HomeMy WebLinkAboutUnbudgeted Expenditure - Appropriation for Workers Compensat t2 0, 4
Council/Agency Meeting Held: 7
Deferred/Continued to: PA(/97 7-0
L Approved ❑ Conditionally Approved ❑ Denied _
A4'12-f City Clerk's Signature
Council Meeting Date: July 21, 1997 Department ID Number: FD 97-010
91V97 CITY OF HUNTINGTON BEACH
s a REQUEST FOR COUNCIL ACTION
72.) -7n.Z
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
SUBMITTED BY: MICHAEL T. UBERUAGA, City Administrator --
PREPARED BY: MICHAEL P. DOLDER, Fire Chief
SUBJECT: APPROPRIATION FOR WORK 'S COMPENSATION AND
RELATED COMPUTER TECHNOLOGIES
[Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachments)f
Statement of Issue: Should the City appropriate funding for the replacement of two
outdated special purpose computing systems which include the Worker's Compensation
Claims Administration System and the Data Communications Processing System?
Additionally, should the City appropriate funding for three computer workstations to
accelerate the migration from old computer technologies to new computer technologies?
Funding Source: The one-time cost of $122,809 will be funded from the Unappropriated
Fund Balance, General Fund. This cost will be offset by savings in current maintenance and
operating costs totaling $11,908 per year.
Recommended Action: Motion to appropriate $122,809 from the General Fund
Unappropriated Fund Balance for the Worker's Compensation Claims Administration System,
the Data Communications Processing System, and the purchase of three computer
workstations.
Alternative Action: Do not appropriate $122,809 and delay replacing the Worker's
Compensation Claims Administration System, the Data Communications Processing System,
and the acquisition of three workstations for computer technology migration.
Analysis: The Worker's Compensation Claims Administration System, purchased in 1987,
and the Data Communications Processing System, purchased in 1989, are older computer
technologies that have support and performance problems. These problems have inhibited
the City's ability to conduct core business functions in the area of risk management,
remittance processing, municipal billing, and building and planning systems.
RL...IUEST FOR COUNCIL ACTIV '
MEETING DATE: July 21, 1997 DEPARTMENT ID NUMBER: FD 97-010
Worker's Compensation Claims Administration
The Worker's Compensation Claims Administration System processes approximately 150
payment checks per week and operates under standards and requirements established by
State labor laws. The Worker's Compensation Reform Act of 1993 imposed additional
responsibilities upon the City regarding the administration of the Worker's Compensation
program. Specifically, the City must provide benefit notices to injured employees, pay
temporary disability, pay permanent disability, and pay medical and vocational rehabilitation
costs all within this specified period. Failure to meet these requirements within the specified
time period subjects the City to monetary fines for each instance of delay, resulting in a self
imposed 10% late penalty payment to the injured worker.
The Worker's Compensation Claims Administration Program is audited biannually for
compliance by an independent auditor. Additionally, the State Office of Benefit Assistance
and Enforcement (OBAE) randomly audits the City's Worker's Compensation program.
Penalties assessed by OBAE may be from $100 per delayed benefit to $5,000 for a serious
violation.
Currently, Risk Management administers the City's Worker's Compensation program using a
computer system that now has an obsolete operating system. This operating system, which
controls the computer's basic functions, was discontinued in 1993 and the manufacturer no
longer supports the technology. The manufacturer has also communicated the warning that
"a problem could arise at anytime that would be unrepairable and the City's system would be
inoperable for weeks before replacement."
Problems have continually plagued this system. However, due to the efforts of a City
employee who had expertise in this old technology, the Worker's Compensation Claims
Administration System has been kept operational. Recently, that employee left the City,
resulting in a critical replacement need.
State standards require the accurate and timely processing of Worker's Compensation
claims. The City's outdated claims administration system is at constant risk of breaking down
which would jeopardize City compliance and result in increased costs from penalties. Staff
recommends that the current Worker's Compensation Claims Administration System be
replaced immediately at an estimated cost of$43,472.
Data Communications Processing System
The Data Communications Processing System is a computer system that provides fast and
accurate communications between the City's mainframe business systems and the various
computers and terminals used by City employees to perform their daily tasks.
WOCOMP3.doc -2- 07/07/97 2:09 PM
GUEST FOR COUNCIL ACTKA
MEETING DATE: July 21, 1997 DEPARTMENT ID NUMBER: FD 97-010
Just as the nation's telephone systems are being overtaxed by increased demand for new
telephone numbers and area codes, the increased demand to access the City's mainframe
business systems is overburdening our current data communications processing capabilities.
