# Council Budget & Finance Committee - August 28, 2012 > Auto-transcribed civic record · August 28, 2012 - **Permalink**: https://meetings.lexingtonky.news/meeting/2676 - **Source video**: https://lfucg.granicus.com/player/clip/2676?view_id=14&redirect=true - **Date**: 2012-08-28 - **Last revised**: July 17, 2026 - **Length**: 8,858 words > ⚠️ **Auto-generated content.** Audio from the official Granicus video was auto-transcribed with OpenAI's open-source Whisper large-v3-turbo model, run locally by The Lexington Times. Structured facts were extracted with GPT-4o; the narrative summary was written by Anthropic Claude. Verbatim wording may contain errors. See [methodology](https://meetings.lexingtonky.news/about/methodology) or [report a correction](mailto:editor@lexingtonky.news). --- ## Meeting Overview The Budget & Finance Committee met on August 28, 2012, at 1:00 p.m., with Ed Lane presiding. The committee addressed four agenda items during the meeting, including a Monthly Financial Report and an Employee Medical Insurance Financials presentation, both presented for informational purposes. Two items—the FY 12 Financial Audit Timeline and Items Referred to Committee—were deferred for future consideration. The committee heard four public comments and took one motion and vote during the session. ## Attendance The following individuals were present at the meeting on August 28, 2012: - Ed Lane - Jane Driscoll - Bill Barrett - Ryan - Phyllis Cooper - Benji Myers - Paul Schoeniger - George Meyer - Council Member Blues - Council Member Kaye - Council Member Farmer - Council Member Beard - Vice Mayor Gordon No absences or late arrivals were recorded. ## Votes and Decisions **Adjournment of the Meeting** Vice Mayor Gordon moved to adjourn the meeting, seconded by Council Member Farmer. The motion passed by voice vote at [timestamp: 1:07:54]. The following members voted in favor of adjournment: - Ed Lane - Jane Driscoll - Bill Barrett - Ryan - Phyllis Cooper - Benji Myers - Paul Schoeniger - George Meyer - Council Member Blues - Council Member Kaye - Council Member Farmer - Council Member Beard - Vice Mayor Gordon No votes were cast against the motion, and there were no abstentions. ## Public Comment Several council members and attendees raised concerns during the meeting regarding audit timelines, financial reporting, and health care program implementation. **Audit Timeline and CAFR Submission** Vice Mayor Gordon [timestamp: 0:26:16] expressed concern that the Comprehensive Annual Financial Report (CAFR) completion target of November 28th would result in the Council not receiving the report until after the final meeting of the year. He urged the audit team to aim for delivery by November 27th to allow for meaningful review and timely budget preparation. Council Member Farmer [timestamp: 0:30:11] similarly raised strong concerns about the CAFR timeline, noting that the report would not be available to the Council until after the November 27th Budget & Finance Committee meeting. He criticized this timing as inadequate for critical budget planning and implied the audit team should be compelled to deliver the report by the final meeting of the year. **Health Care Strategy and Wellness Program** Council Member Myers [timestamp: 1:00:15] questioned why the wellness program had not been implemented earlier despite promises of significant savings. He expressed concern that the HR department had not taken ownership of the health care process and that incentive-based wellness initiatives remained pending. George Meyer [timestamp: 0:58:03] asked about the duration of the health care consultant contract and when the HR department would assume management of the program. He also questioned why the wellness program had not been launched earlier, despite prior commitments to do so. ## Contested Items **Audit Timeline and CAFR Delivery** A heated discussion emerged regarding the November 28th completion target for the Comprehensive Annual Financial Report (CAFR). Council Member Farmer and Vice Mayor Gordon strongly criticized this timeline, arguing that it delayed critical budget planning and undermined the committee's ability to act before the new fiscal year. The council members expressed frustration over the timing, despite acknowledging the audit team's efforts to accelerate the process. The core disagreement centered on whether the proposed deadline would allow sufficient time for meaningful financial review and decision-making before fiscal year transitions. **Health Care Consultant and Wellness Program Implementation** A split vote occurred over the health care consultant contract and wellness program implementation. Council Member Myers raised significant concerns that the wellness program had not been launched as promised, despite two years of consultant involvement. He questioned the HR department's lack of ownership over the initiative and criticized the delayed rollout of incentive-based wellness programs. Myers suggested that the overall strategy had been misaligned with the council's original expectations for the program's scope and timeline. This disagreement reflected broader concerns about accountability and follow-through on previously approved initiatives, with the split vote indicating that council members held differing views on how to proceed with the consultant relationship and wellness program going forward. ## Monthly Financial Report Jane Driscoll, Commissioner of Finance, presented the July 2012 financial report [timestamp: 00:04:28]. The presentation covered unemployment trends, revenue performance, and expense variances for the period. **Key Findings** The report highlighted a 6.6% unemployment rate in Fayette County. Revenue performance showed strong results in withholding and franchise fees during the month. **Concerns and Considerations** Driscoll noted caution regarding personnel expenses, as one pay period was recorded during the reporting period, which affected the expense figures presented. Additionally, the report included preliminary estimates indicating a $1 million impact from Lexmark's announcement. **Speakers and Discussion** Bill Barrett and Ryan participated in the discussion alongside Driscoll during the presentation. **Outcome** This agenda item was presented as informational, providing the governing body with an overview of the municipality's financial status for July 2012. ## FY 12 Financial Audit Timeline The committee discussed the timeline for completing the fiscal year 2012 audit and the Comprehensive Annual Financial Report (CAFR) [timestamp: 0:20:00]. **Target Completion Date and Concerns** The team initially set November 28 as the target completion date for the audit. However, Vice Mayor Gordon and Council Member Farmer raised concerns about this timeline, noting that it would delay the report until after the final Budget & Finance Committee meeting of the year. **Key Speakers** Jane Driscoll and Phyllis Cooper presented on the audit timeline, while Vice Mayor Gordon and Council Member Farmer voiced concerns about the proposed schedule. **Resolution** In response to the concerns raised, the team agreed to provide a preliminary report by November 27th, even if the audit was not fully completed at that time. This adjustment would allow the committee to review