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FINANCE / CLAIMS
COMMITTEE ACTIONS
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MARCH 5, 2003
Approved FJG 06/12/03
ATTENDANCE: Bruce Kimmel, Chairman; Matt Miklave; Carvin Hillard; Bill Krummel; Doug Sutton; Ken Baker (7:45PM).
STAFF: Jack Miller, Director of the Finance Department; Lisa Biagiarelli, Tax Collector; Robert Barron, Risk Manager.
OTHER: Sal Corda, Superintendent of Schools; John Quinn, Director of Finance for the Board of Education; Richard Fuller, Chairperson, Board of Education; Tom Vetter, Board of Education.
The meeting was called to order at 7:40PM by Mr. Kimmel. He introduced the
members of the Council, the staff as well as members from the Board of Education
that were present in the audience.
APPROVE THE MINUTES OF THE FOLLOWING FINANCE COMMITTEE MEETINGS:
JANUARY 21, 2003
Corrections:
Page 3, 1st paragraph, 4th line; 'stated that companies already
having vehicles that were handicap accessible. ' change to ' stated that
companies charging fees to use vehicles that were handicap accessible '
Page 1, 3rd paragraph; $17,000 change to $517,000.
Page 1, last paragraph; 'Mr. Epstein expressed his strong support for the
ordinance. He said' change to ' Ms. Epsteinexpressed her strong support
for the ordinance. She said'
** MR. KIMMEL MOVED TO APPROVE THE MINUTES AS CORRECTED
** MOTION CARRIED WITH 3 IN FAVOR AND 1 ABSTENTION (MR. HILLIARD)
Mr. Baker arrived at 7:45PM.
JANUARY 22, 2003
Corrections:
Page 2, under Fiscal Year 2003, 2nd line 'cap to the Finance
Committee' change to 'cap to the Board of Estimate and Taxation'
Page 2, under Fiscal Year 2003, last sentence of 1st paragraph; 'He suggested
that based on the current level of spending, a place holder be set at 207.4
million dollars' change to ' He suggested that based on the current level
of spending, a place holder be set based on the current $207.4 million dollar
budget.'
Page 3, 1st complete paragraph; 'Mr. Kimmel said that apart from the cap,
it was up to the Finance Department to make final decisions ' change to '
Mr. Kimmel said that apart from the cap, it was up to the Board of Estimate
and Taxation to make final line item decisions'
Page 3, 1st complete paragraph, 3rd line; 'but the decision was ultimately
the Finance Department' change to ' but the allocation decisions were ultimately
the Board of Estimate and Taxation.'
** MR. KIMMEL MOVED TO APPROVE THE MINUTES AS CORRECTED
** MOTION CARRIED WITH 4 IN FAVOR AND 1 ABSTENTION (MR. HILLIARD)
FEBRUARY 5, 2003
Corrections:
Page 3, 3rd line; 'case over the lines' change to ' case over the power lines'
** MR. KIMMEL MOVED THE MINUTES AS CORRECTED
** MOTION CARRIED WITH 4 IN FAVOR AND 1 ABSTENTION (MR. MIKLAVE)
** MR. KIMMEL MOVED TO SUSPEND THE RULES TO ADD A FOLLOWING ITEM TO THE AGENDA:
AUTHORIZE THE MAYOR, ALEX A. KNOPP, TO SIGN WITH A.J. GLLAGHER & COMPANY TO BROKER THE CITY OF NORWALK'S PROPERTY & CASUALTY INSURANCE PROGRAM FOR THE PERIOD OF JULY 1, 2003 TO JUNE 30, 2006 FOR A SUM NOT TO EXCEED $76,000; $28,000 FOR FISCAL YEAR 2003-04, $25,000 FOR FISCAL YEAR 2004-05 AND $22,500 FOR FISCAL YEAR 2005-06.
