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City Manager's Blog

Jul 15

Progress on Addressing Homelessness

Posted on July 15, 2019 at 8:17 AM by Thomas Reeves

Homelessness is unique to every city that we visit or live in and is something that cannot be solved overnight or with a simple fix.  Here in the city of Modesto there are an estimated 1,400 homeless people. There could be several reasons that one could become homeless but some of the more prevalent reasons are because of: mental health issues, loss of employment/income, drug use/addiction, criminal behavior/history, unemployed due to inability or unwillingness to work, or choice of life.

Some of these can be worked through quickly; others can take a long time. So, our vision for the homeless population has been to reduce the negative impact of vagrancy behavior by collaborating with Stanislaus county to get our homeless the help they need through services, shelter and housing.  

We’ve made progress in this regard, and the most visible project has been the creation of the Modesto Outdoor Emergency Shelter (MOES), located underneath the Ninth Street Bridge. MOES is our city’s initiative to follow the Ninth Circuit ruling that it is unconstitutional to ban homeless people from sleeping on the streets. It is home to an upwards of 400 people, and these tenants have access to service providers every day to help them with making appointments, career placements, finding permanent housing and more. By having these services at MOES, there have been several people who have transitioned out of MOES and are beginning to rebuild their lives.

Modesto also has initiated the Downtown Streets Team, an organization that hires homeless (or at-risk of becoming homeless) people to be a team member that works on beautification projects in the city. Then, the team members receive a non-cash stipend to cover their basic needs and help them to transition to employment and find a home. 

The next exciting step in the overall program to address homelessness is the expansion of our Salvation Army Shelter on Ninth Street! Together with the county, we are putting in an access center, 182 more beds and a full kitchen. The access center will be home to onsite service providers and this means that there will be new job opportunities on the market for our community to take advantage of. Come this fall we will be offering this new shelter to the homeless community, and returning the MOES space back to the Tuolumne River Trust. 

Modesto is a community that loves to help, and I couldn’t be more grateful for that. When it comes to our homeless, I know they are in good hands. Our service providers are ready and on-site to get them the tools they need, and the community is ready to give donations to shelters. 

And what is powerful is that our homeless are taking advantage of the help, and many are taking the initiative to begin to transform their lives.

Learn more about how you can help!
Jul 01

New Fiscal Year, New Opportunity to Address City's Challenges

Posted on July 1, 2019 at 2:12 PM by Thomas Reeves

Today marks the official start of a new fiscal year, and recently the Modesto City Council adopted a stable, balanced budget with the intention of providing for critical infrastructure and services.  The budget was adopted with confidence that our city is making great economic improvements, and with caution due to the fiscal challenges we face this next year and in the years to come.  

Our local economy is improving, and we continue to see an increase in revenue from property, business license and sales taxes, which account for 59.2% of General Fund revenues.  During fiscal year 2018/2019, the city council approved the sale of Cannabis within city limits.  Eight dispensaries were approved to sell cannabis, and the Cannabis Tax will provide the city with a new revenue source in this and future fiscal years.

Our initial projections show significant increases in CalPERS - city employee and retiree retirement program - contributions for this upcoming fiscal year, and the increases will continue in subsequent years.  In short, pension costs, among overall expenditures, continue to outpace the growth in revenue. 

We have a strong team in place that will reimagine the way we provide the same level – or better – of service to our community despite the budget challenges.


A few consistent themes you will notice in the upcoming budget year:
  • Public safety will remain our priority, and that also means addressing the well-being of those experiencing homelessness.
  • We want to be known as an organization focused on the customer experience.
  • We will align resources to be an innovative and solutions-oriented organization.
  • The city is finalizing a refreshed Strategic Plan to guide staff on priorities of the city council.
  • Staff will actively manage vacancies, as they occur, to ensure resources are available to meet future budget challenges.
  • We will work toward an aggressive pro-business approach to expand existing businesses and attract new businesses.  
  • We will invest in collaborative partnerships with other jurisdictions, business community, our neighborhood groups and faith organizations.
  • We will strive for an open transparent government and will make decisions based on data and evidence.
Be on the look out for a new Citizen's Budget Guide, which will be unveiled within the next few weeks.  This guide, the first of its kind for Modesto, will creatively position the city's budget numbers and process in such a way that gives our residents and stakeholders a simple way of understanding where their taxes and fees go.  

I'm excited about this new tool, and I'm excited about what we will - together - accomplish this new year.
Jun 03

City Files Lawsuit Against Former Insurance Broker

Posted on June 3, 2019 at 10:47 AM by Marc Garcia

The city has been diligently working on addressing the urgent need to change insurance carriers for its employees; as you know, several months ago we found out that our carrier could no longer meet their financial obligations, and we needed to make a unexpected change to our insurance coverage.  In the midst of that, early on, I committed to our employees that we would fight those who placed us in this terrible position, and today I am announcing a step toward that fight.

