MINUTES OF A BUDGET WORK SESSION HELD BY THE MAYOR AND COUNCIL OF THE TOWN OF CHAPEL HILL, TUESDAY, APRIL 9, 1991 AT 5:30 P.M.

Mayor Howes called the session to order. Council Members in attendance were Julie Andresen, Joyce Brown, Joe Herzenberg, Nancy Preston, Arthur Werner and Roosevelt Wilkerson. Council Members Alan Rimer and James C. Wallace were unable to attend. Also in attendance were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Finance Director James Baker, Personnel Director Pat Crotts, Public Works Director Bruce Heflin, Assistant to the Attorney Richard Sharpless and Town Attorney Ralph Karpinos.

Mayor Howes stated that this evening's session was the second of the three budget work sessions to be held by the Council in April, with the last one scheduled to take place on April 23rd. He added that the Council would also schedule two additional work sessions after the submittal of the Manager's proposed budget. Mayor Howes said that the Council would discuss General Fund matters, employee fringe benefits and the Transportation Fund this evening. Town Manager Horton stated that the Town staff would discuss any matters desired by the Council.

Personnel Director Pat Crotts reviewed the Town's benefits package in relation to other employers in the local market. She stated that the Town's benefits approximated the average for all of these local market employers. Ms. Crotts noted the importance of a good benefits package in attracting and retaining employees. Council Member Andresen inquired about changes in the Town's job rates since 1981, relative to position classifications. Ms. Crotts noted that the biggest adjustments had occurred in low to middle level positions. She noted that the Town was approximately fifteen percent below the market rate for most positions in 1982. Ms. Crotts stated that the Town had been fairly competitive with the market average since that time.

Council Member Brown inquired about proposed levels of pay adjustments in other area communities for the next fiscal year. Ms. Crotts responded that some communities anticipated a two to three percent market adjustment. She added that additional information would be available in about a month. Mr. Horton responded that there would likely be little or no change in market rates in other local communities. He added that no local communities were planning to change from existing merit-based pay programs. Council Member Brown asked whether some communities planned to offer two to three percent market adjustments in addition to merit incentives. Mr. Horton said this was correct, based on informal discussions with staff in other local government units. Council Member Herzenberg inquired about planned State of North Carolina adjustments. Ms. Crotts stated that the latest proposal was for a two percent market and merit adjustment.

Council Member Brown inquired whether other communities had merit programs similar to the Town's. Ms. Crotts responded that most similar programs placed a greater emphasis on the market adjustment. Mayor Howes inquired about the genesis of the Town's 401-K benefit plan. Ms. Crotts responded that the State Legislature passed a bill in 1987 requiring that local governments contribute to a five percent supplemental retirement program for law enforcement personnel. She noted that the Town Council chose to broaden this benefit to all Town employees. Ms. Crotts said that the Town of Cary and City of Burlington also made five percent 401-K contributions for all employees, while other local governments contributed lesser percentages for this program.

Council Member Andresen inquired about the current annual cost of the 401-K program. Ms. Crotts responded that approximately $400,000 was the total cost, with approximately $100,000 covering the cost for public safety personnel. Noting that he had served as the President of the North Carolina League of Municipalities in 1987, Mayor Howes said he felt that all Town employees were equally entitled to the 401-K benefit.

Council Member Wilkerson inquired whether any other existing benefits differentiated between employee classifications and circumstances. Ms. Crotts noted that longevity, disability and health insurance coverage differed among individual employees.

Council Member Wilkerson inquired about the percentage of eligible employees who elected not to have family insurance coverage. Ms. Crotts said approximately fifty percent. Council Member Wilkerson what percentage did not have family coverage due to cost considerations. Ms. Crotts responded that the staff could do a confidential survey to try to determine this information. Council Member Preston inquired whether personnel expense projections included anticipated increases for salaries and benefits. Mr. Horton said yes. Mayor Howes asked whether other local employers offered other benefits not currently provided by the Town. Ms. Crotts responded that some other local governments paid for dental insurance coverage, while others had higher maximum life insurance coverages.

