Government Performance and Finance Committee - Regular Meeting

I'd like to call the order

if the government performs the finance committee meeting of 10/21/2025.

Clerk, would you please call the roll?

Vice chair Bushnell?

Present.

Deputy mayor Daniels? Here. Council member Rambaugh? Here. And chair Heinz?

Here. Alright. Moving on to public comments.

So if

you please read.

Request to speak during public comment for items on the agenda, please sign up in your phone. If you have not done so already speaking virtually, please press the raise hand button near the bottom of the Zoom window or star nine on your phone. Your name or the last four digits of your phone number will be called out on a description. Alright.

Clerk, has anyone signed up

to speak

virtually or in person?

Neither. Alright.

I would have one vote for a comment.

And moving on to briefing items. The first item is a city insurance program, and Luis Reynoso, resume.

I'll turn it over to you.

Good morning. Again, for the record, my name is Luis Vangoso, the risk manager of the city of Tacoma, and I'm here to provide a very high level overview of the city's insurance program. No info it's it's an informational briefing only. No action is required. So we don't have the presentation up there. Sorry. There it is. Next slide. And then next slide. Thank you.

So from 2023 to 2025, the city purchased 18 different policies for property and and cash flow policies. We have many different products that we need. We have commercial property, insurance, excess liabilities, cybersecurity, excess workers' compensation. The city owns approximately 20 drones. We have to purchase insurance

for it.

Ocean marine fleet fire boats, and our other smaller policies. This is a truly a team effort that involves all city departments. We start the process of renewing policies between two and three months before the policy renews. So we start collecting information from different departments, which then we provide to our insurance broker, and they are in charge about marketing the policies. Policies.

So they go out to the market. They provide all the information, underwriting information, loss history, and what we need in in terms of coverage. They conduct benefit cost benefit analysis for us, then they negotiate the terms with the insurance companies. And finally, they find the policies for us. Slide.

So unfortunately, the cost of property and casualty coverage has increased significantly for the last seven seven years. We've had a very hard insurance market, which is defined by demand and supply. Right? So there are too many insurance companies who are willing to write public entities, and those that do charge a high premium. That's that's the bottom line. There is no clear indication that the market has turned the corner. However, the increases are slowing down. I'm not saying that the there are no more increases. They're just as

as they used to be.

Next slide.

So in 2000 the latest policy renewal, just the premium for general government for property insurance was $2,600,000. That provides coverage for buildings and building contents. The city has a coverage limit of $500,000,000 with a 150,000 self insured retention, which is a deductible, basically. So we pay the first $150,000 for a loss, and then the insurance company pays anything in excess of that up to half $1,000,000,000 with some exceptions. For example, for flooding, there's a supplement of $50,000,000.

For earthquake, there's a $10,000,000 supplement and a 5% or a $250,000 minimum deductible. Next slide, please. There are a lot of challenges right now. Unfortunately, climate change being probably the most important one. In 2024, there were 27 individual weather and climate related disasters in The US.

These are the ones that the government keeps track of that exceed $1,000,000,000 in damages. So the total for 2024 was over a $180,000,000,000. This is a factor that affects everyone pretty much. So insurance companies are there to make a profit, and if they can't, then they're gonna increase the premiums, the rate they charge consumers. There's a lot of economic uncertainty every day. I read a paper, and one day it says, you know, unemployment is not too bad. The next day it says unemployment is really high. It's getting worse. And the same with inflation. Depending on on how you get your news, inflation could be higher, lower, lower.

2%, could be 4%. And then for microeconomic factors for the city, we are looking at claim frequency and claim severity. So frequency is the number of claims and often we have claims, and the severity is how large those claims are. And as you know, it's been difficult to get here. If you go to the next slide, please, you'll see this is a graph that I took from the Internet, and it shows both billion dollar.

Next slide. So liability insurance protects the the city when we have house damage or injury to someone else or their property. Just the premium for this particular coverage for general government was $5,100,000, and we have coverage limits of $20,000,000 in excess of our $5,000,000 deductible. So $25,000,000 total. Next slide, please.

