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HomeMy WebLinkAboutBudget Advisory Commission - 07/10/2007 APPROVED MINUTES BUDGET ADVISORY COMMISSION TUESDAY,JULY 10, 2007 5:00 PM, CITY CENTER 8080 Mitchell Road, Eden Prairie, MN Heritage Room COMMISSION MEMBERS: Katherine Kardell (Chair), Don Uram(Vice Chair), Mark Kantor, Richard (Rick) King, Jon Muilenburg, Richard Proops, Gwen Schultz CITY STAFF: Scott Neal (City Manager), Sue Kotchevar(Finance Manager), Tammy Wilson (Finance Supervisor), Janet Jeremiah (Community Development Director), Rob Reynolds (Police Chief), Karen Kurt (Human Resources Manager), Angie Perschnick (BAC Recording Secretary), Luke Fischer(Intern) I. ROLL CALL/CALL THE MEETING TO ORDER Chair Kardell called the meeting to order at 5:01 PM. All Commissioners were present. II. MINUTES Kotchevar passed out the minutes from the BAC meeting held on Tuesday, June 26, 2007. These will be considered at a future meeting since Commissioners have not yet had a chance to read them. III. DISCUSSION Kardell asked about discussion, and the group decided to save that for the end of the meeting. Kardell reminded the group of the upcoming BAC meetings. The next meeting is Thursday, July 12 from 4:30-9 PM in the Heritage Room. The following meeting will be on Wednesday, July 25 from 5-9 PM in the Fire station I room (next door to the Heritage Room). One more meeting is scheduled after that for Tuesday, July 31 at 5:00 PM. IV. BUDGET PRESENTATION AND DISCUSSION A. COMMUNITY DEVELOPMENT Janet Jeremiah presented an overview of the Community Development Department, noting that they have recently reorganized. The Economic Development division is fairly new, and Assessing has been recently brought into the Community Development group. This means they do not have as much history. They try to utilize outside sources as much as possible to do their work. They look to existing policy documents to do their work and in preparing their Eden Prairie Budget Advisory Commission July 10, 2007 Page 2 work plans. They are responsible for a lot of public outreach, and they look for ways to make that work more efficient. Administrative Division They look to the Business Survey (done by the Economic Development Division every 2-3 years), and creating a downtown area was considered the fourth most important priority in the most recent survey. Kardell asked about the CD Forward and whether that was implemented because of the reorganization. Jeremiah confirmed that was correct, and that new leader assimilation and cross training costs were included. There are five divisions, and the fifth is Administrative, which includes Jeremiah and an Administrative Assistant. This division was separated out in 2006 for the first time, and they were extremely conservative in their use of funds. The budget was kept in the 3.5% and 3% parameters for the next two years. They have reduced printing, training, and outside services elements of the budget. They may have difficulty accommodating emerging needs but are fairly confident in the two-year budget plan they have proposed. Kardell asked about the wages and no benefits category, and Jeremiah confirmed it is for a Community Development Intern. Kardell asked about the contracted services costs, and Jeremiah said that money is for CD Forward and leadership training or coaching for supervisory staff. The Capital Improvement request presented for Streetscape and Public Way- finding improvements is largely unfunded currently. They are looking at creating a major center area (downtown) on the ring road of Prairie Center Drive and the segment of Valley View along the top of the circle, and it would cost approximately $8.6 million for the entire project. They looked at averages of what other cities have spent to do this, and it would include signage, lighting, sidewalks, and landscaping. Proops asked what could be done in terms of signage, etc., for $1-2 million. Jeremiah responded that the study done by the Wayfinding Committee looked at a range of options for what could be done for less money for signage specifically. They are expecting a recommendation to come from the Chamber of Commerce to the City Council in the next few weeks. She is hoping they also looked at cost estimates for a scaled-back proposal. Proops asked why the Chamber would not say the proposal is great: who is balancing the Chamber? Jeremiah has proposed that the project could use some of the funds received from the sale of City property (police land sold, Columbine site south of the old Flagship, and an area on Dell Road by new Fire Station), and the amount expected would be about $500,000 per year over the next five years towards this Capital Improvement project. Proops asked why those funds were picked and clarified that those funds could be used for anything. Jeremiah said the City Council has given her this policy direction. The Economic Development fund is $2.651 million, and it includes the sale of the old police station land and property on 212 and Prairie Center Drive. The expected sales on Dell Road and Columbine Road are not included in this number. Kardell said the Special Service district could be a source of funding for this project too. Jeremiah said that some of the businesses have taken responsibility for some signage directing Eden Prairie Budget Advisory Commission July 10, 2007 Page 3 people back to the freeways, but they also probably think the street signs are the City's responsibility. The verdict is out on whether or not they would be willing to cost-share with the City for the project. Proops asked about the lower cost proposals and whether or not they were available in a report. Jeremiah said that the Wayfinding Committee signage report is useful, and she will get that report to the BAC group through Sue. Kardell would like to know the outcome of the discussion at the upcoming Council meeting regarding this project if it can be documented for the BAC group. Jeremiah's currently proposing only $500,000 from the City per year, so they are assuming a Special Service District would pay for more than half of the project($1.7 total per year from City and Special Service District combined). When private developers come in, they are required to integrate the streetscape into their plans and implement it at their own cost. Proops asked about the total package for creating a downtown center, and Jeremiah said the report that examined this issue is available online under MCA. Assessing Division Steve Sinell leads this group, and they are increasingly busy with mandated work, but they are trying not to add to staff. Instead, they are using electronic homestead applications and making some information available online. They maintained the 3.5% and 3% growth by cutting line items, and they excluded some items that could make them more efficient. They are putting sketches onto an APEX program, and they would like to continue hiring outside help for this. To meet the budget, they had to take this item out, and it has a customer service advantage. Uram asked about the volume of requests Steve Sinell receives. He said probably 30-40 quick questions per week and 5-6 inquiries for substantial information. One-time questions are typically pushed down to Lisa Ramsey and her backups. They use an ACE data-sharing consortium, but it is not a public forum that people could be referred to. Uram asked about tax court appeals (volume, expense, time