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HomeMy WebLinkAbout2006-06-07 Special Called Regular Meeting of the La Porte City Council A MINUTES OF SPECIAL CALLED REGULAR MEETING OF THE LA PORTE CITY COUNCIL June 7, 2006 1. CALL TO ORDER The meeting was called to order by Mayor Alton Porter at 6: 30 p.m. Members of City Council Present: Mayor Alton Porter, Council members Tommy Moser, Mike Clausen, Mike Mosteit, Louis Rigby, Barry Beasley, Howard Ebow and Chuck Engelken. Members of Council Absent: Peter Griffiths Members of City Executive Staff and City Employees Present: City Manager Debra Feazelle, Assistant City Manager John Joerns, Assistant City Attorney Clark Askins, Assistant City Manager Cynthia Pearson, Parks and Recreation Director Stephen Barr, Accounting Supervisor Phyllis Rinehart, Building Official Debbie Wilmore, Police Lieutenant Carl Crisp, Police Chief Richard Reff, Police Department Matt Novosad, Planning Director Wayne Sabo, EMS Chief Ray Nolen, Assistant City Secretary Sharon Harris, City Secretary Martha Gillett, Assistant EMS Chief Lisa Camp, Secretary Melissa Lanclos, Office Coordinator Peggy Lee, Police Chief Richard Reff, Planning Department Brian Sterling, Animal Control Supervisor Clarence Anderson, Records Technician/Deputy Clerk Bonnie Garrison, Patrol Officer Sherman Moore, Police Sergeant Matt Daeumer, Planning Department, Parks Maintenance Supervisor Randy Cernosek, Assistant to the City Manager Crystal Scott, Assistant Public Works Director Don Pennell, Parks Superintendent Aging Services Karen Beerman, MIS Department Mike Gibbons, Office Coordinator Peggy Lee, Assistant Finance Director Michael Dolby, Dispatcher Wanda Richards, Finance Supervisor Lorie Doughty and Human Resources Manager Robert Swanagan. Others Present: Carla Fields, Don Fields, Neal Welch, Earl Garrison, Kenny Martin, Tracy D. Phelon, Jeff Tippit, Ivy Tippit, Allen Gudgell, S. Griffin, Paul Hickenbottom, Buddy Jacobs and other citizens. 2. Mayor Porter delivered the invocation. 3. Mayor Porter led the Pledge of Allegiance. 4. PRESENTATIONS / PROCLAMATIONS There were no presentation or proclamations presented. 5. Consent Agenda A. Consider approving Minutes of the Regular Meeting and Workshop Meeting of City Council held on May 22, 2006. Motion was made by Council member Engelken to approve the consent agenda as presented. Second by Council member Ebow. Motion carried. City Council Special Called Regular Meeting - June 7, 2006 Page 2 Ayes: Mosteit, Moser, Ebow, Engelken, Rigby, Beasley, Clausen and Mayor Porter. Nays: None Abstain: Councilmember Mosteit and Rigby abstained from Item A. 6. PETITIONS, REMONSTRANCES, COMMUNICATIONS, AND CITIZENS AND TAX PAYERS WISHING TO ADDRESS COUNCIL ON ANY ITEM POSTED ON THE AGENDA. There were no citizens wishing to address Council. 7. Assistant City Manager John Joerns provided a report on Foreign Trade Zone. Ron Carey of Port Crossing provided Council with an overview of the proposed Foreign Trade Zone. He further informed Council of the benefits and indirect benefits. The Foreign Trade Zone incentives will remain consistent with Industrial District Agreements and have the same seven (7) year term. It was the consensus of Council for staff to put on agenda for June and authorize staff to send a letter of intent by the following Tuesday requesting an additional 2-3 weeks time. The letter is to include statements on abatements. A copy of the letter is attached as exhibit A. 8. Human Resource Manager Robert Swanagan and Health Consultant Neal Welch provided council a presentation on Employee Retiree/Health Insurance. Human Resources Manager Robert Swanagan reported since he first advised Council the Chapter 172 had not met, they have since met and made it a priority to meet and discuss relevant issues, gather related information, and to understand the complexities of the health insurance issues. They have made an attempt at making informed decisions regarding benefits for active retired employees in the City of La Porte. We are attempting to meet all 7 chapter 172 Texas Political Subdivision Uniform Group benefit program requirements through review, evaluation, and making recommendations to the City of La Porte Management regarding the employee and retiree benefit program. In 2006, we've met 3 times and will be scheduling another meeting shortly. Retirees and active employees are encouraged to attend our meetings even though they cannot participate. They can observe the discussions and deliberations of all relevant issues. Mr. Swanagan then turned the presentation over to Neil Welch of Hilb Rogal & Hobbs. Mr. Neal Welch's comments: Mr. Welch informed Council they have some tough decisions to make. He noted some budget decisions have to be made and taking into consideration some new federal guidelines relating to accounting principles for our retirees and our health plan. Council