SUMMARY OF A BUDGET WORK SESSION HELD BY THE MAYOR AND

COUNCIL OF THE TOWN OF CHAPEL HILL, NORTH CAROLINA,

MONDAY, MAY 1, 1995

Mayor Broun called the work session to order at 5:42 p.m. Council Members in attendance were Joyce Brown, Joe Capowski, Mark Chilton, Pat Evans, Lee Pavão, Jim Protzman and Rosemary Waldorf. Council Member Barbara Powell was unable to attend the session. Also in attendance were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Finance Director James Baker, Personnel Director Pat Thomas, Public Work Director Bruce Heflin, Transportation Director Bob Godding, Engineering Director George Small and Town Attorney Ralph Karpinos.

Expenditure Analysis

Finance Director James Baker presented an overview of the Town's expenditure and revenue analysis for the past five years. He noted that the major expenditure increases during this period were for enhancing the Town's public safety program, funding resources for the new larger library facility and automating a portion of the Town's financial records.

Council Member Protzman thanked staff for the information. He said the information was quite enlightening and mostly reassuring. Council Member Protzman stated that the information was useful in analyzing where the Town had over and underinvested during this period. He also said it appeared that past Councils had appeared to do a good job of keeping the Town on task the past five years.

Council Member Capowski said the inflation-adjusted increase in expenditures during the past five years was remarkably small. He inquired how large expenditure increases for landfill-related expenses had been balanced during the period. Mr. Baker stated that both tip fees and the volume of refuse collected had both increased significantly during the past five years.

Council Member Protzman said the analysis had presented a clear picture of where the Council should focus its budget-related discussions.

Compensation Matters

Noting that the staff felt it was important to remain competitive in terms of compensation, Personnel Director Pat Thomas briefly reviewed the process for the classification of Town positions. She noted that a total of sixty-one employees would receive a pay increase as a result of proposed position reclassifications. Ms. Thomas said staff recommended a 1% adjustment to all salary ranges in addition to merit increases averaging 3.25%.

Council Member Capowski inquired whether the salaries for police officers referenced in the staff's report were gross salaries.

Ms. Thomas said this was correct. Council Member Capowski asked whether the Triangle Transit Authority's bus drivers were unionized. Mayor Broun said although the drivers were not formally unionized, there were some union provisions tied to federal funding of the transit system. Mr. Horton said some provisions of State law made it difficult to ascertain whether or not employees belonged to unions.

Council Member Capowski said he was comfortable with the staff's compensation and reclassification proposals if they could be accommodated without the need for a property tax increase.

Council Member Waldorf asked why staff was recommending a higher average pay rate for Police Officer II positions than a similar position with the City of Durham. Ms. Thomas said staff was recommending that the position's salary be brought into line with the weighted average for the same position in other communities.

Council Member Waldorf inquired about the level of turnover in the Police Department during the current fiscal year. Ms. Thomas said she could provide this information to the Council. Council Member Waldorf inquired about the Town's overall turnover rate. Mr. Horton said the rate was about 11%, compared to a desirable rate of 8 to 10%. Council Member Waldorf inquired about the turnover rate excluding retirements and disability. Ms. Thomas said retirements and disabilities accounted for about 1/3 of turnover.

Mr. Horton said turnover rates above ten percent tended to have a major impact on organizations.

Noting that she favored the staff's compensation proposal, Council Member Evans also noted that it was possible that State employees would receive no salary increases during the next fiscal year. Mr. Horton said he believed the State would short-sighted not to give some sort of fair compensation increase to its employees.

Health Insurance and Other Benefit-Related Matters

Ms. Thomas said staff had reviewed Town benefits relative to other local employers, including health insurance coverage for employee's dependents. She noted that the Town's insurance coverage had not provided final details about whether or not they would be willing to provide health insurance to domestic partners of Town employees.

Ms. Thomas stated that Northern Telecom made provisions for same and opposite gender partners to receive health insurance coverage.

Council Member Capowski inquired whether staff was recommending that options for health insurance be made available to domestic partners of Town employees. Mr. Horton said State law was unclear about whether or not it would be permissible to provide health insurance coverage to domestic partner dependents. He also said if the Town took such an action, it might be challenged legally.

Council Member Capowski inquired about the limits of domestic partner liability in matters such as mortgage payments. Mr. Karpinos said this would depend upon the specific contractual arrangements involved. Council Member Capowski said he objected to making direct cash payments to domestic partners for health insurance purposes. Ms. Thomas said the proposal was for reimbursements, rather than direct cash payments.

