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Minutes - 06/24/2002 - Committee of the WholeMINUTES OF THE JUNE 24, 2002 COMMITTEE OF THE WHOLE MEETING OF THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF OAK BROOK APPROVED AS WRITTEN BY VILLAGE BOARD ON JULY 9, 2002. 1. CALL TO ORDER: The Committee of the Whole Meeting of the Village Board of Trustees was called to order by President Bushy in the Samuel E. Dean Board Room of the Village Commons at 7:33 p.m. Village Clerk Linda Gonnella called the roll with the following persons PRESENT: President Karen M. Bushy, Trustees Stelios Aktipis, George T. Caleel, John W. Craig, Susan Korin, Elaine Miologos and Alfred P. Savino. ABSENT: None. IN ATTENDANCE: Stephen B. Veitch, Village Manager; Michael A. Crotty, Assistant Village Manager; Debra J. Jarvis, Fire Chief and Gary Clark, EMS Director. President Bushy suggested that the agenda item to discuss ambulance fees be addressed at this time as a courtesy to the Fire Department representatives in attendance. The Board concurred with the recommendation of the Village President to address the discussion of ambulance fees at this time. 3. AMBULANCE FEES At the meeting on February 26, 2002, the Village Board reviewed several items of information regarding ambulance fees, the cost of providing ambulance services, and the Village's cost recovery efforts for providing this service. Based on the discussion at that meeting, the following direction was given: 1. The Village Board wanted information as to what other municipal Fire Departments and Fire Protection Districts charge for ambulance service. 2. That the Village Board wanted to maintain its current fee structure by charging one bundled rate for ambulance service and would continue to only bill for those calls requiring transport of the patient. 3. Based on the survey information staff would provide recommendations or options with respect to the bundled rate for service. 4. In acknowledgement of residents now paying telecommunications taxes and some utility taxes to the General Corporate Fund (thus contributing to funding the emergency medical services program), consider the option of having different resident /non- resident rates. COMMITTEE -OF- THE -WHOLE Minutes Page 1 of 12 June 24, 2002 3. At the Village Board meeting on March 26, 2002, a memorandum was prepared which addressed these issues and addressed several fee alternatives. However, after that memorandum was prepared the Village received news regarding significant changes in procedures related to Medicare billing. It was decided that any Board action would be deferred until the Medicare issues were resolved. Medicare Changes In response to the Balanced Budget Act of 1997, on January 25, 1999 the U.S. Department of Health and Human Services issued final Medicare rules (with a comment period) that would implement revised billing procedures for ambulance services. On Friday March 22, 2002 the Village received notice that the rules have been finalized and would be effective on April 1, 2002. These new rules will substantially alter the way Medicare reimburses for ambulance charges. The more substantial changes are as follows: • A bundled rate charge for service and a charge for mileage are the only charges that would be considered by Medicare. Unbundled charges for supplies, drugs used, etc. (this methodology is not currently utilized by Oak Brook but is in practice in many other jurisdictions) will no longer be considered. Medicare will determine both the charges for service and the mileage rate irrespective of any local considerations, unless by chance our bundled fee is lower than the Medicare rate. • In order to receive the maximum reimbursement from Medicare the Village will have to differentiate between three levels of service: basic life support (BLS), advanced life support level 1 (ALS 1) and advanced life support level 2 (ALS2). • Effective April 1, 2002 the Village will be mandated to accept assignment of benefits for these services. This means that the Village is required to accept only what charges Medicare will consider and may not bill the patient except for their deductible or co- payment amount. • There is a five -year phase in process of the new rules. The reimbursement is calculated on both the new method and the old "reasonable charge" method. There is a 20% weighting on the new method in the first year, increasing by 20% each year until 100% is reached in year five. • Although the new method will result in Medicare paying more than at the present time, there is a substantial decrease in what the Village expects to receive (somewhat less in year five after the new fee schedule is completely phased in) due to the requirement that the Village accept assignment. COMMITTEE -OF- THE -WHOLE Minutes Page 2 of 12 June 24, 2002 3. The manner in which Medicare will reimburse in the future is based on a "conversion factor ", which is an amount of money used to develop a base rate for each category of ground ambulance service. Presently, the conversion factor is $170.54 and will be updated by Medicare "as necessary ". Next, a "relative value