SUMMARY MINUTES OF A BUDGET WORK SESSION

SUMMARY MINUTES OF A BUDGET WORK SESSION

OF THE CHAPEL HILL TOWN COUNCIL

WEDNESDAY, JUNE 15, 2005 AT 5:00 P.M.

Mayor Kevin Foy called the meeting to order at 5:00 p.m.

Council members present were Sally Greene, Ed Harrison, Cam Hill, Mark Kleinschmidt, Bill Strom, Jim Ward and Edith Wiggins.

Council Member Dorothy Verkerk was absent, excused.

Staff members present were Town Manager Cal Horton, Deputy Town Manager Florentine Miller, Assistant Town Manager Bruce Heflin, Town Attorney Ralph Karpinos, Town Information Officer Catherine Lazorko, Parks and Recreation Director Kathryn Spatz, Police Chief Gregg Jarvies, Finance Director Kay Johnson, Housing Director Tina Vaughn, Library Director Kathy Thompson, Information Technology Director Bob Avery, Engineering Director George Small, Acting Public Works Director Bill Terry, Fire Chief Dan Jones, Inspections Director Lance Norris, Human Resources Director Pam Eastwood, Acting Planning Director J.B. Culpepper, Transportation Director Mary Lou Kuschatka, Assistant Finance Director Jeanie Erwin, Principal Planner Gene Poveromo, Fire Administrative Officer Susanna Williams, Senior Long Range Planning Coordinator Chris Berndt, and Town Clerk Sabrina Oliver.

Manager’s Introduction

Finance Director Kay Johnson noted the preliminary budget had been presented on May 9, and since that time they had been able to make adjustments as requested by the Council that have brought the expected tax rate increase down to 2.9 cents. She noted the proposed changes in the General Fund:

• Reduction in the expected increase in medical insurance rates of $156,560.

• Received notification from Chapel Hill-Carrboro City Schools that they may not be able to afford the cost of School Resource Officers at the middle schools, therefore we have reduced the budget for those officers.

• Received notification that natural gas prices are increasing 13.4 percent, requiring an additional $10,000.

• Funds allocated for the Greenhouse Gas Emissions Measurement Study at $13,000.

• Additional donations to human service and arts organizations determined by the Council:

o Interfaith Council Homeless Shelter, $20,000

o Chapel Hill Public Arts Commission, $25,000

o Human Services Advisory Board, $19,000

o Carrboro Arts Center, $10,000

• Reduction in the CIP additions by eliminating funds for the air conditioning system in the Town Hall ($280,000), and for the first payment on renovation work at the Estes Community Center ($224,000).

• Proposed increase in revenues from commercial garbage fee collections were reduced from $149,000 to $136,000 to reflect the decision not to charge multi-family residential properties for additional commercial garbage fees.

Ms. Johnson noted two changes to the Transportation Fund:

• Reduction in estimated cost of medical insurance from $103,010 to $45,890, a reduction of $57,120.

• Received notification that natural gas prices are increasing 13.4 percent, requiring ad additional $10,000.

Council Member Strom requested that the $25,000 for the Chapel Hill Public Arts Commission be earmarked specifically for the master plan. Mr. Horton said that could be included as a condition in the performance agreement.

THE COUNCIL AGREED BY CONSENSUS TO EARMARK THE $25,000 CONTRIBUTION TO THE PUBLIC ARTS COMMISSION SPECIFICALLY FOR USE IN PREPARING A MASTER PLAN.

Discontinuation of the Weekly Payroll Option for Future Employees

Mayor Foy reviewed the items listed for discussion on the agenda, noting that all of them did not require Council action. He pointed out that item #4, Discontinuation of the Weekly Payroll Option for Future Employees, would require Council action. Mr. Horton stated that if the Council had an opinion they would like to know about it. He said they were proposing changing to a bi-weekly system gradually, by offering only the bi-weekly payroll option to future employees. Mr. Horton said those on weekly payroll who would like to change would be allowed to do so, and any employees who are promoted into administrative or professional positions would be transferred to bi-weekly as well. He said those who are already employees and are on a weekly payroll would be allowed to continue.

Mayor Foy noted that Option 1 would be the gradual phase-out of weekly payroll, and Option 2 would be the elimination of the weekly payroll cycle. Mr. Horton said they had heard expressions of concern from some employees who are currently on the weekly payroll cycle, and they believe that they were hired under a weekly cycle and should be given the option to continue. He said his recommendation was for Option 1, so that those already on a weekly cycle could continue unless promoted into an administrative or professional position.

Council Member Ward said under Option 1, it would take some length of time to eliminate the weekly cycle. Mr. Horton agreed it would take years to do it, but the number of employees on the weekly payroll would diminish over time, and he did not believe it would take an exceptionally long time.

