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Minutes 11-29-10 MINUTES OF THE FINANCIAL ADVISORY COMMITTEE MEETING HELD ON MONDAY, NOVEMBER 29, 2010 AT 6:00 P.M. AT THE LIBRARY ROOM "A," BOYNTON BEACH, FLORIDA PRESENT Don Scantlan, Chair Michael Madalena, Vice Chair George Feldman David Madigan Merline Pamplona William Shulman Victoria Castello, Alternate Terry Lonergan, Alternate (arrived 6:05 p.rn.) Kurt Bressner, City Manager ABSENT: Glenn Jergensen Chair Scantlan called the meeting to Order at 5:59 p.m. The Recording Secretary called the roll. A quorum was present. Motion A motion was made and duly seconded to appoint Ms. Castello as a regular member for the meeting. The motion unanimously passed. The following was added to the agenda: Item 6.5 Discussion of Methods of Revenue Generation. Motion Mr. Shulman moved to approve the addition. Mr. Madigan seconded the motion that unanimously passed. Motion Mr. Shulman moved to approve the agenda as presented. Mr. Madigan seconded the motion that unanimously passed. 1. Approval of Minutes - N/A 1 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29, 2010 2. Review of FAC Work Area List - Follow-up Discussion from November 15,2010 Meeting. This item was discussed later in the meeting. 3. Review of Survey Monkey's Ease of Use and Comparison of Key Features Free vs. Unlimited Use The members discussed whether the City wanted to buy a version of Survey Monkey that would allow for more than 10 questions and 100 responses. Mr. Atwood believed the City would pay the fee to do so and indicated he or Mr. Bressner will advise when they purchased the survey. Mr. Feldman commented he interviewed a department head and the department conducts their own surveys. The department ascertained if you send out a survey and the population is 100% you only receive a 10% response rate. The department sends out one or two questions at a time. He questioned if there would be a 10% response rate and whether it would be a real indicator reflective of the community's mindset or if they should send out two questions at a time on a monthly basis. (Ms. Lonergan arrived at 6:05 p.rn.) Chair Scantlan had combined the questions submitted and could add more. He suggested they have an agenda item on the topic. The Committee needs to have some type of answer before March. The Committee had discussed having a comment in the water bill, or on the City website. Vice Chair Madalena suggested a letter from the Board in the water bill would be appropriate. If a sufficient amount of responses could be received, it could help the Committee develop a priority of services which residents would pay more for or be willing to lose. Chair Scantlan would research if there was a way to put an introduction in the survey. Mr. Madigan felt a 1 % response rate would be good, but it was not reflective of the entire community. Chair Scantlan disagreed and pointed out it was data they could qualify. Although the budget was not approved until the first weekend in September, they still needed to obtain the information by February. Discussion turned to the squeaky wheel gets the oil. Chair Scantlan passed out copies of the 10 questions from the last meeting. Additional questions will be discussed at the next meeting. It was also requested Wayne Segal, Public Affairs Director, put a notice on the web that a survey was forthcoming. 4. Utility Department Response to FAC Question RE: Paperless Utility Billing Chair Scantlan explained staff was working on providing the option to receive an electronic bill in the future. The e-notification did not provide a way for residents to notify the City they did not want to receive a paper bill and go online. Mr. Atwood 2 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29,2010 explained the e-notification provides the information without getting the bill. The end user should be able to view the aspects of the bill. Chair Scantlan commented the first way to start saving money is to start having citizens pay their bill online. Ms. Lonergan commented she opened a personal bill and was charged $1 per month to pay her bill through the regular mail. Chair Scantlan suggested doing so at the City may be of benefit, but that question was not on the survey. 5. Presentation of Budget Issues - Boynton Beach Public Library, Craig Clark Craig Clark, Library Director, and Anne Watts, Assistant Library Director, presented a brief news clip about public libraries highlighting that in the current economic environment, public libraries were booming. The Library Mission Statement and General Assumptions were reviewed as contained in the meeting backup. Many services were only available online. The Library statistics were reviewed from the meeting materials. The new Library was an addition to the old Library and was just under 63,000 square feet. The Library employs 29.5 full-time employees, which was the equivalent of the 1999 staffing levels. Some positions were frozen during the last fiscal year. They hosted 96K computer appointments averaging 50 to 55 minutes each and held 581 programs. Currently, free wireless internet access is