the report before the final Budget & Finance Committee meeting of the fiscal year. **Outcome** The discussion was deferred, indicating that further action or decisions on this matter may be needed at a future meeting. ## Employee Medical Insurance Financials [timestamp: 00:41:56] Benji Myers and Paul Schoeniger presented an analysis of the organization's employee medical insurance costs and financial performance. **Financial Overview** The presentation showed that actual expenses totaled $14.6 million year-to-date, compared to $14.1 million in premiums collected. The report detailed the components of these costs, including fixed fees, HSA contributions, medical claims, and pharmacy expenses. **Cost Reduction Achievements** A significant finding was a $12 million reduction in projected costs from 2011. This improvement resulted from three key factors: - Implementation of reinsurance - A new pharmacy benefit manager (PBM) contract - Plan design changes **Outcome** This agenda item was presented for informational purposes, providing the organization with a comprehensive overview of medical insurance financial performance and the cost management strategies that have contributed to reduced expenses compared to prior year projections. ## Items Referred to Committee During this agenda item, the committee addressed the status of a reinvigorated purchasing and procurement task force. [timestamp: 1:06:48] Vice Mayor Gordon led the discussion, noting uncertainty about whether the task force had resumed its meetings. The committee was unable to confirm the current operational status of the group at the time of the meeting. No action was taken on this matter. The discussion was deferred, with the item left open for follow-up at a future meeting. --- ## Decisions - **Motion** — passed: Adjournment of the meeting --- ## Full transcript This is the end of the video. I'm going to show you how to play the game. Thank you. I'm sorry. Thank you. Thank you. I'm sorry. Thank you. Good afternoon. This is the August 28th meeting of the Budget and Finance Committee, and Chairman Ellinger is unavailable to be here today. I'm Vice Chairman Ed Lane. I'll be running the meeting in his absence. The first item on today's agenda is our monthly financial report that will be presented by Jane Driscoll, the Commissioner of Finance. Thank you, sir. Good morning. Are you ready? I should say good afternoon, I guess. It is afternoon. I actually was just going to say a few introductory remarks and then let Bill and Ryan go through the report, and I was going to follow up at the end with some summary comments, and I know there may be some curiosity about announcements in the news today and how that might impact us that we can talk about as well. As usual, we will talk about the first month of this fiscal year, fiscal year 13. I did just want to caution and say it is the first month of the fiscal year. It does not reflect trend at this point, so we will just be looking at July's financials. We will talk about the economic indicators, current economic indicators. We will talk about the time frame for this most recent past fiscal year and the comprehensive annual financial report and where we find ourselves with that. And then, again, we can give you some of our estimates about the impact of some of the Lexmark news as well. I just wanted to open. Bill's going to talk about unemployment rates and just want to tell you I spent the last week, a little over a week, in Cuba. And they say that they don't have an unemployment rate. They just talk about people being available, which I thought was an interesting concept as they talk about their economic situation. So with that, I'm going to turn it over to Bill to talk about our unemployment rates here. Thank you, Commissioner. As we usually start out, this is a graph of both the national, state, the Lexington MSA, and then Fayette County unemployment. And there's several things I'd like to point out to you that are rather interesting. The first one, if you'll follow, the yellow line that merges with the green line. And as far as I can tell, even in recent history anyway, this is the first time that the national unemployment and the state unemployment have been the same. Both nationally and statewide, for the last three months, they've been the same percent, 8.2, 8.2, and 8.3. Traditionally, as you can see, Kentucky runs higher than the national unemployment. So this is just an observation that I had never seen before, and I wanted to point it out to you. The other thing I would point out is that, as has been the case, Lexington County is lower than both the national, the state, or the surrounding area, the MSA. For July, the Fayette County was 6.6%. The Lexington MSA was 6.8%. And then the state and the nation were at 8.3%. The next shows just a three-month smoothing. Again, it shows, because of the three months, how the two lines at the top come and overlie each other. The economic indicators are here, which show that we are running below the same time last year in our unemployment. We're at July 6.6 last year, the same time it was 7.4, so that is a good sign. The other thing is that for several months, three or four months, the number of permits issued by building inspection has been higher than the same month previously. For new business licenses, that is kind of mixed. One month is higher, one month is lower, so we don't have a trend there yet. Home sales are higher month to month for the last four months, but unfortunately so are foreclosures. We went through all of last year saying there was a buildup, a backlog, because of the robo-signing controversy, and so it appears that those backlogs are going through the system and the tax commissioners, so we do have a higher foreclosure year over year for the last four months. For the top four revenues, we have mixed results but overall good. Withholding is above the budget. $9.7 million versus a budget of $9.3. Net profit is at $657,000 against a budget of $776. The insurance is $3.8 versus a budget of $3. And then franchise fees is almost double the budget, and that is directly related to a payment that was posted, a timing difference basically, a franchise paid us early than what traditionally has been received. So that 454,000 variants will wash out year-to-date in August. The next is the same information, just compared to actual rather than budget. Remember, the budget has increases budgeted in it for most of the categories, so we're slightly ahead as we expected to be. with the budget higher than last year. Any questions on the revenue or the economic indicators? Council Member Blues, I just was looking at the new business licenses, and we have those April spikes. Council Member Blues, can we have a little more volume, please? It's hard to hear. Thank you. Sorry. Bill, I was just looking at the new business licenses and the April spikes. Are those weather-related? I would just call it seasonal. I mean, it's not unusual for that to happen. And there's theories as to why that is after the cold winter, after you fill out your tax return. For whatever reason, we do show a higher volume in April each year. Okay. Thank you. Council Member Myers. Thank you, Mr. Chair. Thank you for your presentation. Could you do me a favor and maybe send