Council Member Kleinschmidt asked what the benefits were of being paid every week. Mr. Horton said that many employees are accustomed to being paid weekly, and live so “close to the edge” that even a few days difference in receiving pay made a substantial difference, adding it may mean not being able to pay rent on time, make a car payment on time, or having to choose between necessities of life. Mr. Horton said he could remember early on in his career that he and his family lived “week to week,” so he had respect for that.

THE COUNCIL AGREED BY CONSENSUS TO ENDORSE OPTION 1, THE GRADUAL PHASE-OUT OF WEEKLY PAYROLL.

Pay Plans with Steps 2.5 Percent Apart and 3.0 Percent Apart

Mayor Foy called the Council’s attention to page 5 of the agenda item, noting that the chart detailed the 12-month cost of that increase at $1.2 million. He stated that he supported a 3.78 percent increase, but he did believe there was a benefit to the Council in making an adjustment in the pay plan. Mayor Foy said for the Council, 3.78 percent between steps does not work, and he would like to see a more rational step. Then, he said, the Council could give an additional amount, for example 1 percent or some other amount, and he would like to see how that would affect the pay plan.

Mayor Foy said if we were to shift to 3 percent between steps, and then awarded an additional amount, how would that work within the pay plan. Mr. Horton said they would recommend in that circumstance that the additional amount be used to adjust all of the pay ranges and provide a market rate increase that would affect all employees. Human Resources Director Pam Eastwood agreed with Mr. Horton’s statement.

Mayor Foy said to him that would be a way to proceed, and would suggest doing that. He said he understood that it may cost $1.2 or $1.3 million.

Mayor pro tem Wiggins asked Mayor Foy to elaborate on his statement that the 3.78 percent steps between ranges did not work for the Council. Mayor Foy responded that he believed that because of the way the pay plan was currently structured, the Council was locked in to a 3.78 percent change every year, and if we don’t grant 3.78 percent it tends to create problems within the pay plan.

Mayor Foy said the idea behind the pay plan was to move people towards the job rate, and he did not believe that was happening because the Council was not always in a position to grant 3.78 percent. He said he believed the Council would be in a better position if it amended the pay plan so that there was 3 percent between steps, then it would have the discretion to grant more dollars within each pay range, and that was what he was suggesting the Council.

Mayor pro tem Wiggins said that would mean that the .78 percent would be discretionary. Mayor Foy said it would mean that any amount over the 3 percent would be discretionary. He said actually any amount was discretionary, but if the pay plan was modified to place 3 percent between steps, then that 3 percent would be the expectation and an employee would move up on the pay range.

Mayor pro tem Wiggins said, then, the Council could grant less than 3 percent. Mayor Foy said that was correct. He said he was suggesting that this year, the Council grant 3 percent as a step increase, then the .78 percent as discretionary dollars.

Mayor pro tem Wiggins said the bottom line was that with that plan, the employees would still receive the 3.78 percent; it would just be divided somewhat differently. Mayor Foy said that was correct. He said he was not sure how that would work.

Ms. Eastwood said they could make adjustments in a flexible manner based on the dollars the Council provided. She stated that on page 4 of the memorandum there was an explanation along with a chart of the costs associated with moving to a 3 percent step. Ms. Eastwood said there was some additional cost in changing the steps, because it would require placing employees on a new array of steps. She noted that the description of page 5 of the 3.78 percent plan was what the Town had been doing for the past several years.

Ms. Eastwood said if the Council decided it wanted to move to 3 percent steps, they suggest using the process described on page 4 of the memorandum. She noted that they could take a 3.78 percent funding and distribute that into 3 percent steps, noting the difference in dollars would not be significant.

Mayor Foy said he would suggest that the Council take the cost of the 9-month funding listed on page 5 of $914,003 and grant a 3 percent pay increase plus .78 percent as discretionary dollars. Ms. Eastwood confirmed that this did not affect the special pay increases discussed on May 9. Mayor Foy stated that was correct.

Mayor pro tem Wiggins confirmed that employees would be receiving a 3.78 percent increase. Ms. Eastwood said yes, they would make that work with those funds and at the same time move to 3 percent steps.

Council Member Strom said he wanted to confirm that the presentation made by Ms. Johnson at the beginning of the meeting included the 3.78 percent pay adjustment. Mr. Horton stated that was correct. Council Member Strom endorsed Mayor Foy’s suggestion, noting it addressed the Council’s concern as well as the Manager’s concern while dealing with the same amount of money.

