Faced with a persistent deficit in its self-insurance fund that has now hit $28 million, the city will consider setting up a trust to help close the multimillion-dollar shortfall.
The practical effect of the trust is the city will have to hand over money to the fund to pay claims and then can no longer take it back.
Finance Director Kelly Gottschalk said the city must set up the trust - which would be run by Gottschalk and four people appointed by the council - or risk no longer being able to self-insure because its regulators won't let it.
"I'm not sure we can continued to be self-insured without it," she said.
The City Council heard a presentation Tuesday and is expected to vote on the trust in June.
The city also will hire an actuary to estimate its future liability and deficit, which rose from $18 million in 2009 to $28 million in 2010. Gottschalk said she doesn't believe the city's future liabilities increased that much, and that's the reason for hiring an actuary.
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The self-insurance fund has been in the red for each of the past 10 years, paying out more in claims than the city has put in. The city had a plan to charge more to city departments to help pay down the deficit, but those plans have been abandoned given the city's ongoing budget crisis.
Because the fund has no money, the city couldn't use it to pay the $1.75 million settlement to the family of an 8-year-old boy who was electrocuted at Reid Park in 2008. Instead, it had to borrow money from another fund to pay it.
The city has excess insurance to pay anything more than $3 million for each liability claim and more than $1 million for a workers' compensation claim, but the city is on the hook for liability settlements up to that amount.
In other business, the council voted unanimously to scrap planned increases of residential garbage fees of 25 cents for 65-gallon garbage cans and shared-use cans, and 50 cents for 95-gallon cans.
All monthly garbage fees will increase 34 cents to pay for groundwater protection. Commercial garbage fees will rise by 2 percent, and landfill fees at Los Reales Landfill for residential self-haulers will rise by 50 percent. The self-hauler fee would rise from $10 to $15 per load.
Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com