Same thing. We have many challenges. Reducing short capacity, which I I talked a little bit about later before, and I have to grab later to go more into more detail. But, again, there's a certain number of insurers that are willing to write public entities. Not all insurers that can write insurance for public entities do write it.

So that's the problem. Draving jurisdiction, as you probably know, there are no caps and damages in Washington state. So if a case goes to court, there's a trial, there is no limit. Sky's the limit. Other jurisdictions, other states have a limited time for someone to file a claim against the municipality. And in Washington state, you have three years to file the claim and then pursue an action, pursue a lawsuit. In California, for example, you have one hundred eighty days to present the claim, and if you do not, then you can

no longer pursue it. You cannot file a lawsuit.

You only have that freedom of opportunity. There's an expansion of municipal liability in Washington. Some courts, some judges are reluctant to make the right call, and some judges are ignoring established precedents and not allowing dismissal of a claim. We have joint and several liability in this state, which is known as the deep pocket rule. So if there are two defendants, plaintiff is not at fault.

If one of the defendants is found 1% responsible for the damages, then they have to pay 100% to the plaintiff. I'm gonna say that we we need tort reform. Know, lobbying, it's it's something that maybe you should consider doing. Social inflation, the larger reports. Ten years ago, anything in excess of $10,000,000 was considered a nuclear verdict. Unfortunately, we are seeing now verdicts in the amount exceeding $100,000,000. Not 10.

$100,000,000.

So social inflation. Third party litigation funding is a big problem. We have now individuals, entities investing, paying for the plaintiff's case. And when when the plaintiff recovers money, they actually get a percentage of that recovers. There is no loss against it, and it's not regulated, unfortunately.

I think any efforts have failed, and I don't believe there's anything pending right now to prevent that from happening. Next slide. This is the graph I was talking about. So this is over the last ten years. We had 27 markets that were willing to write public entities.

It is down to about 17. But out of those 17, only 10 actually do write public entities. So that's the problem. In terms of capacity, it's down from $375,000,000 to 44 and a half million dollars. Just a few years ago, I I believe it was 2018, the city had one insurance company to the right, three separate waivers.

It has they had subsidiaries. So we had $20,000,000 in coverage, and they were all written by the same insurance carrier. Now the last renewal, they don't wanna write more than two and a half million dollars in coverage. So now we have to go to five to six. TPU has, I believe, 10 different carriers because they're not willing

to do $5,000,000

coverage or $10,000,000 coverage. Next slide. So this are the insurance costs for general government only. And as you can see back in 2018, Citi paid $1,700,000 for all the policies it had. The latest renewal, $8,700,000. That's a fivefold increase over seven years.

Any questions about this or yeah.

Any questions? That's what I'm all.

Unfortunately, I know a lot about court reform because my husband was a personal injury attorney. But I'm curious. Other cities and how they feel about this. Like, I don't see a comparison between, like, Seattle and, say, Yakima and Spokane on what they're paying to get it and that would be helpful to understand where they sit in any kind of reform. Like, if Seattle says, no, we're not gonna do anything because of the personal injury attorneys or the attorneys that do, like, that do litigation.

I just I wanna understand this conversation is a really good conversation because, basically, if we got a claim that was over $70,000,000 or $80,000,000, we would not have the money even in reserves to cover that. And that would mean we would have to go bankrupt like other like Cle Elum did. And so I'm just curious what the what the feeling is amongst other cities if you have an idea. And if you don't have an idea, I'd love to have a follow-up at some point to find out because I think that I think this is a good conversation. I also wanna say in other states, they don't have Tory form, And it's really unfortunate when your child is the one that's scalded by the hot coffee, that somebody on the counter hit your kid with it, and they have facial burns for the rest of their lives, and you can't pay to fix that.

So there's a reason to have tort reform? Yes. And there's a reason to protect our community. And so it's like that fine balance of figuring out, like, what what's extreme. And I think that that's what you're talking about is some of these cases seem to be very extreme. And the idea that what did you call it? You call it what did you the idea that that you can just go ahead and pay 1%. What is that called?