available throughout the building. For those who cannot afford the internet fee, patrons just bring their laptop. The Library has archives and special collections as well as 500 foreign language files. They receive State Aid to Libraries, which requires them to reciprocate to other libraries. This results in local residents being able to use Delray and Palm Beach County Libraries. The circulation statistics were reviewed as contained in the meeting materials. There is a people counter at both entrances to track usage. In 2007/2008, 275,979 people used the facility. This fiscal year ending September 30, there were 348,000 visits. The budget was comprised of personnel, operating, and capital costs. They support the Children's Schoolhouse Museum and the total budget was $2,447,790. The Library has an overtime budget. Over the past year, there were over 60 police incidents. A police presence helps curb potential dangerous situations. Many public libraries are experiencing the same problems. The Library has a policy to ensure parents do not drop off their children in lieu of a babysitter and staff was trained to identify these instances. The Library has two staffing shifts. The Library is part of the Cooperative Authority for Library Automation (COALA), which started in 1984. The consortium shares a common computer system housed in the Library. They share annual maintenance costs and it works out very well. It requires very little staff time and is managed by one of the division head librarians. 3 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29,2010 The Library also is part of the Southeast Florida Library Information Network (SEFLlN), which helps them gain access to state and federal dollars. Their return on investment was $2 for every $1 spent. The Sunshine Library Program allows customers to have access to Florida Atlantic University and Palm Beach State College Libraries. The Schoolhouse Children's Museum had professional services and two staff positions. The rest of the expenses were fixed costs. The total budget was $204,519. Ms. Watts reviewed the Library's return on investments survey. The State Library System conducts research for the City and libraries across the State and they engage the University of West Florida to perform return on investment studies. They did a phone survey to identify the most frequently used services. A copy of the survey was included in the presentation materials. This survey allows the State to calculate what an individual would personally save. Staff used a hypothetical family for the survey, which revealed the family would save $138 per month, or $1,600 per year. Staff then reviewed and calculated, based on the Library's circulation, that the community would save $9,776,302 per year. This figure was based on the monthly statistics they have and a sampling they had that was conducted throughout the year on a variety of services. Because the data came from the State Library and the program was made to fit all libraries in the State, it did not always reflect some of the high-value projects the Boynton Beach Library has. The Library offers homework assistance using an AmeriCorps volunteer. The volunteer tutors 30 to 35 students. The data does not measure use of in-house reference materials, nor the independent library user. Another popular service was the use of WIFI. Most mornings, the tables on the second floor are full of patrons using the service. For every dollar the taxpayers invested in the Boynton Beach City Library, they receive at least $4.45 in return. In response to questions, it was noted there were 84 computers in the Library. Because the Library receives State Aid, they cannot charge for Library services. This year, the Library would receive about $54,000. Should the Library charge for services, they would be ineligible for aid and lose its reciprocity with other libraries. Boca Raton has determined that the library must charge for certain items. They have a revenue system, but at great personal cost to the families there. Mr. Clark explained most customers who come in to use the computers do not have jobs. The Library charges late fees and those monies totaled about $45,000 which are deposited into the General Fund. The Schoolhouse Children's Museum was an offshoot of the Library about 10 years ago, when the building was renovated. The Library Director was charged with helping with its organization. The Library Board just hired an Executive Director who would look at revenue options and who was responsible for hiring staff. 