unit" is assigned for each level of service: BLS -1.60, ALS1 -1.90, and ALS2 -2.75. Finally, the rate is adjusted by 70% of a "geographic adjustment factor" (70% of 1.072, or 1.0504). Thus, the amount Medicare would consider for a BLS call is $286.62 (170.54 X 1.60 X 1.0504), $340.36 for ALS 1 and $492.62 for ALS2. Finance Director Langlois estimates that Medicare would consider charges of approximately $174 for a BLS transport, $261 for an ALS 1 transport and $292 for an ALS2 transport during 2002 using the 20 %/80% blending of the rates (substantially less than our current flat rate charge of $375). By 2006, the rates would project out to approximately $287 for a BLS transport, $340 for an ALS 1 transport and $493 for an ALS2 transport (still less than our current $375 charge in most instances). In order to mitigate the revenue loss, the Village could consider imposing a mileage charge over and above the bundled fee amount. The maximum mileage rate (which is updated periodically) that Medicare will consider is presently $5.47 per mile. Comparability Data Only approximately 30% of billable calls involve Medicare. Thus, other factors must be considered before adjusting the rate. Previous memorandums have addressed the cost of service of the EMS program and that establishing a rate that recoups 100% of the cost is not possible. In a survey of 17 fire jurisdictions in Oak Brook's general vicinity the data indicates Oak Brook's current fee of $375 is below both the average and median rates as it applies to non - residents. However, as it relates to resident rates, the current charge is above both the median and average rates. Four ambulance fee options for the Village Board's consideration are the following: Option 1 - Leave the bundled rate unchanged at $375 and accept assignment from Medicare. This option would maintain the existing flat fee structure for level of service as well as resident /non- resident. However, there would be a negative revenue impact due to the loss associated with accepting Medicare assignment and from a market perspective our resident rate would continue to be above the average and median rate and our non- resident rate will continue to be below the average and median rate. Beginning in 2004, there would be some Medicare funds "left on the table" for an ALS2 transport since the fee amount of $375 would be less than the maximum amount Medicare would consider. COMMITTEE -OF- THE -WHOLE Minutes Page 3 of 12 June 24, 2002 3. Option 2 - Resident rate would remain at $375 and increase non - resident rate to $500. This option would maintain the existing flat fee structure and would increase the non- resident rate to $500, which is slightly above the average and median rates. The Village would only yield this higher amount for non - Medicare patients, as the Medicare fee schedule will overrule any locally established rates. Of the options presented this is the most advantageous from a revenue perspective. The resident rate would continue to be over the average and median rates and as with Option 1 a small amount of Medicare funds will be forgone beginning in 2004 for an ALS2 transport for a resident. Option 3 - Decrease resident fees to $300 and increase non - resident fee to $500. This option would accomplish most of the objectives indicated by the Village Board: that the flat fee structure would be retained, both the resident and non - resident rate would be closer to market averages and the resident rate would be reduced in recognition of the utility taxes paid to the General Corporate Fund. By 2006, this would amount to between $5,000 and $10,000 annually. Option 4 - Adjust resident fees to new Medicare amounts and increase non - resident rate to $100 above Medicare amount. The majority of resident transports (68 %) are Medicare patients. Thus, since the Medicare fee schedule will apply in 68% of the transports for residents regardless of whatever rate the Village sets, the Village would simply set rates at the approximate Medicare fee schedule rates for residents. This methodology would also result in all residents paying the same for the same service instead of those with Medicare paying less in some instances. For non - residents, the rate has been set at $100 over the resident rate (a larger increment could easily be considered). This option will maximize the Medicare reimbursement and will result in some savings for most residents. However, this option would eliminate the current flat -rate billing methodology, would result in a fee increase for those residents requiring an ALS2 level of treatment and the fee schedule would have to be revised more frequently in conjunction with changes in Medicare's rates. There are indications that the rest of the insurance industry will follow Medicare's lead on this subject. Mileage As previously noted, in addition to the new bundled rate fee schedule Medicare will also reimburse for mileage from the point of pickup to the hospital. The current rate is $5.47 per mile, which will be adjusted periodically by Medicare. The typical transport mileage ranges between 3 and 7 miles, depending on the