Council Member Kleinschmidt said he did not understand the logic of between declaring 3.78 percent to be arbitrary, and then not understanding the 3 percent to be arbitrary. He said any amount was going to be an arbitrary amount, and right now we were locked in to the 3.78 percent in the same way we would be locked in to the 3 percent being proposed now. Council Member Kleinschmidt said when we move to 3 percent, how would than affect employees trying to move to job rate. Ms. Eastwood replied that it would add an additional step.

Council Member Kleinschmidt said it takes five years to reach job rate now, and asked how much longer it would take under this new proposal. Ms. Eastwood replied it would take an additional year, or another pay action. Council Member Kleinschmidt said then it would take six years to reach job rate, and the Council needed to understand that. He said when someone looks at a job and what the Council believed that job to be worth, which was the job rate, then they would see that it would take them six years to reach that point. Council Member Kleinschmidt said the longer we push that out, the more compelling are the arguments about what it means to work in America where people don’t spend a lot of time in a job, although that was not especially true with the Town.

Council Member Kleinschmidt said this proposal would create a disincentive for longevity, noting that people move more frequently now and with the kinds of jobs we have available, the skills are easily transported to other towns nearby. He said we needed to keep the number of steps to reach job rate as low as possible, and he did not support adjusting our pay plan to make it take longer to reach job rate.

Mayor Foy stated that what Council Member Kleinschmidt may be true, but the absolute dollars and the value of the job are of more importance that whether or not you are at job rate. He said if you were not at job rate, then you were guaranteed a 3 percent step if that was what was awarded. Mayor Foy said if you were above the job rate then it was discretionary. He said if the jobs were being paid at a competitive salary, then he was did not believe that was a disincentive.

Council Member Kleinschmidt said he believed it was not prudent to use the word “guarantee.” He said that the same guarantee that Mayor Foy was placing on the table now was the same guarantee that employees thought that they had this year, which was that there was a 3.78 percent difference between steps and that the Council would fund that difference. Council Member Kleinschmidt said that was the “guarantee,” and it was not any more of a guarantee when you take it to 3 percent, although it made it more likely because the Council would have to fund a lesser amount, and it also makes it less notice because it was less money. Council Member Kleinschmidt said the guarantee the Mayor was referring to was ephemeral.

Mayor Foy said that argument could be made in both directions, that if 3.78 percent and 3 percent were both arbitrary then so was 5 percent or some other percentage. He said we had to work with a range that was reasonable, and when we were in the economy that we are now in he did not think it was necessarily fair to make a promise to employees that they knew they could not keep, and that was what the Council had done. Mayor Foy said he believed what he had proposed was a balance.

Mayor pro tem Wiggins said she was happy that the bottom line was that employees would be receiving what the Manager has proposed, which was 3.78 percent. Mr. Horton said he understood that they would place employees who were below job rate on the appropriate step where necessary, which may mean that some employees would receive slightly more, and some slightly less. He further explained that they would modify the pay ranges by .78 percent, and that some funds would be available for employees who were above job rate that was equivalent to 3 percent, but would depend on their performance rating.

Mayor pro tem Wiggins said she did not think the 3.78 percent was arbitrary. She said after years of working with the pay plan, she believed that percentage was arrived at logically. Mr. Horton said he recollected that there was logic behind it when it was set, having to do with the amount of spread between the beginning step and the mid step, and included a probationary step. He said that one could likely argue that the 3.78 percent should have been set slightly higher or slightly lower.

Mayor pro tem Wiggins commented that if the Council was going to allocate it this way this year, she hoped it would not be “written in stone.” She said she would urge future Council’s to give this issue a lot of thought, noting the pay plan as currently written was written to address competitive pay, compression, and a number of other issues. Mayor pro tem Wiggins said she was not comfortable with supporting this adjustment to 3 percent without more detail and logic. But, she said, since everyone would be receiving 3.78 percent more or less, she would support it at this point.

Council Member Ward said he did not understand how employees would get the same 3.78 percent with this concept that the Mayor outlined using less money. Mr. Horton said it would be the same about of money. Council Member Ward said then what we were doing was modifying the pay plan to have 3 percent between steps rather than 3.78 percent, but we were awarding an additional .78 percent, so the money was the same. Mr. Horton said the steps would be changed to 3 percent, and in doing that there would be some employees who would have to be moved up to the next closest step and would receive slightly more than 3.78 percent. He said you would have for persons above the job rate the sum of money that would be equivalent to about 3 percent, and those employees would get a rate adjustment depending on their performance. Mr. Horton said then there would be a small amount of money that would be used to change the pay ranges themselves, which would apply to everyone.

Mayor Foy said essentially it would be a 3.78 percent pay increase. Mr. Horton added that certain individuals would receive differing amounts with the two different proposals.