** MOTION CARRIED UNANIMOUSLY
Mr. Barron said that the City of Norwalk did not have an insurance broker for their property and casualty insurance. As a result, he had recently went into the marketplace to find one. He added that last year after experiencing some market difficulty with the property insurance, he was able to quickly find a broker to help reduce the cost from a 7¢ rate to a 5¢ rate, which ultimately saved the City $150,000. He continued to state that the City would benefit from that type of service and experience especially with the current market conditions. He added that he advertised for qualified brokers and there were seven responses. The list of seven brokers was narrowed to four, based on several variables including the fee schedule: Marsh, AON, USI of New England and A.J. Gallagher. AJ Gallagher was chosen as the best deal based on their long term experience with the City of Norwalk and they were lowest in terms of pricing for brokerage services. Marsh came in at $60,000 moving to $66,000 in the third year while AON & USI came in at $40,000 for all three years. A.J. Gallagher was most cost effective at $28,500 for the first year going down to $22,500 in the third year. He added that the company had expressed confidence that they would maintain a good relationship with the City and were very anxious to do business. Mr. Barron then stated that he recommended that A.J. Gallagher be engaged to help with the brokerage of the City's property and casualty insurance for the next renewal. He added that the purpose for adding the item to the agenda tonight was that it was imperative to begin putting together a proposal no later than April in order to meet the July 1st renewal deadline.
Mr. Miklave then inquired about when the decision was made to seek a broker. Mr. Barron said the decision was made two months ago. Mr. Miklave asked when bids were open. Mr. Barron clarified that they were not bids but rather a request for qualifications and that occurred 1 month ago. Mr. Miklave then inquired about the service the broker would be providing over the next three years. Mr. Barron responded that since 9/11, the insurance industry had not been able to make any money through investments which consequently had caused the pricing of insurance to take a very steep incline. Accordingly, the underwriting carriers have become very selective and a municipality was not very high on the list. He added that the City would be better served if it had a broker with in depth knowledge of public entity business on a national basis, such as A.J. Gallagher, in order to get a program that would be beneficial under the current market conditions. Mr. Miklave asked if other fee arrangements had been looked into or if there were other brokers that would complete the same service for a commission. Mr. Barron stated that many brokers would operate on a commission basis but as the premiums increase, so would the commission. He stated that the fee as presented by A.J. Gallagher was very reasonable for the knowledgeable help the City would receive with dealing with a cost factor that was a lot more than the fee. Mr. Miklave asked what the normal commission rate of brokers that were offering the same service. Mr. Barron responded that the rate used to be 20% but was around 10% currently. Mr. Barron commented that the premiums for the current year were $671,432, 10% of which would be around $67,000. He further stated that a 20% increase was projected in the premium. Mr. Miklave inquired about the current property insurance. Mr. Barron said that the City had a blanket amount on all the City and Board of Education properties. The blanket amount was ideal in that no matter where the loss occurred, there was a very high limit that applied to everything. He continued to state that the amount of insurance was $400 million which represented 100% of the property value. That amount was reduced to $75 million, which he believed was still a substantial amount to cover any major loss to the City. The deductible was currently $100,000, which aided in reducing the premiums to the lowest possible level. He further commented the current liability coverage had a $500,000 retention which meant that any loss that occurred below $500,000 would be covered through the City's insurance fund. The limit of the insurance coverage was up to $11 million dollars. Mr. Miklave inquired if Gallagher would bid on the service for a percentage of the ultimate insurance acquired in order to look for the best rate. Mr. Barron responded that he believed they would because it was to their advantage and the City would end up paying them more. Mr. Miklave then asked if they had investigated what the lowest commission rates were. Mr. Miller then commented that they were paying for professional services and preferred not to have the fees hidden. Mr. Miklave commented that there were several ways to pay for this service other than paying a fee and wondered had any other approach had been looked into. Mr. Miller responded that he felt that this was the best way to approach the matter. Mr. Miklave then asked for a basis for that conclusion. Mr. Miller responded that based on experience, the certain knowledge of what the cost would be to the City as well as the service to the City, the fee proposed by A.J. Gallagher was a bargain. Mr. Baker inquired as to why the fee structure presented by A.J. Gallagher decreased so significantly in the third year. Mr. Barron responded that the company felt that the initial work needed to establish a relationship would be more expensive because of the time and man hours needed to properly gather the necessary information. He added that the logic was that once the relationship was developed and there was a better understanding of the exposures that existed in the City, the renewal process would be less costly for them to do. Mr. Hilliard commented that he felt this was the better deal for the City and would rather pay a flat fee rather than have it based on premium. Mr. Kimmel commented that he was in agreement that this was a very logical approach to the situation. Mr. Miklave commented that he was generally reluctant to approve things that were presented on such short notice due to the fact that he needed advance notice to investigate any conflict of interests on his part. He added that the time had allowed for the request to be placed on the agenda prior to tonight. He added that he tried to be as cautious as possible to avoid even the suggestion of impropriety and would appreciate more advance notice in the future.