4 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29,2010 The City contributes a subsidy to the Museum, which was changed last year. The Museum was a non-profit organization. They used to have a bifurcated staff with both City and museum staff. By divesting of staff, the Museum could do their own fundraising. The City owns the building. The $200,000 subsidy was based on the estimated cost to maintain the building and the $124,000 cost was for two employees, paid for by the non-profit. The workers do not receive any City benefits. Mr. Clark explained Libraries do not exist to make money. They can charge the cost to cover some services, i.e. faxes, etc.; however, they break even and do not make money. Mr. Madigan commented that with the advances in technology, paper books are something of the past. He inquired what effect it would that have on libraries. Mr. Clark commented e-books are an added service. The Palm Beach County Library system purchases e-books from a company called Overdrive. Depending on what type of reader the individual has, they mayor may not be able to use the library. As an example, a Kindle could only be used for books purchased from Amazon. A Barnes and Noble Nook could use books from the Palm Beach County Library collection of e- books. It is a service some libraries can afford. Boynton Beach cannot afford e-books at this time. Chair Scantlan inquired why the City spends money on a Library when the County has one. He asked why not turn it over to the County. Mr. Clark responded it would cost too much money. The Library has a volunteer system - the Friends of the Library, which was their fundraising arm, who have been in existence since 1981. They donated $100,000 for furniture, have a gift shop and their volunteers work in the archive. Mr. Shulman inquired if there was any equipment staff would like to have but cannot afford to buy. Mr. Clark responded they have a number of local old newspapers dating back to the 1940s, which are deteriorating. Staff would like to digitize them but would need to microfilm them first. It was pricy and labor intensive. Staff would like to create a searchable database but it would be cheaper to outsource it. Ms. Watts estimated it would be about $1,000 to $7,500 for a reader/printer. Staff has old City directories, particularly from the public domain, where they have the film, but do not have the equipment. The cost to microfilm the records was anticipated to be $50,000 to $60,000 if they outsourced it. Staff would apply for a Library State Aid grant for this type of equipment but there are licensing issues. Staff would attempt to undertake the project with State money and see if it will work. A 15% budget reduction would be a $367,169 cut and it would result in having to reduce hours, eliminating one day and one evening per week with an overall staff reduction of three full-time, two part-time and one full-time vacant position being eliminated. 5 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29, 2010 6. Presentation of Budget Issues: Personnel costs - Sharyn Goebelt, Director of Human Resources Sharyn Goebelt, Human Resource Director, introduced herself and Marylee Coyle, the Assistant Human Resources Director. Ms. Goebelt reviewed her handout about benefits and clarified full-time means 36 hours per week. Medical, dental, vision, life and accidental death and dismemberment, long-term disability and an Employee Assistance program is provided to employees. Ms. Goebelt explained personnel costs are about 80% of the budget which includes salaries, social security, overtime, Medicare, pension and health-care benefits. About $4.2 million or 6.14% of the total general fund budget was for the cost of benefits. Staff worked very hard to keep the costs down. They went out to bid, changed co-pays and deductibles. Many changes were made to the plan. It was noted benefits are a good recruitment tool. To hire good people, you need good benefits. Additionally, an Insurance Committee was formed to review the benefits and the City Commission makes the final decision regarding the plans. Ms. Goebelt reviewed the increases in health insurance premiums compared to other indicators. The cost of City medical benefits was reviewed. The prescription claims ranged from $100,000 to $200,000 per month. There was a 50% increase in claims from 2007 to 2010. Ms. Goebelt explained the City has an aging workforce, with the average age being 47. Health care reform was anticipated to result in an increase in the costs due to new requirements. The City would no longer be able to limit preventative services. There was no lifetime dollar limit on essential benefits. Children up to the age of 26 must be covered. There are no pre-existing condition limitations on the plan and the City had to address the changes. Currently, the City has 789 employees on the plan. The City had Blue Cross/Blue Shield since the 1960s and Blue Cross/Blue Shield wanted a 36.4% increase. The City went out to bid fir each benefit and Cigna bought the business with a 9% increase. The City still has a good plan although many costs were transferred to the employee. Staff encouraged employees to use in-network doctors because the co-pays increased. The other plan carriers remained the same. The Life and Accidental Death and Disability costs were reduced 10% and vision was reduced 10%. Most contracts were one-year contracts with options for renewals. The plans are paid 100% by the City but the employee paid 100% of the costs for their dependents. Mr. Bressner commented the City's participation was very unusual. Most governmental agencies cover 60% to 80% of the dependent coverage. Boynton Beach employees pay 100% of dependent coverage. 