MINUTES OF A BUDGET WORK SESSION HELD BY THE MAYOR AND COUNCIL OF

Mr. Horton noted that greater than expected ash and mixed waste tonnage had contributed to a larger than anticipated Landfill Fund balance. Council Member Brown inquired about the origins of the increased tonnage. Mr. Heflin said the majority was from private sources, with all local governments having some small increase in tonnage. Council Member Capowski inquired about the estimated life of the current landfill in light of increased tonnages. Mr. Horton said this depended on a number of different factors including some information which was not currently available. Mr. Heflin said the working estimate date was the year 2000. Mr. Horton landfill expenditures were lower than anticipated principally because of the temporary halt to the landfill search and work on the integrated solid waste management system. He noted that a truck had also been purchased for recycling services, resulting in reduced payments to the Public Works Department and overtime savings. Mr. Horton said the Landfill Fund would end the year with a noticeable revenue surplus.

Noting that Orange County was in the process of completing a property tax revaluation process, Mr. Horton said assessed property values had increased by an average of sixteen percent, while the entire (commercial and residential) property tax base had increased by approximately fourteen percent. Noting that the revaluation estimates were preliminary in nature, Mr. Baker briefly reviewed figures and calculations pertaining to tax rate equivalents. Mr. Horton said Mr. Baker or himself would be happy to review figures with Council Members or other interested persons.

Mr. Horton noted that the Town's biggest revenue source was from property taxes. He added that the Council had no control over the next largest source of revenue, state-shared revenues. Mr. Horton said the Town was grateful that legislation was being considered to restore some locally-shared State revenues. He expressed hope that this matter would be resolved prior to consideration of final budget adoption. Council Member Andresen said this was quite a great uncertainty. She inquired when additional information might be available. Mr. Horton said there was a good chance that the matter would be resolved prior to adoption of a final Town budget. He added that the Council had the option of adopting an interim budget until the General Assembly concluded its session.

Mr. Horton stated that the Town had been encouraged by the local legislative delegation to examine the Town's fire protection service costs relative to the University campus. He noted that Fire Chief Dan Jones and his staff were working on this matter. Mr. Horton added that the economy appeared to be making a slow and steady recovery. Noting that the Town was receiving an average of 3.5 percent interest on its funds, Mr. Baker stated that interest rates were at their lowest point in twenty years. Council Member Capowski inquired why the Town did not have a portion of its fund invested in the stock market. Mr. Horton said the State's very conservative fiscal control laws made this impossible. He noted that North Carolina had more AAA-rated communities than any other state in the nation. Mr. Horton said the laws offered a very high degree of protection for the State's citizens. He stated that a 4.75% pay increase to take effect on July 1st was proposed for Town employees and an additional merit recognition for five to ten percent of employees was also proposed.

Personnel Director Pat Crotts distributed a number of charts comparing recent and projected salary adjustments in the Triangle area and across various occupational categories. Council Member Andresen inquired about the sectors used for comparison purposes. Ms. Crotts said a variety of private sector positions had been surveyed as had a sampling of employers around the state. She added that Triangle area government competitors had averaged a 4.5% salary adjustment during fiscal year 1992-93, with an average change of 3% in hiring rates and 1.5% in merit pay. Ms. Crotts said although the average adjustment in pay among Triangle governmental employers was 9% over the past two years, an adjustment of only 4.75% was proposed for fiscal year 1993-94. Noting that there had been a virtual wage freeze at the University, Mayor Broun inquired about the 8% increase in UNC wages noted in Ms. Crotts' exhibits. Ms. Crotts said this reflected changes in benchmark salaries. Mayor Broun inquired whether this meant that hiring generally occurred at higher salaries. Ms. Crotts said yes.

Council Member Capowski noted that most State employees had received a salary increase of $522 during the current fiscal year, while a few lower-paid employees had received slightly greater increases. He added that staff in Governor Hunt's office had indicated that State employees would likely receive a 2% pay adjustment plus the possibility of an additional 1% for merit. Council Member Capowski said he was having trouble reconciling the projected numbers in the staff's chart with these figures. Ms. Crotts noted that part of the chart reflected anticipated averages based on broad generalization of what might happen in the marketplace. Mayor Broun noted that the chart reflected benchmark figures rather than anticipated salary increases.

