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Clarksville City Council Fiscal Year 2014 Budget Update, May 20th 2013

 

Clarksville City Council - Ward 10Clarksville, TN – The Clarksville City Council met in two long, long work sessions this past week (Monday and Thursday) to go over the budget. These sessions have enabled council members to publicly request access to budget and operational information from city department directors, which the mayor’s office has often been unwilling to provide upon repeated request.

It seemed about half the council had few to no questions to ask and the rest of us had many. I will be narrowing the scope of this report and future reports to a few items at a time to help lessen the complexity and reading time.

Be assured, you will still get all the details in more reports, but shorter length.

City Health Clinic

You may have read in the newspaper that the city officially opened its employee health clinic on May 16th.  Neither the council nor the current operating budget had any details as to costs or function of this clinic until the past week. The concept with the clinic is that it should result in lower health insurance premiums for the city in the long run.

A cumulative savings of $5.4 million is projected after five years and the concept seems to work in other places.  The city is also talking about going self-insured on health insurance.  However, this is another concept we have no details on as to costs or function.  Perhaps the council and taxpayer will learn about those minor details the day before, if and when it starts, too.

The overriding concern with the clinic project was the council was kept out of the loop on costs, spending and contract details. When a program has startup and operational costs approaching a million dollars in its first year, you would think any mayor would let the council in on it. Especially when it was nowhere in sight in the FY 2013 budget as a projected expense or even a concept.

In the budget workshop discussions a number of questions were asked as to why no substantial information was provided until the council found it in the proposed amended budget of FY 2013 and FY 2014? Mayor McMillan eventually tried to provide a cover for not coming to the council by basically stating the representatives from the proposed clinic operations had been here several times and the council could have asked questions.

Eerily, that was the same duck and cover response given to council members when some of us found the mayor borrowing $100,000 to do a study for a performing arts center she couldn’t explain, listed on page 648 of a 650 page budget document, in last year’s budget.

These representatives may have been in Clarksville and talking with the mayor and her staff, but it was never an agenda item for the full council to look at, consider or fund at any time. After the proposed FY 2014 budget exposed this program for questioning and closer examination, council members were finally given documented information on the project the day before the ribbon cutting on May 16th.

We keep hearing the administration tout “open government” and “ high ethics”, but recent actions by the mayor to reward a few of her chosen staff with “revised” jobs providing thousands of dollars in new pay raises and now a program few knew details about, shows more of a “do as I say not as I do” approach to the city business.

Several major issues are apparent with the methodology used to pay for this project.  First was the Mayor’s decision to use the Health Fund account to fund the building/remodeling of the city’s Spring Street building ($231,000+) to house the clinic without asking for the reallocation or other funding to do so.

The second was Mayor McMillan’s authorizing the signing of a $665,000 initial cost contract with the company that will provide the medical services without securing council approval for funding.  Third, some employees refuse city health insurance and do not sign up for it. The city does not allocate insurance funding for those employees who decline.

Yet, the city included these non-city insured employees as recipients of this clinic’s services. That will cost the city $600 for each of the non-insured employees.  The administration made the decision to use taxpayer money to fund the whole cost for insured and non-insured with the clinic.

According to the Finance and Human Resources departments, the Health Fund account is a budget item that the city allocates money to each year to pay for Health Insurance and Pharmacy costs, premiums and provides $750.00 to help offset the $2000 deductible for each of its city employees.  The employees also pay a portion into the health account too.

However, 85% of the health insurance allocation is city funded. At issue is what is the “codified” definition and use of the Health Fund account. When I asked that question, it turns out that there is no documented definition. The “general understanding” is the fund pays for the health needs of the employees.

For most of the rank and file, we would understand that to mean to pay for the premiums and actual costs of health care visits provided to employees. With no hard definition to work from, Mayor McMillan stretched the understood definition to include funding a building remodel to provide a health clinic.  I cannot recall or find another instance where major building modifications or remodeling took place where the need was not listed as a capital project in the yearly budget.

That process requires documentation and approval from the council as to the funding source and amount.  As an example, the effort to remodel a section of that same building a few years ago to house the Clarksville Downtown Market was a $250,000 project that came before the council. It was listed as a capital project. Issues with the building kept that particular capital project from occurring. The mayor did not step up to defend her usage of the health fund in this matter, instead leaving the affected department heads to try and explain. The question was posed to the city attorney who stated this seemed to be a gray area that would require further study.

