The Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (CKH Act), is LAFCo’s governing law and outlines the requirements for preparing periodic Municipal Service Reviews (MSRs) and Sphere of Influence (SOI) updates. MSRs and SOIs are tools created to empower LAFCo to satisfy its legislative charge of “discouraging urban sprawl, preserving open space and prime agricultural lands, efficiently providing government services, and encouraging the orderly formation and development of local agencies based upon local conditions and circumstances”.
While MSRs are not legally required of Joint Powers Agencies/Authorities, LAFCo has been requested by the cities and County (i.e. JPA member agencies) to provide MSR-like service reviews of selected types of JPAs in the county. LAFCo has the authority to furnish informational studies and analyzing independent data to make informed recommendations regarding the efficient, cost-effective, and reliable delivery of services to residents, landowners, and businesses via these JPAs. With this intention, LAFCo has modified its MSR checklist to conduct service reviews of JPAs.
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This item was continued from the August 22, 2019 meeting in order to allow the CEO for the Yolo County Public Agency Risk Management Authority (YCPARMIA) an opportunity to attend and respond to any issues/questions.
Agency Information
YCPARMIA is a joint powers authority formed in 1978 by participating members. It provides non-profit risk management, insurance, and safety services to its members within Yolo County with seven full time employees. Prior to implementation of the YCPARMIA self-insurance program on March 1, 1979, each agency purchased its own insurance. Its risk sharing pool is comprised of public entities in Yolo County that have entered into a joint powers agreement as either a voting member or an associate member. It is governed by a Board that is appointed by its six member agencies. There are an additional twenty-six associate member public agencies served (including Yolo LAFCo). YCPARMIA’s Board is independent, and not controlled by their member agencies. There is no insurance; with few specialized exceptions, members are covered by programs of self-insurance (funds YCPARMIA has set aside to pay claim costs). YCPARMIA, in turn, is a member of various excess pools made up of hundreds of other California public entities that provide coverage above YCPARMIA’s pooled retentions/limits.
YCPARMIA’s annual revenues come entirely from member premium/cash payments. An annual actuary study is used to determine premiums based largely on member’s claim history in liability and workers’ compensation. Loss prevention efforts that drive down claim frequency and severity will result in lower premium charges while catastrophic losses will result in increases. When YCPARMIA is able to “beat” the actuary’s projections of future losses, surplus funds result. The YCPARMIA Board returns these surplus funds to members in the form of premium rebate credits. YCPARMIA is staffed to provide professional risk management and claim services for members; there are no separate charges for these services. YCPARMIA staff has no authority over the risk management efforts of its members; at best staff serve as an outside consultant, albeit with a vested interest representing agency’s risk sharing partners.
The annual "premium" charged each agency is designed to reflect the risk exposure of each participating agency, and modified to reflect the actual losses paid by the pool on behalf of each participating agency. Equity is achieved to the greatest extent possible. The annual premium charged to each participating agency consists of its pro-rata share of: 1) Excess insurance premium, 2) Charge for the pooled risk (or losses), recognizing the deductible selected, 3) Claims adjusting and legal costs, and 4) Administrative and other costs to operate the Authority. Total expenses for YCPARMIA (administration and claim payments) has ranged from $7,201,216 to $10,418,622 over the last five fiscal years reviewed. Detailed information is provided in the report.
JPA Service Review Determinations and Recommendations
Six of the required seven MSR determinations are applicable to JPAs (the determination for disadvantaged unincorporated communities was removed for the JPA Service Review checklist). YCPARMIA's determinations and recommendations for Commission review and consideration are as follows:
Growth and Population Determination
Projected population estimates for the entire County is 243,234 by 2025 (an increase of 20,656 or 9.28%) and 259,339 by 2030 (an increase of 36,758 or 16.51%). YCPARMIA’s claim volume can be correlated to population growth and/or a commensurate increase in agency staff (i.e. more staff, more claims). If the volume of member agency claims increases over time, YCPARMIA may need to increase its staff capacity to manage those claims, which would increase member administration and overhead costs. Agency annual "premiums" are designed and adjusted to reflect the risk exposure of each participating agency, and modified to reflect the actual losses paid by the pool on behalf of each participating agency. YCPARMIA serves public agencies within Yolo County and population growth would not affect its service area.
Capacity and Adequacy of Public Facilities and Services Determination
There are no deficiencies in YCPARMIA’s capacity to meet member service needs and the agency is able to respond to any member needs to increase capacity as determined by its Board. YCPARMIA owns its facility but the building is in need of some upgrades. YCPARMIA should consider developing a schedule and setting aside funds for regular maintenance.
Climate adaptation is an important issue for YCPARMIA and it is aware and responding to climate adaptation issues by necessity. YCPARMIA’s CEO indicated industry property premiums have been going up due to changes in weather patterns by 30-50%. Even if there are no claims for YCPARMIA agencies, there is an indirect impact statewide.
Capacity and Adequacy of Public Facilities and Services Recommendation(s):
- YCPARMIA should consider developing a schedule and setting aside funds for regular building maintenance.
Financial Ability Determination
YCPARMIA is a financially well-run organization. Adopted budgets with revenue exceeding expenditures are routinely adopted. In addition to the annual financial audit the agency is subjected to 4 other audits and an annual actuary study. The agency has been accredited with excellence by two of the auditing organizations. In addition, YCPARMIA has received the Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting for each year covered by this MSR.
YCPARMIA also has good financial polices including funding reserves. As of June 30, 2018 net position was $2.6M, which is approximately 23% of total expenses. The agency has also served its members well by maintaining a relatively flat level of general administrative expenses over the past 5 years.
Financial Ability Recommendation(s):
- YCPARMIA should consider modifying their budgeting practice to include budgeting for loss reserve adjustments, expenses that are passed through to member agencies, dividends paid to members, depreciation, and changes to retiree health insurance (OPEB), pension and accrued compensation liabilities. Budget modifications can be made during the year as amounts are known. Some of these amounts are known after the completion of audits and actuarial studies.
- YCPARMIA should consider reviewing the reserve calculation process to ensure funded reserves balances provided to the board reconciles to the actual ending net position balance. Also YCPARMIA should consider creating separate general ledger accounts for each reserve and maintain the balances to agree to the amounts calculated and reported to the board.
- YCPARMIA should consider establishing an irrevocable trust to accumulate assets to fund the OPEB liability.
- YCPARMIA should consider making voluntary lump sum payments to CalPERS, as funding permits, to reduce the pension liability.
Shared Services Determination
The JPA in itself is a risk sharing pool to reduce agency costs.
Accountability, Structure and Efficiencies Determination
There are no issues with YCPARMIA meetings being accessible and well publicized. JPA members keep the Board member seats filled with staff, which tend to be human resource professionals. There is a lack of risk management expertise on the Board, however, agencies rely on YCPARMIA to provide this as a shared service. The JPA’s staff has remained relatively stable. Audits are performed on a regular schedule, on time and without issues or findings. YCPARMIA does need to improve its website and the content provided, per the 2018 website transparency scorecard.
Accountability, Structure and Efficiencies Recommendation(s):
- YCPARMIA should improve its website and content. The agency received a 26% transparency score in the Yolo Local Government 2018 Website Transparency Scorecard report. The JPA’s information deficiencies can be viewed here: https://www.yololafco.org/yolo-local-government-website-transparency-scorecards .
Other Issues Determination
There are no other matters related to effective or efficient service delivery not already discussed in this report. |