6 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29, 2010 Mr. Feldman spoke about dental services and commented the fees could often be negotiated. He inquired if the City could negotiate its own plan as there are many dentists that service the areas from Boca Raton to West Palm Beach. The City provides basic life and accidental death and disability for employees and retirees. The City paying for retirees has been in place for a long time. The Police Lieutenants have a higher rate and these rates are negotiated in the collective bargaining agreements. The disability cost is 45 cents per hundred dollars of covered salary based on earnings. It is not capped at a certain percentage. Claims are the largest portion of health care costs. The City has a stop loss provision for extraordinary costs. The City has tried to negotiate multi-year agreements to lock in the rate, which most companies do not want. The premiums are based on the claims experience. The Fire Union requested their claims be tracked separately and it was determined their claims were just as high as the other departments. Mr. Feldman commented Police and Fire are the two largest departments. He inquired if they could be segregated by departments. Ms. Goebelt responded, generally, the larger the plan, the lower the rates. Mr. Feldman inquired if the City was partially self-insured, how would it be administered. Ms. Goebelt explained the City was fully-insured right now and has been considering becoming either fully or partially self-insured. By being partially self-insured, they would keep the insurance with a stop loss for claims that were very high and the City was moving towards that, but has not been able to do so because their claims have been so high. Blue Cross lost over a million dollars last year. If the City were self- insured, they would have lost a million dollars. Willis's consultants evaluated the trend, data, have actuaries and provided valuable input. Vice Chair Madalena inquired if Willis could assist with self-insurance. Ms. Goebelt explained the City was trying to move toward that and they would go out to bid and receive rates for fully, self and partially self-insured. To obtain their goal, the City had to focus on wellness. Cigna provided wellness incentive dollars to motivate employees and held wellness fairs with onsite health screenings. The employees, because their co-pays have increased, are becoming educated. The City held several Commit to be Fit sessions with health experts. The idea was to be proactive as opposed to reactive, and the goal was to open an on-site clinic. It cost $800,000 to set up a clinic for City employees and their dependents. The clinic would be free to employees and dependents and the claims are not submitted to the insurance carrier. It would take about a year to realize the savings. It could also be of benefit for physicals, etc. Mr. Feldman inquired if the City tried to collaborate with Publix, CVS or Walgreens regarding free medications. Ms. Goebelt responded employees were sent brochures where to go for reduced medication fees. 7 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29, 2010 Vice Chair Madalena inquired if there were governmental consortiums to boost the base. Ms. Goebelt explained Collier County has one. Mr. Bressner advised there is a six county consortium for health benefits. Colleges and University have ICUBA. Chuck Magazine, Risk Manager, explained the City attempted to use a consortium a few years ago and went out to bid, but the initiative fell apart because municipalities received better rates from the insurance companies. Vice Chair Madalena inquired about the morale of the employee base. Ms. Goebelt opined the employees were grateful for their jobs although they may be fearful of what may happen next year. The obstacle to self-insurance was the reserve money the City would need to have. The City is paying 15% just for plan administration and would have to go out to bid. The City pays taxes on the plan and they have certain limitations as there are mandates on how plans should be designed. There would be much more control over a self-insured plan and the City was carefully considering it although it was noted some municipalities that opted to self-insure were now in red, and continue to lose money. 7. Workers Compensation - Chuck Magazine, Risk Manager Mr. Magazine introduced himself and Pam Brown, Claims Administrator. Mr. Magazine explained he was asked to give a presentation on the City's Workers Compensation Program and advised they have had a self-insured workers compensation program for the last 20 years. In the past, they had been using an outside administrator including case manager, financials, and check disbursement. They analyzed and determined they could do it more economically in-house. Ms. Brown serves as the case manager. An adjuster would have four or five different accounts and as many as 500 claims at one time. Using that process, an injured worker calls and is sent to the urgent care center. The physician at the center examines the worker and sends the paperwork to the adjuster