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HomeMy WebLinkAboutStaff Report 2510-5352CITY OF PALO ALTO CITY COUNCIL Special Meeting Tuesday, January 20, 2026 Council Chambers & Hybrid 5:30 PM     Agenda Item     8.Approve Recommended Changes that will Align Increased General Liability Insurance Costs in the General Liability Fund to be Included in the Mid-Year Budget Report as Recommended by the Finance Committee. CEQA Status—Not a project. City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: Administrative Services Meeting Date: January 20, 2026 Report #:2510-5352 TITLE Approve Recommended Changes that will Align Increased General Liability Insurance Costs in the General Liability Fund to be Included in the Mid-Year Budget Report as Recommended by the Finance Committee. CEQA Status—Not a project. RECOMMENDATION The Finance Committee and Staff recommend that the City Council approve including amendments to the Fiscal Year 2026 Budget Appropriation for the General Liability Fund to recognize increased insurance costs as part of the Mid-Year Budget Report (scheduled to be considered by City Council in February 2026). BACKGROUND At its October 21, 2025 meeting, the Finance Committee reviewed the City’s approach to Risk Management 1. The City’s current practice combines self-insurance for liability up to $1 million with layered excess insurance coverage purchased annually through the City‘s risk pool, ACCEL2. The Finance Committee evaluated the current practice and concurred with Staff and the City’s broker, Alliant Insurance Services, that the approach continues to provide the City with key benefits, including lower long-term costs, collective purchasing power in the insurance market, protection against significant losses, and shared cost responsibility across risk pool members. The staff report also informed the Finance Committee that the actual cost of Excess Liability insurance in Fiscal Year 2026 was $6.6M - an increase of $1.5M or 30% compared to the prior fiscal year. The report further noted that Excess Liability insurance costs are projected to increase by 15% to 25% in the coming fiscal years, which influenced the City’s Long-Range Financial Forecast discussed by the Finance Committee in December 2025. These cost increases 1 Finance Committee Meeting, October 21 2025, Staff Report 2507-4955 https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=16278&compileOutputType =1 2 ACCEL: Authority for California Cities Excess Liability are driven primarily by payroll growth, recent claims history, the City’s experience modification rate (Ex-Mod), recent large jury verdicts against public entities, and reserve requirements. ANALYSIS The Finance Committee unanimously approved the recommendation: The Finance Committee and Staff recommend that the City Council approve amending the Fiscal Year 2026 Budget Appropriation for the General Liability Fund within the FY 2026 Mid-Year Report, with the following referrals to staff: 1. Evaluate increased liability insurance for cybersecurity and earthquake, 2. Add tort reform to the proposed 2026 legislative guidelines, 3. Request that staff conduct systematic claims analysis and mitigation strategy, 4. Request that staff update the City Council on risk management and safety policies, and 5. Evaluate the adequacy of senior safety positions throughout the organization. 1. Evaluate increased liability insurance for cybersecurity and earthquake 2. Add tort reform to the proposed 2026 legislative guidelines 3. Request that staff conduct systematic claims analysis and mitigation strategy improve operations. This work is facilitated by the Office of Emergency Services. Additional risk mitigation strategies include safety inspections, permitting and oversight of field activities, scheduled maintenance of City vehicles, and review of contractual insurance requirements. 4. Request that staff update the City Council on risk management and safety policies The City focuses on establishing and maintaining safe workplaces, equipment, materials, practices, and procedures. Risk Management is embedded across departmental policies and procedures to ensure a coordinated and holistic approach to the City’s diverse and multifaceted exposures. These policies collectively address risk prevention, mitigation, transfer, and retention. A list of key risk management and safety policies is provided in Attachment A, with each policy referenced by topic area and a general description of what it aims to address. The foundation of staff responsibilities is, above all, to ensure the safety of employees and the public, while actively implementing training procedures, fulfilling safety committee duties, and administering the remedial action process. Each department implements safe work practices to support the City's Injury Incident Prevention Plan (IIPP), to train staff, and to provide guidance to contractors on workplace safety and expectations, proper use of equipment and materials, hazard identification, and record keeping. Human Resources coordinates mandated safety training annually for various City operations as required to meet key CalOSHA program areas. IIPP updates are completed periodically as regulations or City processes are revised. For example, an update to the Workplace Violence policy is currently under revision and will be followed by training for all employees prior to the end of this fiscal year. Always seeking to improve, policies reflect both proactive and responsive measures to ensure we learn from incidents, trends, and emerging areas of concern. In addition, the City auditor does a risk assessment to develop the annual workplan for Council review and approval. Many have included a more in-depth assessment of risk in specific areas, such as cybersecurity, providing an independent lens and industry-specific feedback to ensure the City considers best practices. 