Rising health insurance costs and the tax rate were among the topics of discussion for the Key Biscayne Village Council at their first budget meeting on Sept. 11.
Perhaps the most talked-about item on the budget was the increase of 31 percent for life, health and long-term disability insurance over the previous year as well as a 10 percent increase in property and liability insurance.
Michelle Gomez from National Marketing Group, the village’s health insurance broker, said that the cost increase was necessary because of several large employee claims. She pointed to several cases of employees who had ongoing claims that had reached hundreds of thousands of dollars in medical claims including one case where the claims had reached over $800,000 and counting. Currently, the medical loss ratio for Blue Cross Blue Shield reached 260 percent; this meant that Blue Cross was paying $2.60 for every dollar for the village paid towards its medical insurance.
The village approached several providers to seek lower rates, including Aetna, Cigna, Humana, Neighborhood Health, United Health, AvMed, but all of these declined to quote.
Village Manager John C. Gilbert said he and his staff explored the possibility of forming a coalition with other newly-formed municipalities like Pinecrest as a way to decrease their healthcare costs but this would have had a negative impact on the costs that other municipalities spend towards their healthcare plans.
Another option would have lowered the healthcare cost increase to roughly 6 percent (as opposed to 31 percent) but the deductibles would have skyrocketed for employees, reaching $3,000 for single employees and $9,000 for families. The council members said this would be a significant burden for village employees and this plan was not considered viable.
While the increase is significant, Gomez said that Blue Cross Blue Shield had initially proposed a 53 percent rate increase but that through tough negotiations and implementing initiatives like a health fair and providing medical risk assessment forms for employees, they were able to negotiate a lower rate.
The 10 percent increase in property and liability insurance was attributed to factors such as higher values for village-owned property and an increased number of village-owned vehicles.
While many local governments have been cash-strapped, Key Biscayne is maintaining a significant budget surplus this year. At the current tax rate of $3.20 per $1,000 in taxable value, the budget would have a nearly $1.7 million surplus; money from surpluses goes into the General Fund. However, several council members asked the Council to consider lowering the tax rate.
If the village were to lower the millage rate to $3.10, this year’s surplus would amount to $1.1 million under the budget as proposed by the manager; if the rate were lowered to $3.00, there would be a $523,000 surplus.
Councilmember Michael E. Kelly advocated a lower tax rate and also balked at conservative estimates for projected revenues from sources like fines, which in some cases were projected to have large drops in revenue compared to the previous year. He suggested that these overly-cautious estimates don’t reflect the typically higher revenues that end up being taken in, which often leads to the large surpluses every year.
“Every year for 20 years, we’ve collected more money than we spent and that money just keeps accumulating and accumulating and now in our CIP (Capital Improvement Plan), there’s $8 million unattributed to projects and that’s over and above the $16 million that is attributed to certain things ... so the idea that we’re going to put our village at risk by lowering the millage [tax] rate is nonsense,” Kelly said.
Council members tentatively agreed to keep the rate at $3.20, but planned to discuss the matter again at their final hearing next week.
Another point of contention were the budgets for various line-items that had large amounts of unspent funds this year but were maintaining the same budgets. Money unspent by departments does not rollover into the next year and is instead applied toward the General Fund.
One specific item was the Youth Council, which several members suggested had been unsuccessful in recent years and had a large amount of unspent funds this year. While plans earlier this year had called to eliminate the council, the current plans call for a reduction in public funds contributed by the village while private sources of revenue from a local foundation would help fund the remaining necessary to still maintain the organization.
Despite the significant surpluses, council members were generally keen on reducing costs wherever possible. For example, the council decided to switch phone systems from traditional landlines to more advanced Internet-based phones, which would reduce phone costs dramatically and also give access to their numbers from off the island. Vice Mayor Mayra Peña Lindsay suggested that the council wanted to maintain the same level of services Key Biscayne residents enjoy while still keeping costs low.
“We want the Ritz-Carlton type service. It’s a model here in the village.”
While many points were contested, there was no debate on salary increases for village employees. Non-union employees, general employees and police will all see an 0.9 percent increase in pay; in addition, some police and fire employees will see a 5 percent step increase and general employees will be eligible for a merit increase that will amount to up to 4 percent based on performance evaluations.
The final budget meeting will be at 7 p.m. on Tuesday at Village Hall, 88 W. McIntyre St. The new budget year begins on Oct. 1.