TOWN OF OCEAN CITY

FISCAL YEAR 2022 ADOPTED BUDGET

RISK MANAGEMENT FUND

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BUDGET HIGHLIGHTS:

 

REVENUE CHANGES:

Interest earnings are expected to decrease slightly in FY 22. The expenses for this division are separated into four categories: General liability, Auto claims and insurance, Property and Worker’s compensation. Expenses in these four categories are allocated to each department based on a formula determined by an actuarial study done every few years. Worker’s compensation costs are the most expensive of these three categories, making up roughly 41% of the Risk Management budget.

 

PERSONNEL CHANGES:

Two full-time positions are funded in this division. A step increase effective January 1, 2022 has been included. Reductions in this line item reflect the retirement of a long-term employee. A part-time Office Associate position was eliminated in FY 22. Estimated contributions for retiree health and pension increase, while health insurance decreases.

 

CHANGES IN OPERATIONS:

Contracted Services include professional services and legal services. Legal fees have been budgeted at $139,000. An Actuarial study to assess ultimate losses and outstanding liability associated with the Town’s self-insured worker’s compensation, general liability and auto exposure will be conducted in FY 21 to give funding recommendations for the next few years. The last study was conducted in FY 19 and is completed every three fiscal years. Necessary reserves for each type of insurance claim and the allocation to each department by insurance type is determined by the study. The last actuarial study increased the amount of Risk fund balance restricted for claims and liability, auto claims and future claims. Reserves necessary for worker’s compensation claims decreased. Overall, restricted fund balance increased $510,612, resulting in a budgetary loss in FY 18. As a result, a contingency of $80,000 over the projected expenses has been included in every budget since FY 20. Insurance coverage and payment of insurance claims are the largest expenses in this department. $2,079,430 has been budgeted to cover the cost of insurance policies and insurance claims for FY 22. Costs for insurance policies, increase $136,480 in FY 22, due to anticipated increases in property and general liability insurance. Property insurance is estimated to increase to $422,202 for FY 22, while General Liability excess coverage was increased to $480,956. The Maryland cap on General Liability and Auto claims was increased to $400,000 on October 1, 2015, further increasing overall liability to the Town. The amount allocated for worker’s compensation claims in FY 22 is $650,000, while the total allocation for worker’s compensation is $1,086,650. Liability claims have been budgeted at $100,000. Automobile claims are budgeted at $265,000. Allocations for General Overhead, radio lease and IT Services increase, while the allocation for Vehicle Lease decreases for this department.