Fort Smith Board again debates insurance plan offered by the Arkansas Municipal League

The Fort Smith Board of Directors met Tuesday (Feb. 9) for one final study session devoted to the renewal of city insurance on an estimated $300 million in fleet and property assets. Also, the Board discussed moving to a “more equitable” salary ordinance for city employees.

The bulk of the meeting involved another lengthy back-and-forth from City Directors to Don Zimmerman, executive director of the Arkansas Municipal League (AML), and Scott Clark, executive vice-president of Brown Hiller Clark (BHC), the city’s current consulting firm on insurance matters.

Clark has been an opponent of the AML proposal since it first appeared before the Board in 2015, pointing out Tuesday that “it’s not insurance” and that the policies proposed by AML are not governed by the state’s insurance department. At the Jan. 26 study session, Clark also attacked the flexibilities offered in the AML plan and countered the argument that premiums would be much cheaper compared with Travelers Insurance, the city’s current provider.

“I know premiums are attractive, but premiums don’t pay the claim,” he said. “And I’ll be the first to admit that whenever there’s a claim it all reverts back to a contract. What’s the wording in the contract? Until we’re comfortable with the answers to every one of these questions, then the city shouldn’t go forward with this. There’s a lot of ambiguity here.”

MUNICIPAL LEAGUE RESPONSES
Tuesday, Zimmerman provided four pages worth of answers, which were provided in the Board’s official packet.

One particular area of concern involved a hypothetical catastrophe that affected Fort Smith and several other cities in the region — for example, “a widespread hail storm where multiple municipalities are affected.” Zimmerman reminded Board members that once damages hit a certain point, the Alliant reinsurance program applies, adding that the AML property program “is never out more than $100,000 on any loss.”

There was also concern from Clark that the AML program’s deductible per building could get pricey in the event of an occurrence with multiple damages. To that point, Zimmerman confirmed that there is a separate deductible per building/contents for each loss.

“However,” he added, “there is only one deductible applied in the event of a covered peril that has damaged multiple buildings/equipment.”

This “occurrence-based” model means that if a hail storm hit 10 buildings at once, the city would not have to pay 10 separate $5,000 deductibles before coverage kicked in, only a single $5,000 for the entire incident.

As for the savings breakdown, when comparing the AML plan to actual rates from Travelers Insurance, city purchasing manager Alie Bahsoon stated in a memo to Board members that the city would have saved $196,344 by going with the Municipal League last year. Travelers Insurance has proposed a 10.2% reduction from 2015-2016’s $826,344 premium to $746,148 should the city choose to renew for 2016-2017. This is still about $116,148 short of the $630,000 AML quote.

The Board showed no clear signs of how it will vote, but, with a renewal deadline of March 1, it’s a decision that will have to be made at the Feb. 16 regular meeting.

SALARY ORDINANCE
The Board took no action regarding the annual salary ordinance as it relates to uniformed and non-uniformed city employees, except to reassure that it had no intention of taking away benefits from city staff.

City Director Tracy Pennartz acknowledged that 2015 had “been a tough year with tough decisions for everyone,” and her request to review the information was to seek a more equitable solution for all staff. Director Keith Lau agreed, expressing his desire to see some of the non-uniformed employees being offered the same incentives for continuing education and certification as what exists in the pay structure for the Fort Smith Police Department.

With Tuesday’s meeting primarily informational, the discussion for how to actually get there was deferred to a later date.