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HomeMy WebLinkAboutMINUTES - 07271999 - C121 b HOUSING.AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Robert Mc.Ewan,Executive Director DATE: July 27, 1999 SUBJECT: CALIFOR.TIA HOUSING WORKERS`COMPENSATION AUTHORITY(CH-WCA)yOINT POWERS AGREEMENT ATMENDMENNT SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND J STIFICATION I. RECOMMENDED ACTION: ADOPT Resolution;No.4072 approving an amendment to the California Dousing workers'Compensation Authority (CHWCA)Joint Powers Agreement(JPA), IL FINANCIAL IMPACT: N one Ill. REASON'S FOR I C Yt-ME-NDATTO'.N/BAC GROLND The Mousing Authority oA the County of Contra Costa is self insured for workers'compensations as a member of California Mousing Workers'Cornpenssation Authority(CI-HCA). On April 29, 1999 fhe CH CA Board of Directors took action to amend the Joint Powers Agreement to include the following language '°,..>, hich provides or the pooling¢�,�'sey,- insured claims or losses among the Mem&rs". CFI CA's legal counsel is recommending this language so that the?PA clearly utilizes the word"pooling". Althoug�this charge is very minor,amencn"sents to the Joint Powers Agreement require a two- t`:irds vote of the members,acting through their local governing boards. The CHWCA Board of Directors did re✓low this amendmsent at the April 29`x°meeting and decided that CH VCA should proceed with the amendment in Order to fit precisely w'thi€r the law, IV. CONSEQUENCES OF NEGATIVE ACTION: Should the Board of Corr_nnissioners elect not to adopt Resolution No.4072 arnending the JPA for CIIWCA as stated above;the xcsusirg Autho ity wo4u'd be in:jeopardy of losing it's Workers'Compensation Insurance. CONITRN QED£IN ATTACHMENT: YES SIGNATURE WJQ RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER v, Rr ACTION OF BOARD ON �� � ,�7 m 19 a APPROVED AS IiECC�MMENI3ED XX OTTER VOTE OF C01A,4MISSIONERS I HEREBY CERTIFY THAT THIS IS A Xy,UNANIMOUS "ABSENT - - m - - - - TRUE ANIS CORRECT COPY OF AN AWES: NOES:- _ ACI ONT TAKEN AND ENTERED ON TIDE ABSENT: ABSTAIN: WINUTES OF THP BOARD OF COMMISSIONERS ON THE DATE SHOWN. ATTESTED Ju I y 2 7_,_19 9 9 PHIL BATCHELOR,CLERIC OF THE BOARD OF COMIM-ISSIONERS AND COINaTY ADMINISTRATOR B DEPUTY bo-Cl'w0a;pa HE BOARD OF COMMISSIONERS S HOUSING AUTd-GRITTY OF THE COUNTY OF CONITA RA COSTA SOLS,* i IO�l NO. 4072 RESOLUTION AI'I'ROVINIG AN, AMENDMENT TO THE JOIN'111 POWERS AGREEMENT OFTHM CALIFORNIA HOUSING WORKERS COMPENSATION AUTHORITY(CHWCA) WBEI-EAS,the Contra Costa County housing Authority is a member of the California Housing Workers Compensation Authority; and WHEIREAS,the Executive Committee of the Beard of Directors as said Authority has recommended that the Joint Powers Agreement thereof be amended to explicitly state that the agreement provides for the pooling of claims among members, in order to clearly bring the agreement within the language of new amendments to Government Code Sections 990.8 and 6512.2, relating to the rights of terminated members: and WHEE .F,AS, it is in the best interests of this.Authority to approve said amendment. NOW, THEREFORE,BE IT RESOLVED THAT: This Authority votes affirmatively to amend Article I of the Joint Powers Agreement of the California Housing Workers Compensation Authority, by adding to the first sentence thereof, the following: ..., which provides for the pooling of self-insured claims or losses among the members. PASSED AND ADOPTED ON 4�m v �� g ��9 9 :�y the following vote of the Commissioners, AYES: COMMISSIONERS CILIA, U11-KEMA, GERBER, DeSAUT-NIER and CANCIAMILL A NOES: NONE ABSENT: NONE AESTA : NONE I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACT10 N TAKEN AND ENT IR E D DN TIE TviINNU I`ES OF THE BDA OF COMMISSIONERS ON THEE DATE SHOWN, A'x"'ESTER _.r. .,,?�g�r ..®a PHIL BATCHELOR,C ,ERK OF THE BOARD OF COMMISSIONERS ANIS COUNTY ADMINISTRATOR BY JOUI,rr POWERS AGREEhIENT CREATING CALIFORNIA BOUSING WORKERS' COMPENSATION AUTHORITY This agreement is executed in the State of California by and among those public housing authorities, housing authorities and redevelopment agencies, or housing commissions,organized and existing under the Constitution sof the State of California which are parties signatory to this agreement. all such agencies hereinafter called Members, shall be listed In Exhibit A, which shall be attached hereto and made a part hereof. WHEREAS, RECUALS article i, Chapter 5, Division 7, Title i of the California Government Gude(9 6500 et seq.) permits two or more public agencies