School Board Meeting – June 27, 2018 (Special Meeting)
Articles,  Blog

School Board Meeting – June 27, 2018 (Special Meeting)

Good morning I’m Missy Bender president
of the Plano ISD Board of Trustees and I call this meeting of the Plano ISD
Board of Trustees to order at 8 o’clock a.m. on June 27th 2018 at the Plano ISD
administration building if during the course of this meeting discussion of any
item on the agenda should be held in the closed session the board will adjourn to
closed session at that time on the board’s behalf I wish to extend a warm
welcome to all who are present and to our web and video viewers we will
conduct our meeting focusing on the district’s two major goals ensure
continued improvement in student learning and ensure efficient use of
resources let me introduce my fellow trustees and staff seated to my left and only person on my left is Sara Bonser Superintendent of Schools everybody else is seated to my right
we have board vice president Dr. Yoram Solomon; trustee David Stolle; trustee
Jeri Chambers and executive assistant to the superintendent, board of trustees Sharon Nowak
we have an item for discussion and action today with closure
required and Randy McDowell our CFO we’ll begin the discussion regarding the
request for proposal 2018-047 commercial property insurance Mr. McDowell>good morning thank you President Bender
members of the board I can’t think of anything more exciting to talk about at 8
o’clock then commercial property insurance and so this is a bid that
honestly we’ve been working on has taken a lot of our time for about the last
three weeks with a couple of insurance consultants it is pretty complex but
we’ve tried to simplify it for you here today
we were notified back mid to late May that the current policy
that was going to be the fifth year of that term had some significant changes
in the renewal in that policy does end on June 30th and so the current
carrier which was Lexington which is an AIG company it didn’t have any layering
with that we’ll talk about later and it was also just with one carrier the limit
on that policy was 750 million dollars total coverage so if we had a claim it
would cover it up to 750 million dollars the wind and hail deductible on that
expiring is one percent of the property value previously that was a hundred
thousand dollars after the 2016 claims it was raised to one percent and then
we’ll talk about the renewal here in just a minute the premium on that was a
just under 950 thousand and that’s just under a six cent rate the year four
policy again the upcoming one would have been the fifth year of that policy and that policy was awarded to INSURICA with Lexington as
the carrier back in 2014 and then it had been renewed three additional times on
the final year of that the renewal that Lexington brought back to us dropped the
limit on that coverage to only 25 million and so any claim we would have had over
25 million it would not have covered anything in excess of that also the wind
hail deductible had been raised to 5% and so in a district like us has a 5%
deductible our total property values are about 1.6 billion and so for every 1%
that’s about 16 million dollars that the district has exposure if we have a
significant it’s typically going to be a hail claim and so on a 5% that would be
about 84 million dollars of exposure to 5% deductible so we get a really big
hailstorm that comes through damages a lot of property the district could have potentially been out 84 million dollars and you know that would
be a significant amount of our fund balance that gives us a lot of exposure the other thing on that as we continue
to negotiate and INSURICA did Lexington was not willing to increase
that limit at all they worked on that for some time also Lexington was not
willing to budge on the wind and hail deductible to come down on that 5% and
so at that point we realized we were gonna have to do something different and
with it being such a significant change we didn’t feel like we could just
negotiate the terms of the previously awarded bid because it was so different
than the bid that had been awarded and so we began a bid process again we had
some insurance consultants working with us the RFP was sent out to over 120
insurance companies and then we had three different phases in this bid and
this is part of what makes it complex it’s a process I’ve never been through
the full three phases but I think when I’ll explain it you’ll see why the so
the first phase the insurance agents of those 120 they could submit an RFP
and they had to request which carriers they wanted to represent which ones they
wanted to submit bids on the reason we have to do that is there’s only so many
carriers out in the market and a carrier will only bid with one insurance agent
and so if you get Travelers which really isn’t even in the market anymore or you get
Munich or somebody like that they will only quote one company and so they get
them locked up and so you can see that that’s where the problem comes in is
there’s not enough of them to go around especially when we look at this layering
that we’ll talk about in a minute and so we evaluated those I’ll show you how
that worked and then we ended up assigning agents to just certain carriers we
evaluated those based on their priority request and their experience with the
