finance committee will now come to order are there any members of the public wishing to speak on items not on today's agenda yet under the jurisdiction of this committee seeing none i will close public comment and go to our first item mister sue mario please tell us what we're here for today sure thank you mister chair a consent item on the city council's agenda but because we've seen this past year a change in the status of our workers comp programs funded status as a result the most recent actual report we thought we'd bring it to you and talk a little more detail about the report but also what the status of our program is in the context of this report so with that i'm going to turn over to marc howard use our risk manager you'll present the report great thank you mister howard good afternoon council members and chair  this is a continuing series of reports as mister samargan was saying we are obligated by california law to bring this to the council's attention every year and we've done so for over a decade now and  that's the justification for us coming to you today so california law requires that you either purchase insurance for workers compensation or you are self insured and if you are self insured like the city as a public we are required to report to the department of industrial relations and the city's governing board you folks what the results of that report would be for fiscal year thirteen and just as a way of background the city council created the self insurance fund in one thousand nine hundred and seventy four for workers compensation currently we are maintaining a self insured retention or sar of seven hundred and fifty thousand dollars per claim the city participates in a joint powers authority called sesac for excess workers compensation for coverage beyond the seven hundred and fifty thousand dollars self insured retention to a million dollars we also participate in that pool by purchasing excess insurance to bring that coverage up to statutory requirements because under california law the employer is required to pay for all medical treatment and disability payments to relieve andor cure the effects of the injury and thankfully for our history we have not had those very traumatic injuries that would go beyond our self insured retention but that is always an exposure that we have to take into account so moving along coverage details who's covered under the workers compensation program any city employee that's regular city employees bob and myself as well as hourly staff we hire on a part time or temporary basis who's not covered volunteers are not covered as well as staff hired through a temporary agency we have to hire temporary staff to fill short term vacancies those are not covered in this program so the annual report that we present to the department of industrial relations covers two types of expenses or benefits paid to an injured worker the first type is called inde these are the disability type of benefits often referred to in the industry as temporary total disability or ttd that includes two types of salary continuation that city employees are eligible to receive that includes the salary continuation that is bargained through the collective bargaining process as well as the labor code section four thousand eight hundred and fifty salary continuation benefits as part of state law for safety officers police fire harbor patrol and  permanent disability is for those few claims that have any permanency after the injury and the second type of benefit is called the medical treatment so those are the two basic types of mister howard yes how did the the salary continuation in this other state code how do those work is that a percentage of the salary or a time or a chairman francisco it is a percentage of their salary the state law requires the employer to pay two thirds of your salary as temporary total disability with a minimum maximum value to that however under the collective bargaining process the city has  bargained with its employee groups to supplement that ttd payment up to eighty five percent of their salary for a short period of time ninety working days under california state law safety officers police fire arbitral and airport patrol receive a hundred percent of their salary for one year of disability wow okay thank you very much so this slide shows us what the typical are not the typical but the top five injury types in fiscal year thirteen you'll see that the largest grouping is of the strain sprain type of injuries th hundred and twenty nine claims that we had in fiscal year thirteen so the city hires a third party administrator to do claims administration the self insured laws require that you do several things on a daily basis for workers compensation claims we have entered into an agreement that was approved by counsel with jt to integrated resources to provide these types of services one of the primary that they perform as they establish claim reserves for each individual claim telling us how much we should expect to pay over the life of that claim we'll be talking about that in further detail when we come to the actuarial studies and this screen shows us our tenure claim history from fiscal year three through fiscal year twelve showing ten complete years of history you'll see that the frequency of claims has been declining over the decade which is great news we always believe that fewer claims should lead to fewer costs moving on to the next slide we'll see that the claim severity the amounts we are incurring for those claims had been going down through fiscal oh eight and then you'll see two spikes one in fiscal year nine and one in fiscal year eleven that have led to a change in how the actuary views what we need to operate the self insurance fund for workers compensation this chart shows how much we've been paying out the door each fiscal year in claim payments as you can see it's been going down mirroring the trend line on the frequency of claims over the last ten years and the anomaly will still remain with fiscal year nine and eleven as we'll see going forward mister howard do we have this history going back further like say twenty five or thirty our self insured handle report and advise you whether that current accounting and financial reporting of these liabilities comply with the requirements of gatsby statement ten we're here today to tell you that the is in compliance with that along so how do we come to that well the city conducts a biannual actuarial study to estimate the amount of funds required to operate our self insurance fund the actuary uses several types of historical data looking at a five year window past five years to project the financial means for the next two year budget cycle they're looking at our loss runs that show the number of claims and the cost or the frequency and severity of those claims any payment trends and any claim reserved trends the claim reserves being the amount of money that we are putting aside to pay for those future benefits the actuarial study identified that these values are the claim payments that we need for out the door writing checks in a given fiscal year as well as an estimate for the total costs of claims going forward those currently outstanding than what the claims that have been reported to us as well as those what we call the incurred but not reported our exposure so for example i being our exposure we are at the mid year almost of fiscal year fourteen we'll still have incurred but not reported claims through the end of the fiscal year we don't know about them yet but we know they're coming okay those types of things so the actual report the most recent one was completed in november of two thousand and twelve and it recommended increasing workers compensation reserves by approximately three million dollars