** MR. HILLARD MOVED TO APPROVE THIS ITEM
** MOTION CARRIED UNANIMOUSLY
CLAIMS COMMITTEE: RECEIVE THE MONTHLY CLAIMS REPORT; REVIEW AND APPROVE CLAIMS AS REQUIRED FOR CLAIMS REPORT DATED MARCH 5, 2003.
Ms. Biagarelli handed out a report to the Committee. Mr. Kimmel said that he did not see any amounts over $5,000. Ms. Biagarelli commented that the report was strictly for informational purposes only. She stated that in light of the fact that there were guests present, the Committee could review the report and let her know if they had any questions. Mr. Kimmel inquired as to the date of the 96.2% reported. Ms. Biagarelli responded that the number was as of the end of February and that they were on target compared to last year at the same time. Mr. Kimmel said there was no need to vote on this item.
DELINQUENT TAX REPORT: RECEIVE REPORT AND DISCUSS.
Mr. Kimmel inquired if there had been any more progress with delinquent accounts. Ms. Biagarelli answered that Marshalls and Constables were currently serving warrants. Over 100 warrants were actively being served. She added that the support of the Council was welcomed. She said that an account that had been 15 years past due was recently paid in full a week following being served a warrant by the Marshall. Mr. Miklave thanked Ms. Biagarelli and her staff for preparing the report. Mr. Kimmel stated that there was no need to vote on this item.
RECEIVE BOARD OF ESTIMATE AND TAXATION SPECIAL APPROPRIATIONS FROM MARCH 3, 2003 MEETING.
There was no discussion on this item.
DISCUSSION ON COUNCIL MEETING ON MARCH 18 TO AMEND THE FISCAL YEAR 2003-04 OPERATING BUDGET CAP ON EXPENDITURES.
Mr. Kimmel said that since there were members from the Board of Education present, he wanted to discuss the proposed 4 to 5 million dollar budget cut mentioned in the newspapers.
Mr. Miller began by saying that the budget request had a 2.5%
built-in tax increase for the coming year. There was also additional loss
of funding in the amount of $900,000 from the State per Governor Rowland's
proposal. He added that the recession had triggered increases including increases
of benefit coverage from the Board of Health. He also pointed out that the
City had to contribute to its pension plan up to 5% to make up the major decline
in assets. He commented that they were still in the middle of negotiations
with various bargaining groups. In the recent Board of Estimate and Taxation
meeting, the Mayor had set some targets that he hoped to have accomplished.
In particular, no more than 1% increase for the City and no more than 3.5%
for the Board of Education.
Dr. Corda said that the City was experiencing a situation that was not unique.
He added that every effort was being made to reduce expenses and raise revenues.
However, the difficulties in the marketplace have made it very hard to raise
revenue. He added that the financial reality was that the 3.5% increase meant
that they would have to reduce their budget by over 5 million dollars.
