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08.i. Suspending Conversion of Annual LeaveMEMORANDUM TO: CITY COUNCIL FROM: STEVEN ADAMS, ClTY MANAGER f SUBJECT: CONSIDERATION OF A RESOLUTION SUSPENDING CONVERSION OF ANNUAL LEAVE TO SALARY FOR MANAGEMENT EMPLOYEES DATE: JUNE 12,2012 RECOMMENDATION: It is recommended the City Council approve a Resolution implementing preliminary adjustments to compensation for management employees for FY 2012-13 in order to suspend conversion of annual leave to salary. IMPACT ON PERSONNEL AND FINANCIAL RESOURCES: If fully implemented, the proposed change could save up to approximately $65,000 in FY 2012-13. It could also have impacts on personnel and service levels by encouraging more use of annual leave. BACKGROUND: Management employees are currently allowed to convert up to 100 hours of annual leave to salary if they have accumulated at least 160 hours remaining after the leave is deducted. Cash out can take place in July andlor January. The memorandums of understanding covering police and miscellaneous employees also provide benefits involving conversion of leave to salary, but are different since they receive sick and vacation leave instead of annual leave. Their cash out of leave only takes place in January. Labor negotiations with represented employees will likely not be completed by July 1''. ANALYSIS OF ISSUES: The current plan approved by the City Council to address the projected budget shortfall for FY 2012-13 included the need for approximately $350,000 in savings from efficiencies andlor employee concessions. Staff will be presenting final budget recommendations to the City Council at the June 26, 2012 meeting. After the City Council takes action on proposed reductions, there may be a remaining need for employee concessions in order to adequately address the budget shortfall. Agenda Item 8.i. Page 1 ClTY COUNCIL CONSIDERATION OF A RESOLUTION OF THE ClTY COUNCIL OF THE ClTY OF ARROYO GRANDE MODIFYING COMPENSATION FOR MANAGEMENT EMPLOYEES FOR FY 2012-13 TO SUSPEND CASH OUT OF ANNUAL LEAVE JUNE 12,2012 PAGE 2 Elimination or reduction of benefits involving conversion of leave to salary could be one option for employee concessions to generate savings. To maintain this as a viable option, it is necessary to suspend July cash out of leave while negotiations proceed with other labor groups. Staff will return with an additional Resolution establishing final provisions for management compensation and benefits for FY 2012-13 once these issues have been resolved. Therefore, the benefit is not recommended to be eliminated at this time. It is simply being suspended to provide time to include it as one alternative in deliberations involving budget strategies. ALTERNATIVES: The following alternatives are provided for the Council's consideration: - Approve Resolution suspending conversion of annual leave to salary; - Modify and approve Resolution; - Do not suspend the conversion of annual leave to salary; or - Provide staff other direction. ADVANTAGES Adoption of the Resolution will maintain elimination or reduction of conversion of management annual leave as a viable strategy for savings to address the FY 2012-13 projected budget shortfall. DISADVANTAGES Suspending conversion of annual leave to salary will negatively impact employees that have anticipated that compensation in July. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: The agenda was posted in front of City Hall on Thursday, June 7, 2012 and on the City's website on Friday, June 8, 2012. No public comments were received. Agenda Item 8.i. Page 2 RESOLUTION NO. A RESOLU'TION OF THE ClTY COUNCIL OF THE ClTY OF ARROYO GRANDE MODIFYING COMPENSATION AND BENEFITS FOR MANAGEMENT EMPLOYEES FOR FY 201 2-1 3 WHEREAS, the City Council of the City of Arroyo Grande ("City") deems it in the best interest of the City that compensation and benefits for management employees be adjusted as hereinafter provided. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo Grande that: 1. Conversion of annual leave to salary by management employees shall be suspended until final recommendations for compensation and benefits for management employees for FY 2012-1 3 are approved. 2. All other current management employee salary and benefit terms and conditions shall remain in full force and effect until final recommendations for compensation and benefits for management employees for FY 201 2-1 3 are approved. On motion of Council Member seconded by Council Member and on the following roll call vote, to wit: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted this day of Agenda Item 8.i. Page 3 RESOLUTION NO. PAGE 2 TONY FERRARA, MAYOR ATTEST: KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: STEVEN ADAMS, CITY MANAGER APPROVED AS TO FORM: TIMOTHY J. CARMEL, CITY ATTORNEY Agenda Item 8.i. Page 4