involved). They are substantial and take up about half of Sinell's time. Uram asked if developers could be charged for costs from court appeals, and Sinell said they cannot. Sinell tries to ensure they do not give money back (minimize losses), but they cannot recover costs. They do leverage their costs. Kantor asked if a high level of skill is required for the APEX conversion, and Sinell said it does. Also, the software is expensive. When they create the sketches, they save them as a jpeg so anyone can access them. Economic Development This group is a business-community liaison headed by David Lindahl. They have a broad work plan initiative. They anticipate doing the business survey again in 2009. Lindahl looked at his historical usage and cut his budget to the bone (a 17% reduction in his proposed budget between 2007 and 2008). Part of his wages and benefits are paid by the Housing and Redevelopment Authority (HRA) budget, and that budget was started in 2006. He is guessing what the emerging Eden Prairie Budget Advisory Commission July 10, 2007 Page 4 needs may be in this budget since it does not have historical information. Proops asked if the HRA budget was required by law, and Jeremiah said it was not. It is a budget that evolved as economic development has taken more on a higher priority. If it were eliminated, Lindahl's salary would come out of the general fund instead. Proops asked what if the work was no longer done at all. Jeremiah said there would be a reduction in relations with the business community, the business climate would decline (a lower satisfaction rating), and retention and health of business properties would decrease. Kardell asked if a separate levy was used for the HRA budget. It is a $200,000 levy, and $150,000 of it is for the wages of City staff. The levy is not near the maximum of what could be levied for HRA. The HRA budget will be used for a lot of development-related activities, including inspection funding. They pay for some smaller development studies out of this budget also. They have done some outreach to the large number of people working out of their homes also. They try to eliminate duplicate subscriptions and look for other efficiencies as they are able to also. Uram asked about the Dunn Brothers deal and Cummins' Grill. The Council still has to make a call on whether they want to do adaptive reuse or find someone who wants to restore it. Uram asked about the value they have seen from their meet and greets with outreach to the business community. They have had very positive responses from almost all of the meet and greets. They sit down with business leaders and can problem solve any minor issues they have along with thanking them for keeping their business in Eden Prairie. Housiniz and Community Services Molly Koivumaki shows very conservative growth of 1.6% in 2008 and 2.8% in 2009. They are not proposing any increase in staff. Schultz asked about staffing numbers. A grant was used to pay for a position in 2006. Koivumaki is partly paid out of HRA and partly out of the general fund, and Mary Keating is paid this way also. A policy decision was made to make Duale's position a full-time position after the grant seed money was used up. There is one other part-time loan specialist paid out of community development block plans. Proops asked about the $190,000 budgeted for contracted services and if $90,000 of it could be taken out. This is a big piece of Koivumaki's budget, and most of the money is paid to agencies to provide services to local residents. This is a policy issue, and most communities do this. They have a rigorous accountability process, and they are currently in the RFP process for 2008 requests. After this process, the Council is asked to make decisions on the recommendations for Human Services. Proops asked what we do for PROP. Jeremiah answered that the money from the City goes towards operating expenses, administrative costs (they have two paid staff, including a Director and Volunteer Coordinator), and sometimes food costs (donations go down typically in the summer). PROP is run by a third-party and supported partially by the City. Proops asked about the Senior Community Services. Keating stated it provides a person who works with Eden Prairie Budget Advisory Commission July 10, 2007 Page 5 seniors needing assistance and their families. The County does not take on this responsibility but contributes some towards it, and the City is expected to contribute the rest. Proops restated the question of how they could reduce their budget further. Koivumaki noted they had reduced it by $8,000 already for the 2008 and 2009 budget, and further cuts would mean the City residents would receive a reduction in service from the agencies. She noted Eden Prairie receives a lot more in services than it pays for in costs from organizations such as PROP. Muilenburg asked how many of the programs we are funding are funded by other entities also (state, county, or federal). If they are funded by other entities, he wonders why we are also paying for them. As a philosophy, he has a slight problem with the City funding private charities by redistributing taxpayer money. Koivumaki stated there is not a redundancy in the services they provide, and they check that as part of the review process before giving funds. Charitable organizations look for other organizations to come to the table and share the costs. Jeremiah said a lot of this information is available as part of the workshop presentation to the Council on June 19. They track what Cornerstone (for domestic violence) and other organizations are actually spending on Eden Prairie residents, and it is far in excess of the money the City gives the agencies. They ensure they are getting multi-fold value for the money spent, and they believe the programs are preventing bigger problems for the City. The City only reimburses for services provided after the service is provided and the receipts are received. Keating noted that each group submits quarterly reports to the City showing demographics and number of people served, and the City conducts site visits. Kardell asked about the Human Services Review Committee. Jeremiah said that it is an interdepartmental staff group with Community Development, Police, Parks & Rec, and Administration. They do the detail work, look at the proposals, and do the follow up. They make recommendations for which groups should receive funds. Neal clarified that the City Council sets the budget for how much money is to be given, and the staff does the detail work to decide how the money is apportioned among the groups. No growth is proposed at all for this division. Planning Division This group is mandated to work with the comprehensive plan and to respond to all development proposals within 60-120 days. The number of permits is steady, but the number of zoning inquiries varies significantly. More inquiries happen when people are refinancing frequently. They are recommending a substantial reduction in their budget as well. When they were mandated to do the comprehensive plan update in 2006 and 2007, the money hit their budget all at once ($100,000 per year). They do this every ten years, and the plan is to save $25,000 per year going forward in a special fund for the next comprehensive plan update. They are not recommending any increase in staff for this division. The redevelopment work is getting more