Council Member Ward said in that case he would agree with Mayor pro tem Wiggins. He said why completely reconfigure a pay plan that was thoughtfully constructed and had served us well. Council Member Ward said he was one who had thought that the 3.78 percent was a larger stride that we were financially able to do each year. He said he would support the 3.0 percent, but if we grant the .78 percent then we were spending the same amount of money. Council Member Ward said he would like to discuss this in more detail before making a decision.

Council Member Ward said he was moved and convinced by the employees who had spoken at the Council meeting a month ago, and he had a special support for those at the lower end of the pay plan. He said when you consider those employees, a 3.78 percent increase would not cover the cost of inflation or the increased cost of medical insurance. Council Member Ward said employees who were making $70,000 or more a year should be compensated for a job well done, but they were not facing the same pressures as someone who was making $25,000 a year. For that reason, he said, a bonus which represented a significant increase percentage wise to a lower paid employee and a lower bonus to a higher paid employee was a strategy that made sense to him. Council Member Ward commented that while he wanted to be fiscally prudent with the taxpayers money, he also wanted to be fair and reward a job well done but not put our lower paid employees in any more jeopardy than they are already because of the rising cost of living.

Council Member Ward said he got the feeling that bonuses were not the way the Manager would like to go. He asked why bonuses would not work. Mr. Horton said that bonuses by their nature were temporary and could not be counted on. Council Member Ward said maybe he had used the wrong word. He said what if a $1,000 was added to an employee’s salary. Mr. Horton replied that would be a flat increase, and would eventually create compression problems and would make it more difficult for us to compete in the market place. He said it would put us back into the same situation we were in before we adopted the current pay plan. Mr. Horton said these kinds of ideas were what had put us in those situations to begin with, and he could not recommend doing that again.

Council Member Ward said the real issue of compression is that longer tenured employees end up being paid a similar amount to a new hire. Mr. Horton said that was correct, and the employees feel that their longevity and greater ability was not fairly recognized.

Mayor pro tem Wiggins said regarding agenda item #3, which showed the net pay changes for employees after the increase in medical insurance premiums, there was a chart that helped the Council to understand that process. She said if you look at line that reads “Net take-home pay after increase under new Pay Plan with 3.0 percent steps and new medical insurance rate,” you see that the sample employee would get less that if we had stayed with the 3.78 percent. So, Mayor pro tem Wiggins commented, what we would do was take the .78 percent to adjust that salary so that it would end up being what it would have been. She asked if that assumption was correct, because if it was not and the net pay went done then she would agree with Council Member Ward.

Ms. Eastwood explained that the net effect of what they were discussing, if the Council authorized funding at 3.78 percent, is that the employee would end up in the same place. She said it would be done by two separate actions, one of which would be the step change to put them on step in the new range of 3 percent step, and then give them a step which would advance them toward the job rate. Ms. Eastwood said then the remaining funds would be used to change the dollar value of every step and the maximum of the range.

Mayor Foy commented that the chart may have been confusing, since the sample employee carried family coverage and therefore paid half of the cost of the medical insurance. Mayor pro tem Wiggins asked how that person in the chart would get the additional funds. Mr. Horton responded that they would get an additional amount to get them on a 3 percent step, then they would get a 3 percent step, and then they would get an additional amount that raised their range.

Mayor pro tem Wiggins asked the Manager to prepare a charge that would show all of that so that the Council would understand exactly what the effect would be. Mr. Horton agreed to do so. He said it did have the effect of placing more money with employees who were in the bottom half of their range out of the full distribution of the money.

Mayor Foy commented that was because they had to get “bumped” up a little bit. Mr. Horton replied that was correct. He said they would prepare an illustration that used this kind of comparison.

Council Member Ward asked for that illustration to include a comparison with someone making twice that amount of salary. Mayor Foy said it was not about who made twice as much, it was more about who was above the job rate.

Council Member Hill said as long as we were looking at agenda #3, the sample employee makes an annual salary of $28,944 with a $257.21 net take home each week. He commented that he had not been this “shocked” at the amount of deductions since he received his first paycheck at the age of 17. Council Member Hill said that net pay means that this employee brings home only $13,374, meaning his deductions are greater than 50 percent of his salary. Ms. Eastwood responded that with this example, they had chosen an actual employee who had family medical coverage. She said they took the actual deductions coming from the employee’s pay right now, which included all taxes, life insurance, dental insurance, and a $10 per week voluntary contribution to the 401(k) program. So, Ms. Eastwood concluded, it was not just the statutory deductions but voluntary deductions as well that resulted in that net pay.

Council Member Hill said it would seem to him that what was relevant was the standard deductions that everyone suffers, so that we could make a comparison. He said we could not consider an employee’s particular situation such as whether or not they had children, because we could not pay people differently based on their situation at home.