different carriers and the reputation of the agency then the next phase the
assigned agents were asked to go out and shop coverage for their assign markets in
ten million dollar limit, twenty five million dollar limit and possibly a
fifty million dollar limit and then they reviewed those we scored
those we had a committee that looked at them with our consultants and then we
had to award all markets to the highest ranked proposer in phase 2 and then in
phase 3 they went out and the intent was to release all markets and so they could
go out and put together the whole plan and we’ll show you what that looks like
so in phase one we received 8 responses out of the hundred and 20 RFPs that went
out so at 8 different insurance companies that responded you can see
those listed across the top here we looked at their experience we looked at
the number of school plots they have commercial wholesale or we also looked
at the volume that they have that’s not listed here and then on the three
different categories they had to list in rank order this up to 6 companies that
they would like to work with up to 6 carriers we went through that process
everyone got their first choice except for Wortham because someone else
had gotten that and then again we looked at volume we looked at rank we looked at
all that and we assigned those markets out and so 7 of the 8 companies were assigned
markets and so we asked them to then go out to market and start shopping and
putting those plans together that were the in phase 2 potentially 10
million dollars 25 million of coverage and 50 million of coverage looking at
different deductibles maximum coverages premiums and so then we had to analyze
that we only received yes go ahead>quick question on the previous slide can you
explain Inland Marine I looked at it and I wasn’t sure what it meant>and so
that’s gonna be a lot of our property that can be things like towers and some of our insurance guys here they
can explain I’m sorry>(inaudible) towers like you said (inaudible audience member)>does that help>(inaudible audience member)>it’s not in the water>I don’t know
why they use marine on that okay so when we looked at those INSURICA
the agent that’s had the district for 28 years really just responded with the
Lexington proposal as the option one on 25 million dollars of coverage they did
give us an option to up to 50 million they had to blend Munich in but they
weren’t even assign Munich that was assigned to another insurance agent then we had
a response from Gallagher and they gave us a couple of options and then we got
three different options from McGriff Seibels & Williams and
those are the agents that are here today Johnny Fontenot and Robert Wagner and so
when we evaluated those and again working with our consultants we
determined that McGriff Seibels and Williams had done the best as far as
bringing us some options and the best value of the options and so at that time
we awarded them to go ahead and proceed into phase 3 where all markets were
released and they could begin putting the plan together and if we go to this
spreadsheet so we’ve got three different columns here so we have the expiring
policy of what we had with Insurica we had the renewal offer that we talked
about with Insurica which is also Lexington and then the plan that we
ended up coming up with that McGriff has been working the last couple of weeks
trying to put this together it with the help of some of our
consultants as well so again the current premium is the nine hundred and forty
nine thousand the coverage that they were able to piece together is five
hundred million dollars of coverage which we think is adequate the premium
on that though does increase up to over two point two million
and that’s really about where we thought it was going to end up we were thinking
two million or a little bit north of that so we went from just under a six cent rate to fourteen point three cent rate and the other we talked about the wind
hail but this one is a two percent deductible and so potentially we could
have about thirty two million dollars of exposure on the hail claim however we
did ask him to look at putting a maximum in place and so we did pay some
additional money to put in a maximum that would cap it at ten million you
never know what that’s worth but we know if we do get a big hail storm that will
save the district twenty two million dollars on that one hail claim so we
felt like that was worth that; that did add quite a bit to the cost another
thing that they were able to include in another coverage is the terrorism limit
and this is optional it’s really outside of that but it would provide up to one
hundred and twenty five million dollars of coverage worth to a million on an
active shooter limit but the premium on that’s an additional thirty nine
thousand that is recommended by both of our consultants and has become
pretty standard in the market now unfortunately>Randy>yes>this is probably just a very
basic question but since insurance is not my game my industry I’m not familiar
with the this a certain practice so we insure our home
you know I’m ensuring that my entire investment in my home is value you know
replacement so that if it’s destroyed I can you know rebuild
so in our expiring policy if our all of our assets are one point six billion
we’ve been insuring at seven hundred fifty million probably I’m assuming
