10.A.
City Council Meeting - FINAL
- Meeting Date:
- 09/06/2016
- Co-Submitter:
- Dean Coughenour
- From:
- Rick Tadder, Management Services Director
Information
TITLE:
Consideration and Adoption of Ordinance No. 2016-06; and Approving a Declaration of Trust: An ordinance of the City Council of the City of Flagstaff, amending the City of Flagstaff City Code Title 1, Administrative, Chapter 1-24, Insurance, relating to the Board of Trustees and administration of the Self Insurance Trust Fund; providing for repeal of conflicting ordinances, severability, and establishing an effective date; and approving a Declaration of Trust (Self-Insurance Trust Fund).
RECOMMENDED ACTION:
1) Read Ordinance No. 2016-06 by title only for the final time
2) City Clerk reads Ordinance No. 2016-06 by title only (if approved above)
3) Adopt Ordinance No. 2016-06
4) Approve the Declaration of Trust of the City of Flagstaff Self-Insurance Trust Fund
2) City Clerk reads Ordinance No. 2016-06 by title only (if approved above)
3) Adopt Ordinance No. 2016-06
4) Approve the Declaration of Trust of the City of Flagstaff Self-Insurance Trust Fund
Executive Summary:
The proposed changes to the Self-Insurance Trust Fund ordinance will require the City Council to appoint a Board of Trustee (versus having the Audit Committee Members serving as Trustees) and will help clarify the roles of the Trustees, consistent with Arizona Revised Statutes 11-981 related to establishing trust funds. The Declaration of Trust will provide Trustees with information and responsibilities regarding the Self-Insurance Trust Fund.
Financial Impact:
There is no financial impact to adopting this ordinance.
Connection to Council Goal and/or Regional Plan:
This item does not address Council or Regional Plan Goals. This item addresses Effective Governance under the Management priorities.
Has There Been Previous Council Decision on This:
The last changes made to the City Code related to the Self-Insurance Trust Fund were approved with the adoption of Ordinance 2010-13 in August 2010. First reading of this ordinance occurred at the August 16, 2016, Council meeting.
Options and Alternatives:
- Approve Ordinance 2016-06 as presented.
- Amend and Approve Ordinance 2016-06.
- Consider elimination of the Self-Insurance Trust Fund.
Background/History:
In 1986, City Council approved Ordinance 1463 to create a funding source and mechanism to pay for certain City insurance premiums, claim losses and claim related expenses.
In 2010, City Council approved Ordinance 2010-13 to further define allowable expenses that may be paid for with trust funds and to designate the City Audit Committee, excluding the Management Services Director, as the Trustees for the Self-Insurance Trust Fund. These changes aligned the City Code with Arizona Revised Statue 11-981.
Recently City staff, including representation from Risk Management, Legal, and Management Services, reviewed our current City Code for the Self-Insurance Trust Fund to assure we are in compliance with State law. Staff is recommending several changes to align our Code with State requirements and to better define the role of the Board of Trustees. Under the existing Code, the City Audit Committee members are serving as the Trustees. In communicating with City Audit Committee members, they did not unanimously agree to be designated as Trustees. City Staff is recommending that Trustees be appointed by Council. City staff worked to develop a Declaration of Trust for the Self-Insurance Trust to better define the roles and responsibilities of the Trustee as purpose of the fund, allowable expenditures, and to provide Trustee protections. The City Risk Manager will continue to serve as the Risk Management Consultant for the fund. As structured, the Board of Trustees will provide a third party financial review and make recommendation to staff and report annually to Council.
Like some larger cities with a self-insurance trust, the City could decide to add greater powers to the Board of Trustees; however, such approach is not recommended this time. We would like to have the Board of Trustees make recommendation for change should they see fit to.
In 2010, City Council approved Ordinance 2010-13 to further define allowable expenses that may be paid for with trust funds and to designate the City Audit Committee, excluding the Management Services Director, as the Trustees for the Self-Insurance Trust Fund. These changes aligned the City Code with Arizona Revised Statue 11-981.
Recently City staff, including representation from Risk Management, Legal, and Management Services, reviewed our current City Code for the Self-Insurance Trust Fund to assure we are in compliance with State law. Staff is recommending several changes to align our Code with State requirements and to better define the role of the Board of Trustees. Under the existing Code, the City Audit Committee members are serving as the Trustees. In communicating with City Audit Committee members, they did not unanimously agree to be designated as Trustees. City Staff is recommending that Trustees be appointed by Council. City staff worked to develop a Declaration of Trust for the Self-Insurance Trust to better define the roles and responsibilities of the Trustee as purpose of the fund, allowable expenditures, and to provide Trustee protections. The City Risk Manager will continue to serve as the Risk Management Consultant for the fund. As structured, the Board of Trustees will provide a third party financial review and make recommendation to staff and report annually to Council.
Like some larger cities with a self-insurance trust, the City could decide to add greater powers to the Board of Trustees; however, such approach is not recommended this time. We would like to have the Board of Trustees make recommendation for change should they see fit to.
Key Considerations:
It is important to the City's fiscal health that the Self-Insurance Trust Fund is established to provide both expected expenses related to insurance premiums and claims as well as those claim expenses that are not covered through insurances. Also having a Board of Trustees to assist in administration for the fund will provide a third party review in addition to the City's annual audit.
Community Benefits and Considerations:
Adequate funding of the Self-Insurance Trust Fund provides the community protection from exposure to unfunded claims and claims expenses.
Community Involvement:
Citizens will be appointed to the Board of Trustees. The Board responsibilities are defined in the Declaration of Trust of the City of Flagstaff Self-Insurance Trust Fund in Article 5: Powers and Duties of the Board of Trustees.