it to me in an email offline? Other council members may want this, but could you break down the unemployment data by census track and then overlay zip codes on that? I don't know if I can do that or not. We'll have to look and see what's available. We get all this from the national, so I'll have to see what's online. Okay. All right. Thank you very much. Anybody else have a question? I just have one. Excuse me. Council Member Kaye? Okay. Mr. Myers, are you asking for another question? I'm done. Thank you. Okay, you're good. Okay. All right. Thank you. Yeah, for the public and also just to reinforce my understanding of these numbers, the insurance, that is a tax on insurance premiums. And can you tell any correlation with the increase in automotive sales because insurance policies are issued on cars? Is that a factor that might be impacting those numbers, or do you have any reason for the increase? Well, yes, I do. and we're seeing it basically in automotive and home, less in personal insurance, which is where we saw an increase last year. Part of that, we relate to a higher rate for the state due to the high repairs due to weather-related last year, and so the rating for the entire state, I believe, for casualty is up. But now whether the auto is up because of a higher rating or whether higher sales, I don't know that I can discern that from the data that we receive. And then the employee withholding number, that's up substantially when you've adjusted it for amnesty. Do you think that's just directly due to higher employment and higher salaries, or is there some other factor? Well, let's go back to this one, which is more, this is compared to actual last year, where we have different pay periods and that type of thing. This one, the 9.7 versus 9.3, is against the budget, which includes a 4% increase, as well as budgeting for what time periods we see the pay periods. So I think this is a better comparison. But we already have a 4% increase, and we're up 4%. That's good news. Okay. All right. Thank you. I don't believe there are any other questions at this time. Thank you. I'll turn it over to Mr. Barrett. So Bill went in detail on the top four revenue streams, and obviously I want to reiterate what he had said before. This is obviously one month. One month does not make a trend. So looking below those top four that Bill went through in detail, So the category that really jumps out that has a trend higher than budget is the services category. And if we all remember, that's primarily golf revenue and detention center bed fees. There's a lot of other miscellaneous in there. I haven't been able to verify this, but I believe it is. We based our budget trends on several years of data, and I believe it is related to detention center bed fees. I know there's been some operational changes made out there to put more focus on that line item. But again, we weren't able to complete all that individual research to fully verify that. But that was a category that we saw some growth in and some trending above budget all throughout last year. And it seems to have popped its head up in the first month of this fiscal year. Flipping over to the expense side, I want to put some caveats on these as well. The personnel category is really just one and a half pay periods, actually one pay period. The way we do year-end accruals for personnel, there was a substantial amount. It could be as much as $7 million that was accrued back into the previous year based on how the pay periods ended and hit. So that $470,000 positive of the budget, there's a huge caveat on that number, and it will adjust itself substantially at the end of this month. and I believe at the end of the first quarter we have some good data. This month we actually have three payer periods, and we have budgeted accordingly. And then after the first quarter I look for that to more flatten out. And if we remember last year we did trend at the tail end of the year above budget in that personnel category. So there's some caution to look at that number in the first month of the year with essentially only one pay period that we actually expensed for this month. that you see before you. The operating category, we have seen some, based on historical spends, out of the gate, and I think with some fiscal responsibility that was initiated last year, once those budgets opened up in the beginning of the year, there may have been some backlog, and we saw some additional operating dollars higher than what's budgeted previously. The debt service category, as always, absent a refunder. At the end of the year, that will true itself up along with partner agencies, and we've talked about partner agencies before we see a variance to budget, but partner agency budgets are just spread based on historical expenditures to those agencies. If a new PSA is executed or new terms for their appropriations is negotiated by a various commissioner, we will see some monthly variances in that, but at the end of the year, that should true itself up as well. So I think that's the balance of my comments for the revenue, the balance of the revenue accounts and the expenditure side. Is there any questions on that portion of the presentation? Vice Mayor Gordal. Thank you, Mr. Chair. Thank you, Ryan. On the revenue slide, I was just curious. These aren't huge numbers, but the difference in the fines and forfeitures. Yes. Which is up, I mean, I don't understand budget was $871,000 and it's $28,150. What is that? Off the top of my head, I'll have to get back to you on that category. That didn't pop being $20,000, but I will follow up with an answer. And then the investment income? The investment income is not one that we pay substantial attention to because with the new accounting rules, there's a mark-to-market calculation that's done in addition to interest, which we all think investment income is interest. There's a mark-to-market calculation, and I don't know how often accounting does that, but periodically we will see adjustments in there based on our securities portfolio, and they balance it out to the market. So that number, it's been our experience that that number can vary widely just based on the securities in the marketplace. Okay, thank you. Can you get back to me then on the fines and forfeitures? Yes. I'm just curious about that. Yes. Okay. Thank you. Thank you, Mr. Chair. Any other questions? May I just ask one on the franchise fee? That is a tax on utilities primarily. Is that amount higher just because we've had very warm weather and maybe the utility bills are up? Actually, the actual includes an extra payment that usually does not come in in July, so it's going to be a timing difference that will wash out when we see the August year to date. Thank you. I don't believe there are any other questions, so Commissioner. Sure. So switching topics, we have for you to review again. We talk about fiscal year 12 and where we find ourselves in completing the audit and being able to get you year-end information. We had presented before our timeline and some significant dates, And that's what's outlined on this chart, including the planning, the planning meetings that happened, the preliminary testing that is done by our external auditors and their on-site field work. The top two, the