Council Member Capowski said he was having trouble justifying a 4.75% pay increase for Town employees when the Town's largest employer was not providing a similar increase. Mr. Horton noted that the Town's competitive employment market included the entire Triangle rather than being limited to the University. He stated that not paying in accordance with market rates could mean the Town would have to settle for less talented and competent employees in the future. Mr. Horton emphasized the importance of maintaining reasonable compensation levels. Council Member Capowski said that State and other local governments were in similar situations. He also noted that there were relatively few comparable benchmarks between Town and University employee positions. Mr. Horton said the data presented to the Council could be presented in many different ways. He added that staff would provide additional information on actual pay ranges at the next Council budget work session. Ms. Crotts noted that the proposed 4.75% adjustment to salary ranges did not catch the Town up to other similar employers in the marketplace.

Mayor Broun suggested that the staff prepare a report for the next budget work session comparing the Town to other governmental units in terms of pay ranges and comparable positions. Council Member Brown requested that staff provide information for comparably-sized Towns and businesses and merchants. Mr. Horton noted that although data could be gathered for similarly-sized towns, the Town's real competitive market was the Research Triangle area. Council Member Herzenberg noted that the Town of Cary was the most comparably sized Town in the area. Council Member Brown said Chapel Hill was a fairly small Town with a limited tax base.

Council Member Werner said that two different items, percentage increases and comparability, were being mixed but needed to be treated separately. He added that comparability was the key issue. Mr. Horton said the staff would make a fuller presentation on personnel-related matters at the April 1st meeting. Council Member Andresen inquired about the possibility of obtaining comparable salary and benefit information from smaller employers. Ms. Crotts said it was somewhat more difficult to obtain this information, although the Employment Security Commission and other agencies offered information on a range of employers.

Noting that she was not a strong advocate of merit pay, Council Member Powell inquired about the criteria which would be used for awarding merit bonuses. She also inquired why most employees, rather than all, would receive the proposed 4.75% increase. Mr. Horton said some employees in a large organizations were not performing at expected levels. He added that market level adjustments were only being recommended for employees at or above expected levels. Mr. Horton stated that exceptionally good performers would be nominated by supervisors and individual employee performances would be evaluated against work standards and plans. He added that the Assistant Managers and himself would review each nominee before any one-time merit increase was granted.

Council Member Andresen said although she favored a merit pay system, she was particularly concerned about the amount of proposed percentage increases. Council Member Andresen inquired about the proposed range of merit pay raises. Mr. Horton stated that the Town's former pay plan with various merit percentages had been abandoned a few years ago. Council Member Werner inquired whether bonus systems were prevalent in local governments. Mr. Horton said they were not, adding that most governments had systems whereby merit awards became part of the employee's base pay from year to year. Council Member Andresen said the Environmental Protection Agency had a similar merit pay plan. Mr. Horton said the proposed major change in the Town's pay plan was a 4.75% market rate adjustment. Council Member Andresen inquired what happened to the Town's merit pay system. Mr. Horton said there were insufficient funds available to support the Town's merit performance system. Council Member Andresen noted that the EPA awarded bonuses of up to $1,000 to outstanding employees. Mr. Horton said a total of approximately $30,000 was available for distribution among about twenty-five to fifty Town employees. He added that the details of the proposed merit plan had not been finalized. Council Member Andresen said she favored this type of approach.

Council Member Chilton inquired whether it was correct that the proposed 4.75% market adjustment would apply to most, rather than all, Town employees. Mr. Horton said employees performing below expected level would not receive the proposed adjustment. Council Member Chilton asked whether it was correct that a whole category of employees would not be excluded. Mr. Horton said this was correct, noting that the sole criteria for awarding the proposed adjustment was individual performance. Council Member Capowski asked whether fringe benefits would be calculated in accordance with merit pay. Mr. Horton said benefits such as FICA, retirement and worker's compensation would have to be deducted, as required by law. Council Member Capowski inquired whether the total merit pay pot for the General Fund was $30,000. Mr. Horton said this was correct. He added that the staff would provide considerable additional information about personnel services at the Council's April 1st budget work session.

Mr. Horton said that the opening of the new library would likely mean a substantial increase in the number of library patrons. He added that an increase of approximately $237,000 was requested for expanded library operations tied to the new facility. Mr. Horton said a full presentation concerning the proposed library budget would be made at the Council's April 1st meeting. He noted that the second largest increase in proposed budget, involving an estimated $89,000, would occur in the Police Department. Mr. Horton said these funds would be used primarily to replace body armor and to provide additional in-service training. He added that funds were not available to complete the separation of the Police and Fire departments. Council Member Andresen inquired about the amount of funds needed to complete the separation. Mr. Horton said approximately $186,000, adding that the transition could be completed within five years. Fire Chief Dan Jones noted that a study completed two years ago found that the smallest staffing rotation needed to maintain proficiency would involve six additional public safety positions. Police Chief Ralph Pendergraph expressed his concurrence. Council Member Capowski inquired whether the Fire Department reviewed the University Capital Improvements Program on a periodic basis. Chief Jones said no, adding that although the University was not required to involve the Town in its development review process, the University had elected to do so. Mr. Horton noted that all members of the Consultation and Coordination Committee were providing development-related information to each other.

