $1,460,971 $1,132,731 (as of 6/30/09) (as of 6/30/10) (as of 6/30/11) (as of 6/30/12) (as of 6/30/13) (as of 6/30/14)