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08.i. Salary and Benefit Adjustments for ManagementMEMORANDUM TO: CITY COUNCIL FROM: STEVEN ADAMS, CITY MANAGER @ SUBJECT: CONSIDERATION OF SALARY AND BENEFIT ADJUSTMENTS FOR MANAGEMENT EMPLOYEES DATE: AUGUST 14,2012 RECOMMENDATION: It is recommended the City Council: 1) adopt a Resolution establishing salary and benefits for management employees for FY 2012-13; and 2) adopt a Resolution to implement the paying and reporting of the Employer Paid Member Contributions (EPMC) to the California Public Employees' Retirement System (PERS) for all Miscellaneous Management employees. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: The proposed resolutions include a number of employee concessions that will result in a total estimated annual savings in FY 201 2-1 3 of $75,440 and a savings of $55,440 from the prior year budget. The recommendations represent a significant amount of time and effort by staff, but approval will not result in a meaningful amount of additional staff time. BACKGROUND: Management compensation is reviewed on an annual basis and adjustments are normally recommended in conjunction with the annual budget process. The City's current salary and classification system was structured based on a compensation and classification study completed by Ralph Andersen & Associates in September 1997. As noted in the study, the goals of the City's compensation plan are to: Ensure that the City has the ability to attract and retain well-qualified personnel for all job classes; Ensure that the City's compensation practices are competitive with those of comparable employers; Provide defensibility to City salary ranges based on the pay practices of similar employers; and Item 8.i. - Page 1 CITY COUNCIL MANAGEMENT SALARY AND BENEFIT ADJUSTMENTS AUGUST 14,2012 PAGE 2 Ensure pay consistency and equity among related classes based on the duties and responsibilities assumed. At the June 26, 2012 meeting, the City Council approved recommended adjustments to the FY 201 2-1 3 budget to address a projected shortfall of approximately $944,000. The budget was balanced through a comprehensive list of strategies, one of which was reductions in salary and benefit costs to be negotiated with the City's labor groups. ANALYSIS OF ISSUES: Adjustments were developed for management compensation by determining the percentage of total General Fund salary and benefit costs that is attributed to management employees; applying that percentage to the total remaining budget shortfall; and then developing recommendations to generate savings equal to that amount. Changes in management salary and benefits from the prior year recommended in the attached resolution include the following: Non-sworn management employees will pay the full 8% of the employees' share of PERS pension costs (non-sworn management employees currently pay 7% and sworn management employees pay the full 9%). Management employees will pay 50% of the increase to medical benefit costs that take effect on January 1,2013. The amount of annual leave that management employees can transfer to cash will be reduced from 100 to 32 hours annually. The maximum accumulation of annual leave will be reduced from 750 hours to 725 hours. The three regular work days between the Christmas holiday and New Year's Eve holiday shall continue to be non-paid furlough days for all non-sworn management employees. Changes to management salary and benefits have traditionally been made through Council resolution annually. The detailed description of benefits for management employees has been found in the Personnel Regulations. As a result, the Personnel Regulations have become frequently outdated and inaccurate, there has not been one central document that can be easily referred to for a summary of management salary and benefits, and the Personnel Regulations have become confusing since they describe employee benefits that include differences for each of the employee groups as determined by the memorandums of understanding for the represented employees. Item 8.i. - Page 2 CITY COUNCIL MANAGEMENT SALARY AND BENEFIT ADJUSTMENTS AUGUST 14,2012 PAGE 3 Therefore, an overall management salary and benefit resolution has been drafted and recommended this year that outlines all salary and benefits for management employees. This is part of staffs overall efforts to improve and streamline internal procedures. Update of the Personnel Regulations is under way, which will be made easier by the development of this resolution. The City contracts with PERS to provide retirement benefits to employees. These benefits are financed through two-part contributions, an employer contribution and an employee contribution. 