Fueling the City's demand has been the addition of Personal Computers (PCs) at City work
locations as part of a City Council approved citywide networking effort. Many of these PCs
use software that allows them to access the business databases residing on the City's
mainframe. Each PC connecting to the system must have a unique identification "address"
from a limited address pool. The City's Data Communications Processing System has been
in use since 1989 and has reached its available address limit.
The current system is also plagued by functional limitations that have become apparent as
new projects are attempted. Recently, the Treasurer's Office, the Risk Management
Division, and the Community Development Department all needed additional access to the
mainframe business system. After delays of over three months, City staff was able to
provide access to the City business systems. Implementation delays are compounded since
the manufacturer no longer provides timely technical support for the system.
Adding needed functionality to the outdated system is expensive and delays the project. One
pending project requires increasing file transfer capabilities at a one-time cost of $5,000 and
an annual support cost fee of $1,700. Acquiring a new Data Communications Processor
includes the added file transfer capabilities at no additional cost.
Annual maintenance fees for the current Data Communications Processor system are more
than $23,000. In addition, the manufacturer has been increasing the fees by approximately
12% per year. By comparison, maintenance fees for a new Data Communications Processor
are approximately $9,400 annually. This results in annual savings of approximately $13,700.
No technology replacement will last forever. However, recent communications protocols and
faster interfaces allow the new Data Communications Processors to keep pace with
technology improvements and should result in a longer useful life.
It is important that we immediately replace the Data Communications Processor at a cost of
$68,023 in order to meet current access demands and to maximize the maintenance cost
savings. Delaying the acquisition will have significant operational and economic impacts.
Computer Workstations
During FY 1997/98, efforts will begin to upgrade the City's technology infrastructure using
guidelines established by the City's Strategic Technology Plan. This will be a major
undertaking requiring an unprecedented effort on the part of the entire Information Systems
staff, as well as other City departments. As with any project of this magnitude, preparation is
the key to success.
WOCOMP3.doc -3- 07/07/97 2:09 PM
R.-JUEST FOR COUNCIL ACTI%A
MEETING DATE: July 21, 1997 DEPARTMENT ID NUMBER: FD 97-010
Early in FY 1997/98, staff will begin an evaluation process for selecting new technology
products that will best serve the City in the areas of accounting, payroll, human resources
and other business systems. Concurrently, other new technology products will be added.
During this conversion period, staff will be required to support and maintain the existing
business systems. Completing these projects during the next two to three years will place a
premium on staff time. Therefore, it is essential that we take full advantage of the remaining
months to develop hands-on familiarity with new technology before the business systems
conversion effort begins. Acquiring three computer workstations now will enable key City
technical personnel to develop necessary expertise in new computing technologies when
time is available, and before the business systems conversion begins.
Staff recommends that three workstations and software be immediately purchased at a cost
of$11,314.
Environmental Status: Not applicable.
Attachments):
City Clerk's
Page Number No. Description
1. Fiscal Impact Statement
RCA Author: Ken Blendermann
WOCOMP3.doc -4- 07/07/97 2:09 PM
ATTA CHMENT 1
1
Fo-� BINTERDEPARTIVIENTAL
CITY OF HUNTINGTON BEACH
COMMUNICA TION
To: Michael T. Uberuaga, City Administrator
From: Robert J. Franz, Deputy City Administrator
Subject: FIS 97-53 Appropriation for Workers' Compensation and
Related Computer Technologies
Date: July 3, 1997
As required by Resolution 4832, a Fiscal Impact Statement has been
prepared for Appropriation for Workers' Compensation and Related
Computer Technologies.
If the City Council approves this request (total $122,809), the
estimated unresery , undesignated General Fund balance at
Sept 9 will be reduced to $5,249,806.
obert J. Fr Az,
Deputy City Adminis ator
fis9753
Adopted Current
Fund Balance -General Fund Budget Estimate
Beginning Fund Balance $3,227,959 $6,847,000
Plus Budget Surplus 356,590 1,017,310
Plus One Time Revenue (Estimated) 1,130,000
PERS Refund 456,000
Less Approved One-Time Costs (1,868,068)
Less Transfer of PERS Refund (2,199,627)
Less: Pending Budget Amendments (10,000)
Less FIS 97-53 (122,809)
Estimated 9/30/97 Balance $3,584,549 $5,249,806
Fund Balance-General Fund
I
$5,500,000 -
$5,000,000 -
I
$4,500,000
$4,000,000
$3,500,000 - $5,249,806
$3,000,000 -
$3,584,549
$2,500,000 -
$2,000,000 -, �
Adopted Revised �
Budget Estimate
Page 1
Memorandu m
Date: July 29, 1997
To: Mayor and City Council _
Via: Michael T. Uberuaga, City Administr or f
From: Michael P. Dolder, Fire Chief
RE: AGENDA ITEM F-1 (ADDITI NAL CLARIFICATION OF APPROPRIATION
FOR WORKER'S COMPENSATION AND RELATED COMPUTER
TECHNOLOGIES)
At the July 21, 1997 City Council Meeting, Council Member Harman pulled item E-10
(Appropriation for Worker's Compensation and Related Computer Technologies)
from the Consent Calendar. Because of the lateness of the meeting this item was
deferred to August 4, 1997 and will be considered as Item F-1.
