HomeMy WebLinkAbout04.c. Review draft Position Paper to authorize payment of an additional $45,166 for the FY 2020-21 property insurance renewal premium Page 1 of 2
Item 4.c.
All" BOARD OF DIRECTORS
' POSITION PAPER
MEETING DATE: AUGUST25, 2020
SUBJECT: REVIEW DRAFT POSITION PAPER TO AUTHORIZE PAYMENT OF AN
ADDITIONAL $45,166 FOR THE FISCAL YEAR 2020-21 PROPERTY
INSURANCE RENEWAL PREMIUM
SUBMITTED BY: INITIATING DEPARTMENT:
SHARI DEUTSCH, RISK MANAGEMENT ADMINISTRATION DEPARTMENT- RISK
ADMINISTRATOR MANAGEMENT
REVIEWED BY: PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
ANN SASAKI, DEPUTY GENERAL MANAGER
ISSUE
Central San's property insurance renewal premium for Fiscal Year (FY) 2020-21 was significantly higher
than the amount budgeted, requested from, and authorized by the Board of Directors. Additional Board
authority is required to pay the invoice.
BACKGROUND
Earlier this year, staff researched renewal impacts on other public entities to see how such insurance
market shifts were affecting renewal premiums. Prices were starting to increase by early February and
further price increases were predicted as the quarantine took effect and the economy shut down.
At the time staff prepared the insurance budget, special districts were seeing rate increases of up to 20
percent with no change in insured values. Some of this increase could be ascribed to the lingering
financial effects of prior catastrophic losses, but such considerations were included in the budget
estimates. Across the United States, cities received the most severe rate increases, as high as 35
percent. Special district renewals seemed to be less severe, with rate increases of 20 to 25 percent.
As a result, staff prepared the FY 2020-21 property insurance premium budget at a 25 percent premium
increase and requested authority up to $200,000 to renew this coverage. This turned out to be
insufficient. The actual increase was closer to 45 percent and exceeded this authority by over$45,000.
The Risk Management Joint Power Authority (J PA)was so surprised by the size of the increase that they
reduced their program fee by over 60 percent to lessen the impact on pool members.
Including the reduction in the JPA charge, the actual invoice total is $245,166. This is $45,166 more than
the Board approved on June 4, 2020 with the FY 2020-21 budget.
August 25, 2020 Regular FINANCE Committee Meeting Agenda Packet- Page 82 of 118
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ALTERNATIVES/CONSIDERATIONS
To maintain spending within the budgeted amount, we would need to remove over$145 million worth of
assets from the insured values schedule. This is not recommended.
FINANCIAL IMPACTS
The actual invoice for$245,166 is $45,166 above the $200,000 previously authorized to pay the annual
cost of the property insurance program.
COMMITTEE RECOMMENDATION
The Finance Committee reviewed this matter at its meeting on August 25, 2020 and recommended
RECOMMENDED BOARD ACTION
Authorize payment of an additional $45,166 to pay the FY 2020-21 property insurance renewal premium
invoice.
August 25, 2020 Regular FINANCE Committee Meeting Agenda Packet- Page 83 of 118