involved, so they will be busier. They have deferred training needs and need to do some maintenance in this area. They want to have adequate expertise in-house to avoid hiring as many outside experts. Eden Prairie Budget Advisory Commission July 10, 2007 Page 6 The Planning Division does have some revenue since they charge back most of their costs from permits and applications from the development community. They are proposing a budget reduction of 1.8%. She does want to add back in the APEX development project if possible (to get to 0% growth). Schultz asked about the heritage preservation budget item, and what happens in their area of the budget with this. Jeremiah responded that they have a Heritage Preservation specialist, as required by law, and the person coordinates the Heritage Commission and is a liaison with the state Heritage office. When this person is less busy, the person's time can be spent on comprehensive plan activities, other special projects, and items they are currently spending consultant money on. Proops asked if there are any new heritage projects on the horizon. Jeremiah responded that the cemetery study is not completely done, and the heritage preservation ordinances are being reviewed currently. The Cummins' Grill reuse study is being handled by Heritage, but there are no new initiatives proposed. Uram asked about staffing. Zoning enforcement is currently handled in the Police Department, and zoning administration is handled in the Community Development Department. Neal clarified that Jean Johnson did a lot of different things, and they are still in the process of dividing up all the work she did into the appropriate departments going forward. Proops noted he appreciates the work the Community Development Department is doing, and his questions were not personal. B. POLICE Rob Reynolds and his team presented the Police Department budget. Reynolds is asking for two additional people in 2009. For the next two years, they are looking at the backside of their organization to try to make the organization more efficient. They are running short on the street, and they need to increase these numbers based on the demands on the current officers' time. They are on the way to implementing these changes, but they cannot fully realize the plan until 2008. They want to see what effect their reorganization changes have in 2008, and then they anticipate the additional people will be needed and hired in 2009. He will justify the need for these people to Scott prior to 2009. They are auditing their objectives, resources, etc. in detail so they can have a new structure in place in 2008. King asked what the metric is that tells Reynolds he needs to hire more people. Reynolds responded that, in the Midwest, there is typically 1.1 officer per 1,000 people. There are different variables involved depending on how involved the department wants to be in the schools and community (traffic enforcement, etc.), and Eden Prairie's is very involved. King asked if a large amount of overtime would be considered in determining personnel needs. Reynolds walked the group through the overtime reasons slide. The largest percent of overtime is from holdovers (when an officer has to stay later than their shift end time to finish the call they are in the middle of and the associated paperwork). They have been able to decrease holdover overtime from 29% to 20%, but they cannot realistically Eden Prairie Budget Advisory Commission July 10, 2007 Page 7 reduce that number any further since there will always be some calls occurring late in the shift. Proops asked about the training overtime category. Reynolds responded that they try to schedule training so that it is not an overtime expense (trading days worked), but that is not always possible. One change they are making is to schedule training a year in advance to reduce the overtime expense associated with training. King asked about special events overtime. This number includes Schooner Days, Fourth of July, and dignitary protection (Presidential details). Last year there were 2 Vice Presidential and 1 Presidential details, and they are required to have several officers at every intersection that the dignitary's car will pass through. This protection is very costly, and it is expected to increase in 2008. Schultz asked about the staffing ratios (two officers per support staff person). Reynolds said they have a unique environment in that they use non-sworn people (civilian staff). They can do this because they are a non-union shop. The reserve units are all volunteers, and traffic direction is typically handled by volunteers. Schultz asked about 911 medical calls, and Reynolds confirmed that one or two officers go out on all 911 medical calls (they are also EMTs). A firefighter will often ride in the ambulance if the person needs to go to the hospital. Uram asked about internal charges, and these were clarified to be pension, PERA, disability, dental, severance, worker's comp, etc. Uram asked about zoning enforcement. Reynolds said Jean's position is not posted yet, and they are making some changes to it now since the position grew significantly over her thirty plus years with the City. They want to streamline some of the interactions with Parks & Rec from the position and add responsibilities for computer forensics to the position. Muilenburg asked about the wages going from $6.081 million to $6.45 million with the same headcount. Reynolds responded that this is just figuring in a base pay adjustment. They clarified the two additional headcount they are requesting are not in these budget numbers. Also, the 2006 budget was prepared in mid- 2005, but in May, a new Hennepin County Jail Administrator was hired to bring its finances back in line. The Board of Prisoner is defined as what it costs to bring people to jail at Hennepin County (booking fees and per diems). They do not house people in jail here in Eden Prairie. Proops noted that wages represent a 6% increase in wages, and he wondered how they arrived at that number. Reynolds said the number is fixed by HR and he has no control over it. Muilenburg asked if they targeted 3.5% with their wages and benefits numbers. Reynolds said they could not because 94% of their cost is personnel. That cost is fixed by HR, so the department was already over budget before he started working with it. Eden Prairie Budget Advisory Commission July 10, 2007 Page 8 Uram said that other departments are cutting out paper clips and other tangible items, and these may not impact the City much. Without reducing staffing, how could Reynolds reduce his budget? From a priority standpoint, how did Reynolds determine what he could cut? Is there anything in the list he could actually do without? Reynolds responded that he cannot cut small items like paperclips to reach his budget target; the impact would be insignificant. They need pretty much everything that is in the budget. They did cut education (the school liaison program) because it is not critical to life safety. The calls still come in and have to be responded to. Their optional things are the educational programs. In regards to the RNC, they probably cannot get rid of this expense. They need to do it for mutual aid purposes. His budget currently includes all of these things. This is the only budget that is the opposite of the others in that it includes the optional items. Uram stated we need to have an increase