City-Ops-FYFP-Combined_0 — Intro — Part 3 of 4

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FY 2025-30 Requested Budget Five Year Plan Fund & Bureau Name: Health Insurance Operating Fund, City Operations - Bureau of Human Resources Plan Overview The Health Insurance Fund collects revenue and pays expenses incurred for medical, dental, vision and prescription drug claims, claims administration, internal administration and occupational health and wellbeing programs, chronic disease management, and stop-loss insurance for the insured programs (e.g. Kaiser medical/dental/vision, life insurance and disability programs) and self -funded CityCore, CityBasic and dental programs elected by most City employees, COBRA enrolle es, retirees and other casual employees who gain access to coverage through the Affordable Care Act or a collective bargaining agreement. This Operating Fund is separate from the PPA Health Fund. Health Plan Funding Health care costs are predominately measured in terms of premiums the City pays to obtain coverage through an insurance carrier (e.g., Kaiser) and the “premium equivalents” assessed for the City’s self - funded health, dental and vision plans. The City generally shares the cost of its medical, dental, and vision plan offerings with full-time employees by contributing 95% of the total cost with employees contributing the remaining 5% balance. All covered employees enrolled in the City’s CityCore or Kaiser medical plan (not eligible dependents) are incented to seek preventive care services (physical check -up once every two calendar years) with their primary care provider to maintain their 5% bundled premium share. Should an employee not meet the standard outlined within the Employee Benefit Handbook, or their collective bargaining contract, the member’s bundled premium share increases from 5% to 10%. Groups outside this funding model are casual employees who gain access to coverage either through the Affordable C are Act or through other collective bargaining units that are enrolled in the CityBasic plan. For these separate groups, the City contributes 95% of the total cost with employees contributing the remaining 5% balance. Health Fund Reserve The fund maintains two components to its reserves. The first component is a restricted reserve covering the Incurred But Not Paid (IBNP) requirements. This component of the reserve is in accordance with standard industry practices and guidelines and includes all liability components incurred but not yet paid. AON Consulting has estimated the Incurred But Not Paid (IBNP) liability for the City of Portland’s self -funded medical, prescription drugs, dental, and vision plans to be $13,486,000 for Non-PPA health plans as of June 30, 2024. In addition to the IBNP reserve, an additional $15.8 million Risk Based Capital (RBC) reserve should be set aside pursuant to National Association of Insurance Commissioners (NAIC) requirements. The four major components of the RBC formulae are: underwriting risk (insufficient premiums relative to expense), asset risk (default, reinsurance failure), credit risk (stop loss recoveries, fully insured medical, dental and vision premiums, administrative service agreements, fees, and prescription rebates), and business risk (expense overruns). The RBC is used to determine and calculate when it is appropriate to use excess reserves to moderate future rate increases. The policy recommends targeting any reserve surplus above 150% of RBC for use as a subsidy (buy-down) on future rate increases. Conversely, the policy recommends targeting any reserve deficit below 75% of the RBC as the threshold by which the plan actuary would calculate a surcharge into

FY 2025-30 Requested Budget Five Year Plan future rate increases, building up the RBC reserve to a fully funded level. Claims above $1.2 million from participants enrolled in the self-funded plans are covered by stop loss insurance and the City pays a premium to its third-party administrator for the coverage through this Fund. Occupational Health and Well-being CityStrong Well-being (CityStrong) provides evidenced based expertise with person-centered workplace wellness opportunities, resources, and support to all City of Portland employees to encourage physical, emotional, and mental well-being. This program is currently funded through a combination of interagency funding and internal administrative fees to bureaus. Occupational Health provides nurse practitioner led safety programs, incident response, OSHA compliance services, preventative health services, education, advocacy, and consultation to all employees. Program goals include increased engagement of employees with their own health and well-being that results in a safer, healthier, happier, and more productive workforce. Additional goals include proactive use of healthcare services includin g EAP, and utilization of on- site opportunities so employees have a positive workplace wellness experience. Destigmatizing mental health challenges and helping staff with skills to recognize and respond to those affected with appropriate support and resources remains the primary focus of our programs. CityStrong also works to help the City take a trauma informed and person-centered approach to designing work, engaging with staff, and developing inclusive policies and procedures. Revenue Assumptions The City projects its health fund costs over a five -year forecast period. AON Consulting assists the City in its continuing plan design, review, and preparation of the five -year forecast. It is important to note the forecast is based on several assumptions that may not remain static over a five -year period. As a result, the actual fund balance is expected to vary from what is projected within the forecast. Updates are provided to the City every six months. The projected beginning fund balance for FY 25-26 at this time is just $7.4M. The recommended beginning fund balance is $24M-$29M. The plan will need additional funding to rebuild the reserves over the next few years. Occupational Health revenue assumptions include standard inflation factors for staffing and materials and supplies. For the basis of the projection, it is assumed that interagency revenue for Occupational Health will keep pace with expenditures. Expenditure Assumptions Based on the most recent forecast in December 2024, the City anticipates a rate increase of 8% for medical plans in FY 2025-26 and anticipates the average annual growth to be 8-10% over the five-year forecast period. The City has historically used an aggressive strategy to use excess reserves to mitigate increases to City Bureaus. Reserve levels have fallen below the 150% Risk Based Capital levels actuarially recommended, so the City must shift to a strategy which builds these back up to a fully funded level over the next one to three years. The projected FY 2025-26 rate increase and annual growth assumptions by AON Consulting does not include the use of any applicable calculated reserve subsidy. Increased claims could result in higher than expected costs and could lead to changes within plan design to mitigate future impacts.