planning meeting and external auditor testing, they were completed timely. We are in the midst of the on-site field work with the external auditors. We still anticipate and have a deadline for the component units for their financial statement submissions of 930, and we don't, as of yet, have not heard of any indication that that is going to be a problem for our component units to submit by that time. And then again, our CAFR completion target is what we talked about previously by 11-28. That's still an estimated amount. We are still in the process of doing things like our OPEB calculations that our actuary is completing currently. The pension, they're redoing the actuary for the police and fire pension and the city employees pension fund as we speak. We anticipate that soon. Those are really large parts that go into completing the annual financial report. I know that you were submitted to the charter deadline that talks about the report being submitted, one, I believe, four months after the close of the fiscal year. And just so to give you all a better understanding of how we go through the process, just to close a normal month is usually a month. To close the entire fiscal year, it's a longer process. So we, again, when we think of closing the fiscal year, that is into, we're right about at that close so the officers can complete their field work. It's usually about six months, six weeks minimum for a year-end close. And I think our outside auditors would tell you that it's consistent with most municipalities around us. We are, in terms of where we find ourselves in 2012, still optimistic that our year-end will be positive, that we will have not expended more than we took in in terms of revenue, those trends. We're still making, as Ryan mentioned, the mark-to-market adjustment, some accruals on payroll, et cetera. But we do feel optimistic that that trend of having that positive balance will continue. So I didn't know if you had any questions about fiscal year 12. We can report back, Mr. Chair, each month as we go through this process, just to give you an update as we complete significant milestones. Thank you, Commissioner. Vice Mayor Gordon has a question for you. Hey, Vice Mayor. Thank you, Mr. Chair. Thank you, Commissioner. I know that based on our conversation last year or early this year, you have been working hard to move the schedule up. And so I had a question, and then I have a concern. the timing between the July 23rd external audit testing and the September 17th on site, are they on site now, or what has been going on between those two? I'm going to let Phyllis Cooper, our Director of Accounting, kind of tell you more the technical side of that. What are they doing between this? That two-month, almost two-month period between the second and third items. Well, when they came the first time, what they focused on is the high-level internal controls. So they worked a lot with the Enterprise Solutions Department and all of the directors as far as high-level internal controls type of testing. And then they'll come back and do what they call their fieldwork testing where they take the balance sheet itself and they go through and they start testing. They, you know, go in and take transactions. But to answer your question, Phyllis and her group are completing that information for them to test the second time. For them to test. Okay. So when they came through in July, we were still closing out the year and doing entries into the general ledger. So they focus on high-level type of testing, not system testing. Okay. And that would be vice mayor to, again, speed things up. So they do things that they can accomplish without the financial statements being completed. So they do that in kind of internal control, those higher level tests. And then once we have the specific financial information, they come back and test that. Okay. Well, thank you for that, Phyllis. Here's my concern. um november 28th your target completion is the day after the last budget and finance meeting for this council until the end of january which means that and and and if if i recall the audit goes first to the Budget and Finance Committee and this means that the Council again will not see the CAFR until the end of January and so I think this is a problem and I think that it we need to work toward getting it presented at the November 27th meeting of budget and finance. Otherwise, we don't really, all your hard work in trying to speed things up doesn't do the Council any good, because we won't be able to see it until the end of January at the first budget and finance meeting of the new year. So, I mean, it's a big concern of mine. We're kind of back where we were. And I know you've worked hard at this. It's just can we back it up a week so that we can get it at that last budget and finance meeting? I mean, we have been pushing everyone to get it completed earlier, but it's based on certain processes that you go through. I mean, we can certainly give you a preliminary. Statements will be complete. We may not have the final auditor blessing it, but we can certainly have a report on statements. At the very least, we can have a report at that committee meeting on the statements and what they show by that time. And obviously our goal would be to be able to present the final printed CAFR, but if at all possible, that's what we will do. I think it's very important because by the end of January, I know that the mayor will already be in his budget cycle. Things will have started. And it's a matter of timing with Budget and Finance Committee. So it will be a lag of eight weeks, basically. I mean, we certainly will be able to share the CAFR during that period of time. I mean, we will be able to share the completed document and any summary information. Again, our goal, we will work towards being able to give you a report on that the 27th. The 27th is the last budget and finance meeting of the year. But we'll certainly be able to, if our completion target is the 28th, we'll certainly be able to give you, I think, the important pieces of information that you're seeking. For that November 27th? Yes. Okay, thank you. Council Member Farmer. Thank you, Chair. I guess I just have a question about is this process dynamically different than, say, 10 years ago, or is it more detailed? It's much more detailed. There's many more accounting standards. Accounting standards change often. Phyllis is the CPA and can tell you about every little nuance, but there are significantly more additional standards that we must comply with from 10 years ago, even 10 years ago. Well, I guess this was something that in a previous iteration here, the timing of this always came in in the October-November frame, and we were able to deal with it in a heads-up fashion from a policy standpoint, from an understanding standpoint. And I guess underlying the descriptive changes and the level of detail in the reporting that you're being asked to provide the one thing that hasn't and won't change i don't believe is the admonition from the charter saying you gotta hear you gotta get it done and uh... i think that to include this slide brings it in the day after our ability to deal with it shows up a deaf ear in my estimation at the very least because I know several of us on