I contacted Council Member Harman on July 23, 1997 to clarify his concerns
regarding E-10, which are listed in his July 28, 1997 memorandum to the City Council
(Attachment 1). The memorandum raises the following five questions:
1. Why are these capital purchases needed at this time?
2. Why is staff "cherry picking" the unappropriated General Fund in advance of
the 1997/98 budget deliberations?
3. Since every department has urgent needs, why should E-10 be given priority
now?
4. What types of computers and software are being purchased? Will the
purchases be compatible with our existing or future computer needs?
5. Why is only one person trained in the current Worker's Compensation
computer system?
Questions one, two and three are related and staffs response is as follows:
1. Why are these capital purchases needed at this time?
2. Why is staff "cherry picking" the unappropriated General Fund in advance
of the 1997/98 budget deliberations?
i
July 29, 1997 Memorandum:ADDITIONAL CLARIFICATION OF APPROPRIATION FOR WORKER'S
COMPENSATION AND RELATED COMPUTER TECHNOLOGIES 2
3. Since every department has urgent needs, why should E-10 be given
priority now?
The unappropriated General Fund request of $122,809 for computers and software
involves three separate areas, which include A) Worker's Compensation Claims
Administration; B) Data Communications Processing System; and C) Computer
Workstations. Although the needs of each request are different, the urgency of all
the requests necessitates immediate funding. Delaying consideration and funding
until the 1997/98 budget deliberations are completed results in significant operational
and economic impacts. In fact, this request should have been submitted for Council
consideration in March 1997. However, because of the March 1997 Information
Systems reorganization and assignment to the Fire Department an additional needs
assessment was conducted which delayed the request until now.
On July 22, 1997, 1 hesitated delaying Council action because of the urgency of the
request. However, considering the lateness of the meeting and the impacts of a two-
week delay, the risk was manageable. Delaying the acquisitions for two months to
coincide with the FY1997/98 is not recommended and causes the following impacts:
A)Worker's Compensation Claims Administration
As the agenda report states, the manufacturer of the Worker's Compensation Claims
Administration software no longer supports the existing software and operating
system. This software uses the Pick Operating System (an operating system written
specifically to support relational databases). There have been numerous problems
with the system but the manufacturer was able to fix those problems. In 1993, the
manufacturer stopped supporting the system. Fortunately, at the same time, the
Police Department's Computer Aided Dispatch (CAD) Computer used the Pick
Operating System, and their CAD Specialist had extensive knowledge in Pick. He
was able to understand the programming of the Worker's Compensation software
and fixed any problems that arose. This employee resigned recently, which leaves
the Worker's Compensation system vulnerable to failures. If the system is not
immediately replaced it will result in State labor law violations and fines. Once
funding is approved the system replacement will take an additional six weeks to two
months to implement. Consequently, If Council delays the approval of this request
until the 1997/98 budget process, the City will be operating on a non-repairable
system for an additional four months. Due to the labor law requirements and
penalties, it is simply not economically or operationally prudent to wait.
B) Data Communications Processing System
Each day we delay replacing the Data Communications Processing System results in
the loss of economic savings that cannot be made up as well as operational impacts
that reduce productivity. Purchasing the new Data Communications Processing
System results in immediate one-time savings of $5,000. The savings occur since
the currently needed files transfer capability is included in the new replacement
July 29, 1997 Memorandum:ADDITIONAL CLARIFICATION OF APPROPRIATION FOR WORKER'S
COMPENSATION AND RELATED COMPUTER TECHNOLOGIES 3
system. However, the greatest ongoing savings results from reduced annual
maintentance costs of $13,700 annually. Ultimately when we replace the City's
existing main frame in two to three years, these maintenance savings will stop.
Therefore, the sooner we install the new system the longer we will realize the
maintenance savings. Purchasing this system and installing the equipment will take
an additional two to three months. Delaying this request until the 1997/98 budget
process will add five months to the implementation time.
Until the Data Communications Processing System is replaced, no additional
computer connections can be made to the City's business mainframe. The biggest
impact is to the City Treasurer, Risk Management and Community Development
departments which all need additional connections to the mainframe. This
operational impact results in lost productivity and accountability.