'The employer contribution percentage varies from year to year, based on a yearly actuarial of accumulated reserves and future payments. The employee portion remains constant at 8% for miscellaneous employees. For PERS purposes, payments made for the employees are called Employer Paid Member Contributions (EPMC). In July 1994, under Government Code Section 20636(c) employers were given the option of reporting the EPMC as additional compensation. This means that the PERS contribution paid by the employer, for the employee, is reported as income. Effective August 3, 2012, the EPMC will decrease for non-sworn management employees from 1% to 0%. PERS requires the City Council to adopt resolutions to pay and report the value of EPMC before the reporting change can be instituted, which is attached for Council consideration. ALTERNATIVES: The following alternatives are provided for the Council's consideration: - Adopt resolutions approving the proposed salary and benefit adjustments; - Modify as appropriate and adopt the resolutions; - Do not adopt the resolutions; - Provide direction to staff. ADVANTAGES: Approval of the proposed compensation changes will result in important cost savings, which will help reduce the need for further layoffs and reduction in service levels. Involvement of the management group in these changes helps make possible agreement with other labor groups for similar adjustments, which generate additional savings to the City. Lastly, adoption of the resolution will provide one centralized document summarizing salary and benefits for management employees and will make easier update of the City's Persor~nel Regulations. DISADVANTAGES: Adjustments may negatively impact employee relations. However, based on discussions with staff and efforts to impact all employee groups equally, management staff have been generally accepting of the recommendations. ENVIRONMENTAL REVIEW: No environmental review is required for this item. Item 8.i. - Page 3 CITY COUNCIL MANAGEMENT SALARY AND BENEFIT ADJUSTMENTS AUGUST 14,2012 PAGE 4 PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted in front of City Hall on Thursday, August 9, 2012 and on the City's website on Friday, August 10, 201 2. No comments were received. Item 8.i. - Page 4 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE ESTABLISHING WAGES AND BENEFITS FOR MANAGEMENT EMPLOYEES FOR FY 201 2-1 3 WHEREAS, the City Council of the City of Arroyo Grande ("City") has established a system of classification for all positions within the City service with descriptive occupational titles used to identify and distinguish positions from one another based on job duties, essential functions, knowledge, skills, abilities and minimum requirements; and WHEREAS, the City Council has established a system of compensation for the classification titles listed herein, based on resolutions and agreements as approved and adopted by the City Council; and WHEREAS, the City Council deems it in the best interest of the City that compensation for management employees be adjusted as hereinafter provided. NOW, 'THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo Grande that: SECTION 1. AFFECTED EMPLOYEES The wages and benefits set forth herein are to be provided to all management employees listed in Exhibit A. SECTION 2. WAGES The salary ranges for all affected job classes shall be as set forth on Exhibit A, which is attached hereto and by this reference made a part hereof. SECTION 3. DEFERRED COMPENSATION The City shall contribute $600 per year to management employees and $1,200 to department directors and the City Manager to a defined contribution supplemental retirement plan established in accordance with sections 401 (a) and 501 (a) of the Internal Revenue Code of 1986 and California Government Code sections 53215- 53224. SECTION 4. HEALTH PLAN BENEFITS A. Cafeteria Plan 1. The City shall contribute an equal amount towards the cost of medical coverage under the Public Employee's Medical and Hospital Care Act Item 8.i. - Page 5 Resolution No. Page 2 (PEMHCA) for both active employees and retirees. The City's contribution toward coverage under PEMHCA shall be the minimum contribution amount established by CalPERS on an annual basis. The City's contribution under PEMHCA shall be $1 12 from July 1, 2012 through December 31, 2012 and $1 15 January 1, 2013 through June 30,2013. Employees participating in the City's full flex cafeteria plan shall receive a flex dollar allowance to purchase group health coverage for medical, dental and vision under the City's Cafeteria Plan. For the period of July 1, 2012 through December 31, 2012, the flex dollar