Yeah. It's we probably. Show it in several income.

Yeah. So that that is that is I mean, that's what's hurting us. Right? It's the idea that there's just a little bit that you're paying everything. And I think that, like, there there should be something that happens. I also don't wanna be the council member that says, hey. Go ahead and look at this. But I also think it's necessary that we sort of figure out because I think that there's gonna be other cities and other municipalities that struggle to get insurance. And they're gonna choose not to have insurance, and it's gonna take them down. So and at the end of the day, we want to have insurance to protect our community and protect the buildings here and the structure and the things that happen here for, like, the tidal wave that might come.

You know? I'm not kidding. I'm serious about climate things. And so I appreciate this job you have, and I appreciate that you have that what you brought forward. But I I do wanna know what other cities are thinking.

Wayne, I don't have any numbers for you. I do know that the cities of Spokane, Seattle, Vancouver, larger cities like Tacoma, they're self in they're self insured, which is. Yeah. And the smaller cities are part of risk pools. So there's a RISPO RISPO, but there are actually a couple here in the state of Washington. The director of one of the municipal RISPO was recently interviewed by TMT to come on news treatment about this, and she mentioned that this is not a one city problem. This is not a good state. I mean,

is What service is for?

Washington City's insurance authority.

So they, like, all buy into that? Correct. Yeah. AWC?

Okay. They have 160 members approximately.

And is that okay. So then do they have pay claims that come as big as our claims?

Yes.

Okay. And it's covered through this risk pool. Okay.

So all these municipalities got together, started this risk pool back in the eighties. They they pay a premium assessment every year to the risk pool, and they handle the claims for them.

Okay. I appreciate that information. Thank you.

Yes. RSMA is the name of the. A. W. Correct. Yes. And that is something we've faced challenge with As a team member, some of the challenge we've been running into is cost for insurance for

all these cities to be able

to see the claims going out. So it's it's not just

a city that's going this year. It's a state of Washington and also a national issue. So okay. Any other questions before we

I have a couple more slides. Yep. Next slide, please. Just a summary again. The average annual increase for the period of 2019 to 2025 is 26.7%.

The premiums for property and exit labeling coverage this year was 7,800,000.0, which is 90% of the entire premiums that we paid. CBL exit liability coverage increased 36.7% from last year. And assuming an annual 15% rate increase, which I think is slow, we can expect to pay over $10,000,000 next year for property and casualty coverage and $11,500,000 in 2027. The the most recent property we can also again, property covers damage to buildings and its content and contents. We received a proposal for a combined property program for general government and TPU from one carrier that would have provided about $700,000 in net savings.

However, we did not have enough time because some of the the property programs TPU and general government have right now have some embedded coverages, and we would have had to purchase additional policies, which we we did not have time to do. So but we will continue to look into it for for the future.

Just a reminder. So in our next cycle, 2627, we're looking at $21,000,000 being being charged. What was the what was it, say, five years ago?

Can you go back to the previous slide?

Yeah. Can you go back to the previous slide, please?

The previous slide?

But the

bar turned up.

Yes. One

second. Sorry.

There we go.

One more.

One there we So 1,700,000.0 back in 2018, 2019? Correct. So, I mean, I do think that's important information for the public when they ask. Why is the city struggling with the budget? And, you know, you know, what's going on here? Well, we've seen a 10 x increase in our insurance. Well, not 10. Five x increase in our insurance premiums in the last since 2018. That's more than 1% per year, I would imagine. No. It's more

than 1%.

You know? So I just I think that that's a important piece of for people listening out there that ask us about our budget all the time. Like, I think this is really critical for people to keep in mind, not only the cost of any kind of litigation, but

just the insurance policies. Yeah. Thank you.

Alright. So slide number 13, please. One of the functions my division is in charge of is actually recovering damages. When someone runs into a building, a whole, a sign that the city owns, we pursue subrogation. That's not subrogation.

So we try to recover money. And over the last few years, we've had some good success. So as of 09/30/2025 and for the period 2018 to 2025, we have recovered over $2,700,000 in damages. The annual average is about $337,000 So that's, I guess, that's the good news. Bad news is that we actually recover about 40%, 4¢ of the dollar.

