Finance Committee

TOWN OF MOUNT PLEASANT, SOUTH CAROLINA FINANCE COMMITTEE Monday, October 2, 2017 Municipal Complex, Committee Meeting Room, 3rd Floor 100 Ann Edwards Lane Mount Pleasant, SC 29464 Minutes PRESENT: Elton Carrier, Chair; Gary Santos and Mark Smith EXCUSED ABSENCE: Paul Gawrych STAFF PRESENT: Eric DeMoura, Town Administrator; Marcy Cotov, Chief Financial Officer Mr. Carrier called the meeting to order at 9:01 a.m., and asked for a moment of silence for the Las Vegas incident. 1. Approval of Minutes from the September 5, 2017 meeting Mr. Smith moved for approval; seconded by Mr. Santos. All present voted in favor. 2. Public Comments [None] 3. Employee years of service recognition Ms. Sims recognized Nancy Hanf, for five years of service with the Town of Mount Pleasant. 4. Consideration of Resolution to increase workers’ compensation deductible Ms. Cotov stated that this was presented last month and began in January. She said they had a review that indicated that it would benefit the Town to go self-insured. She stated that staff built into the budget to go self-insured; however, staff realized that 2016 was a bad year for the  Finance Committee October 2, 2017 Page 2 of 7 Town for workers compensation with six large claims. She stated that their experience modifier is going to increase because of 2016. She said that staff’s plan, working with consultants, was to transition to self- insured for workers compensation by incrementally increasing our deductible. She said their first step was to increase our deductible from $50,000 to $100,000. She said that when they ran the numbers based on 2016, the $100,000 was more palatable than going to $200,000. She said they wanted to then begin to capture good years in order to build up a fund reserve, so if there was a bad experience the first year going out self-insured, there would be a cushion before it hit the general fund, fund balance. She said that later in the agenda staff will ask to set up the internal services fund for insurance. She said they went out of nine different commercial carriers and the regional carrier that the Town is currently with. She stated that from those, three responses were received. She said the first is SCMIT who will continue if the Town chooses to go up to $500,000 deductible, which is their maximum before you go on your own. She said the other was Key Risk Insurance; however, they would not do anything less than a $200,000 deductible. She said there was also Arch Insurance who offered $500,000 for employees and Public Safety would have to be at $750,000. She said the other big component is that the Town is in the process of hiring a Risk Manager. She said that staff has an analysis of the current risk, which includes some cost containment features. She said they are hoping that the slow transition will allow staff to get the Risk Manager on board and get the cost containments in place, and capture in that internal services funds, some of the savings in order to begin stepping up, as it has been shown that it will benefit the Town from being self-insured. She stated that SCMIT falls under the State self-insured portion and the Town is a component of their pool, they do require a resolution indicating that the Town is going to increase their deductible from $50,000 to $100,000. She said the Town’s premium will decrease $145,000 and of this, anticipate anywhere from $50,000 to $100,000 the first year to cover those additional claims that the Town is seeing.  Finance Committee October 2, 2017 Page 3 of 7 Mr. Smith stated that this is a huge task, but a step in the direction that is going to benefit the tax dollars. He asked about the net different in what the Town was originally going to do versus the direction now being taken. Ms. Cotov stated that the proposal that was done in January set a $300,000 deductible and determined that the savings would be approximately $1.2 million over 5 years. She stated that when they did the calculation in May, once the high claims were added, they felt that at $200,000 the Town would break even and that the $100,000 was the best option at this time. Mr. Smith asked about a timeframe for implementation of the original plan. Ms. Cotov stated that this plan year begins January 1st and, in discussing with the consultants, spring would be the time to discuss this with the other companies interested in the Town, to discuss the risks. She added that when they looked at the Town’s experience modification number, we went from .965 to 1.04, so the Town would have seen an increase anyway. She said that unfortunately this meant that the Town lost the 5th year which was a good year, and picked up one for the next five years. She said that each year, they will evaluate to see what other companies are able to offer. She said that as a municipality, the Town does not necessarily have to have collateralization, although some of the companies did require it. Mr. Smith asked if the bad year will be with the Town until the next 5 year period. Ms. Cotov responded in the affirmative. Mr. Smith stated that of the municipalities that have gone self-insured, how many went with this approach. Ms. Cotov stated that she is not aware how they transitioned. She said that she did contact them to see why they preferred self-insured. She said that one of the municipalities went back to the Municipal pool and said what their costs would be, and it was not beneficial to them. She said that it does matter what your experiences are.  Finance Committee October 2, 2017 Page 4 of 7 Mr. Carrier stated that there is no timeframe, but by what the Town determines. Ms. Cotov stated that the recommendation will always go to Administration and Town Council based on actual costs, experience and projected savings. Mr. Carrier asked how the role of the new Risk Manager would affect this process. Ms. Cotov stated that the individual should be on board by the end of the calendar year and what they will do with this analysis, makes a guideline of where the Town needs to shore up and look at cost containment, which will benefit the Town. Mr. Smith stated that those areas where the incidents are occurring, the Town is going back to ensure that leadership and management are being provided, along with the tools for safety training in order to educate the workforce on being an incident free workplace. Mr. DeMoura responded in the affirmative. Mr. Santos made a motion to approve the increase in the workers’ compensation deductible to $100,000 as described by staff; seconded by Mr. Smith. All present voted in favor. 