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Home My WebLink AboutFinance MINUTES 10-22-19 Page 2 of 13 F CENTRAL SAN CONTRACENTRAL •STA SANITARY DISTRICT 5019 IMHOFF REGULAR MEETING OF THE BOARD OF DIRECTORS: CENTRAL CONTRA COSTA DAVID R, WILLIAMS President SANITARY DISTRICT MICHAEL R.MCCILL FINANCE COMMITTEE President Pro Tem PAUL H CA USEY JAMES A.NEJEDLY M I N U T E S TAD J PHECKI PHONE: (925)228-9500 92 Tuesday, October 22, 2019 FAX cent alsan. rg www.centralsan.org 2:00 p.m. Executive Conference Room 5019 Imhoff Place Martinez, California Committee: Chair Paul Causey Member Tad Pilecki, alternate for Member Nejedly Guest: Andrew Brown, Highmark Capital Management (left after Item 4.a.) Staff.- Roger S. Bailey, General Manager Katie Young, Secretary of the District Ann Sasaki, Deputy General Manager Phil Leiber, Director of Finance and Administration Stephanie King, Purchasing and Materials Manager Kevin Mizuno, Finance Manager Todd Smithey, Finance Administrator (left after Item 3.b.) Donna Anderson, Assistant to the Secretary of the District 1. Call Meeting to Order Chair Causey called the meeting to order at 2:00 p.m. 2. Public Comments None. At this point, the Committee proceeded to hear Item 4.a. out of order. November 7, 2019 Regular Board Meeting Agenda Packet- Page 381 of 414 Page 3 of 13 Finance Committee Minutes October 22, 2019 Page 2 3. Items for Committee Recommendation to the Board a. Review and recommend approval of expenditures incurred September 13, 2019 through October 10, 2019 This item was heard immediately after Item 4.a. Staff addressed several questions posed by Member Pilecki. COMMITTEE ACTION: Recommended Board approval. b. Review September 2019 Financial Statements and Investment Reports Member Pilecki requested to have the word "Projected"added in front of"% Spent"on the page showing the Sewer Construction Fund variances to make the report clearer. COMMITTEE ACTION: Recommended Board receipt with the addition of one wording change. At this point, the Committee proceeded to Item 4.b. 4. Other Items a. Review and provide input on Highmark Capital Management Government Accounting Standards Board (GASB) 45 Other Post- Employment Benefits (OPEB) and Pension Pre-funding Sub-trust Reports for the Third Quarter of calendar year 2019 Mr. Brown said the results for the last nine months have been strong, with performance about 1% above the overall benchmark for each plan. For both the OPEB Trust and the Pension Prefunding Trust, roughly 3% of the assets have been repositioned from stocks to bonds due to concerns about the slowing worldwide economy and trade issues. A general discussion ensued covering potential implications on investment returns of the 2020 presidential election, negative interest rates, and anticipated reductions in the federal discount rate. The Committee thanked Mr. Brown for his report and insights. COMMITTEE ACTION: Received the update. November 7, 2019 Regular Board Meeting Agenda Packet- Page 382 of 414 Page 4 of 13 Finance Committee Minutes October 22, 2019 Page 3 b. Review Risk Management Loss Control Report as of October 7, 2019 In Ms. Deutsch's absence, Mr. Leiber briefly reviewed the report. COMMITTEE ACTION: Received the report. c.* Fiscal Year 2018-19 Risk Management Annual Report Mr. Leiber reviewed a presentation (see Attachment 2) prepared by Ms. Deutsch, who was available for questions via telephone. Mr. Leiber and Ms. Deutsch responded to several questions from the Committee Members. Member Pilecki asked if the Board would be receiving an update on any damage that occurred from last week's earthquake. Mr. Bailey said yes. Member Pilecki also noted that the District's new property insurance coverage includes a new component of identity theft coverage for all employees. The Committee requested a report at the next meeting as to what this coverage entails. COMMITTEE ACTION: Received the report and requested a report at the next meeting regarding the new identity theft coverage for all employees. d.