I stated that the city signed a $665,000 contract without first securing the funding permission from the council.  I did ask why this wasn’t a violation of city purchasing law where funding has to be identified to pay for any contract. This is where another convenient gray area now seems to exist. The administration had the contract cite the funding source as the Health Fund account.

The city does allocate funding each year in the amount of millions to support that account. There had been a surplus of $1.4 million to start FY 2013. So on the surface this appears to meet contractual requirements as a funding account is identified and there is, or was, money in it. The problem is this account had been funded at a lesser rate for the past two years due to either overfunding in the past and/or lower insurance needs in recent years.  The mayor needed money in previous budgets so the budget allocation was lowered and the surplus was allowed to shrink.

However, these actions have caused problems for this coming budget year.  During FY 2013 Health Fund account expenditures jumped almost $586,000 over projections. The unpublicized decision to pay the costs of remodeling and equipping the clinic took another $270,110 out of the Health Fund. Thus, by the end of FY 2013 the surplus is down to $85,263 from an original projection of $887,329.

The city is now in a bind and has to increase the funding allocations to replenish the Health Fund just to pay for the items the funds was historically used for. In addition, $665,000 MUST be collected and added to pay for the clinic services. The crux of the matter is, there was NEVER any money in the Health Fund account to pay for the clinic contract and there will be no money available until the council passes the budget the mayor has just given us.

I asked the HR director what would happen if the council decided not to authorize the funding of the clinic, which the city had already signed a contract for and was opening in three days? The response reminded me of the phrase “Houston, we have a problem”.

Several of us had issues with the city paying a $600.00 charge to the clinic for non-insured employees.  The city rationale was if these particular employees went to the local city clinic then they might miss fewer work hours and be more productive. The city provides sick leave, which logically means we have anticipated that employees will miss work due to sickness and we have sized the work force to make up the productivity loss of an individual for a defined period of time. I actually doubt we have done that, but I don’t buy into the city providing a partial health service for those who have declined the regular health insurance package.

In the end, the city will allocate for FY 2014, $9,000 per employee into the Health Fund account (we have around 1100 employees and the amount does not include $360.00 dental insurance for each employee, which is a separate account). As previously mentioned, the cost contribution of that amount is 85%-15% city to employee funding.

Remember, that does not include the $600.00/employee for the clinic. The administration cites that two years ago the rate was decreased so if that were taken into account the increase is not that bad.  The FY 2013 amount was $7350. The allocation in FY 2012 was $7,200 per employee. FY 2011 the amount was $8345/employee. In FY 2010 it was $8308. The issue to watch is even with the clinic installed, city health insurance premiums still increased. The premium increase was supposedly reduced by $500,000 with the installation of the clinic.

With the city investing close to a million dollars in first year startup costs, the initial projection is the city will still save over $628,000 the first year of operation with the clinic.  I do hope the analysis is correct and the savings will grow as predicted.  However, if it does not, the projected surplus in the Heath Fund account for FY 2014 is only $190,915 and that will not cover much of an error in cost savings calculations.

Here is a recap of the issues:

  1. The mayor redefining what the Health Fund account funding had historically been used for (building remodel?)
  2. Redefining what has been the previously accepted methodology of funding a capital project (building remodel
  3. What was a blatant misrepresentation to the Purchasing Department to infer “earmarked” dollars were already available for the clinic contract signature when they were not.

One other interesting note as the discussions on the clinic progressed.  A council member or two spoke up during the debate saying that this was a good program and employees had been thanking them for doing this.  The manner and implication of the statement was that this “thanks” was rationale enough to counter concerns raised over the installation issues of this program.

I am not sure why employees were thanking them, as council members had zero input or knowledge of the program costs and potential benefits/issues. Also, I wonder how many “thanks” taxpayers will give council members for allowing almost a million dollars to be spent for something that they did not have a clue about.

There was agreement by the Finance Department, City Attorney and some of us council members that a “codified “ definition and appropriate use of the Health Fund resources is needed. In addition, a loophole in the purchasing process appears to have been found in terms of having a funding source identified versus having actual money on hand to pay for a contract. That loophole needs to be closed.

There also appears to be a need to have a requirement that any project/contract that was not identified in the budget year it takes place and exceeds some limit or cap (emergencies happen and perhaps there needs to be some leeway) will be brought before the council for approval.  Coming to the council for additional money for new projects or transfer of funds between accounts during a budget year has been the requirement and practice before this episode.

More budget information to come.

Editor’s Note: This article contains the view points of Councilman Bill Summers and may not represent the views of the rest of the City Council, the City of Clarksville or ClarksvilleOnline.


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