Council Member Hill said this entire discussion leads him to think about one of the recommendations of the Citizens Budget Committee. He said the Committee had requested that the Council look at employee compensation as a whole, and we have just demonstrated this was not a matter that we were in total agreement with nor did we all understand it in the same way. Council Member Hill said that employee compensation was a huge budget item and the Council needed to get a handle on it. He said he did not believe that could be done before the budget needed to be adopted, but he thought the Council should spend the next year doing so.

Council Member Hill said he understood Mayor Foy’s logic behind his proposal and supported the reduction to 3 percent between steps, but he thought that the Council needed to look at it harder, and consider restructuring the health insurance so that it may result in more cash in employees’ pockets as well as a better option. Council Member Hill said he believed the Council needed to take a long, hard look at the compensation issue with someone’s help, whether that was with a consultant or a committee.

Mayor Foy said he had intended to bring up the recommendation by the Citizens Budget Committee, which was for an employee compensation review, and the other was for an incentive-based management system. He noted that he had no interest in hiring a consultant, adding that this topic needed to be revisited. Mayor Foy said the employee pay plan was about six years old now, and it could benefit by this Council understanding it and then making whatever changes needed to be made to it. He said he did not know what process should be used, but it may be a good idea to reconvene the Citizens Budget Review Committee and ask them to look over the plan and report their ideas to the Council. Mayor Foy added there may be Council members who would like to serve on that Committee. He added this process would be fore future consideration, not for the current recommended budget.

Mayor Foy said he agreed they needed to take some sort of action, and that the annual “routine that they go through regarding employee compensation was unpalatable. He said that the Council considers a percentage each year, employees become concerned, newspaper articles are written, and he did not like it. Mayor Foy said the Council needed to have a better way to consider this issue, because when the Council could not grant the expected pay increase due to the economy or other factors there was ill will. He stated that he wanted to Council to consider changes to the pay plan, and what he had proposed for the coming year was a step in that direction.

Council Member Kleinschmidt commented that there seemed to be support on the Council for granting an amount of money equal to 3.78 percent. He said there also seemed to be interest in looking at perhaps studying the pay plan in the future. Council Member Kleinschmidt said he believed the prudent response was to accept the Manager’s recommendation which was the same amount of money regardless of whether the percentage between steps was amended, and then engage in a discussion some time after June 30 regarding the other issues. He said the only thing that changing the steps now would mean to next year’s Council would be to tell them that the raise would be 3 percent. Council Member Kleinschmidt said why change the steps now if we were contemplating looking at the pay plan.

Mayor pro tem Wiggins agreed, noting that was exactly what she was going to suggest. She said if it was the same amount of money, then leave it as is for this year and then work on the plan. Mayor pro tem Wiggins said she wanted to make sure employees and the Council understood the pay plan, which was one of their criteria for developing the budget.

Council Member Strom stated he supported the Mayor’s suggestion to change the steps to 3 percent, noting that one of the Citizens Budget Committee recommendations was to consider changing the amount between steps. He said doing so would honor that information and would honor the Manager’s recommendation for a 3.78 percent increase, but it would take away the expectation of employees that 3.78 percent was standard. Council Member Strom said he would like to have a resolution come to the Council on June 27 to reconvene the Citizens Budget Review Committee and include some member or members of the Human Resources staff and someone from the Manager’s staff as well as Council representatives to continue to study this issue.

Council Member Strom said he believed the Mayor’s proposal was the way to go if the Council reseated the Committee. He agreed that hiring a consultant was not necessary at this time, but we may need some further expertise to guide this process through to its conclusion.

Council Member Ward said he wanted the Council to look at this in the fall, but did not want to create work for staff to go through the machinations of changing form 3.78 percent to 3.0 percent and get everyone shifted to the appropriate step. He said that did not seem to be necessary if in the end we would be spending the same amount of money. Council Member Ward suggested that the staff make those changes only after the Council decided what the steps should be. He commented we would be asking the staff to do a lot of “number crunching” for the illusion of responding to the Citizens Budget Committee, which bottom line was that the Council spend less money. Council Member Ward said he was supportive of spending less money in a way that would not put particular pressure on the lower paid employees of the Town, and if we could not come up with a solution for that then he could support the expenditure of the amount of money recommended now.

Mayor Foy said he did not believe it was an illusion. He said what we hear every year was that many of the citizens in this community were State employees, who get minimal raises of 1 percent or 2 percent and sometimes nothing. Mayor Foy said if the Town did not give its employees the expected 3.78 percent, which was often two to three times what State employees receive, then our employees felt that they were not getting enough of a raise. He stated that the Manager made a compelling argument that we were not the State, and that we treated our employees better than that. Mayor Foy noted that the people who were paying for that look at the Council and see that we were granting 3.78 percent each year.