* Receive update on Fiscal Year 2019-20 administrative overhead rate now that transition to CalPERS Healthcare has been completed, as requested by the Finance Committee at the January 28, 2019 meeting Mr. Mizuno recapped the information in the agenda material, noting that staff recommended maintaining the current approach for calculating the administrative overhead rate of using audited financial information for several reasons. Mr. Leiber described how a change in the overhead rate would impact various classes of customers, noting that if the rate were reduced earlier than provided for under the current approach, the lost revenue must be made up somewhere. He distributed a chart showing examples of the impacts on rates if the administrative overhead rate were to be changed early by applying the Ca1PERS Healthcare savings to the most recent year of the three-year smoothed calculation (see Attachment 3). That said, he noted that if the approach were to be changed, the earliest practical time to do so would be at the calculation of the overhead rate for FY 2020-21, which will come before the Board in January 2020. November 7, 2019 Regular Board Meeting Agenda Packet- Page 383 of 414 Page 5 of 13 Finance Committee Minutes October 22, 2019 Page 4 Member Pilecki agreed that this year's rate should remain unchanged but supported bringing an option to apply the Ca1PERS savings to next year's calculation. That calculation would show the proposed overhead rate using the current approach that relies on audited financial information, and an adjusted figure that would consider the savings earlier. Chair Causey suggested that consideration be given to the impact any change in approach may have on the City of Concord. COMMITTEE ACTION: Received the information and recommended (1) leaving the current rate unchanged for this fiscal year; and (2) reviewing two options for the Administrative Overhead Rate applicable to next year (one using the current three-year smoothed approach that relies on audited financial information, and another that makes an adjustment for passing on the estimated CaIPERS healthcare savings earlier). 5. Announcements — None. 6. Suggestions for Future Agenda Items a. Receive list of upcoming agenda items and provide suggestions for any other future agenda items 1) Identify Theft Coverage: A report on Central San's identity theft coverage for employees (see Item 4.c. above). COMMITTEE ACTION: Received the list and provided input to staff. 7. Future Scheduled Meetings Tuesday, November 26, 2019 at 2:00 p.m. Tuesday, December 18, 2019 at 2:00 p.m. 8. Adjournment— at 3:20 p.m. * Attachment November 7, 2019 Regular Board Meeting Agenda Packet- Page 384 of 414 Page 6 of 13 10/22/19 ATTACHMENT 2 -r „ _- Committee Item 4.c.(Handout) RISK MANAGEMENT DIVISION ANNUAL REPORT Finance Committee Meeting October 22, 2019 Shari Deutsch, Risk Management Administrator = x Phil Leiber, Director of Finance &Administration WORKERS' COMPENSATION 5-year average cost per MO claim Medical Only Claims-Last 5 Years , $220,0w43 so $1,761 $2,706 $10,604 �r862 40 $100,000 $80,000 30 $6D, 20 MO Claims @ 6/30/19 o°D , $40,00D __12 $20,ODD 10 2016-17..........$55,484 2017-18........$184,496 ADM CSO ENG POD 2018-19...........$15,577 5-year average cost per IND claim Indemnity Claims-Last 5 Years ® $450,000 6 $24,393 $81,820 $26,660 $82,361 $400.00° s $350,000 $300,000 -- 4 IND Claims @ 6/30/19 $250,000 3$200,0°° $150,000 2 2016-17.........$21,837 $100000 2017-18.......$475,078 $50,000 -Sp4,993- 1 2018-19...... $24,393 $- ° ADM CSO ENG POD 1 November 7, 2019 Regular Board Meeting Agenda Packet- Page 385 of 414 Page 7 of 13 10/22/19 Most Common Types of Injury By Year Selected IND Claims by Cause of Injury Last 5 Yrs&Last 10 Yrs 201&1B 2017-18 SIIP/7dP/Pa1l/I,,p P.I. Repetitive Motion 20113-17 ps"IN6PW. •fnBa60N13tun Pu,K dPulling 201518 Q'UB^g°• LifingfRearhing 2014-15 0 ' 2 3 4 5 6 7 B 0 2 4 6 B 10 ■Lan10Yrs ■Ian S7rs • Strains and sprains are no longer the Selected IND Claims by Injured Body most common type of injury. Pa rt Last 5 Yrs&Last 10 Yrs The most common causes of injury are rand, variations on overexertion. Backs(lower_)are the most common part gn•` of the body injured. Back 0 2 4 6 a 10 All 18-19 back injuries were caused by •L-10Y, •Lan SYrs strains and sprains. Average Incurred'Cost per Claim Last 5 Years-Medical Only vs.Indemnity $450,000 $400,000 $350,000 $300.000 $250,000 $200,000 $150,000 $100,000 $50,000 ft $116,3$5: $ ~ 111111" ADM - CSO Med Only ENG POD Indemnity expenses are mostly comprised of temporary disability payments to injured employees while they are off work. Generally,we try to control the cost of indemnity claims by finding temporary modified duty so that injured employees can return to work as soon as possible. We try to find temporary modified duty for every injured employee,even the ones with expensive, ongoing treatment casts. R` 2 November 7, 2019 Regular Board Meeting Agenda Packet- Page 386 of 414 Page 8 of 13 10/22/19 LIABILITY CLAIMS Auto Liability Claims Plumbing Reimbursements 510,000 $9,777 1110 $0,000 11 $9,000 q $3,134 90 g $3,000 g $6,000 7 7 6 $2.00 6 5 5 4 4 $2,OOD 3 $L000 1 201415 201516 2016-17 2017-18 