Mayor Howes noted that there was relatively little impetus for new benefits. Mr. Horton responded that the Town's employees realized the current difficult economic circumstances. He added that Town employees were confident that they would continue to be well-treated for continued good performance. Council Member Andresen inquired about the cost of the Town's merit package. Mr. Baker said approximately $450,000. Council Member Andresen asked whether a one percent reduction in merit increases, from an average of four and a half to three and a half percent, equated to approximately one-fourth of this figure. Mr. Baker said this was correct.

Mayor Howes said that the cost of health benefits and care would continue to be a topic of great national interest. He inquired about any new thinking on the concept of holding down medical insurance costs. Ms. Crotts responded that one of the more effective tools was the use of health maintenance organizations with built-in program cost controls. Mr. Horton responded that the Town's wellness program had been expanded to include safety services, contributing to reduced worker's compensation costs. He added that there did not appear to be any new programs which would hold the annual health insurance increase below the current level of fifteen percent annually.

Council Member Andresen inquired about programs devoted to safety conditions. Mr. Horton provided the example of an employee who's weight loss of approximately one hundred pounds had significantly decreased his personal safety risk. Council Member Andresen said she appreciated the Town's emphasis on safety.

Mayor Howes inquired whether the Manager's preliminary recommendation was for a four percent average merit increase, with no market adjustment. Mr. Horton said this was correct. He noted that market adjustments would not likely be necessary to remain competitive in the local employment market. Mayor Howes said that no market increase appeared to be an appropriate recommendation based on prevailing conditions. Mayor Howes stated that the Town's employees were an important asset. Council Member Andresen inquired about the comparability of benefit packages between local governments. Ms. Crotts responded that attachment seven in the memoranda to the Council provided a comparative overview of benefits offered by local governments. She said that generally speaking, the Town offered equal or slightly better benefits than the City of Raleigh, while slightly less liberal benefits than the City of Durham.

Council Member Brown requested options for lower ranges of merit increases. Ms. Crotts noted that the Town had a wide range of discretion in the early 1980's of two to ten percent, with this range modified slightly in recent years. Council Member Brown inquired how ranges could be modified. Ms. Crotts responded that personnel policies implementing the Town's pay plan would need to be modified. Mayor Howes suggested that Council Member Brown meet individually with Ms. Crotts to explore additional detail on the Town's pay plan.

Council Member Rimer asked whether the Town had a pool of money for merit increases. Ms. Crotts said yes, adding that this pool was divided among the Town's departments and divisions. Council Member Wilkerson asked whether set amounts were provided for each department. Ms. Crotts said this was correct. Mr. Horton added that the merit estimation process occurred on a division-by-division basis and aggregated into a Town-wide total.

Council Member Herzenberg inquired how the allocation by division was determined. Mr. Horton said this was determined by the number of persons on the payroll, position classifications and additional payroll details. Ms. Crotts added that the differentiation between development and performance range employees was also a factor in this calculation.

Council Member Rimer asked whether it was theoretically correct that the system would permit nine percent increases for all performance range employees. Mr. Horton said this was theoretically correct. He added that there was normally sufficient turnover in positions to allow a distribution of percentages, and weeding out of employees with performance problems. Mayor Howes noted that the University has two reward systems, one for State employees and another for professorial staff. He noted that the Town had a good performance appraisal system in place. Mayor Howes inquired about the total estimated cost of the proposed cost accountant position. Mr. Horton responded that the total cost would be about $50,000. He added that the proposed system would move the Town into an entirely different approach in recording and analyzing its costs. Mr. Horton said the cost accountant would determine the appropriate types of accounting software, reports of value to individual departments, and identify cost centers at a reasonable level. He added that the proposed new system would be a much better for decision-making.

Mayor Howes asked whether other local governments employed cost accounting personnel. Mr. Horton responded that communities with enterprise operations tended to do so. He added that the new system would offer new tools for departmental managers. Council Member Rimer said he was excited about the prospect of the proposed new accounting system. He emphasized the importance of scrutinizing the budget on an annual basis. Council Member Rimer also noted that the proposed cost accounting system would streamline many decision-making processes.