hospital, and would result in additional charges ranging from $16.41 to $37.87 per call. At a minimum, charging for mileage would result in additional billings of over $11,000 annually. COMMITTEE -OF- THE -WHOLE Minutes Page 4 of 12 June 24, 2002 3. Adding a mileage charge could apply in any of the four options noted previously. It is mostly a philosophical decision as to whether or not to charge for mileage. It would obviously add some paramedic time in tracking the mileage and would further move away from the simple flat rate structure employed for many years. If a mileage charge were implemented, it could erode some of the resident savings associated with options 3 and 4. However, not implementing a mileage charge would result in forgoing Medicare funds on approximately 200 transports (approximately $5,000 annually). Implementing the mileage charge would help offset the revenue loss associated with mandatory assignment. Due to the Medicare changes staff is seeking direction as to which fee alternative presented (or another alternative the Board might decide) should be pursued, as well as whether the Village Board desires to implement a charge for mileage. Trustee Caleel asked whether the Village was obliged to take patients to the nearest hospital or would adding a mileage charge provide the flexibility to provide transport to a hospital of the patient's choosing. Finance Director Langlois did not believe that Medicare required that the transport be to the nearest hospital but he was not positive. Fire Chief Jarvis responded that the Village was required to take the patient where the hospital or provider indicates is necessary. She added that if a patient asks to be taken to another hospital and there were no negative medical repercussions, they could be transported to the hospital of their choice. However, she indicated that limits needed to be established because if the transport was 45 minutes or an hour away, the unit was out of service too long and not available for the next emergency service. She felt that would change the Emergency Medical Services role from the business of emergency service into a transport service. Discussion revolved around the difference between ALS1 and ALS2 procedures. EMS Director Gary Clark responded to the question and added that primarily ALS calls would be categorized as ALS 1. Trustee Savino indicated his recommendation of Option 3 and suggested adding the mileage fee. Trustee Caleel suggested leaving the resident fee alone at this time. Trustee Aktipis felt that Option 4 was an equally worthy option to consider. Trustee Miologos discussed amending Option 3 to include a sliding scale. Finance Director Langlois explained how it could be structured to maintain equity with Medicare rates. Trustee Caleel and Trustee Korin supported reviewing rates on an annual basis. Trustee Caleel recommended Option 3 with review each year unless Medicare would make changes before that time. This recommendation was the consensus of the Board. Trustee Caleel suggested that fees throughout the Village should be reviewed on an annual basis. COMMITTEE -OF- THE -WHOLE Minutes Page 5 of 12 June 24, 2002 2- The Village Board returned to the scheduled agenda items. 2. INTERIM FINANCIAL REVIEW As the Village Board is well aware, in 2001 the Village experienced a large decline in sales tax revenue due to the loss of revenue from a specific taxpayer, a generally slowing economy, the events of September 11 and internet commerce. This situation posed significant problems with not only maintaining existing service levels but also addressing staffing needs in the public safety departments and other objectives of the Village. In order to address these issues, the Village increased the telecommunications tax and utility taxes on electric and natural gas from 3% to 5 %. The Board also revised its policy with respect to the utility tax whereby 1% of the 5% tax is allocated to the General Corporate Fund and 1% of the 5% tax is allocated to the Equipment Replacement Fund. These changes were made with the hope that this will help provide the resources necessary to enable the Village to add three police officers and three contract paramedics during 2002. At the Village Board's request, the hiring of these additional positions has been deferred until July 1, 2002 in order to allow for assessment of the financial status of the Village's major operating funds. Sales tax, the Village's largest revenue source, was under budget by $74,085 through June receipts and 3.8% below 2001 actual receipts through the same period. Assuming no growth in second half receipts, 2002 revenue would be approximately $9.4 million. The budget /actual comparisons on the financial report for State shared revenues (income tax, use tax, replacement tax, and photo processing tax) are quite confusing due to well publicized delays in payments from the State due to its budget problems. Factoring in the timing delays State shared revenues are under budget by approximately $75,000 through May. These variances are likely due to the recession (income and replacement taxes are primarily effected) and to