Council Member Brown inquired whether any legal challenges had been previously filed against communities planning to provide this type of health insurance coverage. Mr. Karpinos said challenges had taken place in Georgia and Minnesota, with the court's ruling being that the municipalities did not have the legal authority to provide this type of benefit to same sex domestic partners. Mr. Karpinos stated that it was uncertain how the State's courts might rule if the Town were to proceed in the matter and a challenge were filed.

Council Member Evans inquired whether part-time employees received the same level of benefits as full-time employees. Ms. Thomas said all benefits, excepting health insurance, were pro-rated on the basis of hours worked for part-time employees. Council Member Evans inquired about the number of part-time Town employees. Ms. Thomas said there were approximately seventy part-time employees, with the majority serving in transportation and library positions.

Council Member Protzman inquired about the approximate total cost for providing health insurance to employees and their dependents. Mr. Baker said the total cost was approximately $1 million per year for the General Fund. Council Member Protzman suggested that this expenditure might merit future review by the Council. He stated that the Council might wish to discuss whether or not it wished to continue paying fifty percent of insurance coverage for dependents of Town employees. Noting that the Town attempted to provide a balance of good benefits to employees, Mayor Broun said he thought the expenditure was not necessarily out of line. Council Member Protzman said he was suggesting the possibility of reducing down health insurance costs for dependents over a longer period time such as five years. Noting the importance of treating all Town employees equally, Council Member Pavão said he concurred that the matter of benefits could be evaluated over a longer time period.

Noting that there would likely continue to be some degree of uncertainty about the nation's plans for handling health insurance in the near future, Mr. Horton said the Town continued to believe that health maintenance organizations (HMOs) were one of the best ways for the Town to control these costs. He noted that staff would be pleased to provide the Council with options for shifting compensation dollars into other benefit areas. Mr. Horton added that an abrupt shift in health insurance coverage would be destabilizing to many Town employees.

Council Member Brown inquired what percentage of Town employees' spouses were not covered by health insurance. Ms. Thomas said although she did not have a specific figure, the main reason for not carrying health insurance for spouses was that it was too expensive to do so. Council Member Brown said it would be a good idea to get additional information about potential hardships before embarking on possible cutbacks in health care insurance coverage for dependents.

Council Member Chilton said it was quite likely that a small number of people would choose to sign up for domestic partner health insurance coverage if it were to become available to Town employees. Mr. Horton noted that cost was not a driving factor in this matter. He also said it was important for the Council to make a policy decision based on what was best for the community in this matter. Council Member Chilton said it might be worth looking into the State legislative history behind dependent health insurance coverage.

Council Member Evans asked whether the Town's health care insurance coverage involved co-payments. Ms. Thomas said yes.

Council Member Capowski said it was desirable for the Town to be in the middle of the range in terms of compensation and benefits for employees. He also said it was important to evaluate the type of coverage that the Town was receiving for its investment. Council Member Chilton said Council Member Protzman had earlier made a compelling argument about whether the Town should pay for 50% of costs for Town employee dependents. Council Member Capowski said it was not desirable for an individual to take Town employment simply because the Town might choose to provide a portion of health care coverage for domestic partners. Council Member Chilton said it was important for the Town to remain a competitive employer in terms of benefits and compensation.

Mr. Horton said staff examined the entire benefits for employees when comparing it to packages offered by other organizations.

Mayor Broun inquired how much had been earmarked in the Manager's preliminary budget for funding of health insurance for domestic partners. Mr. Horton said $12,000. Council Member Capowski inquired what amount of legal fees might be needed to defend any challenges relative to providing benefits for domestic partners.

Mr. Karpinos said this was difficult to determine since no courts in North Carolina had ruled in this type of situation. He added that there would be no personal liability on the part of the Council or any staff member if a challenge were raised to the provision of health benefits to domestic partners of Town employees. Mr. Karpinos said persons bringing a legal challenge could seek action against persons who received the health insurance benefits.

Council Member Capowski inquired about the likelihood that legal costs would be greater than the $12,000 set aside for the program itself. Noting that this matter was a fairly significant one which had attracted the interest of many people, Mr. Karpinos said he hoped the amount expended to handle a legal challenge would be minimal.

Council Member Evans said she favored proceeding with Council Member Protzman's suggestions concerning future evaluation of health insurance coverage. Council Member Evans also said was possible that precedents could be set by other communities in the near future concerning the provision of health benefits to domestic partners. Council Member Waldorf said she would have a hard time proceeding with an action that the Town Attorney had advised against. Mr. Karpinos noted that there had been no North Carolina court decisions on the matter to date.

Mayor Broun said he believed it was fair and reasonable for the Town to provide health insurance coverage for domestic partners of Town employees. Mayor Broun stated that there was unanimous informal support of the Council in this matter.