So damages are probably because people don't carry insurance or don't carry enough insurance to pay for the damages they cause. And that ends the presentation. Any other questions?

Great. Questions for our presenter?

Vice chair? Thank you, chair. Thank you for the overview and kind of the stark picture that we're looking at here. My question is in regards

to the earthquake

limit liability. It looks like there's a maximum of $10,000,000. Considering the cost of construction and buildings in general as well, that seems it appears to be kind of low, especially for having a large if there's a large wind, there's a larger earthquake that is gonna occur. Maybe that's why it's it's a it's a lower perceived lower limit because there's an expectation that a larger like, we'll hit. So I'm just kinda curious of how we landed at that being the right number.

Yeah. This has been on the books for a few years. We could always revisit, and I'm sure the insurer will be willing to provide additional coverage. That will cost. 20,000,000, but it's a higher cost. Exactly. But that was it's been 10,000,000 for at least seven years.

Yeah. I like, if when when the big one hits, right, and we have many buildings across the city, $10,000,000, I don't think it's gonna go very far. You know? I I think about all, you know, police stations and fire stations, you know, the the other facilities, this building. Like, I don't we're definitely gonna need to to

get additional help beyond that for sure.

Yeah. What I've heard when I was with a former employer as well, you know, FEMA's For now. The way things are now, I don't know if FEMA's gonna be around for five, ten years. So, yeah, maybe we start with other options.

Maybe even a maybe even a year.

Let's see.

And then separately, and I don't know if this is for you, but for us, I think maybe including joint severability. I don't know if that's in our government our document, our legislative affairs document. I think that might be something that, you know, aside from revenue challenges, you know, we should tackle expense challenges. And I think this is one of those things that we could work with, not just the city, but also other jurisdictions, you know, in any these other Mhmm.

About doing a big push on kinda

at least reexamining what joint and cerebral lipoma looks like in the state. K. We'll maybe we'll mark that down.

Okay? I follow-up with Alex about that. Yep.

Great.

Any other questions? Oh,

I I just have a comment in it that we recover 4¢ on the dollar when we are damaged by another party. But, yeah, when we damage another party, we pay a

100%. Right? I mean, we stand behind on,

which is just part of being government, but it's also a really big reason why costs are so much greater because we're not gonna be irresponsible.

Yeah. No. I think the presentation's really good. I I got my previous point, which is just the increasing cost of the city. Now the way the AWC, ours, and they works right is the city's kind of insurance policies that you pull together. Right? We're part of the we have a risk factor because we own a lot of things in the city. Power company, environmental seal, sewer.

GPU separate. Correct. But, I mean, we sorry.

Even apps, we still own a wastewater treatment plant. We own a bunch of other pieces, and I would imagine if a large enough lawsuit came our direction, we would probably be on the upper part of TPU,

at least some of it, maybe.

Well, we are a part of TPU of the city of TPU. I mean, you are a backstop.

Critical critical is that whole bank of credit of the city is why it operates. So, I mean, I think that just as a, you know, as a way of thinking about this and for peep for just my colleagues in public, it's just when you own a lot of things, your liabilities expands exponentially. And so that is something that we're we're in a unique space versus the ABC side of the house where, you know, they're these smaller cities. They're contracts that means they

don't own. Have They their own apartment apartment. They don't have their own

lots of things. So it it it definitely puts us in unique position of why this is

a continued cost for us.

So that was my comment, and thank you for

answering my questions real quick. Yeah. Thank you. Alright.

Next up is presentation number two, which is Fatbeam LLC telecommunications franchise at Lehman. And I'd like to call on I love these names, Jeff Leders from

Office of Communications. Yeah. Can't read the book. That's for

sure. Oh, yeah. Where do we come

up with this? Yeah. It's a fat beat.

