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1976-09-28 Special CC MinutesSPECIAL MEETING OF THE COUNCIL OF THE CITY OF ALAMEDA HELD TUESDAY - - - - - - - - - - - SEPTEMBER 28, 1976 The meeting convened at 5:45 o'clock p.m. in the Council Chamber of the City Hall with President Corica presiding. 1. ' Receipt of the Notice and Agenda of this Special Meeting had been acknowledged by the Councilmen and was on file. The purpose of this session was for consideration of a report on Worker's Compensation Insurance, and to take action thereon if desired. REPORTS AND RECOMMENDATIONS: 2. ` From the Assistant City Manager concerning the Self-Insured Worker's Compensation Program. President Corica introduced Mr. Don DeVere, Vice President of Mund, McLaurin and Company, and requested he give a brief summary of his written report. Mr. DeVere's reported that, as prescribed by law, the city had two options with regard to Worker's Compensation; one, to insure through the State Fund agency, or, two, a prOgrD0of 3elf-1DSUraDCe. He said a third choice might be a combination of the two options. He stated that the city had not had to worry about the program before as the rate of increase from one year to the next had been fairly constant and fairly low until the two last fiscal years when there had been consid- erable increase, due to increased benefits, increased payrolls, etc. For this reason, he said, his consulting firm had been asked to submit a feasibility report on self-insuring Worker's C0m- peDSdt7OD, He noted that a part of the report was the inclusion of specifications for the city to go out to bid to determine costs for excess insurance, and also for the cost of administration. Mr. DeVere said the benefits of a self-insurance program eliminated the increments of rates, payroll, experience modification, and dividend structure, and the only consideration would be the payment of paid claims, the cost of excess insurance, and the cost of administration. He stated the savings would come immediately, although not as dramatically as they would in future years as after the initial fund had been created, the only cost would be the replacement of any amounts which had been withdrawn during the previous year. He said their report had been written on a conservative basis, and at the end of the first year the city could be looking at a $200,000 saving as opposed to the $114,000 which they had projected. He stated they had calculated that over the next ten years the city would receive dividents in seven of the ten years, however it was their opinion dividends would be received for only three out of the ten y2dr3. He noted that the city had not received any dividends for the last two calculated years, and the last two fiscal years and had been uncalculated leaving no basis for a determination. Mr. DeVere stated the specifications had been sent out, cost figures had been received on administration, and full information was set out in their written analysis and addendum. Concerning excess insurance, Mr. DeVere said the chance of the city hitting the excess retention was not probable and they would advise a $250,000 retention, if any. He stated a decision on this matter could more properly be made when the quotation from State Fund was obtained. He reported some political subdivisions were rapidly coming to the decision that for the cost, they were not going to buy excess insurance and were going to a totally self-insured concept. He said he did not believe it made sense for a city the size of Alameda to put out between $25,000 and $40,000 just for the cost of excess insurance, where the chances for that great losses were not too realistic. Councilman Diament asked if it was his recommendation the city not carry excess insurance. Mr. DeVere said it was a question of whether the Council adopted a concept of $100,000 retention or $250,000 retention. He said they felt that the way the cost of excess insurance was going, that by the time the fund was built up, which they generally put in the category of 21/2 times the annual premium, or about $I,000,000, then the city was in the position of standing within the fund any loss which might take place over the $250,000 concept. Until this fund was built up, which he estimated would take from two to five years, he said it probably would give the city peace of mind to purchase excess insurance. DeVere answered questions put by members of the Council on the subject of Worker's Compensation. Councilman Hurwitz noted there seemed to be a pretty good spread between the quotations for administration. He asked if it would be worthwhile to proceed on a low bid basis. Mr. DeVere stated the four firms contacted were totally independent, and they had prior knowledge of the service which they provided to public agencies. He siad these firms were not involved in anything but administration of self-insured Worker's Compensation or Liability, and that each of the three firms who had submitted bids were of equal capacity. He said he would recommend to staff, should the Council approve, that an attempt be made to stabilize the figure received from Gates, McDonald & Company for a period of longer than one year for budget purposes. Councilman Hurwitz asked if it was the recommendation that excess insurance be taken out in the amount of $250,000, rather than $200,000. Mr. DeVere said that verbally he would recommend the t250,000 retention, specifically because of the high premium were the city to continue to insure with State Fund as it had done in the past. He stated that at the end of one year the city should have in the bank over 3400,000 which would deplete as claims built up, and the first year should be the lowest because of the paid claims. He said it was their belief the city would not be in any danger by adopting a concept of $250,000 and saving $20,000 a year. Should the Council adopt a concept of $200,000, he said he thought this would take away the flexibility that staff might have should State Fund come in with a reasonable amount of premium for their $250'0OO minimum retention. On question, Assistant City Manager Creagh reported no bid had as yet been received from State Fund and the closing time for receipt of proposals was 5:00 p.m. on Thursday, September 30, 1976. He asked that staff be given latitude from the Council in terms of accepting the excess quotation from State Fund assuming it was received and was substantially lower than the quotation submitted by Employees Reinsurance and, if not, authorization be given to accept the bid of Employees Reinsurance, as set out in his written report. Councilman Diament asked if it would be possible at some later date to include coverage for the Alameda Unified School District employees and the Housing Authority, should they be interested. Mr. DeVere said this would be possible, however they would not recommend a mixture of political subdivision types. At the conclusion of discussion, Councilman Diament moved acceptance of the report and approval of the recommendt4on of the Assistant City Manager and of Mund McLaurin. The motion was seconded by Councilman Hurwitz and carried unanimously on the following roll call vote. Ayes: Five. Noes: None. Absent: None. There being no objection, the meeting proceeded to "Resolutions". RESOLUTIONS: 3. The following resolution was introduced by Councilman Hurwitz, who moved its adoption: "Resolution No. 8592 Accepting Bid Proposal of Gates, McDonald & Company for Worker's Compensation Claims Administration Services for City of Alameda." The motion to adopt said resolution was seconded by Councilman Sherratt and carried on the following roll call vote. Ayes: Five. Noes: None. Absent: None. The President declared the foregoing resolution adopted. 4. "Resolution No. Accepting Bid Proposal of Employees Re-insurance for Worker's Compensation Excess Insurance for City of Alameda." It was the consensus of the Council that no action would be taken on this resolution at this meeting. Councilman Beckam moved staff proceed with the recommendations of the Assistant City Manager on the award of this specific bid proposal. The motion was seconded by Councilman Diament and carried unanimously on voice vote. Mr. William Godfrey of Alameda Associates asked if it would be possible for his firm to resubmit a bid on the proposal, after the bid had been received from State Fund. He was advised that they would be allowed to do so. Councilman Sherratt asked why State Fund was late in submitting its proposal. The Assistant City Manager reported State Fund had had some personnel problems in their estimating office, however had indicated their interest in submitting a bid on the Excess Insurance for the city but could not guarantee when it would be received. He said there was a possibility they would not submit a bid at all. On question, Mr. DeVere stated this was never intended to be a bid procedure but a negotiated proposal to obtain costs, and had never been put out as a bid through advertising. He stated their suggestion to staff was they make two contacts, one to the present broker and the other to State Fund. He commented that State Fund had removed itself from the business of administering self-insured programs. ADJOURNMENT: 5. There being no further business to come before this meeting, the Council adjourned at 6:25 o'clock p.m. Respectfully submitted, 7 City Clerk