because it is a service industry. Kantor asked how our staffing figures compare to other departments. Reynolds said yes, but there is a clear organizational structure to how the Eden Prairie Police Department adds staff. The department will evaluate after some months have passed to ensure there is a real need to add the two requested employees. King asked if they really need as much supervision as they currently have in place. Reynolds said Eden Prairie tries to staff five officers for every sergeant, and they are currently maximizing their span of control. This means that about six sergeants are responsible for managing the streets. Sergeant 8 has a lot of responsibility because the officers under him are seasoned and do not require much supervision (they are detectives). Sergeants 1-6 are on the street. Sergeant 7 has two traffic officers under him. Sergeant 9 has the juvenile investigation unit. The Dispatch Supervisor also has more reports than they want, but they have a lot of long-term employees there too. King asked if 5:1 is a good ratio for officers to sergeants. Reynolds responded that it is since they need an opportunity to get together and are not in an 8-5 environment. Sergeants 10 and 12 have a lot of projects. Sergeant 7 is an Administrative Sergeant for the Division. Reynolds will print out the 2008 Police Organizational Chart for the group (this was distributed later in the meeting to each Commissioner and staff). Sergeants 10, 11, and 12 are career development rotating positions. For sergeants who are not assigned to the street, they all have back up duty and spend some time on the street. This gives them a perspective on what is happening. The sergeants without many people assigned generally spend lots of time on programs and projects. King asked if Sergeant 7 needs to be a sworn officer. Reynolds said that that position does need to be held by a sworn officer because they do sex offender registration and supervise the field training program. The person manages a lot of programs and is a high level sergeant. This is a position others look to in order to advance their career since it requires working with a lot of different programs. Proops asked about the difference in roles between the Chief and the Captain. The Captain runs day-to-day operations (scheduling). The Chief does more organizational work for the department and external stuff (working with other Eden Prairie Budget Advisory Commission July 10, 2007 Page 9 departments). Reynolds is currently doing both jobs temporarily. Proops asked why he is doing the job temporarily instead of permanently. Reynolds said he is putting in a lot of extra hours in order to do both jobs, and he plans to promote someone to Captain in the near future. Right now they are down and he needs to build the ranks up for patrol before starting the promotion trickle. The promotion process is planned for October or November. Proops asked if they could do with more administrative support and fewer higher paid positions. Reynolds said that was not an option. Eden Prairie Police officers are expected to do a lot more than officers in other cities. King noted that the survey said that the most people (29%) would put that money into Police, and that is a good tribute to how the residents feel about the Police Force in Eden Prairie. Reynolds responded that they strive to provide service beyond expectation, and he expects program ideas from officers. They are expected to come to work excited about what they do. Kantor noted the Citizen's Academy is very good (a six-week program for community members to understand police jobs better; it creates ambassadors for the Police Department). They do not charge for it and do not plan to in the future (it is funded by the crime fund). C. HUMAN RESOURCES, CUSTOMER SERVICE, RISK MANAGEMENT Karen Kurt works with the leadership team (Scott Neal and the Department Heads). They worked to define the compensation and benefits strategy, and Kurt does the research and analysis to determine what they need to do to achieve that strategy. They use a common strategy for compensation and benefits. They made projections and the numbers were then fixed. The Compensation philosophy includes five components: (1) Broad job classifications (they expect people to perform a wide variety of tasks without it triggering a jump to a different job), (2) Internal comparisons and an internal job evaluation system (Decision Band Method), (3) External market comparisons using benchmark positions (they compare their pay and benefits to a set of suburban cities determined to be comparable benchmarks), (4) Market positioning (lead position for pay, meaning they want to pay above average relative to other cities), (5) Fiscal responsibility (flexibility to use compensation dollars efficiently, some performance components). Proops asked who decided they should be in a lead position relative to other cities. Kurt responded that the decision was made by Neal and the Department Heads working together in conjunction with her. King asked if more information could be shared about the performance components of pay. A primary reason for leading is that the City is predominantly a non-union organization, and the leaders want it to stay that way. They have the only non-union Police Department in the metro area. They also want to be able to recruit from other suburbs. They want enough room in their ranges to attract recruits from other suburbs. There is a Eden Prairie Budget Advisory Commission July 10, 2007 Page 10 significant employee relations benefit to leading the market. There is a lot of compression in their wages, and it does not take much extra money to differentiate Eden Prairie as a leader in pay in the market. They pay more and expect more from employees too, and they have been aggressive in their performance management. Schultz asked if more than forty hours per week are expected or what "more" is expected. Kurt said they are not necessarily working more than forty hours, but they expect more in terms of customer service and have a performance partnership where their goals are higher than they were last year. When asked about actual hours, Kurt responded that non-exempt employees typically work forty hours since the City incurs overtime costs if they work more than that. For exempt workers, the hours really vary by position. Overall, City employees have better work/life balance than in some private sector jobs. There are also a lot of City employees attending evening meetings or coordinators working odd hours. Neal added that most of their professional positions are wrapped around projects or other service commitments that typically go on with government jobs. Proops asked if they know the percentage increase in payroll from 2007 to 2008. He noted the Police Chief said they had 6% increases this year, and he would like to know why they are going to 6%. Kurt clarified that they are not proposing 6% (and did not for this year), but there is some variation between departments. The Police Department has a Step system, and their employees receive a Step increase along with the regular increase. If they have a lot of employees in the lower steps, the overall increase amounts for steps and merit/regular increase may be significantly higher for that department than the other departments. Kurt reminded us that someone low in the Step system is paid below the competitive market rate, and