Mayor Foy said he did not believe it was an illusion to say that we would commit to 3 percent, but could not make a commitment to 3.78 percent. He said our pay plan falls apart if we go below 3 percent, so it would be a way to try to address the realities of our community and to say this year would grant a 3 percent increase, with the .78 percent as discretionary. Mayor Foy said he thought there was a lot of merit in that, and furthermore doubted that a committee would come up with some new, ingenious pay plan that we would implement next year.

Mayor Foy said in the recent past when this issue had been studied, every employee was given the opportunity to meet with the Town’s consultant who had been paid somewhere around $150,000. He said we then put that pay plan in place that had taken two years and millions of dollars to make it equitable, and he did not believe we would be able to come up with something that was far more equitable than that. Mayor Foy said he did not see this adjustment as being unwarranted, adding we had had enough experience with this pay plan to know what would work and what would not work. He added that this would get the Council “out of the box” that we find ourselves in each year.

Council Member Kleinschmidt asked why lock next year’s Council into that now, when we were just two weeks from adopting a budget. He said why not just take the same dollar amount and do it after adoption of the budget. Council Member Kleinschmidt said that this discussion would put employees on notice, and if we begin the process for looking at how we handle pay in the fall, then employees would be able to participate in that discussion and we may be able to get support for exactly the proposal that the Mayor had offered today. He said the Mayor had done an effective job of explaining it, but why commit to it now without the opportunity to gain community buy-in when it did not change the bottom line for the budget this year? Council Member Kleinschmidt said if we wanted three weeks to start that discussion, the community would have 51 weeks to consider it before adoption of the budget next year. He noted it did not seem necessary to act on that now, when we had not had the discussion and had not had the notice.

Mr. Horton commented that Ms. Eastwood had reminded him that a key issue was communication with employees. He said we spent a lot of time communicating with employees when this pay plan was established, and we have not had any time to communicate with employees about the proposal before the Council at this time. Mr. Horton said it had been our experience that when we did have adequate time to communicate with employees, it does make a difference.

Mayor pro tem Wiggins stated that the Citizens Budget Advisory Committee had made a salary recommendation, and if the Council had accepted that it would be a lot less than the bottom line we were discussing. She said she did not see that if we took the Mayor’s suggestion that we would be moving in the direction that the Committee had recommended.

Mayor pro tem Wiggins noted that she had been a State employee for several years, and there were years when the State gave 7 percent salary increases and 6 percent salary increases. She said the State had raised the salary ranges for all employees by 4, 5 and 6 percent, because the State had the funds to do so. Mayor pro tem Wiggins said then there was a political climate where taxes got cut, and the State lost about three lawsuits where they had to reimburse employees and retirees hundreds of millions of dollars, so the State was not now in a position to give its employees the kinds of raises it had in the past.

Mayor pro tem Wiggins said that she believed that the State philosophically would like to give its employees a lot more money; they just did not have the funds because they had cut taxes. She said that had affected many of the State’s programs, including social programs. Mayor pro tem Wiggins said she never wanted the Town’s employees to receive salary increases based on what the State granted because our staff had done an excellent job managing our finances. She said the Council had done what it felt was necessary so that we had adequate revenues, and we did not adequate revenues for the things we really wanted.

Mayor pro tem Wiggins said she was not at all bothered by being in a box that said we were going to compensate our employees to the Manager’s recommendations. She said if that was a box, she did not mind being in it because the entire Town reaped the benefit. Mayor pro tem Wiggins said if there were other ways that we then needed to cut back to keep our taxes down, then let’s look at those ways rather than trying to minimize what the employees expect of us or looking at salary increases as a burden or a problem. She stated that salary increases were one of the decisions she made with joy and enthusiasm. Mayor pro tem Wiggins said she would like to be able to compensate employees at an even higher rate, but she would go along with the Manager’s recommendation.

Council Member Ward said the Mayor had stated that if ranges between steps fell below 3 percent, the pay plan falls about, and asked for an explanation of that comment. Mayor Foy responded that given that the plan hinges on steps and getting to the job rate, a number below 3 percent would mean it would take many years for an employee to get to job rate, and, the ranges would be too close together. Council Member Ward said he would not care where he was on the range, he would care about what his take-home pay was. He said he did not understand the critical importance of that, and did not believe that would cause the pay plan to fall apart.

Mr. Horton commented that the comparison that employees make is to what other employers offer, and the job rate was basically what a person who was fully competent to perform the work on a consistent basis was worth in the market place. So, he said, employees measured whether or not they were being paid fairly, and did some in a couple of ways. One, Mr. Horton said, was their pay reasonably related to job rate, or the rate they could get working for another employer. Another way, he said, was to measure if their pay was reasonable in relation to persons who have more experience and ability than they do, and less experience and ability than they do.