allowance shall be $602.28 with respect to an employee enrolled for self alone, $1,108.51 for an employee enrolled for self and one family member, and $1,420.90 for any employee enrolled for self and two or more family members. For the period of January 1, 2013 through June 30, 2013, the flex dollar allowance shall be $626.33 with respect to an employee enrolled for self alone, $1,156.61 for an employee enrolled for self and one family member, and $1,483.43 for any employee enrolled for self and two or more family members. A portion of the flex dollar allowance ($1 12 for 2012 and $1 15 for 2013) is identified as the City's contribution towards PEMHCA. This amount shall be adjusted on an annual basis as the PEMHCA minimum contribution increases. Remaining flex dollars must be used by employees to participate in the City's health plans. Employees who waive medical coverage under the Cafeteria Plan because helshe provided the City with written proof that medical insurance coverage is in force through coverage provided by another source consistent with any rules or restrictions on the City by the medical plan provider, can take flex dollars for the amount provided to employees enrolled for self alone (taxable income), deposit it into their 457 plan, or use it to purchase voluntary products. No remaining flex dollars may be redeemed. B. Medical Insurance 1. The base medical plan shall be defined as the lowest cost Health Maintenance Organization (HMO) program available through CalPERS in San Luis Obispo County. If availability of an HMO to the City is discontinued by the medical plan provider, the base plan shall become the basic PPO plan available to the City by the existing medical plan provider. The City shall maintain health benefits through CalPERS for calendar year 201 3. Item 8.i. - Page 6 Resolution No. Page 3 C. Vision lnsurance The City shall provide a Vision Care Plan for management employees. The City shall contribute the full family premium. The City may select an alternate vision care provider during the term of this resolution providing that: 1. Any new plan maintains equivalent benefits to the employees; and 2. At least twenty-one (21) days advanced notice of plan changes are provided to affected employees. D. Dental lnsurance Plan The City shall provide a dental plan of the City's choice for management employees. The City shall pay up to the full family premium. The City may select an alternate dental insurance plan provider during the term of this resolution providing that: 1. Any new plan maintains equivalent benefits to the employees; and 2. At least twenty-one (21) days advanced notice of plan changes are provided to affected employees. SECTION 5. LIFE INSURANCE PLAN A. The City shall provide group term life insurance benefit plan for management employees, which shall provide for fifty thousand dollars ($50,000) life coverage for employees only during the term of their employment. B. The City shall make available additional voluntary life insurance coverage, at the employee's expense, as long as the minimum participation requirements of the insurance provider are met. SECTION 6. A. Retirement Defined Retirement is defined as the termination of employment at an age when the employee would qualify for an allowance under the Public Employees Retirement System (PERS) and the City's Personnel Regulations. B. PERS Retirement Contributions 1. G.C. Sections 21354 and 21354.4. The PERS 2.5% at Age 55 Retirement Plan is provided for non-sworn personnel. From July 1, 2012 through August 2, 2012, all employees shall pay seven of the eight percent employee share of CalPERS retirement benefit costs. The City shall pay the remaining one percent. Effective August 3, 2012, employees shall pay the full eight percent employee share of Item 8.i. - Page 7 Resolution No. Page 4 the PERS contribution. Effective February 1, 2013, the PERS 2.0% at Age 55 Retirement Plan shall be provided for new non-sworn employees. New employees shall pay the full seven percent PERS employee share. G.C. Sections 21 363.1 and 21 362.2. The PERS Public Safety Officer 3% at Age 50 Retirement Plan shall be provided for sworn personnel. The PERS Public Safety Officer 3% @ Age 55 Retirement Plan shall be provided for new sworn employees. All sworn employees shall pay the full nine percent of the employee share of PERS. G.C. Section 20636 (c)(4) pursuant to Section 20691. The employee portion of the PERS contribution, made by the City, shall be reported to PERS as income. G.C. Sections 21024 and 21027. Employees may buy back, at their expense, retirement service credit for prior military service as permitted by PERS. GC Section 20042. Retirement benefits are based on the highest single year compensation. GC Section 20037. Effective October 1, 2011 for new sworn employees and February 1, 2013 for new non-sworn employees, retirement benefits are based on the highest average annual compensation earnable by a member during three consecutive years of employment. GC Section 20965. Employees shall receive credit for unused sick leave. 