Mr. Horton also said that the University had good fire protection systems in its new buildings and was retrofitting older buildings. Council Member Capowski said he would be interested in Chief Jones' report on the estimated cost of University-related fire protection costs. He also inquired whether expanded hours were proposed for the new library facility. Mr. Horton said no change in total hours of library service were proposed. He added that a report on library patrons service preferences would be available in the near future. Mr. Horton noted that additional library operating hours would translate into a like increase in operating costs.

Council Member Andresen inquired about estimated maintenance costs for the old library facility. Mr. Horton said funds would be budgeted to maintain the appearance of the building exterior and grounds. He added that necessary steps would be taken to preserve the former library as a community resource. Council Member Werner inquired whether the proposed budget assumed no cost to the Town for the use of the building. Mr. Horton said costs might be incurred in succeeding fiscal years. Council Member Werner inquired about the building's normal annual maintenance cost. Ms. Loewenthal said this cost was between $55,000 and $65,000.

Mayor Broun suggested that one approach would be to establish a contingency fund for maintenance of the facility. Mr. Horton added that it was possible to make a one-time use of fund balance for renovation work in the library building. He noted that the break-even leasing rate for the library facility would be about $5 per square foot. Council Member Capowski inquired about the estimated increase in library patrons. He also asked whether there would be any additional externally-generated revenues from Orange County. Mr. Horton said the Town hoped that Orange County would increase its fiscal support for the library facility. Council Member Herzenberg suggested that Mayor Broun discuss this matter further with Orange County Commission Chairperson Moses Carey.

Library Director Kathleen Thompson noted that the Town had the highest per capita library usage rate in the State. She added that an increase of ten to twenty percent was anticipated when the new facility opened. Ms. Thompson also noted that the new library's meeting room would likely be used one to three time per day every day of the week.

Mr. Horton briefly reviewed the number of proposed positions in each of the Town's funds, noting that the number of proposed full-time positions would increase from 466 to 474 and the total number of positions would increase from 522 to 540. Council Member Andresen inquired about the nature of the proposed new position in the Housing Fund. Mr. Horton said the proposal was to add a Clerk in the Maintenance Division. Council Member Andresen inquired about the number of staff in the maintenance division. Ms. Vaughn said eight. Mr. Horton noted that the proposed position would be paid for with Federal funds. He reviewed other proposed new positions including an Administrative Analyst position in the Public Works Department to handle requests from the Landfill Owners' Group. Mr. Horton said a Recycling Technician position was also proposed to assist with recycling programs. Council Member Andresen inquired whether the proposed positions in the Public Works Department were Town staff positions. Mr. Horton said yes noting that salaries would be paid by tipping fees. Council Member Andresen inquired about proposed adjustments in tipping fees. Mr. Horton said an increase of one dollar per ton was proposed.

Mr. Horton noted that most of the proposed positions were part-time and contract employees. Council Member Andresen inquired about benefits for part-time and contract employees. Mr. Horton said contract employees received no benefits while part-time employees received scaled benefits. Council Member Werner requested clarification on the proposed number of additional full-time employee equivalents. Ms. Crotts said there were nineteen, not including contract employees. Mr. Horton said each permanent, contract and part-time position was reviewed to establish its ongoing necessity.

Council Member Werner inquired whether the proposed Drafting Specialist position would involve any Geographic Information System (GIS) responsibilities. Mr. Horton said some responsibilities in the Public Works operation would be GIS-related. Mr. Heflin said the project involved integrating the proposed streetscape design into the GIS system. Mr. Horton noted that he would reevaluate the Town's investment in the Geographic Information System in the near future. He added that full implementation of the system had been delayed by the County's inability to collect all necessary data. Noting that she was not a proponent of Geographic Information Systems, Council Member Andresen said she would be interested in reviewing what the Town received for its investment in the GIS system. Council Member Werner inquired about the possibility of UNC students assisting with GIS projects. Mr. Horton said although this was possible on a limited basis, it was also important to train Town staff for long-term needs and institutional knowledge.

Mr. Horton stated that a thirty percent reduction in federal transportation operating funds was anticipated. He added that staff expected continued financial support of the Town's bus system by the Town of Carrboro and the University of North Carolina. Mr. Horton said it was likely that the two entities would also have to absorb some additional costs. He also noted that funding of about $7,000,000 would be needed to fund twenty-eight new buses over the next two years. Mr. Horton said the Town's share of these expenses would be $700,000. He added that establishment of a capital equipment reserve for future bus purchases was proposed.