Mr. Kimmel commented that 4 to 5 million dollars was a large decrease. He then asked if the decrease would have an impact on class size. Dr. Corda responded affirmatively. He stated that they were bound by contractual limitations in terms of class size to the extent that they have to make maximum use of class size. At the elementary level that would mean moving children from one building to another in order to reduce the number of children in a particular grade. He said that there were many variables that were involved in determining which child gets moved. Mr. Kimmel then asked would children that were bused in from another district be the first to be moved. Dr. Corda stated that it was very important to treat those students carefully in order to not send the wrong message to the child. He pointed out that racial balance had to be maintained and he would try to stay away from focusing on moving those children who were bused in. Dr. Corda also mentioned that class size really begins to emerge as a problem in high school. He pointed out that because high school allowed for elective courses such as foreign languages and advanced placement, that it may no longer be affordable anymore to allow 10 students in a class. Mr. Kimmel mentioned the possibility of combining AP courses and Honors courses. Dr. Corda said that he was not sure if AP classes could be combined but the language courses could be combined. Mr. Kimmel asked how the budget would affect the initiatives that had been made in the curriculum. Dr. Corda said that if there are going to be reductions in the staff, which he believes will occur, and then there might not be enough teachers to maintain the initiatives that have been made. He added that because there will be reductions in central staff, he feared that the revitalization efforts that had been made could be undone in one year.
Mr. Fuller stated that recent test results showed that the longer a child remained in the system, the chance for improving achievement level was much greater. He also said there was a much better chance of closing the gap.
Mr. Kimmel said that one problem with the process was that the budget had to be adopted within a certain period of time and that the City was currently in the midst of negotiations with the NFT. He added that he was concerned with how to determine a final budget if no one knew what the outcome of the negotiations would be. Dr. Corda commented that since the Mayor had given a target, it was much easier to determine how to get to that number. Mr. Kimmel expressed concern with the impact the large budget cuts will have on the initiatives that had been made so far. He pointed out that there were accreditation issues and the "No Child Left Behind" requirements that had to be carefully considered when making such steep cuts. He said since Connecticut had such high standards, a district like Norwalk could find itself with the issue of having failing schools if they didn't watch what programs were cut. Mr. Hilliard asked for some clarification regarding the effects on personnel. Dr. Corda responded that all contracts in terms of reduction in staff were governed by seniority. He said the position would be reduced, not the necessarily the individual. However, if the position only had one individual, then the reduction would only occur to that person.
Mr. Kimmel asked if it would be possible to cut music programs at the elementary level. Dr. Corda responded that everything was on the table. He then gave a list of all the areas they were looking to make budget cuts in order to stay away from the classrooms. He said that central office staff would be evaluated for ways to consolidate duties in order to reduce costs. Another area would be transportation in terms of consolidating routes. Mr. Kimmel said would it be possible to hire another company. Dr. Corda said it would be difficult to find a contract as favorable to the district as the current one. He continued to say that another area that might see possible cuts was the food service. He believed that another $7,500 could be taken from there. Also, there would be a reduction in maintenance supplies which might mean that the bathrooms might not get cleaned everyday. He also added that repairs to equipment would be made only when it was detrimental to health and safety. He added that a new teacher evaluation system has been put in place where the principal would be able to meet with teachers before and after they prepare their lessons. He felt this would help to improve student performance. He then mentioned they were looking at secondary schedules as well as 1/2 day kindergarten. He pointed out that there have been no budgetary replacements for the Early Literacy Program grant that runs out this year. Mr. Kimmel then asked what would be different in the Kindergarten program next year. Dr. Corda said that BLT's, which served as a support for teachers, might not be available. Mr. Kimmel asked how much of the BLT's time was spent working directly with the children. Dr. Corda said he was not certain but he believed it was 50/50.
Mr. Kimmel said that he knew the district had been trying to save money on special education and inquired if any headway had been made with that effort. Dr. Corda said that in a recent analysis in cost of Special Education between the different towns, the principle difference found was staff. He added that more senior level teachers historically taught Special Education, which meant they were in a higher income range. He said that once Norwalk's senior teachers retire and more younger teachers were placed in the program, then that cost would decrease.