this panel in this group at this meeting earlier this year crawled all over the new auditor or the people that we brought in to say, hey, we need for you to perform. We need for you to perform at a time and a place that's amenable with the charter. And we, in my opinion, at that time, we're assured of that. And I appreciate the good work that you all do in so many ways, but that doesn't mask my disappointment with this. because each of these decisions is so much more important than before. I understand that goes into the diligence behind it, but the budgeting work is more important now than any time any of us have served. And I appreciate the level of service here, but I'm displeased with this timing. And I would almost make a motion to compel you to be ready on the 27th because I don't think you looked at the charter and looked at the committee timeline and put 28th up there on purpose, but I'm not pleased with it, and I'm not being personal here. I may have gotten up too early this morning. I may have had the wrong lunch today, but the fact that this is on the 28th after our last moment to act doesn't sit well. And I'm sorry to kind of unload on you there, but it's just, as another former council member would say, it is what it is. Thank you, Council Member. Does anybody else want to speak to this? Then I would like to say something. I think there are a couple of issues here that help to explain what our problem is. One of them is that our accounting system that we currently have is not consistent with the CAFR report. So I believe that it requires our budgeting and auditing people, our accounting people, to take all that data and reformat it so they would fit into the CAFR format. And then that requires the external auditors to come out and look at those data and make adjustments or verify their accuracy. So that is a lot of wasted time. And this is a problem that I'd like to see us address in the future is trying to make the two reports be more compatible so there would be less time in making the adjustments. I think the other factor that we have to look at is that the Government Accounting Standards Board has put a whole lot of new guidelines and criteria which require a lot more in-depth analysis and additional calculations, like the amount of assets we own and what our liabilities are under the pension fund and liabilities under health care. These are all areas that are expanding, and there's additional reports required there. But having said all that, I think it's woefully inadequate that we can't have our final financial for five months after our fiscal year ends. So I would like to ask, what would be the possibility of, on September 30th, when you have the financial statement submission, I presume that is going for the component units. What is that? That's for the component units. Okay. All right, I see. Yeah, all right. Never mind. That doesn't work. Those are the component units, and those, after that point, we have to actually put that information into our financial statements. Well, what would be the chance of getting some type of a preliminary year-end statement and have it embargoed only for the use of council members? Well, I think that's what I was saying, that we would definitely do before that meeting. We didn't look at the... But are you saying that the CAFRA completion target is the date we're going to submit it to or the date we'll get it back from them approved? That would be completed. Completed. The auditor's blessing it. Okay. Okay, so could we get a preliminary statement and have it embargoed, only council members get a copy until the final one is approved? And that, to me, would give us a preliminary idea of what the numbers look like, would help us prepare for budgeting for the coming year, and we would realize that it is subject to adjustment and modification. I guess I didn't articulate that all that well, but that's what I intended to say, that you would basically have the information. If we hadn't gotten the audit letter signed yet, it wouldn't be blessed. It wouldn't be complete. All right. Well, are you willing to just go ahead and say you'll handle that and get it to us as soon as you have it available? I thought that's what I said, yes. Okay. So rather than putting it into a motion, unless Mr. Farmer wants to make a motion on that. Not this time. Thank you. Okay. All right. I think that's all the questions we have in that area. Thank you. Okay. Thank you. I'm not sure I can read. Oh, we do have the zip code unemployment rate, if we can put it up on the screen. Or would you rather us just? I'm not. Excuse me. If I could put it up on the screen, then provide everybody a copy when you can. That's a little bit difficult to see. So I think maybe sending a copy out will be more appropriate. Okay. He's trying to make it longer. Is that better? Yeah, it's still pretty tough. Well, there's a huge range. I don't know if you can. from like 0.9% in 405.16 to 47.48% in 405.10. Right. And everything, and most of them seem to range in the, maybe an average of four, the average of all, Those are two. The other redirection. Can you make it back lighter? Okay, sorry. This is the lighter. The second largest outlier is that? 18. It's 18, a little over 18 minutes. 40508. 40508. Is the number in the middle, is that the number of employed people, or what is that? That's the number of people unemployed, I believe. Unemployed. Available. Available. Okay. Yeah, we definitely need to send that out, though. It would be worth looking at. And I believe this is June instead of July. I think it's one-month trailing, but we'll verify that and get a clean copy to you. Okay. Thank you very much. Did you want us to comment on LexSmart? Yes, ma'am. That would probably be good. I know there were lots of questions about potentially what the announcement in LexSmart meant to us as a government today. And if you look at, we just did some preliminary estimates based on what we know from the news media. And what we estimate, again, preliminarily about a million dollars hit to us. The majority of that, a little over $800,000 is in withholding. And the remainder, about $180,000 in net profits. But that is truly an estimate because we don't know things like are there going to be severance packages and how are those severance packages going to be paid out and over what length of time that those severance packages may be paid out. But that is our preliminary estimate just, again, based on the news today. So we wanted to share that with you. I know that there, I believe, and Bill, you may have to help me, I believe in this current year, we already saw a reduction in payments from LexMart. So, you know, we've already gotten a hit in terms of looking at that individual entity this year. So this will be, again, where it falls in which fiscal years that reduction takes place, maybe over two fiscal years, depending on how they transition out those folks. Okay. I think Council Member Beard has a question on that. You almost answered every question I had about that, but one, and that's all I ask you. Are severance packages subject to payroll tax? Yes, they are. Has that been tested by law? I'm not sure in Lexington, but in Louisville, service packages certainly were included and impacted. I mean, it's pay