C) Computer Workstations
Upgrading the City's technology infrastructure in the areas of accounting, payroll,
human resources, and other business systems, and concurrent completion of Year
2000 fixes, requires unprecedented effort on the part of the entire Information
Systems staff. At the same time, other new technology products will be added which
adds to the workload. The business systems conversion efforts will begin in three
months and will demand 100% of staffs time. Hands-on familiarity with Microsoft's
Windows-NT operating system is critical to the conversion; therefore, it is essential
that we take advantage of the remaining three months to train staff in Microsoft's
Windows-NT technology. Delaying the approval of this request until the 1997/98
budget eliminates two of the three months necessary for the familiarity training.
It is not staffs intent to "cherry pick" items in advance of the budget. Rather, this
request is being made because we have very serious and immediate operational
needs and economic benefits that are reduced with time. Waiting two months to
receive consideration and funding in the FY 1997/98 budget and the additional two to
three months to implement these projects will either result in lost savings and
ultimately penalties and fines because of state labor law violations or both. Although
every department has urgent needs, E-10 is an immediate need that affects all
departments and will ultimately have to be funded in order to continue the City's day-
to-day service to both internal customers (employees) and external customers
(citizens).
4. What types of computers and software are being purchased? Will the
purchases be compatible with our existing or future computer needs?
The Worker's Compensation Claims Administration system will be replaced with
computers that use Microsoft's Windows-NT Operating System. Microsoft's
Windows-NT Operating System is compatible with the City's existing and future
computer needs.
July 29, 1997 Memorandum:ADDITIONAL CLARIFICATION OF APPROPRIATION FOR WORKER'S
COMPENSATION AND RELATED COMPUTER TECHNOLOGIES 4
The Data Communications Processing System replacement is also compatible with
our current computer needs. However, within two years when the City replaces the
current Main Frame computer with Client-Server technology, this communications
equipment will no longer be necessary. Unfortunately, it is critical to today's
operations and we cannot avoid the purchase.
5. Why is only one person trained in the current Worker's Compensation
computer system?
Maintaining the Worker's Compensation computer system had been the
manufacturer's responsibility from the time of purchase up until 1993. When the
manufacturer stopped maintaining and repairing the system in 1993, staff was left
with two choices: replace the system or find someone who had Pick System
experience to maintain it. The Police Department had one employee with Pick
System experience and he was able to fix problems on the Worker's Compensation
system. This employee recently resigned from City employment. The complexities
of the Pick Operating System are such that it cannot be learned in a few weeks time.
Not only did the Police Department employee not have time in his schedule to train
someone else, it was not cost-effective to train someone to maintain a non-supported
software system.
MPDFC
A TTA CHMENT 1
6 J. ne
CITY OF HUNTINGTON BEACH
OU CITY COUNCIL COMMUNICATION
TO: Honorable Mayor and City Council Members
FROM: Council Member Tom Harman
DATE: July 28, 1997 1
SUBJECT: Need to Prioritize Capital Expenditures. i
At the City Council Meeting on July 21, 1997, 1 pulled E-10 from the Consent Calendar. It was
a request by the Fire Chief to spend $128,809 from the unappropriated general fund for
computers and software. The item has been continued to the ust 4, 1997 Council meeting.
I have two objections to E-10 which are discussed below.
First, I felt that E-10 was poorly drafted in that it lacked sufficient detail and back-up information
as to why this capital expenditure was needed at this time. There was no mention of the types
of computers to be purchased and whether or not these computers would be compatible with
our existing or future computer needs. I was also concerned that one reason for justifying the
purchase was that the only employee that knows how to repair one of the computer systems in
question recently left the city. I would•question why we have not been doing any cross- training
for this employee. Chief Dolder hats promised me that he will provide more information to the
Council when the item is returned to us on August 4, 1997.
Secondly, and more importi�ly, I object staff coming to the Council and trying to "cherry pick"
the unappropriated general fund in advance of the budget deliberations which are about to
commence. AlthVnkrRuptcy,
the Fire Chief makes a strong case that purchase of computers and
software is urgenre are many other urgent capital needs of the city. As the Council is well
aware, many urgapital expenditures have been deferred in the last three/four years
because of the b recession, and ERAF. All of the departments have urgent needs for
capital expenditures. There is no compelling reason why E-10 should be given priority over
these other urgent needs.
It is my strong belief that the Council should prioritize the capital expenditures needed city wide
and not single out for approval one particular request without hearing from the other
departments as to their particular priority needs.
In conclusion, I recommend that E-10 be deferred to such time that the Council can look at all
of the priority capital needs of the city, prioritize these needs, and then act on them accordingly.
I-assume this can be done during the forthcoming budget deliberations.
F
TH:lp 3 g
xc: Michael T. Uberuaga v.
Chief Mike Dolder