HomeMy WebLinkAboutApprove FY 2017/18 Year-End Budget Adjustment for the GeneraCity of Huntington Beach
File #: 18-410 MEETING DATE: 10/15/2018
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A. Wilson, City Manager
PREPARED BY: Gilbert Garcia, Chief Financial Officer
Subject:
Approve FY 2017/18 Year -End Budget Adjustment for the General Liability Internal Service
Fund
Statement of Issue:
The Finance Department is completing the year-end closing process for Fiscal Year 2017/18, which
began on October 1, 2017, and ended on June 30, 2018. Certain technical adjustments need to be
made to reconcile the budget with liabilities incurred and to comply with auditing, actuarial,
accounting and/or legal requirements. City Council authorization is requested to appropriate and
transfer $405,060 from the General Fund to the General Liability Internal Service Fund to cover
increased costs in annual general liability insurance premiums.
Financial Impact:
This action will result in the transfer of $405,060 from the General Fund to the General Liability
Internal Service Fund (Fund 552) pursuant to Generally Accepted Accounting Principles (GAAP) in
order to support the costs associated with ongoing general liability insurance coverage. There is
sufficient revenue in the General Fund to support this request.
Recommended Action:
Approve the appropriation of $405,060 in the Fiscal Year 2017/18 Revised Budget in the General
Fund (100) and transfer to the Self Insured General Liability Internal Service Fund (552).
Alternative Action(s):
Do not approve the recommended action and direct staff accordingly.
Analysis:
On March 20, 2017, City Council authorized the consolidation of Citywide accounting and funding for
general liability costs into a separate, single General Liability Internal Service Fund pursuant to
Generally Accepted Accounting Principles (GAAP). This action has enabled staff to better budget,
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File #: 18-410 MEETING DATE: 10/15/2018
track, and monitor Citywide general liability costs.
The City is a member of the Big Independent Cities Excess Pool Joint Powers Authority (BICEP),
formed in 1988 with several other cities to share the risks and achieve a more cost-effective way to
purchase liability insurance. Under BICEP, the City is self -insured for combined liability and cost of
defense up to $1 million dollars per claim. Costs up to that amount are paid from the General
Liability Fund Budget. BICEP then provides coverage for the next $1 million to $25 million dollars in
liability.
The City pays annual insurance premiums to BICEP which have been rising due to a variety of
factors including increased litigation costs. The FY 2018/19 general liability portion of BICEP's annual
premium expenses totals $1.9 million, a 27% increase over the prior year's costs of $1.5 million
(Attachment 1).
In addition, BICEP's total liability (as of June 30, 2018, unaudited) is $10.4 million, representing a
34.3% increase over the prior year's total liabilities of $6.9 million (Attachment 2). Moreover, the
withdrawal of the City of San Bernardino as a charter member from BICEP will place further financial
strain on the remaining member cities including Huntington Beach, Santa Ana, Oxnard, Ventura, and
West Covina.
Please note that this adjustment is based on unaudited financial statements for FY 2017/18. Once
BICEP closes out FY 2017/18, it may require the City to pay an additional equity adjustment cost.
BICEP will complete its audit by December, 2019, and will charge its members any needed equity
adjustments shortly thereafter. The total increase for General Liability, including equity adjustments,
that the BICEP charged to the City for FY 2016/17 was approximately $2 million.
Environmental Status:
Not applicable.
Strategic Plan Goal:
Strengthen economic and financial sustainability
Attachment(s):
1. City of Huntington Beach BICEP FY 2018/19 Cost Summary Versus Prior Year
2. Big Independent Cities Excess Pool Balance Sheet (Unaudited) As of June 30, 2018 and June
30, 2017
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ATTACHMENT 1
CITY OF HUNTINGTON BEACH - BICEP FY 2018/19 COST SUMMARY VERSUS PRIOR YEAR
City of Huntington Beach BICEP Cost:
Liability Program Premium
Workers' Compensation Premium
Administration
Airport/Aircraft Liability Premium
Crime Policy Premium
Environment/Pollution Policy Premium
Fine Arts Floater
FY 2017/18
Program
FY 2018/19
Program
Premium
Increase /
(Decrease)
1,346,823
1,717,891
371,068
90%
336,376
342,685
6,309
2%
96,430
121,175
24,745
6%
56,072
62,223
6,151
1%
9,501
10,396
895
0%
3,565
2,716
(849)
0%
-
3,050
3,050
1%
Total BICEP Annual Payment 1,848,767 2,260,136 411,369 100%
General Liability Portion of BICEP Payment 1,512,391 1,917,451 405,060 98%
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Big Independent Cities Excess Pool
Balance Sheet
(Unaudited)
As of dune 30, 2018 and June 30, 2017
ASSETS
Cash on Hand
LAIF
LAIF Market Valuation
Accounts Receivable- Members
Accounts Receivable - Mlsc
Accounts Receivable - Excess
Interest Receivable
Prepaid Expense
Investment
Investment Market Valuation
TOTAL ASSETS
'4
LIABILITIES AND NET POSITION
LIABILITIES
Accounts- Payable
Reserve for Claims
Reserve for IBNR
Reserve for Reinsurance Corridor
TOTAL LIABILITIES
NET POSITION
Net Position - Prior Year
Net Position - Current Year
TOTAL NET POSITION
TOTAL LIABILITIES AND NET POSITION
6/30/20113 6/30/2017
$20,890
7,634,139
(14,300)
33,425
9,750
75,016
4,783
8,303,715
(104,219)
15,963,199
32,824
3,000,000
2,417,840
5,000,000
30,4S0,664
5,057,699
454,837
S,S12,536
15,963,199
$12,597
3,108,079
(3,292)
27,500
515,000
43,073
1,600
8,157,211
56,016
11,917,783
10,738
1,950,000
1,899,347
3,000,000
6,860,085
5,057,699
5,057,599
11,917,783
115
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