Mayor Broun also said it appeared that the Council favored having the staff look into providing a variety of benefit alternatives to Town employees. Council Member Brown said it was important to give employees some choice and flexibility in choosing their individual benefit packages. Council Member Waldorf suggested that the staff's report be focused on key concepts and broad in nature. Mr. Horton said he thought the report needed to be more specific and outline specific numbers. Mayor Broun said there did not appear to be any Council opposition to having the staff examine all employee benefits. Council Member Protzman added that no Council Members were interested in doing anything to reduce the total compensation package of Town employees.

Noting that some other communities had been reducing the number of overall employees in recent years, Council Member Brown said it was important for the Council to examine the fact that the Town had been adding employees in recent years. She inquired whether staff was proposing to add new police officers. Mr. Horton said this was unknown since the Town had not yet received word on whether it would receive federal funding for these positions. Council Member Brown said she hoped the Council would keep in mind that other cities were employing a lesser number of employees.

Council Member Waldorf said she had a difficult time understanding a merit plan which granted merit increases to all employees except those close to termination. Mr. Horton stated that the Town's work force had a lot of good performers, some outstanding employees and some who needed improvement. He also said the Town tried hard to identify needed improvements needed in employee performance as early as possible in order that necessary adjustments could take place. Expressing concern about potential abuse in some merit systems, Council Member Brown said the Town could possibly explore alternative merit systems. Mr. Horton noted that the Town had an appeals process for employees who disagree with their performance evaluations. Mayor Broun said it is important for the Town to provide some sort of merit increase to recognize the service of employees to the community.

Transit Matters

Transportation Director Bob Godding briefly reviewed projected ridership and revenue figures for the local bus system, based on various bus fares and pass prices.

Council Member Capowski requested an update on federal and state subsidies for the local transit system. Mr. Godding presented an overview of the situation, noting that staff had developed some alternative funding scenarios for Council consideration. He noted that the Town did not yet know the specific change in federal or state transit operating assistance for the next fiscal year.

Council Member Capowski inquired how losses in federal transit subsidies were being balanced. Mr. Horton said the Town had unexpectedly received a greater amount of State transit subsidies this year, which would help to offset a portion of the reduction in federal operating assistance for transit operations next year.

Council Member Capowski inquired whether it was correct that proposed increases in bus fares from 60 to 75 cents and bus passes from $189 to $204 would not completely offset anticipated funding shortages. Mr. Horton said this was correct. He noted that earlier in the day University officials had reaffirmed their support for the proposed increase in fares and pass prices.

Council Member Chilton stated that the $260 annual fee for a parking permit currently charged by the University was artificially low compared to privately-provided spaces. He said it would be desirable for the University to consider raising parking permit prices as an incentive to increase bus ridership. Council Member Brown suggested that the matter could be discussed at the next Consultation and Coordination Committee (CCC) meeting.

Mr. Godding noted that overall farebox revenues generally covered between 30% and 34% of the transit system's operating costs, with recent revenues being at the lower end of this range.

Mayor Broun inquired about the sense of the Council on possible bus fare and pass increases. Council Member Brown suggested that the matter needed to be further examined before any conclusions were reached. Council Member Capowski noted that the Town had no control over the pricing of University parking permits or bus passes sold by the University. Council Member Evans noted that she had contacted the UNC student body president concerning possible alternatives to increases in bus pass prices.

An informal straw poll concerning increased bus fares and pass prices indicated five members in favor and three members opposed.

Council Member Protzman said it was important for the Town to continue to negotiate with the University concerning parking and bus pass prices and bus fares. He added that the University's student body president appeared to be interested in attracting more bus riders to offset the need for increased bus pass & fare prices.

Noting the complexity of the issue, Mr. Horton said it might take some time to work the matters through. Stating his belief that parking permits were underpriced, Council Member Capowski said it was important to develop disincentives to the use of single-occupant vehicles.

Exterior Bus Card Advertising

Mr. Godding stated that several months ago the Town had received an unsolicited proposal for a multi-year contract for advertising on buses. He said projected annual revenues, depending on the size of ad racks used, would be $20,000 to $40,000.

Mayor Broun inquired whether restrictions in subject matter beyond tobacco and liquor were feasible. Mr. Horton said further restrictions would limit the amount of possible revenues. Council Member Evans inquired whether the project could be contracted out to the Chamber of Commerce or another local group. Mr. Horton noted that there was not sufficient demand or expertise for a locally based program to succeed.

