2003-01-08 CC Packet - Laserfiche WebLink

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do so though, we'll need to have a strong fund balance to support that retained risk. Again this year, the LMCIT Board further strengthened LMCIT's financial reserves so that we'd be able to handle increased risk if necessary, but it's possible we'd need to strengthen them even further in the future. That would mean retaining some funds that could otherwise be available to be returned as dividends. The bottom line, though, is this: The most important factor that determines whether LMCIT can return a dividend in any future year and how much that dividend might be is what cities' losses turn out to be. F or purposes of financial planning, here are the key points to keep in mind: It In preparing city budgets, don't rely on there beingfuture dividends. LMCIT will return funds that aren't needed for losses, expenses, or reserves, but we can never guarantee how much if any unneeded funds will be available to be returned in any future year. · The long-term trend is likely to be for smaller dividends in the future. As we've reduced overall rate levels, the safety margin in the rates is smaller. That margin is what produces the dividend iflosses come in at or below projections. Because LMCIT has been able to return sizable dividends for many years in a row, some cities have begun to build those amounts into their budgets. If your city does so, make sure you have a plan for what you'd do if there is no 2003 dividend or if it's substantially smaller. The LMCIT work comp program's recent history is a good illustration. Work comp members received dividends each year from 1997 through 2000. But because of rising loss costs, that program has essentially broken even since then - which means that no excess funds have been available to be returned as a dividend to work comp members. We'll do our best to run the program as economically as we can. LMCIT will return to the members any funds that aren't needed for losses, expenses, or reserves. But we can't guarantee that there will always be a sizable dividend, or any dividend at all. It's important to keep that in mind when you're doing your financial planning. Those uncertainties aside though, we want to congratulate member cities on another successful year. None of this would be possible if cities hadn't put the effort into controlling losses and made the commitment to cooperating through LMCIT. If you have any questions or comments, please feel free to contact Pete Tritz or Ann Gergen at the League office, or any of the members of the LMCIT Board. '"' .J