The city today filed a lawsuit against Peter C. Foy & Associates Insurance Services, Inc., alleging Foy, acting as insurance broker for the city, failed to meet its obligations as a broker and misled the city into purchasing an unauthorized, unlawful, and financially unsound health benefits plan for the city and its employees.  The health benefits plan was offered by Riverstone Capital LLC and NexGen Insurance Services Inc..  

The city’s action today follows investigations by the California Department of Insurance (“CDI”) and the U.S. Department of Labor (“DOL”) into the operation of Riverstone.  CDI and DOL determined that Riverstone was selling unauthorized and unlawful health benefits plans to more than 112 employers and their over 16,000 employees.

On February 1, 2019, the DOL filed a lawsuit against Riverstone and certain individuals who own and/or manage Riverstone, alleging failure to appoint a named trustee and keep plan assets in trust within the United States; failure to set adequate premium rates; failure to timely pay claims, inability to pay full amount of future claims, misrepresentation regarding funding; payment to themselves and others of unreasonable administrative fees and expenses from plan assets; and failure to comply with ERISA reporting requirements.  On February 1, 2019, the United States District Court for the Central District of California (“District Court”) entered a Temporary Restraining Order appointing an Independent Fiduciary to operate  Riverstone.  On February  7, 2019, the District Court, as a part of its Temporary Restraining Order under the provisions of the All Writs Act, 28 U.S.C. § 1651, enjoined and stayed all proceedings against participants, beneficiaries, the Riverstone Multiple Employer Welfare Arrangement (“MEWA”) Plan, employer plans participating in the Riverstone MEWA Plan, and plan assets.  The District Court’s Order stays all federal and state court proceedings, including collection actions, against participants and beneficiaries for unpaid medical claims.  The Independent Fiduciary will attempt to resolve outstanding claims to the extent feasible.

On February 14, 2019, the CDI issued a Cease and Desist Order effective immediately upon Riverstone and its owner/operators Travis O. Bugli, James C. Kelly and Robert M. Clarke.  The Cease and Desist Order alleges that Riverstone was marketing, soliciting, and selling purported “self-insured” health plan arrangements to employers instead of health insurance, in violation of California law.  Riverstone failed to pay medical provider claims totaling approximately $24 million dollars, exposing employers and their employees to risks and significant financial liabilities.  The investigation revealed Riverstone’s business practice of pooling and commingling contributions Riverstone received from its employer clientele into its own corporate accounts. “This company and its owners misrepresented their ability to pay medical claims, putting employers and their employees in immediate danger,” said Insurance Commissioner Ricardo Lara. “We took action to stop these illegal practices and ensure the safety of California workers and employers.”

The city’s complaint against Foy alleges "from October 2016 through February 2019, Foy acted as an insurance broker for the city.  As such, Foy owed the city those duties owed by an insurance broker under California law including, but not limited to, the duties to use reasonable care, diligence, and judgment in procuring insurance requested by the city and to avoid misrepresentations concerning coverage procured.  In addition, Foy held itself out to the city as having expertise in medical benefits insurance coverage, represented that it was familiar with the city’s insurance coverage needs, and represented that it was familiar with Riverstone and the Fortress/Riverstone Plan that Foy recommended to the city.  Based on those representations, the city relied on the recommendations of Foy and purchased the Fortress/Riverstone Plan for Plan Years 2017, 2018 and part of 2019.” 

“Foy failed to carry out its responsibilities and duties to the city to use reasonable care, diligence and judgment in procuring insurance requested by the city. . . At the time it recommended the Fortress/Riverstone Plan to the city, Foy knew, or in the exercise of due diligence should have known, that the Fortress/Riverstone Plan was an unauthorized, financially unsound MEWA, which should not under any circumstance have been recommended to the city, and that Riverstone was a sham company.” 

The city’s complaint further alleges that when the city started to receive complaints from its employees that their health care claims were not being paid, the city reported these issues to Foy.  Foy reassured the city that nothing was wrong with the Fortress/Riverstone Plan or Riverstone, that the Fortress/Riverstone Plan and Riverstone were financially sound and well managed, and that the issues arose from providers’ billing errors, employee misunderstandings of the health benefits offered, a change in a third party administrator, and other benign causes.

Foy systematically and continuously breached its duty of care to the city.

The city is seeking monetary recovery against Foy for all loss, costs and damages suffered, and indemnification for any future losses.  The city currently estimates there are $8.3 million in unpaid claims by city employees under the Fortress/Riverstone Plan.

A copy of the complaint can be found here. [View Documents]

I will share more as progress is made.