Well, government performance finance chair Heinz, and council members. My name is Jeff Leders. I'm the immediate communications office division manager, cable communications and franchise services. Before you today is a next page, please, is the request for ordinance for a franchise agreement between FATBEAM LLC in the city of Tacoma. That being this headquarter in Coeur D'Alene is already operated in a number of Washington cities, including Fallsville, Pasco, Auburn, Parkland, Bonnie Lake, University Place, Mammoth Place, and Kingston.

And as always, due to the Auburn case in 2001, state law does not allow us to have purchase. Next slide, please. We've negotiated a ten year term, allows the provider to operate the right of way, requires the necessary bonds, letter

of credit, and insurance required by title ten sixteen entitled, you know, title 10 of the code.

A little insight into this one, speaking of TPU, is that they were actually doing some work with TPU and realized that

we need after the fact,

and so they're seeking it now. Next page, please. And their their plan is to offer residential services and one gig symmetrical up to eight gigabits enterprise and government at clients, and potentially dark fiber services. Next slide, please. So city council consideration, the first reading would be next week on Tuesday. Final reading

would be November 18. Publication, November 20.

Next slide, please. So staff recommends approval of the LLC telecommunications franchise The

city for the that the government performance and finance committee for the council. Consideration and approval.

K. We

also have a second one of these today too. So

Just just quickly, I think last time we've been talking about these, I talked about the right of way.

Yeah.

And about a fee for because we talked about too many things in there. Could there be a fee tied to the right of way?

Not currently without changing state law.

Okay.

Because what happens when a telecom provider registers with the state of Washington, the UTC takes a fee. And then they made a law that said municipalities and counties cannot take a fee. But there is a there's federal law that allows to call them public. They get a it's it's it's a

fee for service. So just

Yeah. They basically at cost, and they set the cost. The state does. It's, like, $2.75. I can't remember if that's an annual fee, $2.75 per poll. But, anyway so

I just I'm concerned about I guess, chair, I'm concerned about the right of way being so full of all these things. Right. And, like, there's accidents on Lane B Drive all the time, and we're having to fix all of these things when they when something comes down. I just I think that it would be a great conversation how we look at the state and and figure out what the cost is to the city Yeah. For how if there's another cost here that we're not getting to recover, and I just wanna figure out how we recover that cost.

Well, and that's a point where I'll tell you, the red is a finite

amount of And

I'm gonna ask you about it every single time.

You got natural gas in there. You've got electric in there in some cases. You've got all the KTV and telecom products. So at some point, congestion is gonna be

Yeah. So thank you so much. If the chair can have that put down for something to follow-up on, appreciate that.

Sure. Thanks. Yeah. Sure. Okay. Just a quick one.

Thank you for this. I'm curious as to it seems like we're getting a lot of use lately. Has something in the market changed to precipitate all of this? And are these guys gonna be ISPs, or are they just laying out the infrastructure to lease? In

this case, they're they're planning to go. It's my understanding. They wanna compete in the city. They've already had some, like I said, some working relationship with and that kind of treat them to move in this direction. There is another provider that you easy fiber that we just talked about last time, and they have networks already in place in Lakewood, Maine, Kent, and.

And so getting access to Tacoma will allow them to tie it all together, you know, in this region. So it makes sense in that in that vein. And then the one that's coming after this, there's a different explanation.

Okay. I

think, you know, points will take it as well as I'm I'm happy that there are people trying to compete in our space. Yeah. But space is limited. You know, I think that they're and we wanna make sure we're fully utilizing the public right of way as as best as possible because there might be other technologies or utilities or things in the future that, you know, once you fill it all up, that's it. Right. So Alright.

Any other questions? Alright.

We'll do the first motion.

Move forward to propose telecommunications franchise agreement orders with Fatmeam LLC to the whole city council for consideration.

Second.

To be

the second, all in favor signify by saying aye.

Aye. Aye. Opposed? Motions are adopted. Alright.

Next one is let's see about number three, which is Forge Fiber thirty seven LLC, telecommunications franchise agreement.

