HomeMy WebLinkAbout03.e. Authorize a Budget Amendment for the Self-Insurance Fund for $425,000 due to Higher than Anticipated Legal ExpensesPage 1 of 2
Item 3.e.
MEETING DATE:
SUBJECT
BOARD OF DIRECTORS
POSITION PAPER
OCTOBER 27, 2023
REVIEW DRAFT POSITION PAPER TO AUTHORIZE A BUDGET
AMENDMENT FOR THE SELF-INSURANCE FUND FOR $425,000 DUE TO
HIGHER THAN ANTICIPATED LEGAL EXPENSES
SUBMITTED BY: INITIATING DEPARTMENT:
KEVIN MIZUNO, FINANCE MANAGER ADMINISTRATION -FINANCE
PHILIP LEIBER, DEPUTYGENERAL
MANAGER -ADMINISTRATION
REVIEWED BY: ROGER S. BAILEY, GENERAL MANAGER
ISSUE
A budget amendment to the Self -Insurance fund is required for Fiscal Year (FY) 2023-24 due to the timing
and size of legal bills received related to claims defense. Payment of expenditures above this amount
requires a budget amendment. A budget amendment for expenditures in the amount of $425,000 is
requested.
BACKGROUND
Board Policy 037 - Delegation of Authority to General Manager (BP 037), and Board Policy 048 -
Budget (BP 048) authorizes the General Manager to expend funds with the limits of the approved budgets
at the fund level. Specifically, per BP 048, "Any spending above total fund appropriations specified in the
adopted budgets must be accompanied by a budget amendment authorized by the Board.".
Absent a budget amendment, higher than anticipated legal expenses for FY 2023-24 are expected to
result in an exceedance of authorized expenditures in Self -I nsurance fund. Therefore, a budget
amendment to authorize an increase in expenditures of $425,000 is requested to avoid this budget
exceedance.
Based on invoices received, and a conservative estimate for potential additional billings not yet received,
authorization for a total of $800,000 of legal expenses is requested for FY 2023-24. This would result in
total expenditures of $2,585,000 compared to $2,160,000 in the adopted budget, an increase of
$425,000. The additional funding is specifically for Self -Insurance Sub Fund A.
Recovery of claims defense costs above self-insurance retention amounts may reduce the impact on the
overall self-insurance reserve, but the extent of this recovery remains uncertain pending matters that may
be resolved at the conclusion of litigation.
October 27, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 121 of 135
The adopted and the proposed amended FY 2023-24 Self -I nsurance Budget is shown below.
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Sewer Service Charge
S I F Allocation from O&M
Fund
Insurance Allocation from
HHW
Subrogation Recovery
Investment Income
Total Revenues
Claims Adjusting
Insurance Consulting
Loss Payments
Legal Services
Technical Services
Insurance Premiums
Total Expenses
Original FY Amended FY
23-24 23-24 Change
Budget Budget
$1,676,752 $1,676,752 -
$24,000
$24,000 -
$316,300
$316,300 -
$2,017,052
$2,017,052 -
$5,000 $5,000
$175,000
$375,000
$55,000
$1,550,000
$2,160,000
$175,000
$800,000
$55,000
$1,550,000
$2,585,000
$425,000
$425,000
ALTERNATIVES/CONSIDERATIONS
There are no viable alternatives to a budget amendment as legal expenditures are required in claims
litigation.
FINANCIAL IMPACTS
The additional $425,000 of expenditure authority for FY 2023-24 can be funded by a proposed transfer of
a favorable FY 2022-23 O&M variance of $500,000, a matter addressed in a companion Position Paper.
Absent that transfer, additional spending would reduce the Self -I nsurance reserve below the targeted
level, which could be restored during the FY 2024-25 budget process from an additional allocation of
Sewer Service Charge revenue.
COMMITTEE RECOMMENDATION
The Finance Committee reviewed this matter at its October 27, 2023 Special meeting and recommended
RECOMMENDED BOARD ACTION
Adopt a FY 2023-24 budget amendment of $425,000 for legal expenditures in the Self -I nsurance Fund A.
Strategic Plan re -In
GOAL FOUR: Governance and Fiscal Responsibility
Strategy 3 - Maintain financial stability and sustainability
October 27, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 122 of 135