by agreement to exercise jointly powers common to the contracting parties; and WHEREAS, article 16, 9 6 of the California Constitution provides that insurance pooling arrangements under joint exercise of power agreements shall not be considered the giving €r lending of credit as prohibited therein; and WHEREAS, California Government Code 9 990«4 provides that a local public entity may self-insure, purchase insurance through an authorized carrier, or purchase insurance through a broker,, or any combination of these; and WHERF—AS, pursuant to California Government Code § 990.6, the cost of insurance provided by a local public entity is a proper charge against the local public entity; and WHEREAS, CaliforniaGovernment Code § 990.8 provides that two or more local entities may, by a joint powers agreement, provide insurance for any pose by any one or more of the methods specified in Government Code § 990.4 and such joint pooling of self-insured claims or losses is not considered insurance nor subject to regulation under r the Insurance Code; and WHEREAS, the Member executing this Agreement desires to joie with other Members for the purpose of jointly funding a program ofworkers' compensation coverage; NOW THEREFORE, the parties agree as follows: �99d" f'f�i5 HOUK HICKS GARM W.HWY,J . APROFESSMALCORPORATM POST OFFICE BOX 3 + LLOYD L MICS BRADLEY BUILDING CALWfA % WOOD L.ROLLIN 1$ CHURCH MEET TEUPMONE pw:mom November 4, 1998 Board of Directors California Housing Workers Compensation Authority /o Bickmore& Associates 6371 Auburn Blvd., Suite l Citrus Heights, CA 95621 LIABILM TO W=RAWLNG METNIBERS Ladies and gentlemen: You have asked that 1 review the Authority's governing documents, the provisions of SB- 1153 B- 1s5 and the issues in the case of gr s it l a rsti ,� r tl rw , (the "Gro smont case"), and advise you regarding possible amendments to the gove ing documents to protect the Authority rity from liability, such as was incurred in the grossmont case, I have reviewed the Joint Powers Agreement and Bylaws of the California Housing Workers CompensationAuthority; the provisions of SB-1153 (government Code §99.8 d 6512.2); and the briefs of both sides before the Court of Appeal in the Grossmont My conclusion is that your governing documents may require minor modifications to fit precisely within the law, The law provides that if the purpose set forth in the agreement is to pool self-insurance claims of two or more entities, then the agreement may provide that termination by any per'shall not require the return of all, or any part, of the payments made by a party until the agreement is terminated as to all parties. The law further provides that where the Joint powers Agreement (68 ") provides for the pooling of self-insured claims among entities, if any insured peril has existed and she JPA has been liable for that peril, the agreement may provide that the party insured is not entitled to require repayment of any part of the payments made, CHWCA Board of Directors Page 2 November 4, 1998 Article I of your JPA C'Purposes") does not use the word "pooling," although it is to that effect. I would recommend amending the agreement to add to the first sentence, the following: ..., which provides for the pooling of self-insured claims or losses among the Members. The JPA states in Article II that in the event of a withdrawal or termination, the members' interest in the funds of the JPA are determined as set forth in by Bylaws. Section P of the Bylaws, Paragraph 3, states that a member who withdraws or is canoiled is, with certain exceptions, not entitled to a return of the premium of any payment to the Authority, but may share in a distribution, per Part Q on total termination. This is basically what the new law allows you to provide. Section 6512.2 also says that the agreement may provide that on total termination, the remaining money be returned in proportion to contributions made and losses paid. This is precisely what Section Q of your Bylaws does provide. 