Council Member Wilkerson said he very much favored the proposed acquisition of the system. He requested that the staff provide information by April 23rd on why the half-time long-range planner position could not be eliminated altogether. Council Member Wilkerson also inquired how the reduction of an electrical inspector from full-time to half-time would be accommodated. Mr. Horton responded that it would be possible to accomplish all inspections with a half-time position due to slowdowns in the construction industry. Council Member Wilkerson requested a report comparing past personnel and budget reductions in the Inspections Department, compared to other Town departments. He also requested information concerning the proposed addition of a traffic signal technician position. Mr. Horton said this information would be provided for the Council's April 23rd work session. Council Member Wilkerson also requested information concerning the cost of the Town Hall telecommunications system.

Council Member Andresen inquired about the viability of hiring a traffic engineer on a contractual basis, since the position would not be full-time once the system was fully operational. Mr. Horton said full-time attention was needed to make the system fully operational. He also noted the need for active on-going maintenance to keep the system in good condition.

Transportation Director Bob Godding stated that fiscal year 1982-1983 had marked a low point in terms of local operations and demand. He said that there had been considerable increases in service demand between 1986 and the present. He also noted that there had been increase in the number of driver and maintenance personnel during this same time period. Mr. Godding said it would be a major challenge to maintain current service levels during the next year, due to fiscal constraints affecting capital programs. He noted that public transportation services were being expanded in many areas of the state, creating greater competition for funding.

Council Member Andresen inquired about non-state funding of the transit system. Mr. Godding responded that one-third of costs were paid by system users and two-thirds by federal assistance and local government funds. Council Member Andresen inquired about the sharing of costs between the Town, University and the Town of Carrboro. Mr. Godding responded that the Town of Carrboro made a contribution of seven or eight percent, while the University made a contribution similar to the Town's in recent years.

Council Member Rimer inquired whether the contribution formula was tied to service hours. Mr. Godding said that contributions were tied to actual service provided to each jurisdiction and the actual amount of service consumed. Council Member Rimer inquired why the number of riders, rather than service hours, was a component in the impact calculation. Mr. Horton responded that this served as a means of consumption control.

Council Member Andresen inquired whether the ten to fifteen percent increase in ridership was directly attributable to University ridership. Mr. Godding responded that annexation by the Town also played a role in increased ridership.

Council Member Preston said she was impressed that the estimated shortage of revenues had been reduced significantly. She inquired about the possibility of adjusting the estimate of $940,000 for the expansion of the Town's transportation maintenance facility.

Mr. Godding said that this figure was an estimate, subject to change based on actual bids received and the future availability of capital funding. He noted that federal discretionary grants had no implicit guarantees. Mayor Howes inquired whether the City of Durham's change in operations had a measurable effect on Town capital project funding. Mr. Godding said yes.

Council Member Brown requested an overview of bus sizes and their usage. Mr. Godding responded that thirty-five foot buses were good for most Town service needs. He added that shared-ride taxis were used in some areas. Mr. Godding noted that a mixed size vehicle fleet would require extensive additional maintenance and higher insurance costs. He said that this would not be a very efficient means of operation. Mr. Godding also noted that the Town's current fleet of vehicles were the best fit for peak demand periods.

Council Member Rimer inquired about total fuel costs for transit operations. Mr. Godding responded that fuel costs totalled approximately $300,000 of the department's $4,500,000 budget.

Council Member Rimer suggested that the staff explore a demand-responsive system, to address concerns such as after hours access to park and ride lots. Council Member Herzenberg inquired how this would differ from shared-ride services. Council Member Rimer cited the example of computer-dispatched vehicles, as used by the City of Cambridge, Massachusetts. Council Member Brown said that the City of San Francisco, California had a similar program. She inquired whether the Town had filed any grant applications for the use of electric vans. Mr. Godding responded that the Town had not filed any such applications. He added that the Town was monitoring federal rulings pertaining to the Clean Air Act and emission controls.

Council Member Wilkerson inquired about other non-traditional methods of mass transportation. Mr. Godding said that some of the technologies provided cleaner emissions at a considerably higher cost. He noted that the fueling of compressed natural gas vehicles took considerably longer to fuel and added weight to vehicles. Mr. Godding added that methanol is a highly corrosive and carcniogenic fuel.