because you figure well I’m not gonna have a total loss everywhere across the
district so is that typical>that is typical on larger districts especially
you know I think what most people would tell you is if you’ve got a small
town school that has two or three campuses and they’re all right together
one storm one tornado could easily take them all out and so you’d want to insure
all that property but the more spread out and the larger you get even if you
had an F5 tornado which is really I think the worst thing that can happen to
a school in this area it would be hard for a tornado to take out
everything and so we do some analysis looking at the placement of campuses and
what their value is and if you did recently if you did see a tornado that
came through how much property could it really take out>so we’ve decreased that
by a third now to five hundred million>that’s right>of coverage>that’s right>so is that in order to make it affordable
kind of affordable>I think that was for a couple of reasons one is the challenge
of trying to buy this much coverage two is to make it more affordable three is
we did look at it we’ll continue to look at that just there’s some tools some
software and some measurements now to really analyze how much coverage do you
need that you can you can look at what a storm could do to your property and when
our consultants looked at that they feel like half of five hundred million was
adequate>okay>good question>and I think what you’re saying is if we suffered a
1.6 billion dollar loss to this district we probably have bigger problems than
insurance we’re not around (inaudible)>you get the entire community is likely>I was
thinking about you know the Harvey situation and you know if that were to happen>
it would still not be one point six
it’s not gonna wipe us out completely>but if it’s in excess of you know this
value then either we make up a difference or we’re in a really bad
situation and we’re looking for assistance>I would expect it would
probably become a FEMA issue if it was that large>okay thank you>okay that a little bit more detail on
that the auto damage limit stayed about the same except it does have a two
percent wind and hail so that’s when our vehicles are parked if we do get a
hailstorm; bowler machinery and we talked about that cap again down here at the
bottom on the hailstorm so some analyzation of previous hail storms and
what it would have caused and so one of our consultants looked at that
any questions on the coverage of the premium you can see how the rate went
from five point eight cents to fourteen point three the five point eight was an
extraordinarily low premium and I don’t think anybody’s seen rates that low now
the fourteen point three is much more the standard especially in the DFW area
and so there’s a couple of really hot spots that have been analyzed
as far as in a high rated hail zone in the DFW areas one of course the Houston and
coastal areas are for other storms and then up in the panhandle it’s also been
rated very high hail storms lately>Randy you use the word layered or is that
what you’re>I’m about to show you layering which is a new concept for me
this is something that’s been going on in the Houston area in the coastal
areas for quite awhile just because the insurance companies don’t want a lot of
exposure and we’ve seen a lot of the big insurance companies that have pulled out
of Texas, Travelers pulled out a few years ago Fireman’s Fund pulled out last
year some of the large ones but they’re really limiting just like Lexington didn’t
want any more than twenty five million dollars of liability and so what you can
see here these are the different layers and so actually it took twelve different
insurance carriers they had to piece took twelve different carriers together to
come up with 500 million dollars of coverage and some of these layers have
multiple companies that are sharing and so for example if you look at that first
10 million dollar limit we’ve got Lloyds in there two different times so they’re
in there basically for 75% and then Star is in there for 35% so it took two
companies to buy the first layer at ten million that’s going to be the most
expensive layer because they’re gonna get the first exposure on any claims so
if you have two different hail storms one comes in at eight million they’re
gonna be responsible for all that you know except for deductible you get
another storm that comes in at 12 million dollars well they’re gonna pay
the first 10 and then the next 2 million would go into the next layer if that
makes sense and so then we’ve got a twenty five million dollar layer above
that or I’m sorry 15 million dollar layer that would take us to 25 then
we’ve got another 75 million dollar layer that would take us up to a hundred
another 100 million dollar layer that would take us to two hundred and another
300 million dollar layer that would take us up to five hundred and then you can
see the companies the different carriers and how those are distributed in each
layer so it’s likes it’s become very complex you can see why they need all
markets to go out and try to put this together>I can only imagine what it
would be like to file a claim you know who’s the first one that you file a
claim with and then you know how does then the coverage>that’s right>you know