Mr. Horton stated that staff had made conservative projections of anticipated parking revenues. He noted that the Town would work very hard to promote the use of the new parking facility, possibly being very aggressive to balance out daily parking with monthly space rentals. Council Member Werner inquired about the status of possible projects on the public plaza. Mr. Horton said the Chamber of Commerce had expressed an interest in constructing a building on the plaza, with their offices occupying approximately 4,000 square feet and an additional 4,000 square feet available for commercial usage. He inquired whether the Council wished to see a financial analysis of the public plaza proposal. Council Member Andresen said yes, noting that the plaza would be an important component of the overall parking facility.

Council Member Capowski inquired when debt service for the facility would begin. Mr. Baker said July 1st, with the first payment coming from capitalized interest. Council Member Brown inquired whether revenues were estimated for all Town parking lots. Mr. Horton said yes, noting that he did not recall the exact figures for comparative purposes. He also noted that a local business person was interested in leasing parking spaces at Town parking lot number five.

Council Member Andresen requested that the staff perform calculations concerning the estimated number of additional automobiles on area roadways if the Town did not have a bus system. Mr. Horton said he believed that Mr. Godding and Mr. Bonk could work up some reliable estimates in this respect. He noted that the effective proposed tax rate increase for the Transportation Fund was 1.5 cents. Council Member Capowski asked whether 0.9 cents of this increase would be used to fund proposed salary increases. Mr. Horton said $166,000 out of $267,000 in proposed increases would be earmarked for salaries. Council Member Herzenberg emphasized the need for retail uses of the proposed public plaza at the parking facility.

Mr. Horton said a one dollar per ton increase in mixed solid waste tipping fees was suggested in the Landfill Fund. He added that a two dollar per ton increase in ash tipping fees was proposed. Mr. Horton stated that the addition of processing of waste metal, corrugated cardboard recycling and other recycling services was also proposed in the Landfill Fund. Mr. Horton also reported that progress continued on the largest but least known construction project in Orange County, preparation of the new landfill cell on the south side of Eubanks Road. Mayor Broun inquired whether the University was exploring additional alternatives for disposal of ash from the University's boiler plant. Noting that one experimental program had not worked out, Mr. Horton said suggestions about what to do with the waste ash would be welcomed. Council Member Brown inquired about the status of borrow areas relative to the disposal of ash. Mr. Heflin stated that since brush had been moved out of the borrow area, there was ample borrow area to use for ash for the life of the current landfill. Council Member Capowski inquired about costs to the Town for each one dollar increase in tipping fees. Mr. Horton said approximately $25,000.

Council Member Capowski requested a list of costs for each type of Town recycling service. He expressed concern that recycling costs did not appear to be as critically scrutinized as other costs. Council Member Capowski also requested information about the benefits of various types of recycling programs. Mr. Horton said the staff would be very pleased to provide a full report on the costs and benefits of recycling programs. Council Member Brown inquired about the status of the Town's recycling contract with BFI. Mr. Heflin said the Town was in the first year of a two year contract extension, with the contract expiring in June, 1994.

Mr. Horton provided an overview of the proposed Capital Improvements Program, including maintenance of assets such as the Willow Drive bridge. Mr. Horton said very modest amounts were proposed for sidewalk and traffic signal improvements. He added that it would also be wise to begin installing generators in all the Town's fire stations. Mr. Horton said staff welcomed reconsideration of a $50,000 annual allocation for greenway projects. He also noted that $30,000 was included in the proposed Capital Improvements Program for extraordinary maintenance items.

Council Member Capowski inquired what, if anything, could be done to address the Downtown Commission's concerns about sidewalks in the 100 blocks of East and West Franklin Street. Mr. Horton said proceeds from the prepared meals tax, if authorized by the General Assembly, could possibly be used to fund improvements. Council Member Capowski stated that $150,000 was not much funding for a five-year Capital Improvements Program. Mr. Horton said he could not responsibly recommend a larger number of projects without benefit of additional funding resources. Mayor Broun noted that the staff intended to present an introductory overview of the proposed budget and Capital Improvements Program this evening. Mr. Horton suggested that a fuller discussion concerning capital improvements could possibly take place on April 13th. Council Member Capowski inquired about the schedule for the streetscape proposal. Mr. Horton said a public hearing would be held on April 15th. Mayor Broun inquired whether staff had received sufficient Council comment and direction to move forward. Mr. Horton said yes, noting that staff would continue in its efforts to develop service options.

The meeting concluded at 8:01 p.m.