1, therefore, recommend that you proceed to amend the Joint Powers Agreement to add the pooling language. Per Article 16 of the JPA, the amendment requires a two-thirds' vote of the members, acting through their governing boards. This requires that the Board of Commissioners of each member Authority pass a resolution in favor of amending the Bylaws, I will provide appropriate form resolutions+o accomplish this amendment. Amending the JPA at this time would not constitute an admission that members did previously have any withdrawal rights, because the language of your JPA and Bylaws clearly says they do not; and because the new language does not change the intent of the JPA, but merely confirms it, using language from the new bill to show an intent to conform precisely to the law. There are, however, several other areas of concern arising from the Grossmont cue. Grossmont was a medical malpractice JPA, consisting of hospitals. Grossmont withdrew, and ultimately sued for return of its "equity." Grossmont had paid in about $18 million, and only about $4 million in claims had been paid out. The court awarded Grossmont the difference of$14 million. What precipitated this case, however, was the fact that very shortly after Grossmont withdrew from the JPA, the IPA, which had a huge surplus, cut its "Premiums" by about one-half and began paying dividends to the then members. Grossmont protested that the IPA was thereby taking away fTom the surplus to which it would have been entitled when the JPA terminated. 'the suit evolved later into the demand for the return of all unspent premiums. CHVCA Beard of Dire.t�rs Page November 4, 1998 There are many aspects of this complex rase that are not applicable to our situation, so there is no direct comparability. The primary difference is that in Gr ss o t, there was an express trust set up that did appear to provide that it was not a pooled risk situation, and that each entity was individually self-insured, and the JPA was only for common management.ent. ssmont so claimed in the lawsuit. This was done to comply with Medi- Cal regulations, which prohibited any Medi-Cal recipient hospital from paying any costs of another hospital. By analogy, they had two sets of books —one for fedi-Cal and one for the IPA, and gnat caught writh the language they used to comply with the fedi-Cal requirements.ents. 'hey thus had an inconsistent position in court from that which they represented toMedi-Cal. We will have to wait until the court issues its decision and opinion in the Grossmont caw to see if it will have any impact on your JPA, but that case is sufficiently different from your facts, so it may, in fact, not make any difference. It would, however, be constructive to address the issue of diminution of a withdrawing ember's surplus after they leave --- the original issue in Grossmont. This could be a source of liability to any JPs. The claim would be based on the fact that each director is in a fiduciary capacity to all members, and each director owes the highest duty sof good faith to the members; and that it would be a breach of that duty to pay yourselves money out of any surplus that resulted from prior years' over-assessments, which had been contributed to by the withdrawing member, and thereby take money that would have gone to the withdrawing member if it had beer, left in until termination, There are several ways to Dandle this. One would be to provide in the Bylaws that the members recognize that this situation could occur, and specifically agree the, it may, and waive any claim resulting from such payments. Another way would be to come up with a formula, fixing an amount, &-d providing that the withdrawing member would receive that amount at complete termination. In other words, take a snapshot of what a member would get if the whole JPs. terminated when the member withdrew: reduce that sum by administrative expenses, defense and indemnity costs relating to that member after it leaves; and then pay interest at some agreed rate, such as savings passbook, on that sum until disbursement. In that way, if remaining members decided to reduce their town premiums and/or pay dividends, it would not come out of the amount set aside for the withdrawing member. Furthenriore, the pot of money would still be available for use by the JPA to pay claims and losses, subject to the requirement that it be available at ultimate termination,. You could make several permutations on this, including providing that if the fund set aside were used to Pay losses, and not dividends, then the withdrawing member would -not receive the money, You could also provide for dividends to withdrawing members after they withdrew if those dividends related to a. year in which they were a. paying member. CHMCA Board of Directors Page 4 November 4„ 1998 1 hope this answers some of your questions and provides a basis to think about others, and for possible later actions We will have the amendment resolution forms available for distribution at your November 17"" meeting, Very truly yours, fo { C(K)S Attorney L {' s