Mr. Horton stated those two things together were the primary motivators, and all of that comes out in the net pay. He said that employees make certain choices that influence their net pay. Mr. Horton said therefore it was not just where you were on the scale, and not just your net pay, it was where you were in comparison to others in the work force and where you were in comparison to others in the work force of other employers.

Council Member Ward said there was a series of job rates. He said there was a job rate for a new hire, a job rate that the employer climate understands for someone who had performed that job for five years, and there was a job rate for someone who had been doing the job for 10 years. So, Council Member Ward concluded, there were series of job rates for the same job based on where you were in the experience. Mr. Horton agreed with that, stating that the Town had set its job rate at the level someone would expect to be after five years. He said the problem was that that the Town did not provide enough merit increases to get them to that point in five years.

Council Member Harrison indicated that he agreed with Mayor pro tem Wiggins’ remarks, and thanked her for what she had said.

Mayor Foy said he would like to know who supported his proposal. Council Members Harrison, Hill and Strom indicated their support, for a total of four. Mayor Foy asked if the Council would support 3.78 percent. All Council members indicated their support for a 3.78 percent increase by a show of hands.

Mayor Foy said in light of that vote, that amount of money should remain in the recommended budget. The Council agreed to decide at a later time exactly how the pay increases would be distributed.

Council Member Strom asked if a resolution would be provided at the next Council meeting to reconvene the Citizens Budget Review Committee. The Council agreed by consensus. The Mayor noted the Council needed to formulate a charge.

Council Member Ward suggested that the charge be to give further analysis on the Town’s pay plan, which was what the Committee had recommended by done.

Mayor Foy agreed, noting the Committee had said that the Council should conduct an employee compensation review and consider an incentive-based management system. He said he did not know if the Council was interested in the second recommendation, but they were clearly interested in employee compensation review.

Council Member Ward said that we want to start getting the word out to the public that we were interested in taking another look at the pay plan and were asking for support from the Citizens Budget Review Committee. He said that since this request was specific, perhaps additional members with particular expertise or knowledge should be considered. Council Member Ward said he did not know if any of the current members had such expertise. He said he would like the reconvened Committee to be open-ended so that if the Council identified someone with specific expertise, they could be invited to join.

Council Member Kleinschmidt said if we choose not to go with the Mayor’s suggestion, it was not because the Council was being non-responsive to the Committee’s suggestions. He stated that this was not something that had to be done immediately, since it would not affect the budget currently being considered. Council Member Kleinschmidt agreed with Council Member Ward’s suggestion regarding the make-up of the Committee, noting that at least one of the members with experience in human resources in the public sector may be leaving the Committee, and if that was true we need to make sure that that experience was not lost. He said he valued highly the experience of those in the private sector, but there was an important public sector perspective that needed to be present on that Committee so there was a full understanding of the issue. Council Member Kleinschmidt noted that there were several comments that came back from the Committee that may not have reflected wholly what it means to operate a public institution like a town.

Mayor Foy agreed, noting the actions the Council had taken regarding the Committee’s recommendations were very responsive, and there was a difference between being responsive and “rubber stamping.”

Mr. Horton suggested calling on the members of the Personnel Appeals Committee, since a number of those members had human resource experience as professionals in a variety of types and sizes of organizations.

Mayor pro tem Wiggins said her understanding was that all Council members were not on that Committee, and asked if that was correct.

Mayor Foy said we needed to determine if we were going to go forward with reconvening the Committee, and asked the Manager if a resolution would be prepared for Council action.

Mayor pro tem Wiggins said that was the way the Committee was composed originally. She stated that when the Committee started to study the Committee, the Council needed to hear those discussions.

Mr. Horton said they would bring a resolution back on June 27 for the Council’s consideration. He added that he would not advise that all Council members attempt to attend all meetings of that Committee, due to the heavy workload at this time. Although, Mr. Horton added, that would be the Council’s choice.

Mayor Foy said he would not plan on attending all meetings, but Mayor pro tem Wiggins was right. He said the Council had appointed themselves as members, and then there was subsequent discussion. Mayor Foy said the Council had then decided that all members had the option to attend the meetings if they chose to do so. He said he would like that same option to be included in the resolution to come back on June 27.

Council Member Hill stated that this past year the Council had not held a number of work sessions because the Committee had taken on a great deal of that work, and that had allowed the Council to exchange one type of work load for another, that is attending the Committee meetings. Council Member Hill said he much preferred that method of addressing the issues.