the decrease in the Village's population as a result of the 2000 census. Also, the Village stands to lose approximately $8,500 this year and over $17,000 each year thereafter due to the State ceasing the photo processing tax distributions. State shared revenues will likely end the year more than $100,000 under budget. Based on data through May, telecommunications and utility taxes are under budget by $72,170. In reviewing data from the largest payers, Finance Director Langlois is aware of a situation with our largest telecommunications taxpayer whereby he has been told that in previous years there was a system error which caused them to overpay the tax. Early this year, their system was fixed going forward. Director Langlois is currently in contact with this payer in order to determine the correct outcome but if it is correct this will cause a negative variance of over $100,000 since the 2002 projection was based on the incorrect 2001 data. COMMITTEE -OF- THE -WHOLE Minutes Page 6 of 12 June 24, 2002 2. Most of the tax revenue from the other significant telecommunications taxpayers is down between 5% and 10% from last year (adjusted for the rate change). As a 3% inflation factor was assumed in estimating the revenue base (conservative based on historical actual performance), it is currently estimated to be under budget by an additional $100,000 - $150,000. The amount of aggressive price competition in this industry is the major cause for the variance. Staff is still working with several payers regarding the rate change implementation and it is hoped that the resolution will result in additional tax revenue. Utility taxes received from ComEd through the April liability period are under projections by approximately $63,000 or 8.7 %. This variance is likely due to the mild winter and with the summer months still ahead this revenue source still has a chance to recover. As this revenue is shared between three funds, this decrease will impact the General Fund by about $13,000. There is a significant variance related to the tax receipts from NICOR for the utility tax on natural gas. After factoring in the tax rate increase from 3% to 5 %, receipts for the first five months are under projections by 66% or $175,000. These percentage decreases are consistent with gas supply cost factor data. Finance Director Langlois estimates the year -end impact of $35,000 for both the General Corporate Fund and Equipment Replacement Fund and $105,000 to the Infrastructure Fund. In summary, Finance Director Langlois currently projects that revenue from telecommunications and utility taxes will be under budget between $200,000 and $300,000. Permit and inspection revenue is $102,270 over budget and $128,853 over the same period in 2001. This is due to increased permit activity but also the comprehensive fee adjustments recently enacted by the Village Board. Elevator inspections are over budget by $8,775 due to increasing the semi - annual inspection fees from $50 to $75. This account should end the year approximately $17,000 over budget. Charges for services (excluding inspection fees) are over budget by $33,222 but the Village is slightly behind in turning over ambulance accounts to collection. Interest revenue is currently $52,236 under budget and will likely struggle to meet the budget amount of $425,000 due to the current low interest rate environment. In most months the Village's investment earnings have exceeded the benchmark rate. Expenditures In Program 111 -Board of Trustees -there is a positive variance of $50,144 due mainly to unspent contingency funds. Not spending the contingency amount of $100,000 would help alleviate some of the revenue problems noted previously. COMMITTEE -OF- THE -WHOLE Minutes Page 7 of 12 June 24, 2002 2. In Program 162 - Emergency Management -a positive variance of $25,000 is expected due to delaying the full -scale emergency exercise to at least 2003. In Program 221 - Accounting and Reporting -a positive variance of $20,000 in various personnel accounts is expected due mainly to deferring hiring of a part-time Accounting Assistant position. In Program 333 -Snow Removal - positive variances of $12,000 in personnel costs and $20,000 in reduced salt purchases are expected due to the mild winter. How much of this will be available at the end of the year is dependent on November and December weather. In Program 411- Engineering- a positive variance of $20,000 will occur due primarily to a personnel vacancy. In Program 421 - Municpal Building Improvements -a positive variance of $130,000 is expected due to the likely deferral of the Public Works facility roof replacement due to the current revenue situation and the higher cost estimated for the project. In Program 425- Library Building Project -the expenditure amounts are budgeted "net" of the amount budgeted to be received from the Library Foundation. As of today, the Foundation's share of the project is approximately $1,100,000, and the Village has received contributions totaling $400,000, leaving a gap of approximately $700,000. This potentially could have an impact on the Village's financial reserves