where it would sit for a few days before it was determined the worker might need an MRI. The City contacts an MRI facility and makes an appointment which may take three or four days. The adjuster receives the report from the MRI, sends it back to the urgent care center and it is determined the worker may need to be sent to an orthopedic specialist. Appointments could not always be given immediately and sometimes two weeks would elapse from the date of the accident to the appointment resulting in the employee remaining at home. The City does a better job of providing expedient care for the worker. When an employee is injured, they are sent to an urgent care center, which is Med Express. They call ahead and advise the center if the employee needs to see another physician, they should call the City and they do. If an MRI is needed, Ms. Brown receives a call from the Urgent Care Center and arranges for the MRI. The City has arrangements with several MRI facilities and receives a better price for the service than the third-party administrator had. The employee comes back and is sent right back out for the MRI. 8 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29, 2010 From the MRI, they come back that day or the next, and another appointment is already made. The City's methodology shortens the process and gets the employee back to work sooner. The departments work closely with Risk Management and alternate work arrangements are made for the employee, contingent on their abilities, i.e. light duty, etc. In 2002, the City implemented the in-house case management. In 2003, the State set a new fee schedule on what the health care provider can collect. The fee schedule was established so the doctors cannot charge more than the fee schedules. The City does have some issues with the local hospitals with balance billing, but staff addressed it. Prior to implementing the program, the City was up to $10,000 per average claim. This past year, the claims were down to $2,300 on average. The City was one of the last entities to get out of managed care. Overall, the City's payments were on the downward slope. Mr. Magazine reviewed the data. Three years ago, the City retained a Safety Administrator, who is very helpful, working directly with the departments. They identify where the claims are because repeat claims are avoidable. The City conducts frequent employee surveys involving employees with prior claims and the results reflected 100% satisfaction with Risk Management and 98% satisfaction with medical care providers. The City was selective about the doctors they used and follow a process. If there was a circumstance when the care was substandard, the doctor or facility is removed from the list. The City cannot sue on behalf of the employee because they are not the injured party. If the employee sues, the City could lien them to try to recover some of the City's costs. Doctors are researched and checked for malpractice. Physicians used by the City have to carry malpractice insurance. The City's legal involvement was compared to legal involvement on the County level. The County level was 28.7%. The State of Florida had 22.3%. The City was at 1.4%. The average Palm Beach County Claim was $19,139. The State of Florida's average claim was $17,807. Boynton Beach's was $3,830 and more recently was under $3,000 per claim. The OOPS line, which is the number called when an employee is injured, is manned 24 hours a day. If an employee uses a physician he or she selected, the City may not pay for it. Exceptions occurred with serious emergencies where an employee is transported to the hospital. This year to reduce costs, the City increased its self-insured retention amount from $350,000 to $500,000 and reduced premiums for excess insurance by 12%. Mr. Feldman inquired if any of the reductions were due to no hurricanes. Mr. Magazine responded the City does not receive many workers compensation claims from hurricanes. The Department handles the property and casualty insurance, safety, etc. The department was an internal service fund. Pension Information - Barry Atwood, Director of Finance 9 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29, 2010 Review of 3 Defined Benefit Plans (11-18-10) Executive Summary by Segal Company: 10-year Pension Summaries Consolidated Pensions - Employer ARC & Unfunded Past Service Liability Per Actuary's Report Barry Atwood, Finance Director, reviewed the pension plan as contained in his presentation. When reviewing the plan, there are three considerations. With respect to Police and Fire, this is the year when they would see a serious review of the 175 and 185 monies. The General Employees contribute 7% of payroll, Police contribute 8% and Firefighters contribute 12%. The employee share of annual required contribution is 26.70% for General Employees, 17.44% for Police and 25.24% for Firefighters. Mr. Bressner explained under the Statute, because the City accepts 175 and 185 monies, the plans are subject to collective bargaining; and for any increase for Police and Fire Pensions, if the employees deductions for participation in the pension