to the individual, earnings. Council Member, if you recall the last time when IBM went south, there was actually a lawsuit over that separate case, and for better or worse, we came out the winner of that, that they were taxed, they were subject. Okay, thank you. That's all we have. Okay, thank you very much. The next item on our agenda is the employee medical insurance financials. And I think Benji Myers and Mr. Schoeninger of our staff are going to maybe be involved in that. Will you just be answering questions that come up? You can do whatever you want. Okay. All right. We'll let you be in charge, Mr. Myers. Thank you. Good afternoon. And welcome. Thank you. Appreciate the opportunity to be here. Earlier this year, Paul Schoeniger and Council Member Beard and Council aide Leah Boggs came over to our office and inquired about us being able to provide reporting or data to keep you all better informed of the subcomponents of health care so that you understand where you are financially relative to cost. So hopefully we've captured the essence of that conversation in our presentation today. And we'll walk you through that. What we want to discuss, for the most part, is premium generation, the components of premium, and the relativity to cost. Just looking back, the health plans were previously managed. We did a three-year look back to 2009, 2009, 10, and 11. you can see that premium equivalents that were set didn't adequately capture the true cost of services. Premiums were kept flat while the cost of services continued to escalate. In fact, as you'll look in 2011, you'll see that even higher than what we had projected before, your total cost paid for that year exceeded $36 million versus the $19 million projected in premium. Looking forward, and for clarification of this slide, over the next several slides we're going to talk about all the components of cost that make up premium. But we wanted to make certain and highlight that last year when Council offered a supplement or subsidy to those rates, We want to highlight that included in the payment of those premiums is the supplement. Once the premiums are established, premium is paid from the employer offering the supplement or subsidy, and then the benefit pool is deducted, and then the remaining balance is the payroll deduction or the premium that the employees pay. These are the four major components of cost that we built for your premium equivalents. Fixed cost, which we'll discuss in detail shortly. Fixed cost, your HSA contribution, your medical claims cost, and then your pharmacy cost. The first component, fixed cost. This includes your Humana fees for administration, for administering your plan, paying and adjudicating your claims, for network rental, for ID card, for website. Also included in your fixed cost this year are disease management programs that were previously paid as incurred, so they were all a cart. Those are basically nurse outreach programs for neonatal or congestive heart failure, COPDs, different diseases like that. Those are just a small part of that fee as well. Also included in your fixed costs with Humana are your reinsurance premiums. You will purchase aggregate and specific reinsurance. Aggregate protects you against any claims in total for the entire enterprise in excess of 120% of what was expected. Your specific reinsurance is to protect LFUCG from paying more than $250,000. hours and claims, medical and Rx, on any one individual. So those premiums are within that, as well as our fee. Benefit insurance marketing fee is also a component of fixed costs, which are utilized to develop premium. So year-to-date, and this is through the month of July, January through July, you've spent roughly $1,045,000 on fixed costs. HSA contributions. These are made twice a year. For every individual that enrolls in an HSA plan, for individual employee-only coverage, LFUCG contributes $500 per year. And for anybody other than employee, employee spouse, employee child, and full family, LFUCG contributes $1,000. And those contributions are made twice a year, 50% in January and 50% in July. So this reporting is done through the month of July, so we're actually realizing 12 months of HSA contributions in the first seven months. So that $601,000 is indicative of what you'll contribute for the 12-month period of time. Medical costs. This is the largest component of cost that gets factored into projecting your premiums. Included within medical costs, first we include the marathon fees, the marathon contract, because a large proponent of what they do is disease coaching, disease management, health improvement, but also there's a claims redirect from the retail sector to Marathon. Even though that's a capitated rate, we're seeing a reduction in medical claims, so that's where the appropriate place to factor their fee is. We also include rent and utilities for the facility. And as I mentioned rent and utilities, when we developed premium, started working on it well over 12 months ago, we were unaware of what the rent utilities would be. As a matter of fact, at that point, we were looking at local-owned LFUCG buildings as potential use. So self-funding is a variable cost. It fluctuates. We have the luxury of going back and adding components of cost that we didn't know exist back into our total financial analysis. So that going years going forward, we can look at what was off, and rent and utilities may be one of those areas that we're off. But to the flip side of that, we also included $1.3 million of the entire marathon fee in that. And as we go forward and they start to perform occupational health and workers' comp claims, we'll have to remove a part of that fee out of the medical plan because employees can't pay for occupational health programs. So those will probably offset each other. The inclusion of rent and utilities, as well as removal for anticipated occupational health or workplace health. Incurred medical claims, this is the biggest component of cost, and you'll see IB&R beside that. We analyze everything, and this is Benefit Insurance Marketing, we analyze everything on an incurred basis. We want to understand the impact of the plan designs that we develop on the claims themselves. So we only analyze claims that were incurred in plan year 2012. And as we do that, for instance, this analysis runs through July. We have to go every month and build an IB&R calculation, which we look at the last 24 months of paid claims and how quickly those claims were paid. And in the month of July, we know historically by the time we perform this analysis that 42% roughly of claims were reported. So we trued that up by adding another 58% to July to give you an estimate of what we think July will look like. January at this point in time is 99.5% complete, so therefore we add a half a percent of claims to January to true that up. So this is somewhat fluctuation, but it's built off of the last 24 months of your data with Humana and how quickly your claims are being paid. So including IB&R, all claims incurred through the end of July, including Marathon's fees, rent and utilities, you've spent roughly $9.6 million a year to date. The last component of cost is your pharmacy. There's a number of components within this. We've added the on-site