So GPF secretary Hines. I'm the city council members. My name is Jeff Leders. I'm the communications office, division manager for cable communications and franchise services. Before you is a request for ordinance for a telecommunications franchise agreement between Forge Fiber thirty seven LLC AT and T and the city of Tacoma. Next slide. There you go. Forged Fiber is wholly owned subsidiary of AT and T. Forged Fiber is a new provider to the city of Tacoma. However, AT and T entered into a purchase agreement to acquire certain fiber assets within the city of Tacoma Public Right of Way.

Those assets were purchased from Lumen. So the understanding I have at the moment is that all of the assets except level three, which Lumen is not, that would stay with them. But everything all the other fiber that they own in

the city will go to AT and

T as part of the sale. Or whatever will be the name of those. So they're headquartered in Dallas, Texas, and they're seeking a franchise to operate this previously owned building construction. And, again, due

to the Auburn case, there's no franchise leases part of the.

Next slide. It is a ten year term. It allows the provider to operate on the right of way

and requires all necessary bonds that are granted insurance required by title 16 b and title 10. Next slide.

Forged Fiber will provide residents and small businesses with broadband service along with wholesale broadband service. Next slide. Same schedule as the previous one. First reading will be next Tuesday.

Final reading, November 18. Publication, November 20, and effective date.

And next slide. So staff recommends approval of the four fiber thirty seven LLC eighteen twenty telecommunications branches agreement with the

city of Tacoma for the request of the county for the city council Okay.

Alright. Any questions for today? My question would be if someone already has a franchise agreement and then they are purchased by someone, does that do entity make the company get a franchise agreement, or can they operate on a new?

In most cases, there's a stipulation in the agreement, in the franchise agreement that says if it's a transfer Okay. There's a percentage, like, it's about 5% or something, then city council gets to reconsider. Gotcha. Okay. Yeah. Perfect. But in this case,

AT and T's turn

I mean, Lumen didn't have a franchise because they were granted statewide authority because they were here before when when it was telegraphed. Yeah. They were there. They were here before it was a state, before it was a city. So they got grandfathered in. And now AT and T has to have

a franchise because they weren't here. Gotcha. Okay.

One clarifying point that I'll go back to councilman Robert's question about right away. So in this instance, they're assuming all of the infrastructure in the sale. So there's unless they build out new parts of the network, all of the red all

of the infrastructure's already in the red. So there won't be an additional other than two. Expand or or add new customers. Do they have to tell us that?

Well, through permitting. You know, because they're if they're doing underground work or or they find an area of the city that's been built up and in servicing that they want to, then they would have to come in to get a permit to do that work. So that's how we would find out. But this in this branch of agreement would give them the right to work in the right way throughout the city with the permit. So

Great. Alright. If there are no further questions, vice chair.

I move forward to post telecommunication franchise agreement ordinance with Forge Fiber forty seven LLC to the Fulcet Council for consideration. All in favor, signify by saying aye.

Aye. Opposed? There. There's just gonna adopt it. Thank you, Thank you. Alright.

Next up, we have topics

for upcoming meetings. I like to

call it Patrolo, executive liaison, topics for upcoming meetings. Okay. So our next meeting is November 4. There's a slight change to what's printed in your agenda. We moved the monthly budget date down to the eighteenth since there are already three other items that might be lengthy on there with the recycling code and special permit recycling update. So you recall from last year, we kinda changed and had people get certifications to be recyclers. And so we thought we'd give you all an update on how that's going in its first year. Then the water folks are coming to talk about water system development charges and then the power folks, I believe. No. Shane Pettis.

Sorry. Environmental service come to talk about small quantity generators. Then the eighteenth, Danielle Larson's coming to talk about some code changes we need to make to TMC based on the state law changes related to what folks are paying re sales tax retailing with janitorial services and IT services and stuff. We need to update our code related to that. And Jeff Leaders will be back with another telecom franchise. So now we're getting down to the last two meetings of the year. I think we have four left. So Great. Alright. Thank you. Are there any other items of interest? Seeing none, I'll entertain a power motion. Next chair.

Move to adjourn. Second.

All those in favor, keep aye

by saying aye. Aye. Closed.

Yeah. We'll start off with this adjourn. Thank you.