5. Consideration of Resolution to increase property/auto physical damage deductible Ms. Cotov stated current deductible for property, which includes buildings and contents, inland marine, electronic data processing and builders risk, and automobile physical damage is $2,500. She said the savings in shifting to a $5,000 deductible is that the premium drops $31,000 and of that, had the Town been at this level for the past three years, the Town would have saved over $16,000. She said that the Town’s experience, coupled with the Town going internal services fund for all the Town’s insurances, lends this recommendation to say that it is a minor risk to take and the Town experience will benefit from having a slightly increased deductible. She said that the Town has formally put in the place a property asset replacement plan in the Comprehensive  Finance Committee October 2, 2017 Page 5 of 7 Maintenance Plan, so that many of these items are funded in a replacement plan each year. Mr. Smith asked if the Town currently has in place at-fault shared deductible. Ms. Cotov stated that there is a Safety Committee that meets quarterly, which looks at all at-fault cases. She stated that if the employee is found at fault, they will pay 10%, up to a $300 maximum for their cost sharing in that at-fault incident. Mr. Smith stated that as the Town increases their deductible period that the Town look at that maximum, where the Town is covered on the 10% at that level. He stated that if the coverage is going to double at an at- fault situation, that the Town is being good stewards of the tax dollars. Mr. Santos made a motion to approve the resolution to increase property/auto physical damage deductible as described by staff; seconded by Mr. Smith. Mr. Carrier stated that the doubling of the 10% can be reviewed at a future time. Kevin Cunnane, 3032 River Vista Way, stated that when you have four firefighters on a truck, the injuries go down. He said that charging an employee for an at-fault accident is very troubling. He said who is to determine if they are at fault. He said that a police officer driving a vehicle and looking at their computer, which is issued to him by the Town, on his way to work, it is reasonable to do what he is doing. He said that there are 17 duties that firefighters must do in route to a call and the police are the same as well. He said they are both monitoring different radio frequencies, checking notifications when apprehending. He said there are a number of things they are required to do when driving and does not believe it is right to charge them at all, let alone increasing the amount from $300. All present voted in favor.  Finance Committee October 2, 2017 Page 6 of 7 6. Consideration of Resolution to establish an Insurance Management Fund Ms. Cotov stated that the governmental accounting standards board sees insurance as an opportunity for an internal services fund. She said a year ago, the Town established one for health insurance, which does need to remain separate, as employees pay into this fund. She stated that taking all other insurance activities and put them in one fund begins to build up the fund balance and continues the Town’s strategic plan towards physical sustainability and begins to help the Town. She said that it has worked well with the health insurance and the Town currently has a fund balance, as of June, at 25%. She said that this is a request for staff to establish the same thing, effective this past July 1st to allow the Town to build up the reserves on the good years. Mr. Smith stated that the intent here is openness, transparency and accountability to make sure that it is easy to identify, is the sole purpose of reallocating a line for this. Ms. Cotov responded in the affirmative, and stated that it brings clear identification of the Town’s insurance in the Town’s financial documents. Mr. Carrier asked if parameters were set up on this as far as percentages. Ms. Cotov stated that staff requested at the end of the resolution, to maintain at a minimum of 25% fund balance, similar to the health insurance fund. Mr. Smith moved for approval as stated; seconded by Mr. Santos. All present voted in favor. 7. Consideration of Master Bond Ordinance for Stormwater Fees Ms. Cotov stated that Attorney Paul Trouche, bond counsel for the Town, would provide information on the Ordinance. Mr. Trouche stated that the Master Bond Ordinance mirrors the master bond ordinance in place for the water and sewer system, which has been in place since 1992. He said the reason why the Town should have a master bond ordinance, is to set in place a template by which a lender  Finance Committee October 2, 2017 Page 7 of 7 today knows that the Town reserves the right in the future under specified criteria, to be able to issue additional parity in the future. He said in this ordinance would be 115% coverage, net revenues over annual debt service. He said that a first time lender knows that the Town has reserved the right to borrow again the future if it meets the additional bonds test. He said there are other items that provide assurance to current and future lenders that the Town is not going to change the rules. He said the reason the Town has a Master Bond Ordinance is to provide the Town the flexibility in the future. Mr. Carrier stated that 125% of net revenue over debt was mentioned. Mr. Trouche stated that this ordinance mirrors what MPW has, which is 115%, which is a fairly standard and conservative industry average. Mr. Santos made a motion to approve the Master Bond Ordinance for the stormwater fees as described by Mr. Trouche and staff; seconded by Mr. Smith. Mr. Smith stated that for the record, we are discussing a master bond ordinance only and this does not include any fee increase or fee discussion. Ms. Cotov responded in the affirmative. Kathy Landing, 2114 Sewee Indian Court, stated that one of the critical aspects of this is the fact that the Town is currently using an SRF for what is being accomplished in Snee Farm, in terms of working on the drainage issues, and want to ensure that the Town has the flexibility in the future for Council to decide what needs to happen next with the Old Village. All present voted in favor. 8. Adjourn There being no further business, meeting adjourned at 9:24 a.m. Respectfully submitted, Barbara Ashe October 2, 2017