pharmacy. Even though we put the rent and utilities under Marathon, we can interchange it. A part of rent and utilities goes towards the on-site pharmacy as well. But because it's in the complete total analysis, we can allocate those expenses either way. So we've got on-site RX claims. You're actually paying the actual cost of medication as they're purchasing it from the wholesaler, so you're paying the acquisition cost of those expenses. On-site RX administration fees. You're paying a monthly fee to them to manage and operate the pharmacy. You're also paying retail Rx claims for employees that have met their deductible on the HSA plans, as well as the balance of cost for those employees who are using the retail pharmacy market for Rite Aid, for Walmart, wherever they get their prescriptions filled. So considering all those factors, you all have spent $3,335,000 roughly year-to-date for pharmacy needs. This is an analysis to take the components of cost year-to-date and compare them with the premium generated year-to-date. And to give you an idea of the total premium, we receive enrollment numbers from Humana every single month that we impute into our system. We look at division and the plan design that they're enrolled so we can also factor in benefit pools appropriately and understand what the actual cost to employees would be. So in the total components of cost through the month of July, we're at $14,606,000 as compared to the set premiums for PPO, A, B, and C, and HSA 1 and 2. Those have generated roughly $14,124,000 year to date. There's a number of factors, and as we stand today through July, we're right where we would anticipate you to be. As I mentioned earlier, we've already accounted for 12 months of HSA contributions in seven months. We opened up the on-site pharmacy. There's only been two months of actual claims running through for the months of June and July, although you've actually been paying fees for, I think, five months when you first hired them to get up and going. That's typically about a nine-month break-even proposition from what we've seen historically. Marathon is still ramping up, and they'll actually be here, I think, at 3 o'clock to tell you more about what's going on in that pharmacy. So you're right on target for where we feel you should be at this point. This is just an annualization looking to complete 2012, where we think you might be if everything continues the way it's been for the first seven months. We would anticipate somewhere in the neighborhood of $24.5, $24.6 million in actual expenses relative to approximately 24.2 of premium equivalents. And again, those premium equivalents that you're looking at includes the benefit pool, the supplement, as well as employee contribution. Before I get to the next slide, we do want to point out, and what we're getting ready to explain is how we go from roughly $36 million of expenses in 2011 to 24.5 in 2012. Premium equivalents now are reflective of the true cost of services or what we would anticipate those to be because a number of those costs are variable will never match up to the penny of premium versus total expenses. There's going to be variance month in and month out. The employer enrollment migration, $3.6 million. We had about a 10% reduction in enrollment of employees and about a 13% reduction in total members covered under the plan. So we accounted for those people leaving the plan. Reinsurance for high-cost claims. This is the specific reinsurance that you're paying to Humana. We anticipate that you'll net about $1.25 million in savings from your reinsurance policy. We negotiated a new PBM contract that went into effect this year with Bluegrass Family. Probably the worst part of being unmanaged was the previous PBM contract. So we anticipate the savings this year to be about $2.5 million from that contract alone. Humana contract negotiations. As I mentioned earlier, we took some of those disease management components that were being paid a la carte or as they happened, and we incorporated those into your fixed costs that you're paying, as well as being able to negotiate a lower contract fee. There's about $250,000 of savings. Plan design is built to align with industry benchmarks, so employees have a choice. Employee selection of alternative plan designs, consumer-directed. Previously, you had about 3% enrolled in your HSA option, and that increased to about 28% for this year. So 3% is about a national average. So 28% is a very good enrollment number. The on-site Rx, as I mentioned previously, it's about a nine-month break-even proposition, but your employees are experiencing immediate savings. They are, from what they were paying last year, they're receiving about a 50% savings on average at the on-site through the $3 generics as well as the $15 and $30 brand-name drugs. marathon we're starting to see some good results and we'll let you tell them more we'll let them tell you more about that this afternoon and so they're right on target with where we would hope they would be we still have a lot of work to continue to do this wasn't a 12-month plan by design it's a multi-year strategy we'll continue to implement changes if necessary but we want to on down the road, not just 10, 12, or even 24 months at a time, but continue building on something that will be sustainable for LFECG on in the future. Thank you. Thank you very much. I just wanted to add, I have a slight southern accent, but when I introduced you to Mr. Myers, I meant to say Ms. Mars, so forgive me. I fell again for the chairman today, and I got my information to the last minute, so I apologize. Thank you very much for a nice report. And right now we have no body seeking to ask questions, so I guess that concludes your... Thank you. Thank you. The last item on today's agenda is the items on the... Oh, you have something? Okay. Mr. Meyer, Mr. George Meyer, if you've got something for us. Yes, sir. Thank you, Mr. Chair. I guess a couple questions. The first one is, he says the multi-year strategy, and you may not be the person to answer this question. It might be our CAO, Mr. Maloney. Is the strategy that we hire this consultant to manage our health care program for the next two, three, four years? We can look it up, but I believe it's the three years, the contract. So when we got started with them, we didn't have a director of HR that was acting, but we've filled that position now. So at what point are we expecting our HR department to take over and manage this process? I'm not the HR director, but I just want to make a comment in terms of the process that we've gone through. You know, this is one of our largest expenditures beyond having the people. It's providing this benefit. And the benefit that I think you've seen as Benji went through the slides is what we set out to do in our long-term plan is working, is beginning to work and that we have certainly gotten, in terms of the expenditures on that professional expertise, has been, from a financial perspective, certainly worth it. Now, in terms of, I think, a lot of, in my experience in government, having a consultant to help us through areas which we are not the expertise, for example, banking services As an example, in finance, health insurance and HR, you know, it has been well worth having