8. GC Section 21548. 'The spouse of a deceased member, who was eligible to retire for service at the time of death, may elect to receive the Pre-Retirement Optional Settlement 2 Death Benefit. C. Retiree Medical 1. Employees who retire from City service shall be allowed to purchase medical insurance coverage through the City. GC Section 22892. The City's contribution shall be an equal amount for both employees and annuitants, which shall be the minimum contribution amount established by CalPERS on an annual basis. That amount shall be $1 12 per month during calendar year 2012 and $1 15 during calendar year 2013. The City's contribution shall be adjusted annually thereafter by the CalPERS Board to reflect any change in the medical care component of the Consumer Price Index, provided that the City is participating in the CalPERS Health Plan. Item 8.i. - Page 8 Resolution No. Page 5 3. The City shall provide a supplemental contribution to employees that are: 1) employed on a full-time basis as of June 30, 2008 and who have been employed with the City on a full-time basis for five (5) years or more at the time of retirement; or 2) employed on a full-time basis after June 30, 2008 and who have been employed by the City on a full-time basis for ten (10) years or more at the time of retirement. The supplemental contribution shall be equal to the difference between the minimum contribution amount established by CalPERS as set forth above in Section 4. A. 1. and the following amounts: For single annuitant coverage: $175.10 For annuitant + 1 dependent: $302.85 For annuitant + 2 or more dependents: $376.79 SECTION 7. ANNUAL LEAVE Regular, full-time management employees shall accrue annual leave with pay to be used as leave for vacation, Illnesses, and other personal purposes. Management employees may accrue such paid leave as provided by this provision to be used in the future or may convert annual leave to salary compensation under the conditions contained in these regulations. A. Accumulation Rates: Management employees shall accrue annual based upon the following schedule: 1. Management employees with less than five (5) years of service shall earn annual leave at the rate of 29 days (232 hours) per year; 2. Management employees with five (5) to ten (10) years of service shall earn annual leave at the rate of 31 days (248 hours) per year; 3. Management employees with ten (1 0) to fifteen (1 5) years of service shall earn annual leave at the rate of 33 days (264 hours) per year; and 4. Management employees with over fifteen (15) years of service shall earn annual leave at the rate of 34 days (272 hours) per year. 5. New full-time management employees shall be granted fifty-six (56) hours of Annual Leave upon hiring. However, additional Annual Leave shall not be accumulated until after completion of three (3) months of continuous service. If a new management employee terminates during the first three months of employment, the Annual Leave balance shall reflect the actual amount that would have been Item 8.i. - Page 9 Resolution No. Page 6 accumulated at the established rate per pay period, less any usage. If the employee's usage of Annual Leave exceeds the adjust accumulation amount, the employee shall refund the excess amount used. The refund to the City shall be equal to excess hours used times the employee's hourly salary compensation rate. B. Maximum Accrual: The maximum accrual of annual leave shall be 750 hours through December 31, 2012. Effective January 1, 2013, the maximum accrual of annual leave shall be reduced to 725 hours. If an employee has accrued the maximum number of hours, accrual of annual leave shall be discontinued. Accrual shall resume on the first day of the pay period followirlg a reduction in the accrued balance below the maximum allowed. An employee's accrued balance of annual leave shall not be reduced on January 1, 2013 if it exceeds 725 hours, but accrual of annual leave shall be discontinued until the first day of the pay period following a reduction in the accrued balance below the maximum allowed. C. Conversion to Salary: A management employee may convert a maximum of 32 hours of annual leave to salary compensation per year. Such conversions shall be allowed at the first pay period in July and at the first pay period