Mr. Kimmel commented that the Council had to come up with a cap by March 18th and that they were still in the process of collecting information. The public hearing was set for March 12th. He added that the purpose of the hearing was basically to amend the cap that had been originally submitted by the Committee. He expressed that he would feel more comfortable if it went through this Committee before it went to Council again which meant there was not much time to have a meeting. He stated that the Board of Estimate needed at least a day, so he suggested an early meeting on March 17th. Mr. Miller said that the Charter called for the Common Council to amend it's cap no later than the third Tuesday of March.
Mr. Miller spoke about the upcoming schedule. He said that the Board of Estimate and Taxation was meeting tonight in order to further define the budget. He said the Mayor may be making some more recommendations shortly. The Board would then meet on the 10th to develop a revised budget recommendation, after which, a public hearing would take place on the 12th. The Board will then meet on the 13th to consider the comments from the 12th. The revised budget would then be transmitted that evening with a request for the Council to hold a meeting on the 18th to reconsider the revised recommendations. The Board then had to advertise the proposed budget on the website and then adopt a final budget on the first Monday of April.
Mr. Kimmel said he thought the next meeting should occur on Monday the 17th with the only item on the agenda being the transmittal. More discussion took place about the time. Mr. Baker suggested a caucus. Mr. Kimmel said that the next meeting of the Finance Committee would be on March 17th at 7PM.
DISCUSS AND APPROVE INCREASE ALLOWED FOR CONVEYANCE TAX.
Mr. Kimmel said that up until now, the municipalities had been allowed to take .11% of real estate conveyance tax as revenue. However, recently the legislature had decided to allow municipalities, in an effort to raise revenue, to increase that percentage to .25%. In addition, they were allowing the 14 largest municipalities the chance to that percentage to .5% on a temporary basis ending in June 2004. That increase however, would be have to be implemented in a way that would not affect transactions that were currently in place. He indicated that he was not sure of the revenue these increases would generate.
Mr. Miller commented that the change from .11% to .25% would happen automatically across the state. He added that the change would generate approximately an additional 1.1 million dollars if the activity remained the same. Mr. Kimmel asked was the .25% change permanent. Mr. Miller indicated that the change was permanent. He continued to point out that the increase to .5% would generate another 1.9 million dollars which would help with the revenue losses that have occurred. He commented that he had met with the Mayor prior to this meeting and he had expressed some urgency in having this item considered by March 13th in order to incorporate the numbers in the budget. Mr. Kimmel said that he would prefer to have the meeting on the 17th. Mr. Miller strongly advised that the meeting occur on the 13th because the Board of Estimate and Taxation would be meeting to consider approving the conveyance tax. Mr. Kimmel stated that he would not be able to attend and asked Mr. Sutton to Chair the meeting on the 13th. Mr. Sutton accepted and said he would handle sending out all the notices.
Mr. Miklave inquired about who paid the real estate conveyance tax and what percentage was paid. Mr. Miller responded that the seller paid the real estate conveyance tax. Mr. Miklave asked if that occurred when a home was refinanced or only on property transfer. Mr. Miller indicated that he was not sure. Mr. Miklave commented that he would like to know exactly what the impact of the conveyance tax would be on the citizens of Norwalk before he voted on the item. Mr. Kimmel added that the vote would be on the additional 1.9 million that would be generated as a result of the .5% temporary increase.
** MR. KIMMEL MOVED TO SEND THE ITEM TO PUBLIC HEARING ON
MARCH 13, 2003 WITH THE CONDITION THAT MR. MIKLAVE RECEIVE THE INFORMATION
HE REQUESTED
** MOTION CARRIED UNANIMOUSLY
** MR. BAKER MOVED TO ADJOURN THE MEETING
** MOTION CARRIED UNANIMOUSLY
The meeting was adjourned at 9:30PM.
Respectfully submitted,
Michele Montgomery
Telesco Secretarial Services
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