MINUTES OF A BUDGET WORK SESSION OF THE CHAPEL HILL TOWN COUNCIL

TUESDAY, APRIL 5, 1994 AT 7:30 P.M.

Mayor Broun called the meeting to order. Council Members in attendance were Joyce Brown, Joe Capowski, Mark Chilton, Pat Evans, Lee Pavão, Barbara Powell, Jim Protzman, and Rosemary Waldorf. Also in attendance were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Assistant to the Manager Greg Feller, Personnel Director Pat Thomas, Fire Chief Dan Jones, Town Attorney Ralph Karpinos, Public Works Director Bruce Heflin, and Finance Director James Baker.

Item 1 Parking Facilities Refinancing Options

Mr. Horton stated that the Town's bond financial adviser, George Woodall, was present this evening to answer any questions the Council might have concerning refinancing of parking facilities.

Mr. Baker briefly described the bond package, and stated that it was his opinion that refinancing the parking deck at this time was feasible. He stated that the cost of issuing General Obligation Bonds would be somewhat less than issuing Certificates of Participation. Mr. Baker also said it was wise to refinance as soon as possible since interest rates would likely increase in the near future. He stated that bond counsel had indicated that it would not be necessary to borrow additional funds to refinance the bonds. Mr. Baker said he recommended that the Town pursue refinancing as soon as possible.

Council Member Protzman commended the staff for an excellent report. Council Member Protzman said the Council's choice was a clear one and no further discussion was necessary.

Council Member Brown requested clarification of the legal aspects of refinancing referenced in the staff's report. She also inquired about the creation of a legal entity for bond refinancing purposes. Mr. Woodall responded that a legal entity would be created which would own the parking facilities not owned entirely by the Town, and the Town would lease the deck from this entity.

Mayor Broun suggested that in light of this information, the Council proceed with the issuance of Certificates of Obligation to refinance the Town's parking facilities. He asked Mr. Horton whether the Council would be required to take formal action on this matter. Mr. Horton said yes, noting that the Council would be asked to approve certain documents. He said this process would take approximately ninety days to complete.

Council Member Protzman asked what costs were associated with this process. Mr. Woodall stated that any costs would be greatly outweighed by the savings due to the refinancing.

Item 2 Personnel Management Issues

Personnel Director Pat Thomas called the Council's attention to the recommendations for pay increases for Town employees. She remarked on the process of reviewing salaries and the comparisons made to other area employers. Ms. Thomas said Mr. Horton recommended an average 3% market increase and an average 2% merit recognition increase. She said that when comparing the benefits to the area market, it was the staff's opinion that no changes be made to the benefits package.

Council Member Powell expressed concern regarding whether the population of local market employers played a part in the comparison of salary data. Ms. Thomas responded that since the Town had to recruit from all of the areas in the market area, it was dependent on employees who were willing to travel from various points in the Triangle to work for the Town. Ms. Thomas said the increase being requested, if adopted, would keep the Town within the area's average salary range.

Council Member Powell asked what percentage of employees had received a merit increase last year. Ms. Thomas responded that 99% of Town employees had received a merit increase.

Council Member Capowski asked Ms. Thomas whether the recommendation was effectively for a 5% increase. Ms. Thomas responded yes.

Council Member Waldorf stated that she objected to the method used to award merit increases. She suggested that the Council consider a true merit increase which would be used as "bonuses" for truly worthy employees and not included in the employees' base pay. Ms. Thomas responded that there were many different ways to accomplish this objective. She said that it was necessary to reward employees who were performing well. Mr. Horton commented that while some positions did not allow a lot of room for creativity, the employees in these positions perform their jobs admirably. He said exceptional performances should be recognized. Mr. Horton said the Town had a minimal level of recognition because of budget constraints over the last few years. He said because of this small range, the Town needed to concentrate on market increases in order to attract and retain good employees.

Council Member Brown asked how comparisons were derived when looking at individual positions. Ms. Thomas responded that extensive time was spent internally ranking Town positions and surveying other local and State positions to make certain the Town's rankings were comparable to other local employers. Ms. Thomas said that minimum, average, and maximum pay from market employers were compared to the Town's salary ranges. Council Member Brown asked how many employees are hired at the hiring rate. Ms. Thomas responded that although the usual practice was to hire at the hiring rate, occasionally well-qualified employees were hired above this rate. Council Member Brown asked how the salary rates would affect the hiring rates for certain positions. Ms. Thomas responded that if an increase was approved, the rates for each position would be increased accordingly, so the hiring rates would increase by the same percentage.

Mayor Broun asked the Council whether they wished to see the actual salaries being paid for each position. Mr. Horton stated that this information could be provided. The Council's consensus was to have staff provide the information.

Council Member Brown asked about changes made to job classifications and how this effected hiring rates. Mr. Horton responded that when the last reclassifications were made, no salary increases were provided because of budget constraints. He stated that the new practice was to study one-third of the job positions annually so that every three years all positions had been studied.

