2003 03 13 WS MinutesMINUTES OF THE WORK SESSION
OF THE CITY COUNCIL OF THE CITY OF BAYTOWN
March 13, 2003
The City Council of the City of Baytown, Texas, met in work session on March 13, 2003, at 5:35
p.m. in the Council Chamber of Baytown City Hall, 2401 Market Street, Baytown, Texas, with the
following in attendance:
Ronnie Anderson
Coleman Godwin
Calvin Mundinger
Don Murray
Mercedes Renteria III
Scott Sheley
Pete C. Alfaro
Gary M. Jackson
Karen Horner
Gary W. Smith
Council Member
Council Member
Council Member
Council Member
Council Member
Council Member
Mayor
City Manager
Assistant City Attorney
City Clerk
The meeting was opened with a quorum present after which the following business was conducted:
Discuss health care funding.
City Manager Gary Jackson reminded City Council of the work session on health care funding held
one month before. There is no recommendation for action at the regular Council meeting. A
recommendation for action will be brought to Council at a later meeting.
Human Resources Director Alison Smith explained that health care costs are currently funded by
the City paying 91.5% of the costs and the employees paying 8.5% of the costs. The cost of health
care has increased each year since 1998. The total expense for health care increased from $2.2
million to $3.5 million in 2003. For the General Fund, the increase was from $1.7 million to $2.8
million. For the Water & Sewer Fund, the increase was from $320,000 to $476,000. For other
funds, the increase was from $171,000 to $259,000. Funding for the 2003 health care costs is as
follows: S3.5 million from the City; $775,000 from the employees; $126,000 from the retirees;
$41,000 from interest earnings; and $69,000 from retained earnings.
Since 1999 the plan has been operating at a deficit. The excess costs have been taken from retained
earnings. The deficit for 2000 -2001 was 13 %, for 2001 -2002, it was 8 %, and for 2002 -2003, it is
projected to be 2 %. Since 1999 more than $1 million has been used from retained earnings to pay
health care costs.
Other cities were surveyed to determine how they handled retiree insurance. All of the surveyed
'' cities allow retirees to remain on the city's insurance plan. In Baytown the retiree pays 8.5% of the
health care cost. In six of the cities, the retirees pay 100% of the health care premiums. In LaPorte
and Victoria the premium paid is based on the years of service with the city. The surveyed cities
determine the rate by combining the experience of retirees with the experience of the employees.
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Minutes of the Work Session — March 13, 2003
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There has been a significant increase in the payments to the Medical Benefits Fund since 2001. Part
of the increase in personnel cost is due to the increase in the payments to the Medical Benefits
Fund.
The budget ordinance adopted in 1993 provided that any employee hired after October 1, 1993,
upon retirement would pay the full health care premium, without City participation. The Council
has several options. No change can be made and the 1993 ordinance can be implemented. The
Council can repeal the 1993 ordinance and establish a future date that will require all persons hired
after that date, upon retirement, to pay the full premium for health coverage. Council could
establish a tiered system, so that the premium paid and the City's contribution is based on the years
the employee served the City.
Mr. Jackson noted that the problem with the 1993 ordinance is that it was not communicated to the
employees. It is legal to implement it, but he questions whether enforcement is morally correct.
Establishing a future date after which persons hired, upon retirement, would pay the full health care
premium does not help the current fiscal problems of the City. A tiered system for all employees
would provide some help in the current fiscal problems.
Ms. Smith indicated that the increase in the payments to the Medical Benefits Fund is due to the
increase in cost of medical claims. Medical costs are projected to increase at a rate of at least 10%
per annum.
Discuss hventy-year retirement.
Mr. Jackson reminded City Council of the information provided last month during a work session
presentation on the topic. There is considerable interest in twenty-year retirement in the workforce.
However, twenty-year retirement could add additional persons and years to the health care cost
problem. It is very hard to project the numbers due to the many variables involved.
Ms. Smith reported that there are currently 85 employees eligible to retire under the present twenty-
five year retirement program. If the program were changed to a twenty-year program, an additional
49 employees would be eligible to retire. Based on the statewide experience reported by the Texas
Municipal Retirement System, ten percent of the eligible employees will take advantage of the
earlier retirement date. It would be reasonable to expect an additional five retirees during the first
year.
There are many variables to consider when trying to project the impact of twenty-year retirement on
the heath care program. The variables include retirees taking health coverage at new employment,
the age at retirement, the claims experience of the retiree, whether the position is filled and the
claims experience of the newly hired employee.
Mayor Alfaro stated that early retirement could have impacts on other parts of the budget, including
the salary line item.
Mr. Jackson noted that the current rate paid to TMRS is 13.84 %. The rate will fluctuate and would
be expected to be higher under the twenty-year retirement plan.
Ms. Smith concluded by noting that twenty-year retirement aids in a reduction of force, salaries,
career planning, and morale and motivation of employees.
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Minutes of the Work Session — March 13, 2003
Discuss appointments.
Council Member Mundinger stated that he would move the confirmation of the City Manager's
appointment to the Baytown Library Board, Steve E. Ellis.
Council Member Anderson stated that he would move the confirmation of the City Manager's
appointments to the Baytown Civil Service Commission, Ruben Linares to fill the vacancy left by
the resignation of Mark Himsel and Judy Hunter to fill the vacancy left by the resignation of Al
Weatherall.
Adjourn.
There being no further business, Council Member Murray moved adjournment. Council Member
Mundinger seconded the motion. The vote follows:
Aye: Council Members Anderson, Godwin, Mundinger, Murray, Renteria and Sheley
Mayor Alfaro.
Nay: None.
The motion carried and the meeting adjourned at 6:25 p.m.
G W. 9mith
City Clerk