needs to consider some issues for this coming year. He noted he met with the chapter 172 and had an active and lively discussion of the retiree and active health program so the information provided in the book is similar or probably identical to what was given to you before but a few items were added. Tab 1 was discussed. It was noted the City of La Porte is not alone with health care concerns. He informed Council this is a brand new study that mercer just completed it just came out about the whole issue of health care costs and specifically retiree health care costs City Council Special Called Regular Meeting - June 7, 2006 Page 3 whether it be for the public sector or the private sector so the first slide there represents the trend in folks that participate or employers that participate in retiree health insurance programs. Council was informed the lines have gone from a 1993 from 40 some odd percent of employers and this is employers over 500 employees down to folks in the 20-25% range. It was noted in corporate America the change has been made primarily because F ASB was implemented and many of those companies didn't want to have to continue their retiree health insurance. The retiree population was discussed and noted in 1993, prior to pre- Medicate and current Medicate, an example of corporate America as well as public entities showing the prevalence of retiree health plans back to 1993 vs. where they are today. This was the time period when private industry was dealing with what public entities will begin dealing with starting December 15th, 2006. Cities will be required to report liabilities on their balance sheet for the downstream potential cost of health care for retirees. He noted he expects the trends of not offering retiree insurance to increase. The next slide showed the relationship of payments to those retiree health plans, again for those folks that are below age 65 and people who are Medicare eligible, almost 50% in both slides are costs being shared between the employer and the employee whereas the blue section the second largest section is the retiree paying all the cost. It was noted the slide was incorrect showing retiree paying all and this should be employer paying all not employee paying all. An explanation ofGASB was briefly discussed. GASB requires all U.S. public secular employers to account and report for their annual cost of non-pension post employee benefits and related outstanding obligations and commitments rather than accounting for these benefits on a pay as you go basis which is essentially what we do now. Phase 2 will begin in 2007 and here is the real impact to the City and it affects the financial reporting. It does not require that you fund that amount, and by the way this is an actuarial statement and Cities will have to retain an actuary. .. they put some money in the budget through the plan to retain an actuary in order to give us that number. It doesn't require that you have to fund it, they recommend that you ultimately fund it. This could have an impact on a Cities bond rating. It might have affected a stock price or the value of a private company for you it affects a bond rating because for the first time Cities will have a liability stuck on their balance sheet with no asset to offset it. Tab 2 discussions: Tab 2 primarily deals with budget issues. Mr. We1ch noted he had been working with staff to come up with some numbers they feel are possible. He requested Council note the vast amount of the funds of our health plan go to pay claims. He noted the City does not have commissions and fees and taxes and licenses and all of those kinds of things involved with that plan so $350,000 approximately goes to pay for the administration of the program and our reinsurance and all the other dollars go toward paying claims for the plan members. The expected, the midpoint, and the maximum were discussed. Expected is what it says that's what the City would expect the claims to be. A maximum, if you will, is 125% the reason we use that number is because that's where the City also buys its reinsurance or aggregate stop loss insurance, insures the entire fund at a 125% of expected claims will come. This example, if a stop loss company quoted the City's plan for 2007 and the aggregate attachment point was $3,592,000 that would be the maximum liability and from there on from that plan year, the City would receive reimbursement on a dollar per dollar basis. If the City buys insurance and that's what the 213,000 dollars there represents in stop loss for specific claims and then in aggregate. Then halfway between there the City just comes up with a midpoint and the reason that is done is the City wishes they had the perfectly clear crystal ball and always knew where the claims were coming in, but the fact is City Council Special Called Regular Meeting - June 7, 2006 Page 4 they are