AGENDA # 1a(1)

BUDGET WORKING PAPER

TO:                  W. Calvin Horton, Town Manager

FROM:            Patricia W. Thomas, Personnel Director

SUBJECT: Answers to Questions from Work Session of May 3, 2000

DATE:             May 17, 2000

(1)  How many employees live in the Chapel Hill town limits?

Approximately 21% of the Town’s employees live within the Chapel Hill Town limits or in the Chapel Hill  planning jurisdiction.

The remaining 79% of employees commute to Chapel Hill from various surrounding areas:

      13% have a Chapel Hill address but live outside the Town limits

      10% live in Carrboro

      18% live in Durham

        8% live in Hillsborough

      14%  live in Burlington, Graham, or other Alamance County communities

        6% live in Pittsboro or  parts of Chatham County;

        5% live in Raleigh, Cary, Apex, or other Wake County communities; and

       4% live in other communities including Greensboro, Sanford, Oxford, and Roxboro

(2)  What was the distribution of merit increase granted in November, 1999?

In 1999-2000, 343 employees in the Development Range received a salary adjustment to reduce compression based on length of Town service if their performance was satisfactory.  The remaining 269 employees were in the Performance Range (i.e., salaries above the Job Rate) and were eligible for variable amounts of merit increases based on their performance rating.

The adopted budget and pay plan included funds for an average 4.75% merit increase.  Supervisors conducted performance evaluations and turned in their evaluations to the Personnel Department.  The Personnel Department tabulated the evaluations from all departments and used a mathematical formula to determine the amount of increase for each rating level, staying within the 4.75% average. 

The number of ratings and the percentage merit increase granted November 1, 1999  to Performance Range employees were:

2          Below Expected Level                    0 increase

      14        Needs Improvement                       2%  increase

      200      Meets/Exceeds Expectations           4.5% increase

      55        Outstanding                                    4.5% base pay increase and 1% one-time payment (not built into base pay)

Recommended for FY 2000-2001:  The Manager’s Recommended Budget proposes a 4.5% average merit increase for the 85 employees (15% of the workforce) whose salaries would be above the Job Rate of their salary range.   Personnel Department staff will again tabulate the evaluations from the departments and use a mathematical formula to allocate the merit increases and stay within the 4.5% average. Ratings will be one of five performance levels:

         Below Expected Level

         Needs Improvement

         Meets Expectations

         Exceeds Expectations

         Outstanding

(3)  How much do benefits add to the cost of a Town position? What percentage of salary do benefits represent?

The cost of benefits provided to employees by the Town is approximately 27%  of salary, on average.    The average full-time employee’s salary is $34,828; benefits costs and percentage of salary for this hypothetical  employee would be:

      Social Security & Medicare            (7.65% of salary)                                  $2,664

      Local Government Retirement   (4.93% of salary)                              1,717

      401(K) Contribution                       (5% of salary)                                        1,741

      Longevity                                       (5-9.99 years of service)                          500

      Health Insurance*                                                                                       2,376

      Long & Short Term Disability Insurance                                                          420

      Life Insurance                                                                                       81

      Workers’ Compensation Premium (average)                                                   600

      Unemployment Insurance (average)                                                                   60

Total Direct Expenditures                                                                                  $10,159

(Percentages of this hypothetical employee’s salary                                            29.1% )

Benefits comparison to other local governments:  Attached is the Budget Working Paper from 1997 which summarized the Town’s benefits in comparison to other area employers.  Although the information presented is three years old, we do not believe that the information has changed significantly.

Benefits summary statements for employees:  During the work session I mis-spoke when I said that the Personnel Department has done benefits statements for employees displaying the worth of their benefits.  For several years we did statements every other year but, because of heavy staff time on the pay and classification studies, we have not done these statements for employees in 3 years.  We plan to do statements for employees this fall, and subsequently do them at least every other year.

 (4)  What is the projected distribution of employee increases? 

576 employees will be eligible for increases October 1.  The distribution of increases would be:

      4.5%    **                                122 employees       (21%)

      4.6  – 6%                                 215 employees       (37%)

      6% - 7.5%                              144 employees       (25%)

      7.5% - 9%                              18 employees         (3%)

      9%  -   10.5%                          40 employees         (6.9%)

      10.5% or more                          37 employees        (6.4%)

         to correct market inequties

Attached is a listing of 37  positions where employees would receive more than 10.5% increase.  Many of these employees are in positions in the lower grades -- 25% of them are Bus Drivers. Where employees are recommended to receive increases of 15% or more, they are usually either newly promoted into their positions and/or in positions where a significant grade adjustment was recommended because of market competitiveness or internal equity of responsibilities. 

(5)  What increases are other area employers recommending?

Durham County and OWASA:  not decided yet.

(6)  How could the costs of the proposed classification and pay system be reduced?

(a)  Reduction  in  each of the pay rates:  One option for reducing costs would be to reduce each of the rates in the salary schedule, so that hiring rates, probationary steps, salary steps, Job Rates, and maximum rates are each  reduced by .25% (a quarter of a percent) or .5% (half a percent).   This would have the effect of reducing the salary increase that employees would receive by .25% or .5%.  For example, instead of receiving an increase of 4.5%, Performance Range employees would receive an increase of 4.25%, or 4% instead of 4.5%.

Savings:

         .25% decrease        .5% decrease

         $16,500                   $25,000                            General Fund

         $ 5,000                    $11,600                            Transportation Fund

         $ 1,100                    $2,000                                          Housing Fund

         ($1,000) *               ($650) *                           Parking Fund

saves $22,800                  $37,950                            All Funds, salary and benefits

Advantage:  Maintains the structure of the recommended plan and spreads the cuts to many employees rather than to a segment of employees.  Reduction in hiring rates and other steps would  have a small effect on competitiveness.

Disadvantage:  Employee concerns and reaction to reduction of recommended schedule and salary rates: most employees’ pay increases would be a quarter of a percent or a half of a percent less than the implementation proposal.

(b) Delay implementation:  Another method for reducing the costs of the classification and pay recommendations would be to delay implementation by one or two pay periods, from October 1 to either October 20 or November 3^rd.  

      One pay period delay:   October  20^th  saves:

         $40,600       General Fund

         $10,825       Transportation Fund

         $  2,000       Housing Fund

         $    865        Parking Fund

         $54,290       All Funds, salary and benefits

Two pay period delay:   November 3^rd  saves:

         $81,200       General Fund

         $21,650       Transportation Fund

         $  4,000       Housing Fund

         $  1,730       Parking Fund

      $108,580       All Funds, salary and benefits

Advantage:  keeps the proposed implementation plan which was communicated to employees intact. 

Disadvantage:  full year’s cost must be paid in 2001-2002

(7)  What are the various elements of the recommended costs ?

Cost elements of the recommendations for October 1, 2000 implementation are :