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Home My WebLink AboutAGENDA REPORT 1999 0120 CC REG ITEM 11KTO: FROM: DATE: SUBJECT: BACKGROUND r Ll90, �t l� j 4-.. Z-1 (JO, Ll CITY f)F N10011PARK, CALIFORNIA City Council Meeting CITY OF MOORPARK G- AGENDA REPORT rzf The Honorable City Council Donald P. Reynolds Jr., Manager January 14, 1999 ACTION: hog? Admi n i s tt'ts,�- .. _ Consider the Purchase of Earthquake and Flood Insurance for City Property The City has had always carried property insurance for the City and Redevelopment Agency's buildings and fixed assets. In general terms, the policy protects against damages that result from vandalism, accidents, fire and other common occurrences. It excludes certain perils including flood and earthquake damage, and dishonest acts of employees. Employee bonds are in place for protection against employee dishonesty, but there is no City controlled protection against flood or earthquake. In 1998, the basic property insurance policy (including vehicles) cost approximately $4,000, (which includes a $1,000 brokerage fee). The cost is shared between funds by applying the General Overhead Allocations as follows: Fund Percent Total Al<l oc at ed ._ General Fund - 450 $1,800 Administrative Services General Fund- Recreation 10% $ 400 Community Development 200 $ 800 Fund Gas Tax 150 $ 600 Redevelopment Agency 10% $ 400 Total $41000 000275 DISCUSSION The basic 1998 property insurance policy includes all buildings and fixed assets for a total value of $8.3 million. The 1998 vehicles are valued at $57,132. The rate for the vehicle coverage is 1.34 per $100 of value, with a deductible of $1,000. The cost of insurance for buildings and fixed assets (excluding vehicles) is three cents per one hundred dollars of value, with a $5,000 deductible. The City's 1999 property insurance quote includes an update to the vehicle schedule and Vector Control property increases from $4,000 to $5,000. The City added several vehicles and removed two buildings to arrive at an amended valuation of $8 million. This premium was due January 15, 1999, and has been paid. Consideration of Flood and Earthquake Insurance Staff has evaluated four potential options for earthquake coverage, based on various property values. • Option "1" is to insure the total value of $8 million. • Option "2" is to insure a value of $5.6 million which includes all City buildings and excludes content and vehicles. • Option "3" is to insure a value of $5.38 million which includes just the buildings used to provide City services (referred to as "essential buildings ") and excludes those related to the Redevelopment Agency, (including High Street properties, and 665 Moorpark Avenue). • Option 114" is to insure a value which would include City Hall, Community Center (combined value the purpose of this presentation, $3.3 million to include some of (e.g. computers) of each location. of up to $3.3 million, the Annex, and the of $2.8 million) . For Option "4" is valued at the essential contents Each of the four "Options" includes a maximum deductible for earthquake/ flood damages of 50 of the combined total value of the buildings, its contents, and any loss of business income per premise, per occurrence. The policy 2 000276 pays for all losses above $100,000.The maximum coverage of $18 million applies to all insured properties in the City (aggregate per year). The table below describes each of the four coverage "Options" and their approximate cost, (excluding brokerage fees), the applied deductible, (not including the values of lost business), and an approximate "Rate to Value" cost ratio. The rates are determined on sliding scale. They begin at a value of one million dollars, rated at $.0626 each, change at $3.3 million dollars, $5 million, and again at $7.5 million dollars. Insured Piaprty Oast Max . Ratio of Property Value LieductibI6 (5o Rate` to ..ibf the v41ue) Value All City $8,000,000 $15,128 $400,000 0.1891% Property Buildings $5,600,000 $11,267 $280,000 0.20120 Only Essential $5,300,000 $10,665 $265,000 0.20120 Buildings City $3,300,000 $ 5,400 $165,000 0.16360 Hall/ Community Center Staff recommends that if earthquake insurance is bought, that Option 1- valued at $8 million- be selected at a cost (excluding brokerage fee) of $15,128. This is the most favorable "Rate to Value" ratio, when compared to the other three options, and would provide complete protection. If the earthquake policy is bought, staff recommends that the costs be split as determined by the use of each facility. The results of this application is shown in percentages in the Attachment and are summarized as . 