they need to get that person moved up to the market rate for retention purposes. Muilenburg asked if they look at the private sector as well as the benchmark government communities to define the market and evaluate pay competitiveness. Kurt said they look at general data from the private sector from Employer's Association and other consulting firms. It is difficult to do this because pay systems are different in the private sector and some of the jobs do not exist in the private sector. They did test some of their data against generic benchmark jobs within the private sector (IT jobs, administrative jobs found in many private industries as well as in the government sector). The private sector may dictate a different rate for some jobs than the rate the City will pay because the City is subject to the Minnesota Pay Equity Act, which requires them to value internal comparisons (between jobs predominantly held by women vs. men but with similar value to the organization) more heavily than external market data. Muilenburg asked if that meant that if the market data said the position should pay less, the wages would be frozen (or even decreased) until the market caught up. Kurt explained that the law refers to comparable pay within an organization, not between organizations (the market data reflects comparable pay or market averages across organizations). Muilenburg asked if that meant that the pay would be out of whack with the rest of organizations. Eden Prairie Budget Advisory Commission July 10, 2007 Page 11 Kurt said that is generally not the case. They did have a situation where they needed to pay female-dominated Administrative Assistant positions more than the market dictated because they needed the rates to be comparable to the male- dominated jobs of similar value that are part of the City. Employees know what other employees are making in other cities too. Muilenburg asked if that meant that Administrative Assistants are paid more than what they are worth elsewhere, and Kurt said that is less true now than it used to be since the private sector rates for these positions have come up recently as a result of that law. The law said that there has been gender discrimination between male and female-dominated jobs in both the private and public sectors, and it requires the public sector to correct that discrimination. Neal noted that they did decide to outsource their custodial staff because their general wage level was above their private-sector peers, and other organizations are outsourcing that function. They laid off about ten employees and outsourced that function to bring the costs back in line with the market. That is more the harsh way to do things,but they have done that and have to do that sometimes. Proops asked about the hiring done recently from other cities, and he asked how much their pay increased when they moved here. Neal estimates the pay increases were fairly modest(around 5%). Kurt explained that they need to keep consistent pay strategies for all groups of workers so they will not fall out of compliance with the Comparable Worth law. Another factor that influences pay at the City is the salary cap ($140,000; a percentage of the governor's salary that is actually above his salary); this is not much of a concern though. Also, salary data for City employees is public. They are aware of what their coworkers and counterparts in other cities are paid. Schultz asked if there were any other legal requirements affecting pay. There really is not either federally or within the Minnesota government. They could petition to go over the salary cap if necessary. School districts and universities are not subject to the salary cap. Municipalities, watershed districts, and county government are subject to the salary cap. The performance plan covers directors, managers, supervisors, and exempt professional staff, and it adds the largest performance component to pay. This operates similar to a merit compensation plan in the private sector. There are targets put together for employees relative to where they are in the pay range. Directors have to balance their budget, so if one person gets a higher increase, someone else has to receive less. At times employees have received a zero percent increase based on their performance, but that usually does not happen more than once to an employee since it reflects a performance issue. Kardell asked about the percentage of the total wages that is tied to performance (vs. step). Kurt did not have a number off the top of her head, but said they aim for the target rate or midpoint within five or six years. That includes the step and merit components together. Kardell requested to see the merit and step components separately, and Kurt will provide that at a later date. King asked if Eden Prairie Budget Advisory Commission July 10, 2007 Page 12 performance plus where a person is in the range determines the merit increase recommendation (with step considerations included for Police employees on that program). Kurt confirmed this is correct. Neal said they are attempting to be very precise in their wage budget by estimating where employees are in the ranges and where they are expected to be on the merit matrix for salary increases. That makes the budget numbers for wages vary among departments. King noted this is different than how budgeting is typically done in the private sector, where managers are allocated a percent (3.5%, for example) to divide up however they see fit among employees. The City is using a more detailed approach to budgeting wage increases. Kurt said the Step program covers non-union administrative and technical staff, and it has seven steps in the range until you hit the target rate. Then there is a small portion of the range above the target that is performance-driven only. Paying above the target rate is a joint decision that must be made by all directors being in agreement. Lump sum bonuses are given at times for individuals going above expectations with extraordinary performance for the year or completing special projects. Neal said there is a vigorous debate that takes place to justify why specific employees deserve pay above the target rate. This is to ensure they adhere to common standards across groups. The Police and IUOE (International Union of Operating Engineers) Step plans are straight step programs with five years required to reach the top of the five steps. There is not a performance component to these except the Police plan has a possible performance component that is rarely used. Proops asked when the Step programs started, and Kurt is not sure. The program predates her, and she has been with the City for four and a half years. They also have a pay plan that covers their part-time, temporary, and seasonal staff. Typically these positions do not factor into their pay equity plans, and some years they do not adjust these ranges at all. Proops asked when the contract negotiations take place. Kurt said they will be negotiating for the 2008-2009 year. It is a two-year contract, and for this year a 3% increase is in effect. Employees would also receive their step increase if they were not yet on the fifth step. King asked about the negotiations and how they might be affected by the fact that the planned 3.5% for other employees is public. Kurt noted that number is more public this year than in previous years, and they know it could affect negotiations. The