FY 2025-30 Requested Budget Five Year Plan Occupational Health expenditure assumptions include standard inflation factors for staffing and materials and supplies. Expenditure Risks to the Forecast and Confidence Level In FY 2024-25, the City increased the premium equivalent rates for the self -insured medical and Rx plan by 10.4%. When combined with all insured Kaiser options and self -funded dental and vision plans, the combined increase cost was 10.7%. This was offset by one-time employee and general fund subsidies, totaling 2.7%, and an increase to bureaus and employees of 8%. The 2025-26 plan year is impacted by the effects of inflation, high medical trends and the City’s plans are experiencing the return of previously delayed claims due to COVID and increased mental health utilization. Health care costs are vulnerable to catastrophic illnesses or accidents and the City could see an increase of up to 10% in medical claims in the upcoming years. Prescription drug claims are trending high due to increases in overall costs and new medications hitting the market, specifically related to specialty medications which represent almost 60% of prescriptions claims costs. The plan is experiencing increases in generic fill rates and participation in mail order pharmacy, which are cost effective for the plan. Continued plan management, expanded program options, rebates, and member education may help mitigate future cost increases. Ensuring the City is successful keeping employees engaged via the Preventive Care Initiative, ensuring successful access with widespread acceptance of COVID-19 vaccine and having programs in place for early detection of cancer and/or related risk factors will be important future years. Overall confidence level is medium.

FY 2025-30 Requested Budget Five Year Plan Fund & Bureau Name: Portland Police Association Operating Insurance Fund, City Operations - Bureau of Human Resources Plan Overview The PPA Health Operating Insurance Fund collects revenue and pays expenses incurred for medical, dental, vision and prescription drug claims, claims administration, internal administration, chronic disease management, and stop-loss insurance for the self-funded CityNet medical and dental/vision programs and the insured programs (e.g. Kaiser medical/dental and vision). The claims and premiums of sworn employees of the Police Bureau who are members of the Portland Police Association (PPA), retirees of the PPA, and COBRA participants who are eligible employees or dependents of a PPA, are managed and paid within this Fund. Health Plan Funding Health care costs are predominately measured in terms of the premiums the City pays to obtain coverage through an insurance carrier (e.g., Kaiser) and the “premium equivalents” assessed for the City’s self-insured health and dental plans. The City generally shares the cost of its medical, dental, and vision plan offerings with full-time employees by contributing 95% of the total cost with employees contributing the remaining 5% balance. All covered employees enrolled in the CityNet or Kaiser medical plan (not eligible dependents) are incented to seek preventive care services (physical check -up once every two calendar years) with their primary care provider to maintain their 5% bundled premium share. Should a PPA member not meet the standard outlined within its collective bargaining contract, the member’s bundled premium share will increase from 5% to 10% when enrolled in the CityNet plan. Kaiser participants will see a 5% increase to their premium share but the way in which the collective bargaining contract is written, a separate calculation required. Members of the PPA enrolled in the insured Kaiser option pay a premium share that is equivalent to the difference in value between the CityNet/VSP/Delta Dental bundled option and the participant’s election. Currently, some PPA Kaiser participants do not have a premium share contribution within eligible tiers (e.g., employee, employee +1). Health Fund Reserve The fund maintains two components to its reserves. In accordance with standard industry practices and guidelines, the first component is a restricted reserve covering the Incurred But Not Paid (IBNP) requirements and includes all liability components incurred but not yet paid. The Incurred But Not Paid (IBNP) liability for PPA’s self-funded medical, prescription drugs, dental, and vision plans is estimated to be $2,014,000 as of June 30, 2024. This increased from last year due to slightly higher CityNet plan experience. In addition to the IBNP reserve, an additional $2.9 million Risk Based Capital (RBC) reserve has been set aside in compliance with National Association of Insurance Commissioners (NAIC) requirements. The four major components of the RBC formula are: underwriting risk (insufficient premiums relative to expense), asset risk (default, reinsurance failure), credit risk (stop loss recoveries, fully insured medical, dental and vision premiums, administrative service agreements, fees, and prescription rebates), an d business risk (expense overruns). The RBC is used to determine and calculate when it is appropriate to

