CFO outlines cost to buy down 1% hail and wind deductible to protect district management fund

At a regular Ames Community School District board meeting, the district’s chief financial officer reported on a proposal to reduce the district’s exposure under its EMC property insurance renewal and recommended purchasing coverage to buy down a 1% hail and wind deductible.

The CFO told the board that a proposed 1% deductible would apply to the total valuation of the district’s buildings, creating a sizable exposure. She said the buy-down would cost about $147,918 per year and would limit the district’s exposure to a $75,000 per occurrence deductible rather than 1% of total valuations. She described the exposure as “quite substantial.”

The CFO explained the district explored alternatives, and some schools have formed a pool in hopes of reducing premium volatility. She said the EMC valuation is what the insurer uses to set deductible exposure and that the dollar figure on the district schedule may differ from the district’s internal replacement-value estimates. A board member asked for a rough estimate of the asset valuation; one exchange in the meeting mentioned a figure in the vicinity of $250 million but speakers described that as an estimate rather than a firm valuation.

The CFO also noted recent legislative proposals to limit management fund balances and said that although a management-fund cap did not pass this year, legislators are expected to revisit it. The CFO framed the buy-down as a way to reduce the risk that a single large loss would push the district above the management-fund cap when averaged over three years.

There was no formal board vote recorded on the buy-down during the meeting; the CFO presented it as a recommendation and invited questions.