who picks up after that>(inaudible) they can answer that it’s really that was one of the questions we had>(inaudible audience member)>so how does it work when you have like a
variety of carriers take at the twenty five million dollar level I don’t know five
six carriers there and the claim is for that amount of money how do you know so
each one of them trying to figure out how does the how do
you figure out how much comes from each>yes so the claim so whatever their
expenses in that layer then it would be divided based on those
percentages that you see (inaudible) right pro rata so if they bought ten percent of that layer they’d be responsible for 10
percent of that expense>okay okay I see>hopefully all that goes on behind the
scenes and we don’t have to deal with that>yeah okay>how many properties do we
have in the hundred year floodplain do you happen to know I mean I see that we are getting flood insurance I can’t imagine we have many properties
in the flood zone do we do you’ll know>I’m not aware of that>we ran the reports I don’t have it on the top of my head>ok yeah>okay so does that help
visualize how this is working out okay some additional terms of the agreement
McGriff is continuing to work on a 250 so we currently have $100,000 minimum on
a wind hail claim that we would be out the first hundred thousand and then the
2% above that and so they’re looking at if we could go up to two hundred
fifty thousand our minimum would it save enough in premium that that would be
worthwhile and so that they’re going to continue to work on that this week if
we do get an option there that our consultants feel like is in our best
interest and can show us that then if you’re okay with that we would like to
consider that it does give us more you know another 150 thousand potentially
exposure on the front end but if we could save enough on the premium then we
think that might be worth it this would be a one-year contract with four
one-year renewals if we can both agree to terms so they would come back with a
renewal offer every year and we would have to agree to those terms if we can
then it would be extended up to four more years and then third we always have
this in our agreements that the district under state law can terminate any
contract if the budget doesn’t allow it it would be hard to terminate property
insurance though that’s kind of a necessity I would think are there any other questions>
so in terms of action we need to take action on the award>
correct>but in addition to that the other item you just mentioned
about the you know an increment of 25 it’s a 250 thousand dollar minimum
with hail deductible>right>you don’t need action on that you just
want like a verbal>well and that’s why I put in here as presented because we
did talk about it here however y’all would like to include that>so I would suggest that we take action
on the proposal that you’ve put before us>okay>I don’t think we need to take action on
the other but just say to you give you some direction is that okay>sure>is that all right okay
all right you might have any follow-up questions about this>
that was great research it’s I looked at what you were sending that presentation
that you’re sending last night and with the exception of Inland Marine that I
didn’t get but other than that looks like you got it all covered
thank you>somewhat when we got to the finish line it all kind of made sense
but it was a learning process as we went>all right do I have a motion to
award the RFP 2018-047 commercial property insurance for property inland
marine boiler and machinery and auto catastrophic insurance to McGriff
Seibels and Williams Inc as presented>so moved>do we have a
second>second>any other discussion
all in favor please raise your hand motion passes okay so on this secondary
item that you’ve mentioned with regard to whether or not the board would like
to see McGriff to continue to negotiate a policy with $250,000 minimum wind hail
deductible given the analysis that you’ve presented
in your opinion you believe it’s financially advantageous to us in the
total picture it sounds to me like that would be something that would be you
know a good thing to proceed on other feedback>I agree>we’ll pursue that>okay so if that develops
then you’ll bring that back>yes>okay very good since we were having this
meeting anyway we have a couple of items on a consent agenda to consider are
there any requests to remove an item or items from the consent agenda for
additional discussion hearing none may I have a motion and a second to
approve the consent agenda>so moved>second>all right any discussion all in
favor please raise your hand motion passes and we now have a policy
for second reading and I invite Sara Bonser to introduce the policy that we
have on the agenda this morning>thank you president Bender in Karla
Oliver’s absence today she’s asked me to fill in for her
and so we are bringing finalized update 109 policy FFI(LOCAL) student welfare
freedom from bullying to you on second reading and we ask the board to consider
adopting policy FFI(LOCAL) under second reading>thank you do I have a motion to
adopt FFI(LOCAL) under second reading>so moved>and do I have a second>second>
any discussion all in favor please raise your hand motion passes and with no further business this
meeting of the Board of Trustees is adjourned at 8:26 a.m.

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