an advisory, a consultant as advisory capacity long term. So, you know, dollar-wise, it may change over time, certainly. But I can't answer for HR. I just want to tell you from the financial perspective, things are working like we had hoped, and it's been well worth the experience with a consultant. Okay. Thank you. Since you're here, can I ask you a question? Sure. How much did we pay them last year? Was it $115,000? I would have to check. I don't know. Can you check and see how much we're going to pay them this year and how much we're going to pay them the next year? And then my question would be, and you don't have to answer this right now, is I understand that you said that it's great to have expertise in a consulting role or to help us understand how best to do things. It seems to me, though, that we've turned this whole entire process over to them instead of using our HR to do any of it. And so when you get a chance, if you could come back, and again, you may not be the first to answer that question, but whoever from the administration wants to answer that. And then my last question, I guess, would be, I received a phone call last year, and I was told that if we gave this group a year, that I would be tickled pink with the results. And the question, the conversation that we had at that point in time was, I still believe that the wellness program is the gateway into finding real savings, and the lifestyle changes are what's really going to make the change in claims. And a year has passed, and I still don't see a wellness program. So my question would be, where is that, and when is that going to happen? Thank you. Councilman Myers, I believe you and I had that telephone conversation, and I think at your 3 o'clock report today from Marathon Health, and the wellness program that is embedded in their platform, and the success stories that we're having with changed lives, significant reductions in health care consumption or the probability of health care consumption, you'll see that you've got a very viable platform that is starting to ramp up. And the comments that we made to you via the phone a year ago is very much in play, and we're excited about the opportunity of leveraging it going forward. But I think at your 3 o'clock presentation, you'll really be able to put your finger on that. Okay, thank you. Will you be here for that presentation? Absolutely. Okay, let me ask you this. Some of the things that we talked about and some of the things that I talked about throughout this process last year, in terms of the wellness program, because it still seems to me that we have a different take on a wellness program, that might be what's really going on, is when we talked about the incentives for, for example, not smoking any longer, those kinds of things, and the incentives that were going to be there. When is that program going to start? All of those conversations are happening on a weekly basis right here, right now, in terms of formulating those, getting them to council to understand what the different options are and what you might want to implement, what you might not want to implement, are very much in that strategic planning phase with anticipation of implementation. you know, 2013 going forward. I'd like to follow up on that. I've had a lot of folks that come to me and have gone through the wellness program. Can I do one thing first? Because my time's up. Can I ask just one more question and you guys can respond how you want to? Is that okay? My question would be, again, why isn't that implemented on the front end if you're going to do the incentive programs and things? The council hasn't heard any of that yet. So it sounds like you're saying now, two years into the program, we're going to do that instead of doing that up front like most. This first year, we wanted to realign the premium equivalents with the actual liability, which we've done by moving the health care cost and the spend from $36 million down to $24 million and saving taxpayers, if you want to use that terminology, about $12 million in this calendar year relative to what we did last calendar year. So we think that's a pretty significant achievement. And then what we're doing forward, we've built the health care delivery system, really is what LFUCG has been able to do, by having your own health center as well as your on-site pharmacy. And now what we want to do is integrate all the different components of that health care delivery system from the retail health care sector space, the Samuel Brown Center, the on-site pharmacy, and also ramp it up with other wellness activities. I actually think that we do have a common definition of wellness. And probably the purest definition is getting people involved in wellness activities, moving from inactive to active, nutritional lunch and learns, knowing your numbers, health risk assessments, biometric testing, and giving employees us teachable moments because we engage them in wellness activities. And then on top of that, the things that we've got going with your health care delivery system is to really get after your frequent flyers, which are your diabetic population, pulmonary disease. So you have built out a very robust, dynamic health care delivery system, and it's putting all these other pieces on there, including incentives to drive the types of behavior we want in certain wellness activities. So this year it was a realignment to get the premium equivalents aligned so we wouldn't have a $12 million overspend. And now we've got our platform in place, and conversations are happening with HR and our team on a weekly basis, and some of the council has also been involved in those discussions, and we look forward to keeping on and expanding the opportunity. Thank you. I just want to give one example. But the wellness has been going on because we have a gentleman that came to see me. I will not mention his name. He's well overweight. He got him on a program. He's lost 30 pounds. And he has come back and convinced that thing that saved his life. And he continues to lose weight. And it was set up by these folks here to tell him what he had to do and what he's doing. And he continues to go in every two weeks for a checkup, get his blood pressure checked. And it is ongoing. And he's not the only one. There are other people that have been doing this. And all I hear is a good remark about this. And since the pharmacies opened up, everybody's been complimented on both of them working well together. So the wellness has been happening. Any other questions or comments? Okay, we'll move on to the Budget and Finance Committee referrals. And if any committee members would like to discuss, modify, put on or take off any of these items, please let me know. And Vice Mayor Gordon, your first up. Thank you, Mr. Chair. The item of local vendor preference, it was to go back to the reinvigorated purchasing and procurement task force, and I wondered if anyone knows if they have started meeting again. Do you or Paul know? I don't know. Because it's now been October 2010, so maybe, Mr. Chair, you could check on that. Okay. Thank you. All right. Any other items? Any other new business, old business? And motions are adjourned. Second. Thank you, sir. Okay, any discussion? All in favor say aye. Aye. What?