and one of the things next slide please they looked at was this trend line in the the severity of the incurred cost and they noted those two year's  fiscal year nine in fiscal year eleven were dramatically different than all the other years and while staff tried to convince the actuary that those were anomalies the actuary said yes they could be an anomaly or yes they could be the new norm so they are indicating that we should be increasing our reserve numbers by a little over three million dollars and and as this slide shows us three million twenty six thousand seven hundred five dollars is now underfunded in the workers compensation fund these numbers are reflected in both the self insurance fund internally as well as in our capper then you'll be seeing early in january so what's our strategy to deal with the actua indication that we need to increase reserves for this fund well we looked at three different options here we could potentially adjust the rates starting for fiscal year fifteen to a mid year adjustment we could second wait and see the results of the next actuarial study which will be completed late two thousand and fourteen on november and adjust rates if necessary for fiscal year sixteen or we could just wait and see if this is truly an anomaly two bad years and are we going back to our stated trendline of decreasing costs we thought we'd bring these options to this group and see if there was any thoughts or recommendations direction that you might have for us but all these things i think are within the realm of possibility and things we should look at and not needing to take really any action until we see that actuarial study in november sensitive of experiencing them is our is this like just inflation or inflated or just higher values or are there some terrible accidents that occurred that blew these on it above our self insured retention in fiscal year nine and to a smaller degree in fiscal year eleven we did see in a spike in part of the number of claims that were reserved above fifty thousand dollars in the fifty zero to one hundred and fifty thousand dollars range where normally we were seeing around five claims in that area of the striation that fiscal year nine we saw over fifteen claims in that striation in fiscal year eleven we saw more than the five around nine of those so we did see an increase in moderate level claims is that different no we see that periodically the the claims trends run in cycles sometimes those are higher sometimes they're lower but usually not that close together in fiscal years so is it unusual not really is it unusual to have those two close together yes that's unusual and the the one catastrophic type claim that we've had that is new to our program in the twenty some years i've been  rather large amount of payments go over the next two to ten years and is that information is that public information now or we you know what i would say not questions miss maria thank you mister chair mister howard can you explain adjusting the rates starting next year what would that process look like council with maria adjusting the rates would increase the overhead costs for all of the operating departments both general fund and enterprise fund beyond what we had already projected in charging them for the premiums to run the self insurance fund how much that would be i'm uncertain at this point until we actually see what the actuary says in november but we could make a projection to close that the three million dollar gap if we wanted to that wouldn't probably make it quite tight for many of the operating departments to come up with that and additional overhead costs and still balance their budgets if i could add to that we are going to be looking at this we may just add a little bit to next year increase it by a small amount and the impact of the general fund would be pretty nominal but you think maybe try to get ahead of this because if in november of two thousand and fourteen it shows that it's a continuing trend of these larger reserve requirements and we don't want to fall behind to fall behind far behind so we're gonna be considering that as part of the development of this next year's budget in our bid cycle process so will i'm sure we'll probably add a little bit but we're not sure yet and then wait till november to see what those numbers are we're just hoping that this was  you look at the broader time frame of ten years it has been a general trend down where so these we are hoping that these two years are really just unusual that we're going to return back to normal and therefore we don't want to overreact to start overcharging departments you know where do we start generating surpluses at some point which we had several years ago so the thing i wanted to mention is and i'm sorry but you know this is this goes in cycles you know eight years ago nine years ago we were we were severely underfunded we w where we were able to rebate the general fund and other funds over a three year period a fair amount of money over four million dollars we gave back which reduced our assets to about six where they are today six million now there's a saying the reserve should be back up to nine million dollars so we still have a lot of money we're not going to run into any problems got a cash flow basis and we're going to just wait and see whether we need to raise raise over time or maybe not depending on what the results are november so you're essentially recommending  but we're also kind of really kind of hope and see that whether those two bad years were really an unusual circumstance and that'll be explained and told to us by the two thousand and fourteen report and you're saying there is money in reserves and there is no reason to panic but you're just cautiously telling us that this is an issue and i did ask mister casey last week about the programs we have to reduce employees hurting themselves and i guess for the public i just like to put that out there that the city trains people in safety and right part of the risk management divisions functions includes offering this the occupational safety and health program for the city and that program does provide training throughout the calendar year on a variety of safety topics that are either mandated by  mandated because we know that they create exposures to injuries and we want to try and minimize those losses as much as we can it's a very well run program that encompasses all all thirteen departments from a to z and everybody gets to participate in training throughout the year so mister chair if you'll humor me a little bit so when you when i saw the chart up there about strain is that our employees who carry heavy things i'm just trying to figure out where the most dangerous jobs we have at the city or they down at the sewage treatment plant are they driving i guess is an issue sometimes right there's so our last look into the injury statistics shows that the lifting pushing pulling are the most prevalent injury types for city employees that would include back injuries upper arm extremities and knee and leg extremities those were the most prevalent over about sixty percent of all claims happened in those types of lifting pushing pulling the others fall into the minor contusions we do have the most the most injuries are reported by police public works in the fire department they're the ones that do a lot of that heavy lifting pushing and pulling of stuff but we do see injuries from just about all the departments over a five year period of time it appears that even you know the administrative type of departments are having minor injuries  it does happen that all across the board thank you thank you okay any further questions from the committee this is not an action item this is informational so all right general dee's on today's agenda