Minutes Legacy Cost Task Force May 27, 2014 Fellowship Hall at Mt. Zion Baptist Church

Transcription

1 Minutes Legacy Cost Task Force May 27, 2014 Fellowship Hall at Mt. Zion Baptist Church Call to Order A meeting of the Legacy Cost Task Force was held on Monday, May 27, 2014 at 4:30 p.m. in the Fellowship Hall at Mt. Zion Baptist Church, 120 Roberson Street. Members Present: Members Absent: David Anderson, Co-Chair Jim Ritsema, Co-Chair Lee Adams Don Cooney Rafael Diaz Randy Eberts Peg Giem Jim Grace Sally Hainline Marcia Jones Rob Keller Ron Kitchens Barbara Miller Patsy Moore Vernon Payne Jerome Post Tom Skrobola Burt Tenbrink Patti VanWalbeck Jim Jenkins Stephanie Losey* Also present were City Attorney Clyde Robinson, City Clerk Scott Borling, and facilitator David Wheatley. Introductions Mr. Wheatley reviewed the agenda, meeting best practices, output expectations, and the purpose of the legacy task force.

2 Development of Decision-Making Values Mr. Wheatley asked the members to discuss in small groups potential guidelines to frame the conversation as the Task Force began to develop its recommendations. *Ms. Losey arrived at 4:48 p.m. As members shared their responses, Mr. Wheatley captured them in a MindMap entitled Kalamazoo Legacy Cost.decision-making values. A copy of this MindMap was filed with the papers for this meeting and is incorporated into these minutes by reference. Review of the Creative Brainstorm Mr. Wheatley reviewed the MindMap created at the March 24 th meeting entitled Kalamazoo Legacy Brainstorm (creative!) and reminded members he had asked them to share any solutions to add to the list, any solutions that could be eliminated from the list, and their top three preferred solutions. Mr. Wheatley stated he had received response from around half the members, a summary of which had been distributed to all the members via . Mr. Wheatley noted the City Administration had created and distributed via a document entitled Legacy Cost Task Force Summary. Mr. Grace requested the last sentence of the first paragraph of the summary be revised to read, This does not include any pension benefit, which is pre-funded by the City/employees during an employee s employment. Additions to the Solutions List Mr. Wheatley indicated the only new solutions to be added to the MindMap were Key man insurance and Increase the catastrophic insurance deductible. There were no objections. In response to a question from Mr. Skrobola, Co-Chair Ritsema explained that Key Man Insurance was used in the private sector by companies to insure against the death of a top executive, like a CEO. City Attorney Robinson stated he was skeptical the City could use this type of insurance policy, as it did not have an insurable interest in its retirees. City Attorney Robinson indicated the courts had typically ruled that investments in life insurance were essentially gambling and against public policy. Mr. Post added that Julie Sessions of Mercer had never heard of private sector companies using Key Man Insurance for retirees, and the premium amounts, which were based on age, would probably make such a program cost prohibitive. In response to a question from Mr. Diaz, City Attorney Robinson stated the use of OPEB bonding funds were restricted by statute. In response to a question from Mr. Grace, City Attorney Robinson explained any portion of the bond principle that remained after the healthcare liability was eliminated would need to be returned to the people who purchased the bonds, as it could not be used for other purposes. 2

3 Deletions from the Solutions List Mr. Wheatley asked members in small groups to identify solutions on the MindMap that could be eliminated right away. When given an opportunity to respond, the members identified the following solutions to be eliminated: - Increases to taxes on property that is already taxed - Service decreases - Use of overfunding in pension fund - Do nothing different - Advocacy (as a short term solution) - Bankruptcy - Privatizing services (as a short term solution) - Consolidating governments (as a short term solution) It was noted that some ideas, like privatization, advocacy, and consolidating governments, offered long term solutions and should be pursued and/or continued by the City Administration. Discussion took place about the City s ability to reduce its pension liability so that excess funding in the pension system could be used to reduce the retiree healthcare liability. City Attorney Robinson stated the City could not move retirees to a defined contribution pension system, and it would be legally and practically difficult to move current employees to a defined contribution system. Mr. Keller suggested it would be good to distinguish between the portions of pension and retiree healthcare benefits that were vested and not vested to determine the City s legal obligations. Mr. Skrobola stated he would get the information Mr. Keller requested and provide it for the group. Discussion took place about the process for issuing bonds for Other Post-Employment Benefits (OPEB). By consensus the Task Force members agreed the City Administration should take the necessary, non-committal steps to maintain OPEB bonding as an option. The members requested concrete information on OPEB bonds so this option could be discussed at the next meeting. Co-Chair Anderson remarked on the difficulty of generating data on cost savings associated with some of the solutions, like privatization and consolidation of governments. 3

4 Identification of Likely Solutions Discussion took place about the scope of the work of the Task Force and its decision making process. Mr. Wheatley asked members in small groups to identify solutions on the MindMap that could provide the best chance addressing the challenge of retiree healthcare costs. As members shared their responses, Mr. Wheatley captured them in a MindMap entitled Kzoo Legacy Healthcare Cost TF Solution(s) (phase 1!). A copy of this MindMap was filed with the papers for this meeting and is incorporated into these minutes by reference. In response to a question from Mr. Tenbrink, Co-Chair Anderson explained that Payments-In- Lieu-of-Taxes are limited by state law to residential properties that have mortgages or loans through the U.S. Department of Housing and Urban Development or the Michigan State Housing Development Authority. In response to comments from Mr. Grace, Mr. Wheatley suggested staff bring back information on the possible cost savings associated with various healthcare savings options. Co-Chair Ritsema committed to finding out how long it would take to get information on the options for potential healthcare cost savings. Meeting Schedule Discussion took place about meeting schedule. By consensus the Task Force determined to maintain its June meetings as scheduled. Citizen Comments When given an opportunity for citizen comments, the following people addressed the Task Force: Don Litsven, City retiree, stated police officers gave up a lot to get good retiree healthcare at the time the police and fire departments were consolidated and asked the Task Force to find a way to fund current benefits. Ted Lupina, City resident and retiree, stated the issue with having Medicare as the first payer was the City s unwillingness to provide a liaison to handle claim issues. Mr. Lupina stated many retirees did not trust the City Administration. The meeting adjourned at 7:30 p.m. 4

5 Respectfully submitted, Scott A. Borling, City Clerk For approval on June 23, 2014 David Anderson, Co-Chair Jim Ritsema, Co-Chair 5