union members also have to pay dues. Kurt negotiates the union contracts. Kurt noted that there is a "me too' clause in the clause for health insurance/benefits (they take whatever benefits are offered to other employees), and that is very helpful for the City since they do not need to negotiate benefits separately. This union (IUOE) is not the one that Senator Bach is president of, and they are predominately in the construction trades. Eden Prairie Budget Advisory Commission July 10, 2007 Page 13 Kurt passed out benchmarking data that was previously requested. They do a comprehensive market data review every other year. This data was for 2006 since the survey updates are not available online until late summer. Kurt said there is a lot of interpretation that is required in understanding the numbers. Looking at the police data, the numbers look quite high, but she knows that Eden Prairie is the only city that does not give longevity pay. If that adjustment is figured in, the pay is similar between Eden Prairie and other cities (but still a bit higher in Eden Prairie). They have very broad ranges and manage pay within that range, but it is unusual for employees to go above that midpoint. Healthcare data was also provided to compare if Eden Prairie City employees are paying similar amount to employees working in other City governments. With pay, they are seeking to lead the market, but with benefits, they are just seeking to match (be equal to) the market. Pay has a common value to everyone, so it makes more sense for the City to invest money in its pay program than its benefits program. Also, benefits costs are much harder to control. As part of the public sector, the City is required to participate in PERA (Public Employees Retirement Association). They are also required to offer retiree continuation insurance. The City does not pay for the retirees' insurance, but these people are typically high users due to age and negatively affect the City's costs when added to the insurance pool. Also, they provide Public Safety Disability Benefits for fire or police employees injured in the line of duty, and this has not been a big cost for the City fortunately. Proops asked about the medical insurance costs, which are going up by 15% this year. Kurt said that is the total increase for both the City and employee portions combined. Proops asked how the increase was divided up. For single employees, the City pays for all of the health insurance (so they would pick up 100% of the increase too). For families or employee+l, the City picks up 66% of the cost. In that case, the City picks up 10% and the employee 5% of the 15% increase. They also offer deferred comp, which is completely employee funded. Only full-time employees (those working 32 hours or more) are eligible for health insurance. Their benefit year runs from June Is' to May 31sr. Health insurance costs have increased by 2.5% in 2006, 14% in 2007, and 15% in 2008. Muilenburg asked about the 32 hours being considered full-time (the employees are actually .8 FTE status). He said they could consider not contributing the full amount towards health insurance for these .8 FTE employees. Kurt said they could consider this, but they may not have any employees in this category right now anyway. Schultz asked about the possible benefits of bidding on health insurance as part of a group. LOGIS is a City consortium that they have looked at, but it is actually cheaper for the City of Eden Prairie to buy insurance on its own. At least every five years, they review benefits costs to see if they can get a better deal. They have looked at the Southwest Cooperative of public and private entities too. Schultz asked if they have considered dropping family coverage, and Kurt said Eden Prairie Budget Advisory Commission July 10, 2007 Page 14 they have not since it is a common benefit offered to employees in other organizations. Muilenburg asked if they have considered partnering with a private company (a large company in Eden Prairie with) to buy cheaper health insurance with a larger pool. Kurt said they have not really considered that. Southwest Metro actually does purchase insurance with the City, but they only have 25 employees. The group is really small, so the insurance carrier will not break out the group to see if they are negatively impacting the City's insurance pool. Kantor asked if they had considered reducing employee coverage to 90%, and Kurt said they have not. They have structured the coverage so that basic has a $1,000 deductible. They are planning HRA funding, and they are driving employees to the deductible plan to decrease costs. Then the employees have a high incentive to make better healthcare choices. 70% of employees bought into this deductible plan, and employees choosing another plan pay 100% of the additional costs. Schultz asked about leave benefits for part-time employees. For career part-time employees, there are just five people and they do receive some leave benefits and PERA. Part-time seasonal employees do not receive any leave benefits (they are still typically eligible for PERA). Holiday benefits are not required to be provided by law. For full-time employees, two weeks of sick leave per year is provided, and two to four weeks of vacation time is provided, plus eleven paid holidays. From a business perspective, that seems like a lot to Schultz. Kurt said they have considered a PTO program where leave benefits are combined. The current leave benefits are reduced, but retracting benefits has employee relations impacts too. They have grandfathered in current employees, so the reduced leave benefits really apply to new hires. Employees can bank two times their annual leave, but grandfathered employees can bank more. They take their leave at their current rate, and they can accrue up to 1,040 hours. Muilenburg asked about the rate at which sick leave is paid out. If sick leave is paid out, it is at 52% of their current salary after ten years (not the rate at which it was earned). They have short and long-term disability benefits, and 1,040 hours coincides with the short- term disability policy. Proops asked how far along they are at looking at paid time-off benefits. Kurt said it is in the work plan for 2008 & 2009. They have a plan that offers 100% hospitalization, and that accounted for 60% of medical costs this past year, so they changed the plan to reduce these expenses. Significant changes in health benefits and plans have been made recently to control the City's costs. They are only proposing one benefit change for 2008 and 2009 that will increase benefit costs. They want to increase basic life coverage from $20,000 to $50,000. They have some high-risk occupations, and this is a more market-competitive amount to offer employees. This is also a low cost benefit to provide. The $9,000-$15,000 cost for this is city-wide,based on taxable income. Muilenburg asked about PERA costs. Public employees are eligible for this benefit, and the City cannot impact its costs. No Social Security benefits are provided for police and fire employees. Eden Prairie Budget Advisory Commission July 10, 2007 Page 15 Kurt noted that defined benefit plans are going away in the private sector, but these plans (such as PERA) is mandated by the state of Minnesota for public employees. It is a good deal for them. Base wage increase across the organization. For the next couple of years, 1.3% is the step/performance increase, 3.5% the base wage increase, and the total is 4.8% across the organization. 