870 to the General Fund; 5% to the Redevelopment Agency; 4.50 to Community Development and; 3.5% to Gas Tax. The "use" assumptions applied in Attachment "A" follows this approach: AVCP and the Community Center are paid in full by the General Fund; City Hall and the Annex are split per the General Overhead allocation, (the same distribution shown on page one); the Public Works Maintenance Yard is split 50% to Gas Tax, and 50% to General Fund, and; the High Street properties and 665 Moorpark Avenue are paid by the Redevelopment Agency. 3 0002'7' Applying this method, the cost of the four Options is spread as follows: Insured Cast General ` MRA Cerrr. Gam Property Fund ]�euelopment; Tax 87$ 3,5Q',; All City $15,128 $13,1545 $755 $675 $543 Property Buildings $11,267 $9,797 $563 $503 $405 Only Essential $10,665 $9,274 $533 $476 $383 Buildings City $ 5,400 $4,695 $270 $1241 $194 Hall/ Community Center A portion of the current estimated salary savings in the Administrative Services Divisions of the General Fund could be used to pay for these costs. The flood insurance is automatically included if earthquake coverage is selected. None of the City's buildings are located in a 50 -year flood -plain area, as rated by the Federal Insurance Rate Maps ( "FIRM "). If they were deemed to be at risk to flood, the coverage would not be available and the City would have to look to the federal flood insurance plan for protection. Staff has contacted one local insurance vendor for a price quote to compare to these rates. The company would not respond because the CJPIA rates are almost half of the price they could offer. The quote was sought because of indications that the federal disaster assistance program would change and no longer pay for damages to public property, if known hazards exist prior to incurring damage to uninsured property. As of this date, the federal public assistance program has not changed, and continues to allow recovery of damages to public property caused by an earthquake or flood. This is the "one strike" rule, where in order to receive assistance, the public agency has to certify that it will insure against future damages of the same nature. If damages occur a second time from the same cause, to an uninsured property, FEMA won't help with recovery. 4 000278 Therefore, as in past years, the City currently does have some protection against these perils because FEMA has not been used for this purpose in the past. The risk with FEMA is being able to wait for their aid if it is approved. FEMA is moving away from sending advances to local government for the cost of damage repairs. The cost reimbursement process could take months, and require a cash flow from City reserves to begin repairs. In general, the City's risk is relatively low. All of the City's buildings are relatively new and meet or exceed building standards established after the Sylmar Earthquake, (early 1970's). The Citrus Room (which serves as the Emergency Operations Center) is currently being retrofitted for seismic safety. Many of the Redevelopment properties are older than this, but constitute a very small portion of the total value to be insured. SUMMARY In the past, the City's risk management policy was to not insure against an earthquake or flood. This was justified by looking to FEMA for assistance to repair and rebuild. At a cost of approximately $16,000 per year, the City would position itself to keep control of its facilities, and to possibly recover more quickly after a major disaster. In other cities, earthquake and flood insurance is being purchased only after having a catastrophic event. Staff recommends that the consideration to buy earthquake and flood insurance be postponed until after the Fiscal Year 1999/00 budget is considered. STAFF RECOMMENDATIONS That the City Council postpone the decision to buy earthquake and flood insurance for City facilities until after the Fiscal Year 1999/00 budget is considered. Attachment- Cost Distribution Calculations E 00029 EARTHQUAKE AND FLOOD INSURANCE COST ALLOCATION bUILUINU6 DESCRIPTION SIZE 1999 VALUE PROPERTY VALUE G -FUND GAS TAX MRA COMM DEV Small storage /restrooms MISC 610011 City Hall 5700 sq ft 1125680 20.05% 11.03% 3.01% 2.01% 4.01% Annex 1800 sq ft 126640 2.26% 1.24% 0.34% 0.23% 0.45% Comm. Center /Sr. Center 10750 sq ft 1625200 28.95% 28.95% AVC mm. Ctr. 60000sq ft 1234328 21.99% 21.99% AVCP Gym 40000sq ft 1265343 22.54% 22.54% 220 High Street 2900 sq ft 27508 0.49% 0.49% 226 High Street 2900 sq ft 12000 0.21% 0.21% 18 High Street 2000s 77021 1.37% 1.37% 665 Moorpark Ave 1333 sq ft 27508 0.49% 0.25% 0.25% 661 Moorpark Ave (Yellow House) 1500 sq ft 3854 0.69% 0.69% 7150 Walnut Cyn (Vector Contrl) 800 sq ft 53500 0.95% 0.95% sub -total values 5613270 TOTAL VALUES 7326599 86.95% 3.59% 4.99% 4.46% 0 Gr C