system are increased, it has to be used for an enhanced benefit. It could not be used to offset the cost. That provision was under scrutiny and was the provision the Legislature would be reviewing. The Statute mandates that because Police and Fire are in high-risk professions, they have to be treated separately and better than other plans. Palm Beach County made a decision not to accept the 175 and 185 money, which removes the provision in the Statute that requires they negotiate the benefit in collective bargaining and any increase in cost had to translate to higher benefits. Palm Beach County took the estimated total revenue and are not participating in the program. It was unknown if they would need to have a bifurcated system. They were the first municipality to do so because of the red tape. The State was going to look at FRS changing the benefit from the five highest years to all 30 years of service. Mr. Bressner did not know if the State Police, under FRS was participating in the monies or if it only pertained to municipalities. He did not know if the State shared in those revenues. Last year the City accepted about one million dollars between Fire and Police. Palm Beach County took the first step to withdraw from the program. Conversely, there may be changes to modify the bargaining provisions, and the past ruling that if you increase the employees' share for Police and Fire, they have to receive an increase the benefits. That provision was an administrative rule. It was not a Statute and some organizations were starting to look at it to see if it would be codified in the Statute. It was unknown if it will be changed. Different scenarios were reviewed as contained in the handout. Palm Beach County's actions are being watched very carefully. The Town of Palm Bay was also following the matter. Mr. Bressner commented the City already put the Unions on notice that this was an area of special interest and concern, and they will have discussion on it. 10 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29, 2010 It was noted there is no an article in the contract regarding pensions, only a statutory requirement. General employees would be impacted. Vice Chair Madalena commented an underfunded pension plan should not have a DROP, which was an elective in 1998. The Segal report reviewed a what-if scenario. Currently, all three plans are underfunded in FY 2011. The General Employees were at 74.8%, Police at 59.1 % and Firefighters 64.3%. The City funded the plans based on an assumed rate of return, but some of the assumptions were too high. Vice Chair Madalena explained the unfunded past service liability would bankrupt a City. The cost must be controlled and be realigned. Pensions are no longer a guarantee. He noted there were many ways to tweak the plans but there would be less of a benefit for future employees. Cities cannot keep up with the legacy costs of the plans. The markets would not allow for it. The annual retired contribution will also be increasing. The City can make structural changes to the pension programs, but cannot affect the employees currently in the program. If someone has 18 years vesting, and then entered into a defined contribution plan, the City would freeze everyone at 18 years, not the 20- year benefit because anything earned after 18 years would be based on a different pension system. This was what Palm Beach County was attempting to do. The City cannot go back retroactively. Vesting is five years, but for anything after that, if there was a replacement plan would be applied toward that. If this scenario were used, the danger was the defined benefit plan would not have a funding base. The members agreed to review the Segal report. Ms. Pamplona left the meeting at 8:20 p.m. The survey monkey license was discussed. There was agreement the members would finalize the questions at the next meeting and staff will take care of posting the questions. Mr. Bressner recommended staff review the questions and be prepared to address the language and then staff would roll the survey out. Ms. Pamplona returned at 8:25 p.m. Methods of ways the City can generate monies was discussed. Ms. Lonergan suggested imposing the one-dollar service charge for processing paper bills. Mr. Feldman would submit a report on the Golf Course Enterprise Fund. Mr. Madigan would meet with Mr. Bressner regarding the City-owned properties. Mr. Shulman requested a list of Homeowners' Associations. He also asked the Police Chief for a list of equipment they needed but no response was received. A response 11 Meeting Minutes Financial Advisory Committee Boynton Beach, FL November 29, 2010 was received from Chief Bingham for the Fire Department. Any letters sent to the associations would be sent under the Financial Advisory Committee. Motion Mr. Madigan moved to adjourn. Mr. Shulman seconded the motion that unanimously passed. The meeting adjourned at 8:31 p.m. 7. Tour of Library Members interested in touring the Library met immediately after the meeting for the tour. ,_~ (JLiJv. /LLRQ Catherine Cherry Recording Secretary 121510 ,/it f ( "N;JL{) '-~ r-t- , ! v 12