Council Report

City Council Report
Date: October 26, 2026
To: City Council
Through: Jim Smith, City Attorney
From: Sarah Steadman, Assistant City Attorney
Subject: Updates to the Trust Fund Document for the Property and Public Liability
(PPL) Trust Fund and the Employee Benefits Trust (EBT) Fund
Purpose
The purpose of this report is to provide an overview of proposed changes to the trust fund
document for the Property and Public Liability (PPL) Trust Fund and the Employee
Benefits Trust (EBT) Fund.
Background
The City operates the Property and Public Liability (PPL) Trust Fund and the Employee
Benefits Trust (EBT) Fund, which are governed by one trust document (the Trust
Document).1 The Trust Document was last updated in 2015.
State law requires the trusts to be administered by at least five joint trustees. Mesa’s five
joint trustees are the five members of the Self-Insurance Program Board of Trustees (the
Board). The Board meets annually to hear updates and recommendations from staff and
review the financial viability of the trusts and is responsible for making recommendations
to Council. The proposed changes to the Trust Document were reviewed by the Board
at its March 3, 2026, meeting, and the Board recommended adoption.
Description of Proposed Changes
Staff proposes three sets of material changes to the Trust Document, described below,
along with a number of minor, non-substantive changes for purposes of clarity and
1 The City also operates the Workers’ Compensation Trust Fund, which is governed by a separate trust
document and no changes are being to proposed to the Workers’ Compensation Trust Fund document at
this time.
{00614095.1} 1

consistency.
1. PPL Trust Fund
A. Balance
The current version of the Trust Document requires the PPL Trust Fund to maintain a
minimum balance of $10 million by periodic transfers throughout the fiscal year, meaning
that if the balance at any time falls below $10 million, the City is required to return the
balance to $10 million in the same fiscal year. This could result in significant issues for
the City if, for example, the City resolved multiple high exposure claims in the same fiscal
year, and the amount needed to replenish the PPL Trust Fund exceeded the amount the
City budgeted. In that case, the City would need to replenish the PPL Trust Fund in the
same fiscal year regardless of what was budgeted and even if it meant pulling funds from
other sources, including those designated for other departments and projects. This would
defeat the purpose of the PPL Trust Fund to provide a cushion in case of significant
payouts.
Thus, staff proposes to include in the Trust Document that if the PPL Trust Fund balance
is below $10 million at the end of a fiscal year, staff will report the balance to the Board
and the Board will advise on a plan and timeframe to return the balance to $10 million to
$15 million. This change would mean the City would not always need to replenish the
balance in the same fiscal year but can instead consult with the Board and create a
responsible plan to replenish the balance considering relevant information such as
predicted and outstanding claims and lawsuits, the City’s overall budget, and availability
of funds.
Additionally, consistent with the intent of the Trust Document, staff proposes to specify in
the Trust Document that the PPL Trust Fund maintain a balance between $10 million and
$15 million. By raising the target balance and having an allowed range, the PPL Trust
Fund can provide more stability and security, including to make up some of the gap if the
City were to purchase a lower amount of excess liability insurance. An increased target
balance also helps to ensure the PPL Trust Fund has the funds needed to resolve the
increasing number of claims and lawsuits the City has seen over the last 10 years.
B. Litigation Policies and Settlement of Claims and Lawsuits
Staff proposes a set of changes to the Trust Document that will increase transparency
and accountability to the Board and Council regarding expenditures from the PPL Trust
Fund used to resolve claims and lawsuits. These proposed changes are primarily to make
existing practices requirements in the Trust Document.
Pursuant to City Code, “the processes for the payment of claims and lawsuits from the
public property and liability trust fund will be subject to policies adopted by the City
{00614095.1} 2

Attorney.” As such, the City Attorney has adopted litigation policies for the handling of
claims and lawsuits, including the settlement, resolution, and payment of claims and
lawsuits with funds from the PPL Trust Fund (the Litigation Policies). The current Trust
Document, however, does not incorporate the Litigation Policies. Thus, staff proposes
updating the Trust Document to make existing practices required, including for the City
Attorney to adopt Litigation Policies, annually review the Litigation Policies, and annually
provide updates and recommendations to the Board.
Staff also proposes to include in the Trust Document a limitation on the City Attorney’s
and the Board’s ability to increase the settlement amount per claimant per claim or lawsuit
(excluding attorney’s fees and costs) over which the City Attorney must consult with the
Councilmembers (the Consultation Amount). The current version of the Litigation Policies
provides that the City Attorney may settle individual claims and lawsuits for up to $100,000
(excluding attorney’s fees and costs) without consultation with Councilmembers. For any
settlement above $100,000, the City Attorney consults Council during executive session.
This Consultation Amount has not changed for over 20 years. However, as currently
written, the City Attorney can increase the Consultation Amount in the Litigation Policies
without limitation or requirement for Board or Council approval.
The proposed change to address this issue is twofold: (1) require the City Attorney to
obtain Board approval to increase the Consultation Amount; and (2) state that the Board
cannot approve a Consultation Amount above $200,000 (which requires an amendment
to the Trust Document via resolution by Council). This change helps to ensure
accountability to the Board and Council regarding settlement of claims and lawsuits while
allowing the City Attorney’s office to continue to effectively and efficiently defend and
resolve claims and lawsuits.
2. EBT Fund
Staff recommends changes to the EBT Fund portion of the Trust Document to incorporate
current practices and update the language to address changes that have occurred over
the past 10 years, since the last update. Primarily, the changes are to (1) add the concept
of wellness benefits (in order to capture programs and benefits such as the Health and
Wellness Center and Wellness Events/Rewards); (2) clarify that third-party administrators
contracted with the City may be responsible for certain operations of the City’s benefit
programs and the EBT Fund; and (3) more clearly define the responsibilities and authority
of the Employee Benefits Administrator and third-party administrators, including to require
an annual update to the Board (which already takes place but is not currently required).
Alternatives
Not adopting the proposed changes to the Trust Document could result in the issues
described above regarding the balance and budgeting of the PPL Trust Fund and would
mean the proposed changes to increase transparency and accountability to the Board
{00614095.1} 3

and Council would not be included in the Trust Document (e.g., the proposed
requirements and limitations regarding: Litigation Policies, reporting to the Board and
Council, and expenditures from the PPL Trust Fund to resolve claims and lawsuits).
Coordinated With
The proposed changes to the Trust Document were coordinated with the Office of
Management and Budget and the Employee Benefits Administrator.
{00614095.1} 4