in December of each year. In order to be eligible to convert annual leave to salary compensation, the employee must: a) convert a minimum of sixteen (16) hours to pay; and b) upon making the conversion to pay, the employee must be left with a minimum of 160 hours of annual leave. Employees who are promoted or reclassified into a management position and were not subject to the annual leave program for the entire twelve (12) month period shall be allowed to include previous vacation and sick leave use as annual leave for the purpose of this provision. D. Notification and Approval: Annual leave shall be scheduled in advance by the employee whenever possible, subject to the approval of the department director. It is the responsibility of the employee to provide the supervisor or department director with reasonable notice of an absence. The department director shall have the authority to approve or deny the use of annual leave for any period of absence. The scheduling of the use of annual leave shall be by the department director with due regard to the wishes of the employee and particular regard for the needs of the City. Employees who are off for extended periods due to illness or injury may be required to provide a physician's statement authorizing their return to work. Item 8.i. - Page 10 Resolution No. Page 7 Reasonable absences of less than eight (8) hours shall not be debited against annual leave. Such absences should have the prior approval of the employee's supervisor and/or City Manager. E. Separation from Employment: Management employees who separate their employment from the City shall have all annual leave accumulations converted to salary compensation at the employee's current rate. Compensation shall be paid in one lump sum. Annual leave shall not be used to extend an employee's actual date of separation. When notice is given by an employee that helshe is terminating, the use of annual leave shall be suspended. The only exception to this provision is that with the approval of the employee's supervisor, the employee may be granted short-term leave (one (1) to three (3) days) to attend to personal business. However, such short-term leaves may be conducted consecutively and with a frequency to create in effect, a long-term leave. F. Conversion of Sick leave and Vacation Leave to Annual leave; Employees who are promoted or reclassified into a management position shall convert their sick leave and vacation leave accumulation to annual leave. 1. Sick leave accumulations shall be converted to annual leave at the rate of one (1) hour of sick leave equals .5 hours of annual leave. 2. Vacation leave accumulations shall be converted to annual leave at the rate of one (1) hour of vacation leave equals one (1) hour of annual leave. SECTION 8. HOLIDAYS Management employees shall receive the following paid holidays: New Year's Eve, December 31 New Year's Day, January 1 Martin Luther King Day, third Monday of January Lincoln's Birthday, February 12 (or day of observance) Washington's Birthday, third Monday of February Memorial Day, the last Monday in May Independence Day, July 4 Labor Day, the first Monday in September Veteran's Day, November 11 (or day of observance) Thanksgiving Day, fourth Thursday in November (or day of observance) Day following Thanksgiving Christmas Eve, December 24 Christmas Day, December 25 One Floating Day per Fiscal Year (employee choice with Supervisor approval) Item 8.i. - Page 11 Resolution No. Page 8 Every day designated by the President, Governor, or Mayor for public observance as a special nonrecurring single event, such as the death of a national leader or end of war. All holidays in the above schedule that fall on a Saturday shall be observed on the preceding Friday; all holidays in the above schedule that fall on a Sunday shall be observed on the following Monday. SECTION 9. VEHICLE ASSIGNMENT OR ALLOWANCE Automobile allowance shall be provided in the amount of $200 per month for the Director of Legislative and Information Services, Director of Administrative Services, and Direction of Recreation Services, $275 per month for the Director of Community Development, and $400 per month for the City Manager. The Police Chief shall be assigned a take home City vehicle. The Director of Maintenance Services shall be assigned a City vehicle for use during work hours. SECTION 10. JURY DUTY Management employees shall be granted leave with full pay and no loss in benefits when called for jury duty if the employee remits jury fees received for such jury duty. The employee may retain all travel pay or subsistence pay granted by the court because of the employee's participation in jury duty. The employee