self funded and are not rolling the dice but have to make educated projections on where they think the claims in and that is the expected number. It was recommended to be conservative and have a little money for the rainy day. All of that is important from a budget process and then ultimately what the city's contribution would be and what the employee's contribution would be. Council had a question on the stop loss how it had saved the City anything in the last 2-3 years? Mr. Welch noted it always amazed him why stop loss companies are in business because if we went over 10 years we would have well over 100% recoveries of our premium. In prior days it used to be a cash flow business and interest rates are high and risk capitol was a real interesting investment for many people and they'd say we may have a 100% loss ratio but if we get to hold on to those millions and millions of dollars and make money on that money we're willing to take a loss. Today the industry probably is at 93% loss ratio which the City certainly wouldn't want to run our plan at that kind of ratio but yes and a group the City's size can't be out there unprotected. Where we get reimbursements from are on the specific catastrophic plans. He estimated specific stop losses may be $115,000 deductible, noted not to quote him on that, but estimated this was the year that we did not have to increase our deductible the market was pretty competitive so anything up to $115,000 per individual in our plan per year, we are responsible for the first $115,000 then after that they are fully insured. The second page was discussed. It was noted it was important and to some of Council this is new because up until a year or so ago we only ever had one plan. When the City went from TML to Humana, one of the things that they were able to do was introduce in this case 4 different programs that our folks both active and retirees could choose from. It was demonstrated where the numbers were in 2005 when we introduced the program and where they are in 2006. A couple of observations about this is a positive here and that is more people are covering themselves. One of the tragedies in this country we have 40-50 million uncovered individuals who are eligible for insurance coverage. It was noted it's not that these people can't get insurance that's true in some cases it's also that some choose not to buy the insurance whether the employer doesn't provide it or they just choose not to take it, but it's still a figure that's very, very difficult for the healthcare delivery system because of indigent care that comes back and affects us so dramatically when we try to negotiate a contract with a hospital or a physician group. There are right now probably in Harris County 20-30% of the hospital costs are contributed to indigent care and when they write that amount off whether they are for not for profit or for profit that write off has to go against something and essentially it goes against those plans and those employers and those employees who see it in the form of what they pay every time they go to the hospital or physician. The positive trend here is that we're getting more people. The understanding that the population may be growing a bit also. Mr. Welch noted he did not like it when he sees it going the other way. Part of the reason may be is that we do have a better choice of plans. One of the things that is somewhat unique at La Porte is that we do have more people taking the coverage first program $1,500 deductible. It has the lowest premium. The coverage first with $1,000 deductible has a dramatic increase in that and a dramatic decrease in the $500 deductible PPO. The reason is with the benefit program, the coverage first $1,000 deductible has a $500 upfront benefit for every member of the plan and then a deductible behind it. There is a premium difference between the coverage first $1,000 deductible and the PPO 500. The PPO 500 is more expensive. There has been a shift in those people. They are crissed-crossed between the two plans and that is not a problem for the City. That means the plans are meeting the needs of the people. We're not planning on any significant plan City Council Special Called Regular Meeting - June 7, 2006 Page 5 design changes for the upcoming year, nor did we do any last year. Benefit levels we're pretty consistent on the programs. Worksheets were discussed and one of the important things noted was a new column this year. It is called funds subsidy and the funds subsidy is the amount that the City is paying now each year to make up for the short fall that we experienced last year in our program. The short fall was not from a claims expense standpoint, it was from the standpoint that people sought the lesser cost levels of benefit and employee contributions went down quite a bit. The City reaping some of the benefit of that right now due to claims