RISK MANAGEMENT FUND
TOWN OF OCEAN CITY
FISCAL YEAR 2024 PROPOSED BUDGET
Interest earnings are expected to increase in FY 24, as interest rates have increased over the past year. 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 40% of the Risk Management budget.
Two full-time positions are funded in this division. A step increase effective January 1, 2024 has been included. For all departments, the health savings reserve account has been utilized to offset the cost increase for health insurance. Pension contributions are anticipated to increase in FY 24. In addition, no funding has been budgeted for retiree health in FY 24, per the most recent actuarial study.
CHANGES IN OPERATIONS:
Contracted Services include professional services and legal services. Legal fees have been budgeted at $128,000. 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 has been funded in FY 24 to give funding recommendations for the next few years. The study is completed every three fiscal years, and was last completed in FY 21. 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 did not increase the amount of Risk fund balance restricted for claims and liability, auto claims and future claims. A contingency of $80,000 over the projected expenses has been included in every budget since FY 20, in an effort to build fund balance to cover future claims in this fund. In FY 24, the contingency amount was increased to $100,000. Insurance coverage and payment of insurance claims are the largest expenses in this department. $2,701,238 has been budgeted to cover the cost of insurance policies and insurance claims for FY 24. Costs for insurance policies increase $130,115 in FY 24, due to projected increases in property and general liability insurance coverage. Property insurance is estimated to increase to $748,738 for FY 24, while General Liability excess coverage was increased to $624,154. 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 24 was increased to $750,000, while the total allocation for worker’s compensation is $1,304,644. Liability claims have been budgeted at $100,000, and automobile claims are budgeted at $250,000. Allocations for radio, IT and Vehicle lease decreased, while the allocation for General Overhead increased for this department.