TOWN OF OCEAN CITY

FISCAL YEAR 2021 PROPOSED BUDGET

RISK MANAGEMENT FUND

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BUDGET HIGHLIGHTS:

 

REVENUE CHANGES:

Interest earnings are expected to remain level in FY 21. 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 43% of the Risk Management budget.

 

PERSONNEL CHANGES:

Two full-time positions are funded in this division. A step increase effective January 1, 2021 has been included. Funding has been included for one part-time Office Associate position to work seasonally for May through September and to provide vacation coverage for the Risk Associate position. Estimated contributions for health insurance and pension increase, while retiree health decreases.

 

CHANGES IN OPERATIONS:

Contracted Services include professional services and legal services. Legal fees have been budgeted at $104,000. 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 was included in the FY 19 budget and gave funding recommendations through the FY 21 budget. 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 was included in the FY 20 budget, and has also been included in the FY 21 budget. Insurance coverage and payment of insurance claims are the largest expenses in this department. $1,942,950 has been budgeted to cover the cost of insurance policies and insurance claims for FY 21. Costs for insurance policies, increases $104,000 in FY 21, due to anticipated increases in property and general liability insurance. Property insurance is estimated to increase to $357,000 for FY 21, while General Liability excess coverage was increased to $418,000. 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 21 is $650,000, while the total allocation for worker’s compensation is $1,098,997. Liability claims have been budgeted at $100,000. Automobile claims are budgeted at $265,000. Allocations for Vehicle Lease and General Overhead increase, while the allocation for IT decreases for this department.