being relatively flat. Last year I estimate it was 2% increase or 3%, and this year it is estimated to be in the same everything works out through the end of the year. Some of the benefit of those plan cost sharing plan designs are coming back in the form of better claims experience. The fund subsidy is there and staff is trying to determine what to do with the fund subsidy. Is it going to be a City expense, is that going to be an employee retiree expense, or is it going to be shared by both parties? If the City totals the employer contribution at $500 a month down there at the bottom at $2,000,003, the employee and retiree contribution at $556. We need the $433,000 from the fund subsidy to get to the $3,000,002 because as noted in the prior tab, that gets us just up to about our expected costs for our 2006- 2007 year. That issue indicates the City has to figure out what to do with the fund subsidy. The good news is between the three columns, numbers are not too far away from how much is needed for 2006-2007 in contributions. Council will need to determine what to do with that fund subsidy and where it comes from in the future. It was noted the worksheet reads post premium and should read current premium. It should be current premium and contributions and not proposed. It was noted the remaining slides in that section just go on to show expected midpoint and maximum and what the effect of those would be. From a budget perspective the City has to find out where they want to be on contributions and then make the decision on how we fund those by employer and employee. It was noted employee and retiree are considered the same. The next tab discussed focused on the retiree sector. Retiree sector gets a lot of attention just because with the GASB 45 and so forth it demands that we address those issues but at the same time keep in mind that the vast majority of people in the City plan are active employees. Costs are average costs for an active employee, a retiree under 65, and a retiree over 65 and again 65 being synonymous with being Medicare eligible. Units are employees or retiree and members are the "bellybuttons" in the plan. This includes the spouses, children, and so forth. If the City looked at the total claims active, retiree over and under, there is some disparity between the costs of those different classes of people. A bellybutton in our active plan costs us $237 a month in claims. For a bellybutton under 65 but retiree, it's $385 and per member over 65 is $199.50. Why would a retiree over 65 have a lower cost than an active employee? Secondary insurance exactly. Medicare pays primary we pay secondary. Examples were discussed using some very basic math. If active is an x then a retiree under 65 is 63% over x and a retiree over 65 is 16% less than an active. Therefore, the City mayor may not want to consider this. It was talked about it at length in the 172 meeting, whether we ever wanted to separate our retirees into two classes for under 65 and over 65. No recommendation was made, Mr. Welch wanted Council to see the numbers. It was explained to Council the City plan is kind ofa mirror of what the mercer report showed the average cost variance over and under 65. City Council Special Called Regular Meeting - June 7, 2006 Page 6 The rest is supporting documentation from 2005 and it's there for your review if you would like to see it. Mr. Welch noted two other things. Years ago, a decision was made to start eligibility for retirees. A retiree had to elect or sayan active individual who is eligible to retire if they wanted to take the coverage, they had to elect the coverage at the point when they retired and participate in our plan as long as they paid premium. In hind sight, these many years later, we know that we have lots of folks are able to very hard for the City and earn their retirement and can retire at a relatively young age. And very often they go to work at another institution...a plant, a machine shop, etc.) If the City is forcing retirees to elect that coverage at the point of retirement, would we be better served by saying Mr. And Mrs. Retiree you don't have to take that retiree coverage at this point but you retain your eligibility to take it some point in time in the future when you need it. Not to say you can jump in and jump out willy nilly but if I'm a retiree and I'm, give me an age 55, would that be reasonable, 55 years old and I've still got some juice left in the box and I want to continue to work maybe I want to work until I'm 65. If! have to elect this coverage at this point, doesn't the retiree in the form of contribution and the City in the form of contribution aren't they subsidizing the other employer who now doesn't have to offer coverage to that individual. The retiree may have to pay some premium for our retiree which would be an act of somewhere else would have to pay some premium