5.9% is the percentage change when new positions are added into the equation. Proops asked if Kurt saw any way to improve on the 5.9%, and Neal asked him to define improving. Proops would like to see that number lower since the wage escalation seems very high to him. He asked if they could reduce the number to closer to 3.8%. King clarified that 4.8% is the number to look at for the salary budget increase proposed since that does not include the new positions. Benefits cost increases are not included in this number. Kurt said the numbers came out higher in 2008 because of a technical change. It used to be a 3% target with merit pay for performance on top of that. This year they wanted to get employees to the target rate, which accounts for a portion of the 1.3% step number. King asked about the rationale to get all employees to the midpoint. He asked about the voluntary turnover rate. The salary increase number is not driven by the turnover rate since the turnover is low. Kurt said it is easier to communicate salary decisions to employees when they are paid near the midpoint. King noted that the midpoint could fluctuate significantly depending on the salary surveys chosen (since the midpoint is not an absolute number, it does not make sense to him to chase it). Kurt and King agreed that interpreting compensation survey data is more of an art than a science. He wonders why they would move employees to the midpoint in one fell swoop instead of across three year, for example. He wondered if they are too far from the midpoint, why would they hire the employees at that rate to start with. Kurt clarified that they are just looking to move employees who are close to the midpoint to the actual midpoint, not employees significantly below it. King said they take a longer period of time (three years, for example) to move employees to the midpoint if that is the decision made in his organization. Kurt responded that they are not proposing to move employees dramatically in one year either. Proops asked if the CPI increase has been factored in when determining an appropriate salary increase target. At the end of May, the CPI was up 2.8%. Kurt responded that they more closely monitor labor market numbers. Schultz said the CPI and labor market numbers are not typically significantly different in the private sector, but Kurt clarified that the labor market does typically move more significantly (upward) than the CPI in both private and public sectors. Kurt noted that in the mid-90's, the CPI was very low and the labor market moved upward much more significantly (wages grew at about twice the rate of the CPI). Kurt explained that they expect this general trend to continue with the baby boomers retiring in the future and the projected shortage of skilled workers. Muilenburg mentioned that the reality in the private sector seems to be more small increases or even wage freezes. He does not understand why the proposed increases are so high for the City when they do not seem to be for private organizations currently. Eden Prairie Budget Advisory Commission July 10, 2007 Page 16 Proops asked about the philosophy of leading the market and why the City wants to take this position. He suggested they might benefit from being in the middle so other cities do not raise their rates because of what Eden Prairie pays. Neal said they articulated the reason for the philosophy previously,but their goal is really to be ahead of the average rather than the leader, not significantly ahead of the pack. Proops asked about turnover rates. Neal responded that turnover is low. Proops said the basic problem is that, when benefits increases are added into this, the cost of increase of wages and benefits is significant. Neal noted that the unionization issue is a big issue for them. If a contract is put in place, the City would likely have to pay around 3% each year into the future. They value their current pay flexibility and do not want to lose that to a new union, and they have good relations to their current union. Proops noted a City where unionized employees were happy to have a little over 3% as an increase for each of the next two years. Schultz asked about the data from 2006 and if it is a 15% increase over three years from that point. Kotchevar noted that number includes newly added positions too, not just wage increases. Muilenburg said the pension increases seem unsustainable (pension as a percent of wages is increasing by a half percent per year). Neal clarified that those rates are controlled by the state, but the City has some indirect influence since the rates are a percentage of wages. Kurt said the pension percent had been fixed for a number of years but started increasing annually very recently to keep the plans funded appropriately. The Human Resources division has two budgets, one for the human resources department and one for organizational services. They want to implement the career center portion of People Trak, with self-service modules for finding positions, in the next couple of years. They have had difficulty recruiting from outside organizations in the past few years. A new item they are asking for is a part-time Organizational Development Specialist that they want to move from .5 FTE to .6 FTE. Otherwise, no items were excluded to meet the budget targets. Kantor asked about leadership development programs. Kurt explained that there is money set aside in the budget for internal training programs. He wondered if businesses could help with this training (let City employees sit in on the internal training sessions Super Valu or other large organizations conduct regularly). Proops asked about the EAP budget item (Employee Assistance Program). This is a service for employees to call with a variety of issues they may face, including family crises, health situations, work problems, etc. Phone counseling is provided. This is separate from their health insurance currently, and it is an important resource (especially for fire and police workers who have high-stress jobs). Proops asked about unemployment insurance, which is a state-mandated number that has fluctuated over the years. Muilenburg noted that they have budgeted a lot more money for Unemployment Insurance into the future than they have used in the recent past. Eden Prairie Budget Advisory Commission July 10, 2007 Page 17 Proops asked what would happen if$100,000 was the budget for 2008 instead of $155,000 (noting that in 2006 the amount spent was only $86,000). Kurt said there are some programs they really need to do that would not get done in that case. Kurt noted they have been dropping the HR budget a little bit almost every year since she has been here. In 2006, they did not spend much money on Unemployment Insurance. EAP was handled with medical insurance previously, and that benefit is now separate and more expensive. Also, a training program was rolled out in 2006 and is finishing up. Going forward, they will rely much more on external training. Also, they are relying more on support tests (for police screening) that are not written and are more expensive. If they dropped the budget back, there would be no internal training initiatives. Proops asked about the contracted services number, and Kurt said that number is mostly a result of the increase in external training