Mayor Howes inquired whether a regional transportation authority would be large enough to experiment with alternative transit fuels and equipment. Mr. Godding said yes. Mayor Howes inquired about the proposed local transportation tax. Mr. Horton responded that his preliminary recommendation would be to increase the transportation tax from 4.125 cents to 4.525 cents per $100. Mayor Howes inquired about benefits for non-riders of the bus system. Mr. Horton said the principal benefit was that there would be fewer single-occupant vehicles on the road. Mayor Howes inquired whether it was possible to quantify this reduction in traffic. Mr. Godding responded that approximately fourteen thousand vehicle trips per day were handled by buses.

Council Member Preston said she hoped there was no need for a Transportation Fund tax increase during the next fiscal year. She inquired about cutting back the budget for the maintenance facility by $66,000. Mr. Horton responded that the staff's cost estimate was intellectually honest. He noted that each dollar cut would result in savings of only twenty cents, since this was a matching grant project.

Council Member Andresen inquired about the frequency of service to park and ride lots, such as the one located on NC 54. Mr. Godding said that service was every twelve minutes during peak demand and every twenty minutes during the rest of the day. Council Member Rimer inquired about trip loading at non-peak hours. Mr. Godding said he could furnish this information on a trip-by-trip basis. Council Member Rimer requested this information for the NC 54 park and ride lot. Mr. Godding said he would provide the information.

Mayor Howes noted that there was a great deal of uncertainty in the field of transportation. He noted that the General Assembly faced a number of difficult budgetary choices in the near future. He inquired about the transportation funding outlook at the state and national levels. Mr. Godding said he had attended several state

and federal legislative sessions in the last few months. He noted that the recent Middle East conflict had heightened the interest in public transportation. Mr. Godding said that public transportation could help to ween individuals from their private automobiles. Mayor Howes said that public transportation was a good product which delivered good benefits for all.

Town Manager Horton briefly reviewed possible additional revenues from higher cable franchise fees. He noted that revenues during the next fiscal year could be as much as $29,000, based on an additional three percent fee. Council Member Rimer noted that the additional fee would bear a direct relation to those using cable service. He said he was pleased that fifty percent of the Duke Power franchise operation fee was returned to the Town's coffers.

Council Member Andresen noted that many cable subscribers were currently unhappy with their service. She expressed a desire that the Town could operate the cable system and provide better service. Council Member Wilkerson expressed concern about possibly adding a tax to a poorly provided service, while agreeing that new sources of revenue were needed. Mayor Howes said he thought the introduction of the proposed fee was an appropriate course of action. He noted that the Town was preparing to renegotiate its cable franchise agreement.

Council Member Brown inquired about the proposed starting date for negotiation of the Town's cable franchise agreement. Assistant to the Town Manager Greg Feller said that the current franchise agreement would expire on December 15, 1994, with the renegotiation period beginning three years prior to this date. He noted that some initial negotiating could commence during the next fiscal year.

Council Member Brown inquired about the application of federal law to cable systems. Mayor Howes responded that the cable industry was largely deregulated. He noted that some members of Congress were moving toward reregulation, with more local authority.

Town Manager Horton noted that a cable consultant would provide valuable technical information relative to the new franchise agreement. He said that significant sums of money for such advice would be needed over the next three years. Mayor Howes said this would be money well spent if better cable service resulted.

Council Member Rimer said that the current cable system had a very cumbersome headend, unlike any other system in the nation. He emphasized the need for a careful technical analysis prior to entering into the next franchise agreement. Mayor Howes said that many communities around the nation were experiencing similar cable service problems. Mayor Howes suggested that a citizen's advisory committee could possibly play a role in the cable refranchising process.

Council Member Andresen inquired when the Council would discuss the proposal for additional public safety officers. Mayor Howes suggested that the Council could discuss this matter at one of their budget work sessions in May.

Mayor Howes noted that the Council would be discussing the proposed Capital Improvements Program and meeting with the Parks and Recreation and Greenways Commissions at its next work session on April 23rd.

The session concluded at 7:38 p.m.