depending on the length of time that the General Corporate Fund will be required to finance this obligation. Due to faster than budgeted payouts on the construction project, in Program 426 - Municpal Complex Project it is anticipated that this program will exceed its budget in total. To the extent that the project budget stays at approximately $9.7 million, this is simply a timing issue. However, the project budget is approximately $30,000 over this amount at the present time and funding will need to be found for any further change orders during the upcoming Five -Year Financial Plan and 2003 Budget processes. A potential source of funding for completion of the project is the Garage Fund, where the Village Board could consider a "residual equity transfer" of between $150,000- $200,000 due to funds accumulated over time from interest earnings and favorable operating results. Most of its funding is from the General Corporate Fund. There is presently over $250,000 in this fund and the draft 2002 -2006 Five -Year Financial Plan projected this amount increasing to over $300,000 in 2006. A fund balance of $50,000 to $100,000 in this fund would cover most unforeseen items. COMMITTEE -OF- THE -WHOLE Minutes Page 8 of 12 June 24, 2002 2. In Program 611 - Police Services Management -this program will be overbudget due to payments associated with the retirement of a long -term department employee and will be offset mostly by savings in Program 621 - Police Field Services due to the vacancy. In Program 632 - Police Investigations -a positive variance of at least $150,000 through the end of the year is expected due to the continued delay in filling the 2 tactical officer positions budgeted in this program as well as one permanent detective. In Program 741 - Prevention & Public Education -a positive variance of at least $40,000 is expected due to the delay in hiring the full -time Fire Prevention Director position. Infrastructure Fund R evemiec At the end of May, this revenue source was reporting a negative variance of $231,503. The extent of this variance is somewhat misleading in that Commonwealth Edison's May payment was not received by the Finance Department until June 4, 2002, thus only four months of revenue are reported. It is estimated that this revenue source will end the year approximately $150,000 under budget, depending of course on ComEd's summer receipts. Grant revenue, which in this fund all relates to Safety Pathway Projects, is under budget by $45,532. In the normal process, the Village fronts the cost of engineering and is reimbursed by the state a set percentage. Sometimes there are delays in the timing of reimbursement or delays in the pathway projects which causes the revenue amount to be under budget the same percentage as the expense amounts. This account almost always ends the year under budget, as do the expenditure accounts in Program 463 - Safety Pathway Improvements. Expenditures The spraying of Gypsy moths performed this spring will cost the Village approximately $8,500. Although this expense was not specifically budgeted for in Program 365 - Forestry, there will likely be offsets available in this or other Infrastructure Fund programs to cover this expense. Also, a necessary but unplanned project of approximately $75,000 involves the reconfiguration of the street lights on 16`h Street, 22 °d Street, and Spring Road which potentially will cause some budget variances. Sports Core Fund For the Bath & Tennis Club, on a "net" basis through May the results have been tracking very close to budget. Membership revenue is under budget and is slightly under last year at this time, no doubt impacted by terrible May weather. COMMITTEE -OF- THE -WHOLE Minutes Page 9 of 12 June 24, 2002 -no 2. It is interesting to note that through June 18 the Club is up 45 non - resident social members. This is due to a new program that allows tennis players to purchase only a social membership and then pay for court time. Hopefully this will have a positive impact on revenue. For Food & Beverage Operations, through May operating results were approximately $14,000 better than budget and $64,000 better than at the same time in 2001. The expense ratios (expenses as a percent of revenue) are tracking close to budget and sales per guest for weddings are substantially over the budgeted amount. For Golf Club Operations there will likely be some negative variances in revenue due to the poor spring weather. Self- Insurance Fund Health and dental claims are approximately $30,000 under budget through May. Although one or two large claims may have a significant impact on these numbers, the leveling off of claims after several years of double -digit increases is encouraging. There are numerous smaller variances in other programs (most with a positive impact) and capital purchases will be scrutinized for necessity for the duration of the year. However, based on the number of revenue issues noted previously and the need to complete the Municipal Complex Project, Finance Director Langlois recommended deferring hiring any new positions until 2003 at the earliest. The exact recommendations