Council Member Powell expressed concern about the proposed merit increase. She said that her concern was that there was a segment of Town employees who would be excluded from merit increases because their jobs did not allow opportunities for creativity. Mr. Horton responded that although some positions had very high work standards, being creative was not a major component of these jobs. He said these employees should be rewarded for their hard work. Mr. Horton said if a bus driver was always on time, courteous and met all job standards, he or she deserved a merit increase, even if he or she could not invent new routes or a different way to drive a bus.

Council Member Protzman said he was concerned with the Council micro-managing this area of the budget. Council Member Protzman also said he found the staff's material well-organized and impressive, and felt that the staff was doing a good job managing Town salaries. Council Member Protzman said he was not comfortable second-guessing the staff at this stage. He stated that the major question was how much could be earmarked for salary increases.

Council Member Protzman said he would like to make sure that the lower-paid employees received appropriate increases. Council Member Protzman also stated that he felt that the Town should look at only rewarding the top 75% of employees with merit increases. Council Member Protzman stated that although he did not believe that a 5% salary increase was aggressive, the Council needed to be sure that this was how they wished to proceed.

Council Member Brown said it was her intent to look at the best information possible in order to make the best judgments possible.

Council Member Pavão expressed concern about merit increases in general. He said in essence staff was recommending a 5% increase, and this was not necessarily a merit reward. Ms. Thomas stated that employees rated below expected level would not receive an increase. She said that 75% to 85% of employees met job standards and would receive the 3% market as well as the 2% merit. She said truly outstanding employees could possibly receive an additional 1% merit increase. Council Member Pavão asked whether this was truly an incentive. Mr. Horton said many employees performed at an outstanding level daily without regard to money and he had seen this on many occasions. He said creating a large incentive program would not be to the Town;s benefit, because he did not believe the Town could define its standards more precisely than at present.

Mayor Broun said he was concerned about how much of the matter was the Council's decision. Mayor Broun said he believed a merit program was a management decision, not a Council decision, and the Council might need to focus solely on the cost aspects of possible pay adjustments.

Council Member Capowski inquired about the total cost of Town personnel. Mr. Baker responded approximately $8 million. Council Member Capowski inquired about the fully loaded cost of the Town's payroll, including benefits? Mr. Baker responded that he could provide this information at a later time. Council Member Capowski inquired about the cost of the Town's 401-(k) program. Mr. Baker responded about 2 1/2 cents of the tax rate.

Council Member Waldorf said that the Council had to be concerned about the long-term effects of such a program. Mr. Horton said it was necessary to recruit highly-trained, professional individuals, and the Town had to remain competitive in order to attract these types of employees. Mr. Horton said that non-monetary incentives played a part in attracting these types of individuals.

Council Member Capowski asked for an explanation of the merit increases awarded by other employers. Ms. Thomas responded that some employers awarded merit increases on the employees' anniversary dates, while others used different methods.

Council Member Evans stated that she liked the idea of creating a fund which would be used as a one-time bonus for exceptional employees. Mr. Horton responded that if the Council stated that all employees would receive an across-the-board raise, then only the exemplary employees would receive the bonuses, this could be done based on the amount of money in the fund.

Mayor Broun asked whether data could be provided if the Council decided on a 4% market increase with a 1% merit. Mr. Horton said information could be provided for any scenario the Council requested. Mayor Broun said the Council must make a decision as to how much and what mix would be allocated so that alternatives could be studied. Mr. Horton responded that estimates could be provided if the Council wished.

Council Member Pavão asked if the recommendation was a 3% across-the-board, with a 2% merit being received by a majority of the employees. Mr. Horton said yes.

Council Member Waldorf stated that the reason she suggested the merit pay should be a bonus fund was that lower-paid employees would be considered on the same level as higher-paid employees.

Council Member Capowski expressed his concurrence, stating that a merit increase given to 99% of all employees was not a true indication of merit. He said that he agreed that a bonus fund should be established which would reward a small percentage of the employees. Council Member Capowski said he felt that a 5% pay increase was too high.

Council Member Chilton stated that although the number of employees receiving merit increases concerned him, he felt that there might be another problem which had not been touched on. He stated that an aspect of merit increases was that they provided the possibility for some employees to be passed over for pay increases because their work performance was not fairly evaluated by their supervisors. He asked that the staff comment on this matter. Mr. Horton responded that it was the Town's practice to administer the pay system without regard to race, sex, or any other category which has nothing to do with performance. He stated that when complaints were received regarding discrimination, these complaints were vigorously investigated. Council Member Chilton said that giving 90% of employees merit increases in effect punished 10% of the employees, and this raised some fundamental questions. He said this was an area of concern for him and this issue went beyond the issue of race and on to employees who complained about their supervisors. He said this might mean that the supervisor could punish the employee by denying merit increases. Mr. Horton responded that these decisions were not made by one person alone, and there was a grievance procedure in place which the employees may utilize if they believed they had been treated unfairly.