Thanking the staff for their research, Council Member Protzman said he thought projected revenues of $30,000 were insufficient to proceed any further with this proposal. Council Member Capowski said the proposal was not worth it if the advertisements would be primarily national advertisers.

Council Member Brown asked whether the contract period could be for less than five years. Mr. Horton said yes, noting that a shorter term contract would likely result in lower expected revenues. Council Member Brown stated that funds from advertising revenue could be used to offset the need for increased bus fares and pass prices.

Council Member Waldorf inquired about the staff's opinion of the proposal. Mr. Horton said he generally concurred with Council Member Protzman's outlook that the potential benefits would not be sufficient to enter into such a program.

Council Member Waldorf asked whether revenues from a request in vehicle license tag fees could be used for transit operations. Mr. Horton said the Council had not yet adopted a resolution designating the use of these funds, if the additional funds were authorized by the State legislature.

Cemetery Maintenance

Public Works Director Bruce Heflin said total annual administrative costs for the sale of plots for interment were $53,250.

Town Engineer George Small stated that current interment fees were not covering the Town's costs for providing these services. He said the staff's proposal was to double the current fees. Mr. Horton stated that staff could examine cemetery fees on an annual basis, if the Council wished.

Mayor Broun expressed concern that increasing these fees would have the greatest impact on persons with lower incomes. He emphasized that if the fees were raised, they should be used for direct expenses, rather than for other Town operations. Mayor Broun said there appeared to be general Council concurrence on this point.

Council Member Waldorf inquired about the possibility of contracting out the administration of Town cemeteries. Mr. Small said staff would likely propose this as one option for Council consideration. Mayor Broun said there appeared to be Council consensus with the proposal to increase interment fees.

Apprenticeship Program

Town Engineer George Small presented an overview of a proposed Town apprenticeship program, to possibly be initiated in conjunction with local schools and the North Carolina Department of Labor. He noted that if the proposal were approved, it might be necessary to reevaluate program funding on an annual basis.

Noting that the apprenticeship program involved a commitment of four to six years, Mayor Broun inquired whether or not five young people could be accommodated in Town departments. Mr. Horton said he believed the maximum capacity would be five apprentices.

Council Member Protzman said although he was generally enthusiastic about the proposed program, it might be advisable to initiate the program on a somewhat smaller scale. Council Member Protzman also said he favored a program which balanced opportunities for male and female participants. Mr. Horton said he shared these concerns. He noted that the Triangle Fire Challenge Academy was a good model of a program balancing opportunities for men and women.

Stating that women were perfectly capable of handling many non-traditional jobs, Council Member Brown inquired whether there were any guarantees that apprentices would remain enrolled in the program. Noting that a significant time commitment of four to six years was involved, Mr. Small said there could be no guarantees about on-going program enrollment by individual apprentices.

Council Member Brown asked whether Chapel Hill High School offered any technical programs. Mr. Small said the high school offered some vocational programs for non college-bound students.

Council Member Capowski asked whether it was correct that the program was not targeting "at risk" youth. Mr. Horton said this was correct. Council Member Capowski inquired about the amount of paperwork involved in the proposed program. Mr. Small said the majority of paperwork would be for recordkeeping purposes. Council Member Capowski asked whether program participants would receive a degree. Mr. Horton said persons completing the program would receive a formal certificate of completion. Council Member Capowski inquired about the feasibility of providing a shorter-term program. Mr. Horton said this was not feasible. Council Member Capowski asked whether staff recommended proceeding with the proposal. Mr. Horton said yes, noting that the program would meet some of the community objectives of the Youth Committee of the Violent Crime and Drug Abuse program.

Council Member Evans suggested starting the program with a few students, rather than five. Council Member Protzman asked whether there was any economy from having three program participants, rather than five. Mr. Horton said three apprentices would be a more reasonable starting point for the program. Mr. Small said the program would be very fortunate to find five potential participants.

Mayor Broun inquired about the sense of the Council to the proposed apprenticeship program. Council Member Protzman said he favored initially having three program participants. Council Member Evans expressed her concurrence.

Council Member Brown asked whether funds were earmarked in the proposed budget for this program. Mr. Horton said no.

Council Member Waldorf suggested keeping the proposal on the table for further Council consideration.

Mayor Broun said there appeared to be tentative Council approval of a program for up to three apprentices initially.

Mayor Broun inquired whether there were additional items for Council discussion this evening.

Council Member Evans said she favored having at least one Streetscape project per year, with particular emphasis in the downtown area. Mayor Broun said this could be discussed at a future Council budget work session.

Council Member Waldorf requested that staff develop a cost estimate for temporary sidewalks along Piney Mountain Road.

The work session concluded at 8:21 p.m.