for the additional personnel, capital outlays, a review of existing programs and the possibility of a non -home rule sales tax will be made in the context of the 2003 -2007 Five -Year Financial Plan, which is currently being prepared and will be distributed to the Board at the end of August. Manager Veitch commented that issues of concern were principally in the General Corporate Fund. He reported that the variances have been highlighted on both the revenue and expenditure side. He stated that although there was an anticipation of a shortfall of revenues in 2002, it was anticipated that variances on the expense side would offset the shortfall and that on a net basis the 2002 budget target in the General Corporate Fund would be met. Trustee Caleel concurred with the recommendation that the Village defer hiring the suggested public safety personnel and suggested discussion of a hiring freeze on non- public safety personnel in instances of attrition. President Bushy responded that staff had very little depth and that if personnel was cut, decisions would need to be made as to what services would need to be curtailed. Trustee Aktipis commented that he felt there would be a light at the end of the tunnel and that the Village should look toward a change in the economy in the near future. COMMITTEE -OF- THE -WHOLE Minutes Page 10 of 12 June 24, 2002 2. President Bushy added that Smithe Furniture would be opening this year in the previous Homelife building, which will certainly add sales tax revenue. She also noted that there would be governmental block grants provided to the states for municipalities for anti- terrorism and emergency management training of staff. Trustee Caleel also noted that legislation is moving that will provide the Village the opportunity to bring forth a referendum to implement an increase in sales tax. Trustee Miologos and Trustee Caleel suggested that the Five -Year Financial Plan should include a plan to cover the amount of money pledged by the Library Foundation and not received for the building project and any other additional change orders for the Municipal Building Project. President Bushy asked whether the Board wished staff to prepare and present a formal Five -Year Financial Plan. The Board concurred that they felt the need for a Five -Year Financial Plan. Trustee Korin suggested that parameters for the plan needed to be discussed and those parameters that the Board set be used by staff. Trustee Aktipis stated that staff would have a hard time projecting revenues because of the present economic transition of the country. Finance Director Langlois stated that last year staff recommended a conservative projection of revenues. He added that he would find it difficult to project zero growth or negative growth. Discussion ensued relative to differing opinions on projections and predictability. Trustee Caleel suggested that parameters be established by discussion, the Five -Year Plan be reviewed quarterly and changed if necessary. Trustee Miologos asked the status of Westchester Park. Village Manager Veitch explained that as a result of the roadway construction on 31St Street, it was felt that the Village would not be well served to place it up for auction. He added that with part of the roadway being completed it was probably time to move ahead with this auction at a good time in the fall. Manager Veitch stated that it would be wise to listen to the recommendation of the auctioneers as to the appropriate time the sale of the property should occur. Trustee Korin asked how the Village would absorb the lack of the funds from the Library Foundation and the revenue shortfall and how it would impact our fund balance. Finance Director Langlois added that covering the Library Foundation pledges would impact the fund balance but probably not this year. He explained that each department is reviewing what expenditures may be reduced, deleted or delayed to cover the revenue shortfall. Manager Veitch explained that some expenditures will be cut back or not done at all. Finance Director Langlois commented that he felt there were sufficient offsets in the budget to cover the deficit. Trustee Miologos asked if the Sports Core will have a deficit this year. Director Langlois indicated that it is too early into the season to predict. It is hoped that revenues will improve and offset the bad weather in April and May. COMMITTEE -OF- THE -WHOLE Minutes Page 11 of 12 June 24, 2002 2. Trustee Savino noted the professionalism of the Village staff and he suggested that the Board not attempt to micromanage what they are doing. President Bushy stated she felt that they know their jobs and understand the present situation. She added however that if a diminution of service were to be considered, it would be a Board discussion. 3. AMBULANCE FEES This agenda item was discussed earlier in the agenda. 4. ADJOURNMENT: Motion by Trustee Craig, seconded by Trustee Caleel, to adjourn the Committee-of-the - Whole Meeting at 8:40 p.m. VOICE VOTE: Motion carried. ATTEST Linda K. Gonnella, CMC Village Clerk COW062402 COMMITTEE -OF- THE -WHOLE Minutes Page 12 of 12 June 24, 2002