shall be responsible for notifying histher supervisor as soon as possible upon receiving notice to appear for jury duty, make every reasonable effort to keep histher supervisor advised as to the anticipated length of service, and return to work immediately followirlg the end of jury duty service. SECTION 11. BEREAVEMENT LEAVE Management employees are entitled to a paid bereavement leave of absence, not to exceed five (5) days, in the event of the death of a member of the employee's immediate family, to include an employee's or spouse's parents, spouse, children, brother, sister, stepchildren, grandparents, grandchildren, aunt, uncle, son-in-law, daughter-in-law, step relatives described above, or any other person residing in the same household, for the purpose of attending the funeral and making other arrangements at the time the loss occurs. As a condition of granting leave for bereavement purposes, the appointing authority may request verification of the loss. Such leave is independent of annual leave. In order to receive this benefit, domestic partners must be registered with the Secretary of State. SECTION 12. FURLOUGH DAYS The three regular work days between the Christmas holiday and New Year's Eve holiday totaling twenty-four hours shall be non-paid furlough days for all non-sworn management employees. Employees are not eligible to use sick leave, vacation, compensatory time pay, personal days, bereavement, jury duty or other paid leave during these days. Item 8.i. - Page 12 EXHIBIT "A CITY OF ARROYO GRANDE Management Salary Ranges 7/3/2012 Range M-10 M-11 M-12 M-13 M-14 M-15 LOW MID HIGH Position 3,041 3,117 3,197 3,276 3,358 Office Assistant I 3,442 3,526 3,617 3,708 Office Assistant I1 3,799 3,894 3,992 4,090 4,194 4,297 Administrative Secretary 4,406 4,516 4,630 4,744 4,863 Executive Secretary 4,985 Executive Assistant/Deputy City Clerk EXHIBIT "A CITY OF ARROYO GRANDE Management Salary Ranges 7/3/2012 Range M-31 LOW 4,202 4,308 4,415 4,525 4,638 4,755 4,872 MID 4,634 HIGH 5,110 Position Assistant Planner Associate Planner Accounting Supervisor IT Technician Planning Manager Informa tion Technology Manager Building Official Director of Recreation Services Human Resources Manager Legislative & Information Se~ces Director EXHIBIT "A CITY OF ARROYO GRANDE Management Salary Ranges 7/l/2012 Range M-51 M-52 M-53 M-54 M-55 M-55-A M-56 M-57 M-58 M-59 M-60 M-61 M-62 M-63 M-64 M-64-A M-65 M-66 M-67 M-68 M-69 LOW 6,886 7,057 7,234 7,414 7,600 7,637 7,791 7,983 8,185 8,388 8,600 8,814 9,032 9,259 9,490 9,536 9,729 9,970 10,220 10,477 10,738 MID 7,592 7,783 7,976 8,176 8,380 8,421 8,589 8,804 9,025 9,251 9,482 9,719 9,962 10,211 10,467 10,517 10,727 10,996 11,270 11,552 11,841 HIGH Position 8,372 8,582 Assistant City Engineer Director of Maintenance Services 8,795 9,285 Police Commander 10,457 Administrative Services Director C.D. Director 10,717 11,596 Police Chief EXHIBIT "A CITY OF ARROYO GRANDE Management Salary Ranges 7/1/2012 Range LOW MID HIGH Position M-70 11,006 12,135 13,384 RESOLUTION NO. A RESOLUTION OF THE ClTY COUNCIL OF THE ClTY OF ARROYO GRANDE FOR PAYING AND REPORTING THE VALUE OF THE EMPLOYER PAID MEMBER CONTRIBUTIONS TO THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) WHEREAS, the City Council of the City of Arroyo Grande has the authority to implement Government Code Section 20636 (c) (4) pursuant to Section 20691 ; WHEREAS, the City Council of the City of Arroyo Grande has a written labor policy or agreement which specifically provides for the normal member contributions to be paid by the employer, and reported as additional compensation; WHEREAS, one of the steps in the procedures to implement Section 20691 is the adoption by the City Council of the City of Arroyo Grande of a Resolution to commence paying and reporting the value of said Employer Paid Member Contributions (EPMC); WHEREAS, the City Council of the City of Arroyo Grande has identified the following conditions for the purpose of its election to pay EPMC: This benefit shall apply to all Management employees of the local Miscellaneous Group. This benefit shall consist of paying 0% of the normal member contributions as EPMC, and reporting the same percent (value) of compensation eamable (excluding Government Code Section 20636(c) (4)) as additional compensation. The effective date of this Resolution shall be August 3, 201 2. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Arroyo Grande elects to pay and report the value of EPMC, as set forth above. On motion by 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 I 201 2. Item 8.i. - Page 13 RESOLU'TION 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 Item 8.i. - Page 14