expected. The tuition reimbursement program is available for all full-time employees, and participants must be enrolled in a city-related career field. They must receive a C or higher in each course for reimbursement. Kardell asked if charitable giving includes a match, and it does not. Gift certificates are given to employees and sometimes people are given free breakfasts to encourage participation, however. Muilenburg asked about the time spent coordinating charitable events, and Kurt said it is not too significant. Kantor asked if it was done by salaried employees, and Kurt said it was by herself and her assistant. Coordinating the programs does not add cost to the budget,just less tangible opportunity costs. They have set aside some money for compensation reviews and analysis. Most of the work is done in-house, but they hire outside expertise for some jobs. Employers' Association has been conducting 360-degree reviews, and the City works with individual coaches to help with leadership coaching and training. They have hired some project management training externally recently. MuniciPals is an organization that offers training to City employees, so they set aside some money for that training. Every other year they host a health fair and invite in vendors. At this time, basic tests such as blood pressure checks are offered to employees. They have excluded $22,000 from the budget that was in Risk Management previously (risk management testing). This money was really just transferred from one budget to another. They also do pre-employment screenings such as drug tests. Customer Service Schultz asked about the 2008 and 2009 backup Admin support (almost 2 FTEs). This money is to cover reception desks when people are ill instead of hiring temps. Kurt said this is a cost-effective program that also maintains quality service. These employees help with peak workloads during elections and at other times. This pool allows them to have a low level of full-time permanent administrative staff. Wayne Estensen manages the administrative flex staff pool. King asked about the Commission and Council stuff to be posted, and Estensen Eden Prairie Budget Advisory Commission July 10, 2007 Page 18 confirmed that this is all done through Customer Service and included in their budget. He asked about the cost-effectiveness of dropping off packets to Commission members. Estensen said they sometimes do hand-deliver packets to avoid postal fees. Kardell said follow up questions for Customer Service can be directed to Sue Kotchevar. Muilenburg asked how they ended up with 51100 of an FTE, and Estensen this was clarified to result from .8 and .25 combined. King said we are asking tough questions of Kurt to try to understand the compensation and benfits numbers. The questions are not personal or a reflection on her but rather because so many of the costs relate to these numbers. What we learned at the meeting is that the directive to come up with the strategies that resulted in the increases came from a combination of all other directors rather than from HR directly. V. DISCUSSION AND FEEDBACK Proops noted there are just a few weeks left, and there are three areas we have not touched on yet. (1) Capital improvement budget has gone up (this is a big chunk of the total budget). (2) They have learned about a lot of sophisticated, difficult problems, but they need to look at them more closely to come up with appropriate recommendations. (3) A reorientation to make people more conscious that better service is good and the City has done a great job on this, but it does have a bottom line cost. Proops passed out some information and noted that some of his questions have been answered already. Kardell clarified that the issue they are dealing with is Capital rather than debt. Schultz asked when the group would work through the Capital Improvement Plan. It was noted that Thursday's schedule is pretty full already. They do not want the placeholders in the budget but the things they really want and need. The budget is a planning tool so the City has adequate funds. Generally the items are approved, but they may need to be reviewed further. The group decided to get started at 4:30 PM on Thursday, July 12. King suggested that subgroups could meet on each of the items that need to be reviewed. Proops said the wage escalation problem cannot be solved in one hour, but they can start looking at 3.8% wage increases (they could pursue that with individuals). The last item is one that City staff could deal with. They could strip out all the new programs, and Kotchevar clarified that 3.5% and 3% budget increases already reflect just what work is currently being done (not the new programs). The separate, new items desired or needed are listed outside of budgets. The question was raised about where the money is coming from to be spent in 2008 on Capital. Proops wants to inject an outside look and see things that may not have occurred to the City staff thus far in the budgeting process. Muilenburg likes the subgroup idea, and the group decided that they would further discuss subgroup meetings on Thursday. They want to focus on what has a big impact to the budget numbers. Eden Prairie Budget Advisory Commission July 10, 2007 Page 19 It was suggested that a scaled down proposal for the MCA work would be more affordable. Proops asked what would trigger approval of the $8 million Capital Improvement Project(Wayfinding) funding. Neal said they would present the plan to the City Council with a funding plan, but this project is not imminent and will not be approved prior to the completion of the BAC's work. They will see the extent to which the Capital Improvement Project from Mitchell to Southwest Station pays off and review these efforts to see if it is beneficial for other areas also. Proops was concerned that the $2.5 million for the third ice rink passed quickly and seemingly without much review. He said that the City Council approves projects on a piecemeal basis without looking at the overall cost impacts of multiple projects. Kardell wants to see the detail on the percentage changes from HR for performance adjustments versus step adjustments. The leave benefits schedule has also been requested for the BAC's review. Proops noted there is $3,000,000 sitting in a fund (as a liability for the City) for employees from sick leave. He suggests that, if the City goes to a PTO program, maybe they could just pay out that $3,000,000 to employees so it is no longer an accrued liability. If they cut the basic wage increase, the message could be softened to employees by also announcing they would receive their sick leave/vacation payoff(what has been "banked" during their time working for the City). A few other Commission members did not like the idea of paying out that money before it was necessary to do such. Neal said it would be good to see the impact of operational changes (the amount of money saved). They want to improve service, but this goal is in conflict with saving money. People might feel differently about the costs, however, if they determined a big improvement to City programs or technology systems could be made for only $1 extra dollar in someone's property taxes. VI. ADJOURNMENT Two breaks were taken during the meeting, one between each segment (Community Development and Police and between Police and HR/Customer Service/Risk Mgmt) the meeting ended at approximately 9:20 PM.