2018-19 201415 2015-16 2016-17 2017-19 2019-19 �T..I Cres -Number �Te I Cast -Number Other Liability Claims Sl,zao aao 21 $1.000.000 10 $BOO,C00 8 7 $600,000 6 5 $400,000 4 3 it $20,000 . $a3g= 1 $- 0 2014-15 201516 2016.17 2017-18 201849 �Toral Cart Number OVERFLOW CLAIMS Sanitary Sewer Overflow Claims 5200.00 11 $='WO $185,948 ,10 $160,000 $155,545 9 $m,= 9 $120,000 7 $100.00 6 5 $90,000 4 $60,000 $40.000 2 $10,000 1 $ 0 201415 2015-16 2016-17 2017-18 2018-19 T..1 Cost Numher FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 $9,450 $16,904 $13,777 $25,639 $19,443 " r 3 November 7, 2019 Regular Board Meeting Agenda Packet- Page 387 of 414 Page 9 of 13 10/22/19 LIABILITY CLAIMS TYPES COMBINED Cost of Liability Claims-Last 5 Years $1,900,000 $1,100,000 $1,",000 $80D,000 $60D,00D $900,000 $200.0 19/15 15/16 16/17 17/18 16/19 NPL EGL WK EM SECURITY Continuing phased implementation of Security Master Plan. • Frequent turnover in security guard personnel required repetitive training sessions and increased staff oversight. Security efforts are not just physicalAT has expanded cybersecurity awareness and training for all employees. 4 November 7, 2019 Regular Board Meeting Agenda Packet- Page 388 of 414 Page 10 of 13 10/22/19 EMERGENCY MANAGEMENT Conducted annual EOC Activation Exercise and two other training_courses Released minor update to Emergency Operations Plan Started work on a major update to the Continuity of Operations Plan (COOP), expect completion by end of calendar year. ANe WHAT IS "TOTAL COST OF RISK"? I Elements of Total Cost of Risk(TCoR) Insurance premiums The fix and—m easily tracked compone'rrt of Total Cost of Risk is Insurance premhlrns.This Includes the amount o firms spends on Insurance coverage and brokers'commissions. Retained losses The nen element is ratalned losses.The retained rnss Valu-is the amount of money Mat a Rrm spends 'out of pocket"for losses mctsred.These are costs that are below a company's deductible.An example Is a small mishap such as dry-cleaning a cllent5 suh due To spillage from an employee. Costs to protect employeestcustomers from injury The nen applicable costs may nor ba as easy to track but are still Important components captured In the TCoR calculation.These are the costs needed to protect your employees or customers from Inlurlas. Examples am safety equipment.mats'warning signs.training.etc.These costs should ba tracked as part of the TCoR far your business Internally. Costs to engage firms for help with risk&insurance issues The hart componer:Is money spent with professional firms to help you handle Insum—or ether risk as aociated issues.These would Include costs for an attorney to respond to a complaint or to review a ontract's Indemnification-agreamara.These are also part of the TCOR calculation and are considered ertem91d9k control costs. 5 November 7, 2019 Regular Board Meeting Agenda Packet- Page 389 of 414 Page 11 of 13 10/22/19 TCOR COMPONENTS TCOR Categories by Fiscal Year s4soo,aoo $4,000,000 $3,SOO,000 $3,000,000 $2,500,000 $2,000,OD0 $1.500.000 $1,000,000 $500,000 1� Yy 11' 1� 1� 1y S6 h1 ry�9 ,YOy� .YOv .VOyv �yA n01p A,y tiyh ry.'1,� A~$� ■Personnel ■Insurance ■CIS— ■RMPMg— Safety Expenses Mote]: Chart does not include productivity loss or other soft costs arising from losses. Nate 7TCOR segment totals have not been adjusted for inflation. PUTTING IT ALL TOGETHER TCOR Totals and Trend" $4,500.000 $4,243,881 $4,000,000 $3,500,000 . $3,000,000 $2563,264 $2,500,000 -$2,355,733 $2,000,000 — — $1,500,000 $1.000-oD0 — . SSOO.000 —_ ,ps�o ti�,� ��1ry 1-� '�tio ypye �y� yeq ti�e tig�9 V Note 1:Prior year TCOR hos been adjusted to 2019 dollars. 6 November 7, 2019 Regular Board Meeting Agenda Packet- Page 390 of 414 Page 12 of 13 10/22/19 7 November 7, 2019 Regular Board Meeting Agenda Packet- Page 391 of 414 Central San ATTACHMENT 3 Example of Impacts to Rates with Updated Administrative Overhead Rates � Finance Committee 10/22/19 6inmi e Z�ent 4, `iS�QK�d�J Kesidential Connection Inspection at Roof and Rough CURRENT PRO FORMA WITH REVISED RATE Difference Rate Cost Rate Cost Labor 100% $ 168 100% $ 168 Overhead (3 year smoothed) 203%-$ 342 196%-$ 330 Total $ 510 $ 498 -2.3% Mainline Plan Review: Base Fee for Sewer Service Review CURRENT PRO FORMA WITH REVISED RATE Rate Cost Rate Cost Labor 100% $ 1,376 100% $ 1,376 Overhead (3 year smoothed) 203%-$ 2,793 196%-$ 2,697 Total $ 4,169 $ 4,073 -2.3% Source rate material: https://www.centra lsan.org/sites/default/files/file-attachments/ord_307_env_dev_fees_06-06-19.pdPl560363172 November 7, 2019 Regular Board Meeting Agenda Packet- Page 392 of 414