FY 2025-30 Requested Budget Five Year Plan use excess reserves to moderate future rate increases. The policy recommends targeting any reserve surplus above 125% of RBC for use as a subsidy (buy-down) on future rate increases. Conversely, the policy recommends targeting any reserve deficit below 75% of the RBC as the threshold by which the plan actuary would calculate a surcharge into future rate increases, building up the RBC reserve to a fully funded level. Claims submitted by plan participants enrolled in the CityNet plan that are more than $300,000 are covered by stop loss insurance and the City pays a premium to its third-party administrator for the coverage. Revenue Assumptions The City projects its health fund costs over a five -year forecast period. AON Consulting assists the City in its continuing plan design, review, and preparation of the five -year forecast. It is important to note the forecast is based on several assumptions that may not remain static over a five-year period. As a result, the actual fund balance is expected to vary from what is projected within the forecast. Updates are provided to the City every six months. Expenditure Assumptions Based on the most recent forecast in December 2024, the City anticipates a rate increase of 8% for medical plans in FY 2025-26 and anticipates the average annual growth to be 8-10% over the five-year forecast period. The City has continued an aggressive strategy to use excess reserves, when available, to mitigate increases to the Portland Police Bureau. Reserve levels are projected to fall below the 125% Risk Based Capital levels actuarially recommended, so the City must shift to a strategy where reserves aren’t used going forward and we build them back up to a fully funded level over the next few years. The projected FY 2025-26 rate increase and annual growth assumptions by AON Consulting does not include the use of any applicable calculated reserve subsidy. It is anticipated there will not be funds available to lower increases for FY 2025-26 and beyond. Increased claims could result in higher than expected costs and could lead to changes within plan design to mitigate future impacts. Expenditure Risks to the Forecast and Confidence Level In FY 2024-25, the City increased the premium equivalent rates for the self-insured plan by 15.9%. Combined with all insured Kaiser options and self-funded dental and vision, the combined increased cost was 11.5%. This was offset by a one-time general fund subsidy, totaling 3.5%, and an increase to bureaus and employees of 8%. The 2025-26 plan year may be impacted by the continued pandemic and the City’s plans are experiencing the return of previously delayed claims and new claims due to COVID. Health care costs are vulnerable to catastrophic illnesses or accidents and the City could see medical claim increases in the upcoming years.

FY 2025-30 Requested Budget Five Year Plan The City will continue to pursue effective chronic disease management programs and evaluate plan design options to reward employees for healthy behaviors as a strategy to moderate future cost growth. The projected FY 2025-26 rate recommendations and annual growth assumptions by AON Consulting does not include calculated reserve subsidies. Overall confidence level is medium. City Operations - Bureau of Human Resources - PPA Health Insurance Fund FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Resources CY Estimate Plan Plan Plan Plan Plan Beginning Fund Balance $ 4,694,611 $ 4,969,796 $ 5,213,124 $ 5,630,174 $ 6,080,588 $ 6,567,035 Charges for Services $ 19,639,299 $ 20,927,580 $ 22,601,786 $ 24,409,929 $ 26,362,723 $ 28,471,741 Fund Transfers - Revenue $ 607,310 Miscellaneous $ 478,039 $ 639,750 $ 695,146 $ 755,686 $ 821,868 $ 894,237 Resource Total $ 25,419,259 $ 26,537,126 $ 28,510,056 $ 30,795,789 $ 33,265,179 $ 35,933,013 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Expenditures CY Estimate Plan Plan Plan Plan Plan External Materials and Services $ 21,716,443 $ 21,577,165 $ 23,303,338 $ 25,167,605 $ 27,181,013 $ 29,355,494 Contingency $ 3,702,816 $ 4,959,961 $ 5,206,718 $ 5,628,184 $ 6,084,166 $ 6,577,519 Expense Total $ 25,419,259 $ 26,537,126 $ 28,510,056 $ 30,795,789 $ 33,265,179 $ 35,933,013 Planned FTE Total - - - - - -

