Minutes 06/23/2009 - Laserfiche WebLink

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June 23. 2009 B) Adoption of an ordinance to transfer the sum of $5,500,000 from the FY 2008- 2009 Health Insurance Fund and to appropriate $1,500,000 of the transferred funds in the FY 2008-2009 Risk Management and Insurance Fund, $2,000,000 of the transferred funds in the FY 2008-2009 Other Post Employment Benefits (OPEB) Fund, and $2,000,000 of the transferred funds in the FY 2008-2009 General Fund. Background: . The FY09 Budget was adopted with $8 million appropriated for OPEB from all funds, including the General Fund. Council has not officially authorized the establishment of an OPEB fund, thus the OPEB contributions have been made to the Health Insurance Fund. Council action is required to establish an OPEB Fund. . The total OPEB liability for FY09 is $13.8 million, of which $6.9 million is for amortization of the unfunded liability and $6.9 is normal cost and interest. . The Health Insurance fund receives revenue from all departments and all funds for the employer share of both OPEB and health insurance premiums. As of FY08, the Health Insurance fund had a fund balance of $8.1 million. Based on current health care costs and with the recommended transfers herein, the Health Insurance Fund is projected to remain near the $8 million fund balance level as of June 30,2009. . The $2 million appropriation to OPEB will be the City's first contribution toward the OPEB unfunded actuarial accrued liability (UAAL), although the City pays the normal cost portion of the liability on an ongoing basis. However, the City did book the liability as required by the Government Accounting Standards Board (GASB) in the FY08 Comprehensive Annual Financial Report (CAFR). GASB requires reporting the liability but funding the liability is not yet a requirement. . The City's General Fund is projected to close without further erosion of fund balance as a result of the numerous actions taken to offset the projected revenue shortfall. Unless there is an unforeseen and drastic drop in collection trends reported through May 31, 2009, the revenue projections that were revised during FY09 are expected to be met. . Council by consensus during its FY09 deliberations authorized the Administration to reduce its original $8 million OPEB appropriation to $2 million. Given the fiscally sound Health Insurance Fund balance and given the Risk Management Fund deficit that needs to be eliminated, transferring $1.5 million from the Health Insurance Fund to the Risk Management Fund will prudently reduce the Risk Management Fund deficit by nearly 50%. . This methodology of reducing the Risk Management Fund deficit was vetted with the credit rating agencies and was favorably received. Discussion: . This funding will satisfy multiple financial objectives: 1. Provide additional funding to help eliminate the projected deficit in FY2009 to supplement other savings identified early in the fiscal year (debt restructuring, travel and training savings, hiring freeze, furloughs, position eliminations, etc.) 2. Make progress toward elimination of the Risk Management Fund deficit, which is a fiscally prudent action. Further, this action will address rating agencies' ongoing documented concerns regarding unfunded Risk Management Fund liabilities. 3. Maintain the OPEB contribution of $2 million in FY2009. This is followed by the FY10 appropriation of $2.5 million and the FY11 approved $3.5 million OPEB contribution. Financial Impact: . The source of the $5.5 million transfer is from the Health Insurance Fund and appropriating $2 million each to the General Fund and OPEB Fund and $1.5 million to the Risk Management Fund. Staff Recommends: . Adoption of ordinance. Vision Principles: A Robust and Prospering Economy.