Westminster May Switch to Self-Insurance on Liabilities

Faced with dwindling income and possible cancellation of insurance, Westminster City Council members are considering self-insurance, which would make the city the 13th in Orange County without a liability policy.

“We’re paying an awful lot of money and not getting anything out of it,” Councilman Frank Fry Jr. said at a meeting Tuesday night. The council also was warned by City Administrator Chris Christiansen that money is tight and major changes are needed.

The city is insured for $5 million in liability under a policy that covers 10 other Orange County cities. But city officials fear that Pennsylvania-based Planet Insurance Co. will not renew the city’s policy or will increase the premium.

If Westminster decides to become self-insured, it will save the $366,000 premium for the policy that expires in December.

Other Costs Involved

But the city still would need to pay for a claims administrator and attorneys’ fees, Assistant City Administrator Don Anderson said Wednesday. Some self-insured cities in the county have liability reserves ranging from $240,000 to more than $2 million. Others are so new to self-insurance that they have yet to allocate reserves.

Just this week, Anaheim, Santa Ana, Garden Grove and Costa Mesa became self-insured. Some officials of those cities said their carriers did not renew the policies and they could not find another company to continue the coverage. In other cities, officials were forced to “go bare” after insurance carriers raised rates to an unaffordable level.

Buena Park, Fullerton, Huntington Beach, Seal Beach, Placentia, Brea and Newport Beach became entirely self-insured earlier this year, and Orange went bare in December.

Westminster officials also are considering other alternatives to reduce the city budget. Christiansen told the council that because 79% of the fiscal 1986-87 budget consists of expenses for personnel, any cuts would have to come from salaries, benefits and other employee costs.

Elimination of Jobs

Christiansen has recommended eliminating three paramedic jobs and three other general positions in the Fire Department but adding four positions to fire prevention, which he said has the potential of paying for itself in the long run.

“I’m painting a very dark picture because it is a dark picture,” he said. “We need revenue.”

In his proposed budget, Christiansen also recommended elimination of ongoing or refresher training for city employees. But Councilman Elden F. Gillespie said less training for police officers and other public service workers could result in lawsuits and higher costs.

Robert Huntley, a consultant hired in January to examine the city’s financial condition, said alternatives include hiring outside help to take over various departments, such as county handling of police and fire services. But he noted that “the potential for operational savings is grossly inadequate to consider this as an immediate and complete solution to the problems facing the city.”

Revenue Source Sought

Increases in business taxes and fees also should be considered, he said, but the major emphasis should be on finding new sources of money.

A drastic alternative mentioned in Huntley’s report, dissolving the city, is “not realistic at all,” said Westminster Finance Director Jim Antoniono.

Income has fallen short of expenses since 1981, and Antoniono said the biggest disappointment has been the sales tax. In 1984-85, Westminster received about $7.6 million from the tax, but that figure dropped to about $7 million in 1985-86.

He said reserves will cover an estimated $1.2 million gap between income and expenses in 1986-87.

Antoniono added that the elimination of federal revenue-sharing funds, which brought in about $480,000 in 1985-86, will be difficult to make up. Westminster officials expect to get another $63,000 in 1986-87 before the funds are eliminated.

Westminster, Huntley said, compared poorly in a survey of revenue and outlay for citizens of 17 other California cities.

For example, the city’s average general revenue is $196 per resident, compared to an average of $406 for the other cities. The city spends $211 per resident compared to a survey average of $398, he said. And Westminster, with a 1980 population of 72,500, has four employees per thousand residents, compared to seven per thousand for the survey cities.