FY 2025-30 Requested Budget Five Year Plan Fund & Bureau Name: Technology Services Fund, Bureau of Technology Services Plan Overview The Bureau of Technology Service’s (BTS) FY 2025-26 Five-Year Plan incorporates both prior year work plan initiatives from the Technology Executive Steering Committee as well as outcomes from a Gartner Consulting three-year roadmap based on a BTS-specific review and assessment. Gartner Consulting is an information technology industry leader with over 40 years of experience in providing insights and expert guidance to clients. While major areas of focus continue to be in Technology Modernization, Business Intelligence, Workforce Mobility, Information Security, and Equitable & Inclusive Technology and Technology Use –there is an underlying focus and awareness throughout these plans that takes into consideration the broader change touching on all City personnel, offices, agencies, and bureaus. That change includes both the continued transition and implementation of a new form of government and rapidly evolving technology changes occurring in all sectors of BTS operations. Technology has a much more limited lifecycle than other sectors of City operations. It’s not unusual for both hardware and applications to become obsolete and no longer supported by the manufacturer after only three years of operation. The result is essentially forced upgrades and replacements of existing systems. This has become the industry standard and resistance to these cost increases is unavoidable. While BTS can budget for routine expenses such as support and maintenance within its operating budget – the cost of upgrades, replacements and refresh of systems must be captured within the Five- Year Plan. Limited lifecycles have resulted in an increase of project costs as documented in the Five-Year Plan. Along with the bureau’s City-wide projects, the BTS-specific projects listed below provide ample evidence of the continuing need to replace and upgrade systems, while also keeping current with the overall growth of the IT industry. Maintaining IT systems present a constant challenge, a challenge that’s further augmented by economic downturns and required reductions due to insufficient resources. Information Technology Assessment Late in FY 2023-24 and through the early part of FY 2024-25, BTS engaged with Gartner Consulting to assess its existing IT organization as a first step in developing an organizational strategy designed to improve IT services offered by BTS. Specific objectives of the assessment included analyzing and reporting on BTS’s organization, technology and policy structure; engaging BTS staff and stakeholders to get a snapshot of changing business plans and technology needs of organizations BTS supports; identifying opportunities to align services to best practices; identifying opportunities for more responsive, efficient, and aligned service delivery; and recommending a three-year strategic and operational roadmap for better organizational, technology, and policy alignment with annual milestones. The Gartner assessment produced the following recommendations for the first year of the three-year roadmap: • Develop Service Management role and pilots – Service pilots will allow BTS to try out new technologies prior to a full-scale implementation. This also allows for co-creation with BTS partners. • ServiceNow enhancements – Enhancements will improve the user experience, increase self- service capabilities, enhance operational efficiency and offer increased analytics and reporting.