Council Member Hill said the Council may want to have a standing committee that would deal with these types of issues each year. He said he preferred spending his time attending those types of meetings that having the traditional Council work sessions.

Mr. Horton thanked Ms. Eastwood, Anissa Graham-Davis and Ms. Johnson for their work in putting together the salary options that the Council had considered this evening. He added his thanks to the Council for agreeing to award 3.78 percent salary increases to employees, in whatever way they chose to do that. Mr. Horton said he continued to endorse his original recommendation.

Changes Since the Preparation of the Recommended Budget

Council Member Harrison said on page one of Agenda #1, it indicated a combined tax rate increase of 2.9 cents. He said he thought he had understood Ms. Johnson to say how much of that was actually debt service on the Town Operations Center. Council Member Harrison said he could not find that in the materials, and asked how much of the 2.9 cents was the debt service. Ms. Johnson said the debt service on the Town Operations Center was equivalent to 3.3 cents.

Mr. Horton said the total increase in debt service was about 3.8 cents. Of that, he said, 3.3 cents of that was for the Town Operations Center. Mr. Horton stated at this point, the Council’s deliberations had created a tax increase of 2.9 cents, which meant that they had reduced the tax rate below the amount a reasonable person would expect given the additional debt they were facing.

Council Member Kleinschmidt stated then in effect, the budget had been cut. Mr. Horton said yes, the budget had been reduced.

Council Member Harrison said he wanted to make sure that citizens understood that the budget had been cut well below the new debt load.

Mayor Foy said then without the Town Operations Center, we would have been cutting taxes by about a half of a cent. Mr. Horton replied that was correct.

Capital Improvements Program (CIP)

Council Member Strom said he wanted to discuss two items in the CIP that were funded. The first, he said, on page 246 of the Manager’s Recommended Budget, line 58, was the Wallace Parking Facility Capital Maintenance. Council Member Strom said it showed we would spend $155,000 on that item, and he wanted to confirm that we could not defer some of that expense until we have a better idea of what we would actually be doing with the Wallace Deck. Mr. Horton responded that a portion of the maintenance work we performed each year was intended to maintain the structure.

Council Member Strom said he did not want to do anything that would compromise the structure, but he wondered if there was a way to not spend some of those funds now given the potential building program there. Internal Services Superintendent Bill Terry responded that there may be some way to defer some of that work. He said one item in particular that could be deferred was replacement of the area lights, which were reaching the end of their useful life but were still operational. Mr. Terry said there may be some others that could be deferred as well.

Council Member Strom said there was a significant construction project that may take place there, and he asked that before June 27 that that item be checked so it could be reflected in the budget put forth for adoption. Ms. Johnson noted that even if those funds remained in the budget, that because it was in an enterprise fund that unless expenditures were authorized it would not affect the tax rate or the General Fund.

Mr. Horton said he would recommend leaving those funds in the budget, so that if the construction project does go forward we would have some funds to rely on while the income stream from the deck was affected.

Council Member Strom said the second item he wanted to discuss was the Police Department generator. He said we had been successful in reducing the scope of the Town Hall generator, and wanted to reiterate what function the Police Department generator at $225,000 would actually perform. Assistant Town Manager Bruce Heflin noted that the Police Department generator was intended to be a full service generator to provide service throughout the building.

Police Chief Gregg Jarvies said the current generator provided only for the operation of lights in the building, and helped them maintain the phone system. He stated that when we operate a Command Center during a power outage they operate portable generators out of the generator and run power cords into the building.

Mr. Horton commented they do not believe that was a safe way to operate a Police station, especially with the Magistrate’s office located there. He said they have to bring prisoners in and out and book people, and it was not good for employees to have to operate under those conditions. Mr. Heflin added the generator would also power the computer system which was now a much more vital part of Police operations than it once was.

Council Member Strom asked was there a half-step we could take, such as putting in a significantly larger emergency back-up system. Mr. Horton stated that this was the half-step. Chief Jarvies said that was correct, that the new system proposed would not power the entire building, but would power the computer system and enough lighting as well as some level of heat and air conditioning to be able to continue to operate throughout a power outage.

Mayor Foy asked why was the system so expensive, noting it was three times the cost of the Town Hall generator. Mr. Horton said because the Town Hall generator would power only a small area, which was less than half of one floor. He said it would power just computers, a small heating and cooling system, and lights.

Mayor Foy asked how much of the Police Department would be powered by the new generator. Chief Jarvies said they would be able to operate one full floor or the two-floor building. Mr. Horton added that citizens could be told that Town Hall was closed, but the Police Department had to continue to function since they had a different operational need.

Mayor Foy noted that if there was no further discussion, the work session would be adjourned.

The meeting was adjourned at 6:28 p.m.