5. Evaluate the adequacy of senior safety positions throughout the organization Senior safety positions are established within specific operational departments, such as Utilities and Public Works. Department supervisors and managers actively support senior safety staff with reporting, compliance, and training needs, as appropriate. Overall, the structure of senior safety responsibilities aligns with departmental operations and their areas of risk. Further evaluation of senior safety positions would be part of the annual budget development. Centrally, there is a Risk Management position in Administrative Services and a Workers Compensation team in Human Resources that are coordinating efforts Citywide to ensure that transactional work is completed and that a citywide lens is applied to identify trends, concerns, and consistency in safety culture. Discussion of referrals can be found in the October 21, 2025 Finance Committee Action Minutes5. FISCAL/RESOURCE IMPACT . STAKEHOLDER ENGAGEMENT ENVIRONMENTAL REVIEW ATTACHMENTS APPROVED BY: 5 Finance Committee Meeting, October 21, 2025, Action Minutes 2507-4955 https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=16277&compileOutputType =1 1 ATTACHMENT A Risk Management Policy Description 1-03/ASD Cash Handling Manual Addresses theft and misappropriation risk. Implements cash- counting and deposit procedures. Mitigates loss through dual custody and reconciliations. Transfers accountability with documented roles and audits. 1-06/ASD Payment Procedures Addresses duplicate payments, unauthorized payments, and fraud risk. Mitigates financial loss through invoice, PO, and receipt matching. Requires approval thresholds and segregation. Transfers 3rd-party risk via ACH controls. 1-11/ASD Leased Use of City Land/ Facilities Addresses environmental, safety, financial, and liability risk. Mitigates losses through compliance checks, tenant verification, and fair-market-value application. Transfer liability through indemnity requirements. 1-34/HRD Insurance Requirements for Contracts Addresses liability risk. Transfers risk through coverage requirements, indemnity, and waivers. 1-44/ASD Pre- Qualification of Contractors Addresses 3rd party risk. Mitigates project and performance risk through contractor screening and qualification criteria. Transfers liability through bonding and insurance. Requires ongoing compliance monitoring. 1-48/ASD Procedure for Sale/ Transfer of Surplus City-Owned Real Property Addresses legal, financial, liability, and reputational risk. Mitigates loss through title verification, formal appraisals, fair market valuations, council approvals, and public notifications. 1-48/ASD Procedure for Sale/ Transfer of Surplus City-Owned Real Property Addresses legal, financial, liability, and reputational risk. Mitigates loss through title verification, formal appraisals, fair market valuations, council approvals, and public notifications. 1-54/MGR Social Media Use Policy, Standards, and Procedures Addresses reputational, legal, and cyber risk. Implements IT control, monitoring, and documented removal procedures. Mitigates loss through content standards, approval processes, disclaimers, and user guidelines. 1-56/MGR Electronic Signatures on City Documents Addresses fraud and compliance risk. Mitigates loss through secure electronic signature standards, identity validation, and audits. 1-63/IT Information Security Policy Addresses cybersecurity risk. Implements access controls, audits, and backups. Mitigates loss through patching, monitoring, and incident response. Transfers risk through vendor security requirements. 2 ATTACHMENT A Safety Policy Description 2-07/HRD Volunteer Policy Addresses maintaining safe environments for the public and all City employees. Implements background checks and strict training requirements, screening, waivers, and supervision protocols. 2-28/HRD Fingerprint Policy Addresses maintaining safe environments for the public and all City employees, volunteers, and vendors. Implements fingerprinting requirements, DOJ and FBI background checks, verifying clearances, recordkeeping, and compliance reviews. 3-01/HRD Safety Policy Addresses public and employee safety through hazard identification and prevention measures. Implements workplace safety standards, regular review protocol, and vendor compliance with established safety requirements outlined in contracts. Provides volunteers with guidelines and resources to ensure secure participation. 3-02/HRD Workers' Compensation Modified Duty Policy Addresses public and employee safety by assigning modified duties to injured employees. Requires vendors and contractors to comply with return-to-work safety guidelines when applicable. 4-01/PWD Vehicle and Equipment Use, Maintenance and Replacement Addresses public and employee safety by ensuring vehicles are operated responsibly. Implements mandatory training and safe driving standards, regular maintenance, and timely equipment replacement. 4-02/PWD Building Safety Responsibility Addresses public and employee safety by maintaining secure, hazard-free facilities. Implements timely inspections to prevent unsafe conditions. 4-07/MGR Conduct in City Facilities Addresses public and employee safety by requiring respectful and orderly conduct in all city facilities. Implements standards that prohibit disruptive or unsafe actions within buildings, reducing hazards.