as well. A retiree if they go to work somewhere else is not eligible for coverage. Would it be wiser to change the eligibility requirement to say you only get to elect it once but it doesn't necessarily have to be when you first retire. So in that particular case, if Neil at age 55 goes to work at the ABC company and they offer my major medical plan, of course at my age 55, they make a contribution, the ABC company, I make a contribution if it's a contributory plan and I work there for 5 years until I, age 60 for instance then would I be better off saying ok I'm really going to retire now period...I want to join the plan. It seems we're supporting somebody else's health plan where Neil works for that period of time because that employer is getting off scott - free without having to provide the coverage to the employee. I submit that you think about that for a little bit and again GASB in mind. It doesn't mean that we still wouldn't be responsible for Neil at some point in time and in our actuarial projection we might have to say hey Neil is coming back at age 60. We have no idea when he's going to come back but he might not. But if we have this 63%... 163% of an active rate under the age 65, it would seem to me that we would be best served by reducing the number of people in that category as long as we could. That doesn't mean that Neil then decides to go get another job and says now I'm out and then at 65 I want to come back in I'm not proposing that we do this more than once but they have this "open enrollment period" one time once they leave active duty and would become a retiree. In light ofGASB that that might be something to consider. A critical point of that could be we would be allowing someone get the guy back when they are real sick and needs the coverage. The offsetting argument is they're closer to age 65 anyway or 65. The City offers extremely good healthcare coverage but it's not necessarily any better than what corporate America would offer but then for the individual that says I'm going to retire and be my own and work doing my own thing and I want the coverage so be it just like always. Council questioned whether or not we had a flex account and could offer a stipend to those who do not take the city coverage. Council suggested we may need to look at is when a new person is hired they could pay a different rate and look at various options to solve the health care issue Neal Welch noted the wonderful thing about a self funded plan is you basically within the confines of the federal law, have the flexibility to do pretty much what you want to do. You're not being dictated to buy an insurance company or whatever and whether it's City Council Special Called Regular Meeting - June 7, 2006 Page 7 plan design or whether it's contribution. Neal Welch reminded Council they need to make a decision on how to the fund subsidy and what they are going to do with that $450,000. Council discussed the issue and noted their comments. They requested staff to research the following questions and provide Council with answers at a future meeting: 1. Information on City flex spending account for pre-tax. 2. Option of City of La Porte spouses going to their agency and city offering cash incentives. 3. New hires pay a higher premium rate. 4. Forecast for two or more years to determine impact on costs short-term/long term associated costs. 5. Percentage out-of-network options from 80-20 to 60-40, even 50-50 6. Prorate number of dependents in program. 7. Research if we have anyone in program and on insurance that is not eligible. 9. Administrative Reports City Manager Debra Feazelle reminded council of the Annual Juneteenth Parade and Celebration on Saturday, June 17,2006, the 2006 Good Skipper award dinner & auction (benefiting Girls and Boys Harbor), Saturday, June 24, 2006 at 7:00 p.m. at Lakewood Yacht Club and City offices closed, Tuesday, July 4,2006 in observance ofIndependence Day. 10. Council Comments Mosteit, Clausen, Rigby, Moser, Beasley, Ebow, Engelken, and Mayor Porter had comments. 11. EXECUTIVE SESSION - PURSUANT TO PROVISION OF THE OPEN MEETINGS LAW, CHAPTER 551.071 THROUGH 551.076, 551-087, TEXAS GOVERNMENT CODE (CONSULTATION WITH ATTORNEY, DELIBERATION REGARDING REAL PROPERTY, DELIBERATION REGARDING PROSPECTIVE GIFT OR DONATION, PERSONNEL MATTERS, DELIBERATION REGARDING SECURITY DEVICES, OR EXCLUDING A WITNESS DURING EXAMINATION OF ANOTHER WITNESS IN AN INVESTIGATION, DELIBERATION REGARDING ECONOMIC DEVELOPMENT NEGOTIATIONS) 12. There was no Executive Session Items. 13. There being no further business to come before Council, the Special Called Regular Meeting was duly adjourned at 8:21 p.m. Respectfully submitted, City Council Special Called Regular Meeting - June 7, 2006 Passed and approved on this 26th day of June 2006 Q~~t?~ Mayor Alton E.Porter I Page 8 W/&tI~ Martha Gillett, TRMC, CMC City Secretary