Minutes 03/31/2014 - Laserfiche WebLink

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March 31, 2014 Although the City funds its school system at a substantially high level, the outcomes we get for that investment are disappointingly low. Currently, Portsmouth Public Schools has low SOL scores, low graduation rates, and 53% of its schools that are not fully accredited. The School Board will hire a new Superintendent in the near future. We propose that the City work with the new Superintendent to determine how we can ensure that the City's invested dollars are used strategically to produce better results. In addition to strategic budgeting, the Schools could realize significant savings by consolidating administrative/overhead functions with the City and by embracing best practices for health insurance funding. Other School districts have successfully implemented shared benefits and service programs with their appropriating organizations, to include health and wellness programs, maintenance, procurement, and finance. An actuary reviewed the Schools' health insurance and claims data last year and determined that the Schools could save $1.6 million by switching from a fully-insured to aself-insured program of funding medical claims. We cannot afford to forgo the significant costs savings these opportunities provide. The dollars freed up by these cost saving measures can be redirected to classroom instruction. As you know, we made this same recommendation to the Schools last year. Strategies to Reduce Subsidies for Enterprise Funds As you may recall, there are three funds that are intended to be self-supporting, but they require subsidies from the General Fund over the years -Willett Hall, Golf, and the Parking Authority. We stated during last year's budget process that we would evaluate the revenues and operations of these funds, and we would develop recommendations for City Council's future consideration. We are still in the process of reviewing these funds; therefore, we propose to use one- time money from the unassigned fund balance of the General Fund to help fully pay for the cost associated with these funds as we continue to evaluate options and strategies to make these funds fully self-supporting. In total, the subsidies to these funds are $1,422,079 for Fiscal Year 2014-2015. The preliminary analysis of two of these funds, Golf and Willett Hall, shows that restructuring both programs will benefit the City in the short term. For Golf, we will benchmark other municipal golf courses and implement best practices from that study; we will strengthen our marketing efforts to increase the rounds of play, as first steps towards eliminating the subsidy. For Willett Hall, we are considering outsourcing the management of the venue in a similar fashion that we do with our amphitheater. Health Care Costs and OPEB Liability Last year, we tackled our most serious financial liability: the City's woefully underfunded retirement plans. We successfully issued $170 million in Pension Obligation Bonds at a taxable rate of 4.08%. In doing so, we increased the funded level of the Portsmouth Supplemental Retirement System (PSRS) and the Fire & Police Retirement System from 28% and 32%, respectively, to 76% and 77%. Our priority this year is to earnestly begin to address the City's Other Post Employment Benefits (OPEB) Iiability.As of January 1, 2012, this liability was almost $196 million, which equated to 178% of our covered payroll, by far the most significant liability in the Hampton Roads area. We also contributed just 29% of our Annual Required Contribution (ARC}, lower than any of our regional comparative cities. Our actuary estimates that the liability has grown to over $219 million as of January 1, 2014, and our unfunded ARC will be $13.2 million and growing, without any changes.