16-DIRECT CITY MANAGER TO DEFINE AND CLARIFY CITY'S ASSOCIATION FROM THE HEALTH DEPARTMENTCITY CQUNCIL AGENDA ITEM BRIEFING SHEET
Submittal Date:
10-24-11
Council Date:
11_td_11
Originating Department: Presented By: I Agenda item i-4o.:
City Manager I Gene Anderson I 16.
RECOMMENDED MOTION:
Motion to direct the City Manager to define and clarify the City's association from the Health Department.
POLICY ISSUE(S):
Risk Management
See the attached staff report regarding the Paris-Lamar County Health Department.
BOARD/COMMISSION RECOMMENDATION:
None
EXHIBITS:
Ctaff Renort_
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A
BUDGET INFO:
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CTIO
F] Financial Report Z Minute Order
Expense
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❑ Department Report ❑ Resolution
Budgeted Amt.
$NA
~ Presentation ❑ Ordinance
y'I'D Actual
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❑ Public Hearing ❑ Other
Acct. Name
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Acct. Number
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FISCAL NOTES:
None
REVIEWED AND APPROVED BY:
Z Administration Z City Clerk ❑ Community Development ❑ EMS/IT ❑ Finance ❑ Fire
❑ Municipal Court Z Legal ❑ Library ❑ Police ❑ Eng./Public Works ❑ Utilities
Revised 2/04/08
City of Paris _ C A
V `3r
STAFF REPORT
The Paris-Lamar County Health Department was established originally as a support to the Camp Maxey
military base. With the end of World War II and the downsizing of Camp Maxey, its purpose morphed
into its current civilian usage. The site itself remained the property of the federal government until
December 1947 when it was deeded to the City and the County for a price of $1,339.00.
Employees of the Health Department were employees of the State at one time. In a cost cutting
measure, the State eliminated these positions and instead started awarding grants to partially fund the
operations. While the County and the city jointly appointed members to the Health Board, the Health
Department kept its own books, bank accounts, and otherwise operated independently. The City and
the County were contributing to the funding of the department in the same way the City contributes to
the Red Cross and other non-profit agencies currently. Problems arose from time to time because of lack
of oversight of the daily operations. The City and th m ke up thle result ng mtoney short fallt For
inappropriate action had been taken yet were expected to
example, one year the employees received an unauthorized pay increase in the middle of the year. In
1987, the City administratively decided to start kee D~egthe lemployees1were allowed to jo nphe C ty
such surprises. Over the course of time, the Health partment
retirement plan and insurance plans.
tself se, the
The Health Department has been sued twice over personnel SThe'County was able to first
Health Department, City, and County were named defendants
dismissed from the suit because their sole connection to the Health Department was its financial
contribution. The City tried to do the same thingt emu to be services
nsurance
(including payroll) and allowed the Health Departmen ployes
plans, the Court said the Health Department employees Was fact" eethey had this
how they were treated. In the second lawsuit, the Coun y
the strategy is to run up the defense costs
defense available to them. With such nuisance lawsuits,
through discovery, depositions, attorney fees, staff time, and other costs to the point that the insurance
carrier wants to settle the suit to avoid further costs. This strategy worked in both cases to the tune of
$127,314.93 paid out by TML on the City's behalf. Thisd0 ff consider doby unnecessary lit gation
staff time required to help in preparing the defense. Cly ta nts were not made
matters are not available to do the real work of the City. While it is true these payme
directly out of City funds, these payments do have a negative impact on City insurance premiums for at
least three years.
It would only be prudent risk management for the City to cease providing the services which allow us to
be drawn into such lawsuits. The City does not control the operations of the Health Department and is
powerless to take steps that would otherwise help reduce liability. It is only a matter of time before
another such suit arises.
All of the services the City has been providing can be easily outsourced.
1. Medical Insurance-TML will provide medical ins ~~ent employees wou d increase $10,312 if the
group. The cost for the 14 full time Health Dep
Health Department chose to fund 100% of the p~ also ontrol its insuorance costs by copy ng the
currently in place. The Health Department co
City practice of budgeting a flat dollar amount per employee for medical insurance that is
independent of the insurance premium. Health Department mployee concerns about insurance
coverage between retirement and age 65 could be easily addressed by the Health Board setting
a policy that mirrors the City's policy on this issue.
2. Bookkeeping/Payroll-Proposals received by the Health Department from two local CPA firms
indicate that these services can be provided for $10,200. This cost is higher than it should be
because the proposers are concerned about possible unknown variables. With time these fees
could conceivably be lower. Local bookkeeping firms (non-CPA firms) should be contacted to see
if they would be less expensive. The Health Department should also consider doing this work in
house since they have at least one person on staff who has done this type of work before. With
only 14 employees and an average of 100 vendor checks per month, this work could be handled
by an experienced person in addition to other duties.
3. Retirement-Health Department employees can keep their existing TMRS retirement accounts
and continue to earn interest on those accounts. They could not make additional contributions
to the accounts, but could retire under the TMRS plan when they meet the eligibility
requirements. The Health Department could set up a 401K or a 457 plan for future retirement
contributions as is practiced in the private sector.
4. Cash Flow-Any cash flow issues could be addressed by having the County and the City contribute
their annual financial support at the start of the fiscal year. This should be more than sufficient
funding to operate on until reimbursements for actual expenses could be received from the
State. If there are still concerns about cash flow, pre-approved overdraft arrangements could be
made with their bank.
5. Audit-Outside audit costs have been stated to be about $10,000, but I believe this is a high
estimate due to it being a first time audit situation. Other independent auditors should be
contacted for proposals. I would think $5,000 would be a realistic second year audit cost.
Worst case scenario would see costs rise $30,515 half of which would be paid by the County.
This necessary legal separation can be accomplished without endangering the continued operation of
the Health Department or adversely affecting the current employees. The City will continue to financially
support the Health Department, and the Health Department employees will all still have their jobs,
medical insurance, and retirement.
Other alternate scenarios would be for the County to provide these services or for PRMC to operate the
department as one of their clinics.
The recommended course of action is to direct the City Manager to achieve the City's legal separation
from the Health Department using the abov guideline.
ty Coulncil for agreement
if
seems prudent, such a document would be brought back to
the City continues to treat the Health Department employees as if they were City employees (by
providing retirement, insurance, and bookkeeping services) an inter-local agreement will not provide the
City with the protection it needs. The Court would ignore the inter-local agreement wording if actual
practice varied from that wording.
The City should state clearly its intent to support of the Health Department financially in the future, but
separation from the Health Department is in the best interest of the City.
L, ~p