FY 2025-30 Requested Budget Five Year Plan • Performance measures – Refine measures to help increase focus and alignment within the bureau and help increase transparency for BTS partners. • Organizational changes – Review and adjust the organizational structure to establish more BTS accountability/responsibility over strategically important capabilities and decisions. • Governance – Inventory current technology/IT governance processes. A good governance system allows for City bureaus to align with the objectives and services of BTS and ensures the security and integrity of data and information that touches the City’s network. Unified Project Portfolio Process For the prior year’s Five-Year Plan, BTS implemented a Unified Project and Portfolio Management (UPPM) process used by the Project Assessment Team to review and prioritize project requests. While implementation was successful, it was more time-intensive and resulted in delays in producing the final Five-Year Plan. The process was made more difficult due to constraints limiting what BTS could accomplish in a given fiscal year or over a multi-year period. Those constraints included limited financial resources that covered less than 30% of the annual project needs; restrictions on time available to BTS staff when their daily focus was on ongoing operations as opposed to major maintenance projects; and the coordination of staff on multi-disciplinary projects. For this year’s Five-Year Plan, BTS will utilize an abbreviated version of the UPPM in order to meet the required timeline. This process will again be designed to prioritize projects while taking into account constraints still in place from the prior year. The resulting Five-Year Plan best utilizes both BTS personnel and financial resources. The plan includes a mixture of capital and operational projects in seven different divisions. While financial resource limitations don’t allow for BTS to budget for all desired projects in FY 2025-26, included below is a list of the projects planned for each division. Communications • Enterprise Network Technology Refresh – The enterprise data network is a critical component of the City’s computing infrastructure and provides the backbone Internet protocol communications for the City’s computer applications. This project provides for lifecycle replacements of the network’s hardware and software. • Wireless Network Refresh – This is an ongoing project to deploy and maintain WiFi network coverage in City facilities. • Transport Network Refresh – BTS has transport network equipment on the Wide Area Network that allows for devices to talk to each other and for the Local Area Network to function. This is a five-year lifecycle replacement project for transport network switches, routers, and monitoring equipment. • Fiber Program – This is an ongoing project for future fiber builds. Fiber optic construction will include engineering, conduit placement, fiber, vaults, splicing, construction of building entrances, and fiber management installs. • DWDM System Lifecycle Replacement – This is a lifecycle replacement project for the Dense Wavelength Division Multiplexing (DWDM) system. DWDM is a technology that combines data signals over optical fiber instead of physical fiber. It’s more cost-effective than installing and maintaining physical fiber and allows for better use of existing fiber already owned and maintained.

FY 2025-30 Requested Budget Five Year Plan • Firewall Technology Refresh – This project, which is in alignment with the ZTA roadmap, would replace City firewalls which have reached both end-of-life and end-of-support. Certain City compliance domains must legally meet baseline requirements to operate. Those requirements necessitate replacing firewalls that are at end-of-life in order to minimize risk to both the City and users of these systems. • Call Management System Upgrade – The Call Management System (CMS) provides data analysis for telephony data. Vendor support for the existing system is expected to be discontinued sometime in 2026, so an upgrade to the most current version of CMS is needed. Users of the system include Water Bureau Customer Service, 311 and Parks Bureau call centers. Production Services • SAN Storage Expansion – This project provides for the lifecycle replacement and increased capacity of centralized data storage and enterprise backup. The continual maintenance, replacement and upgrade of this system allows BTS to meet customer demand for projects and data growth. • Cloud Architecture – This project focuses on delivering cloud architecture technologies for City users. City bureaus have brought forward various business needs that can best be addressed through the implementation and development of a cloud infrastructure. • Server Technology Refresh – This is a lifecycle management project that keeps server hardware and technology current. Keeping server infrastructure current provides a higher level of performance and reliability at a lower cost. • GIS Infrastructure Technology Refresh – This is a lifecycle replacement and expansion project for the City’s GIS (Geographic Information System) infrastructure. GIS includes databases and mapping applications, such as Portland Maps, used by City bureaus and other agencies. • Cryptography Infrastructure Refresh – This project is needed to keep the City’s Public Key Infrastructure (PKI) fully supported and in a secure state. PKI enables the City to securely communicate on networks, reliably verifies the identity of another entity via digital signatures and allows for other entities to verify our identity. • Data Center Lifecycle Refresh – BTS uses multiple data centers for storing and backing up City data. The lifecycle for equipment in these centers varies from 5-10 years but needs to be regularly replaced over its lifespan to ensure stability, manageability, and resilience. • Server Containerization Pilot – Server containerization is a lower-cost solution to using traditional server virtualization. Containers share a host operating system while maintaining isolated environments for applications. The project will fund a thorough assessment of container-based solutions, focusing on cost, performance, scalability, security, and ease of migration. • Server Virtualization Evaluation – Server virtualization will allow for multiple virtual servers to run on physical servers by using software to partition hardware resources. This project will evaluate options for this needed software. Eventually this virtualization approach will enable the City to optimize hardware usage, improve system reliability, streamline management processes, and take advantage of economies of scale. Information Security • DSPM Purview – The City’s cybersecurity insurance requires a Data Security Posture Management (DSPM) application with data loss prevention capability. This project would

Parent: City-Ops-FYFP-Combined_0 · ← Part 2 · Part 4 →