Mayor Broun said he believed the Council should leave it to the Manager to decide on how the merit program would be administered. Mayor Broun stated that the Council should only be concerned with the dollar figure involved.

Council Member Protzman said he felt that the merit increases should truly reflect merit. Council Member Protzman said he did not believe that the Council was in agreement on how this should be accomplished. Mr. Horton stated that it would be appropriate for the Council to give staff further instruction on alternatives the Council may wish to examine

Mayor Broun said the staff needed a Council consensus on how much money should be allocated for market and merit increases.

Mr. Horton said the staff could present several alternatives based on this dollar figure. Mayor Broun also said he believed that the Council should not reward lower-paid employees with a higher increase than higher-paid employees, as occurred in fiscal year 1993-1994.

Council Member Chilton said he recommended a 4% across-the-board salary increase for Town employees.

Council Member Protzman asked whether there was a pool of money to be gained which recognized the turnover rate and vacant positions which would be large enough to pay for the recommended pay increases. Mr. Horton said the largest component of money left over at the end of the operating budget came from vacant positions.

Mayor Broun asked whether Council Member Chilton was suggesting a 4% market increase with no merit increase. Council Member Chilton responded yes, adding that he would like to discuss the possibility of a bonus plan such as the one proposed by Council Member Waldorf.

Council Member Brown asked whether Council Member Chilton was indeed suggesting an across-the-board increase with no merit increase. Council Member Chilton said yes.

Council Member Waldorf stated that if the Manager could find additional savings in the budget, she would be willing to consider a 5% across-the-board increase with no merit increases.

Council Member Capowski asked what other savings in the budget could be found other than unused personnel funds. Council Member Waldorf said one possibility would be freezing vacant positions.

Council Member Brown inquired what other kinds of savings could be realized. Mr. Horton said one possibility would be to implement a roll-out garbage program or to reduce the hours of library operations. He said there was no end to ideas which could be proposed.

Council Member Capowski said he favored a 4% increase, with lower-paid employees benefiting the most.

Council Member Brown asked whether employees made a contribution to the 401-(k) fund. Ms. Thomas responded that approximately 30% of employees choose to contribute to the 401-(k) fund. Mr. Horton said if the 401-(k) plan were reduced or deleted, the Town would no longer be competitive in its employment market area. Mr. Horton also said he felt that the Town offered a good mix of benefits.

Council Member Protzman said he supported a 4% across-the-board increase, but would agree to allow the Manager latitude in how this would be achieved.

Mayor Broun said he was comfortable with the Manager's recommendation of 5%. He said it was a reasonable request.

Council Member Pavão agreed with Mayor Broun, saying he felt that based on the staff report, 5% was the appropriate amount of increase.

Council Member Evans said she would like to consider a 4% increase with the possibility of a bonus fund.

Council Member Powell agreed with Council Member Chilton's across-the-board 4% proposal, but with no merit increases.

Town Manager Horton suggested that in preparing the recommended budget, a 4% increase be used as a base budget number, with staff outlining options for allocating any available funds greater than 4%. The Council concurred that this approach was reasonable.

Council Member Protzman asked whether Town employees were limited to the three Health Maintenance Organization plans offered by the Town. Ms. Thomas said yes. Council Member Protzman asked whether employees were able to choose their own physicians. Ms. Thomas said many physicians were members of these three plans. She said the Town had been unable to find an independent carrier to underwrite the Town's health insurance.

Council Member Brown stated that since a decision had been reached concerning the pay increase, the report requested earlier in regard to current salaries by position was no longer needed.

Item 3 Public Works Issues (Roll-Cart Program)

Council Member Evans requested that the Council consider a once-per-week pick-up service rather than a roll-cart program. Mr. Horton responded that this type of change would not create significant savings. Mayor Broun inquired whether a staff report could be prepared using Council Member Evans' suggestion. Public Works Director Bruce Heflin said yes.

Council Member Protzman stated that his company had prepared a study on the pilot roll-cart project before he became a member of the Council. Council Member Protzman said he was surprised that the Council had not already instituted this project. Council Member Protzman said that he now had a different perspective on this program. He said that a roll-cart program would open up sanitation collector jobs to women who could not lift refuse containers. Council Member Protzman said he saw no reason not to institute a roll-cart program.

Council Member Powell said her concern was the issue of elderly persons having to push these carts out to the street. She asked the Manager to assure the Council that the persons who would need exemptions would be able to obtain them. Council Member Powell also stated that there were many areas without sidewalks where the carts would need to be placed on the street. Council Member Powell said she was concerned about the appearance of carts left on streets and not removed by residents in a timely fashion.

Council Member Waldorf said that residential garbage pick-up was not equitable. She said some residents had private dumpsters, some lived in apartments or condominiums and were required to use dumpsters, while others had to use the Town's landfill. Mr. Heflin said there were a number of ways that garbage and recyclable materials could be mainstreamed so that it would be more equitable for Town residents.

Council Member Brown said she had supported the roll-cart program when it was first considered three years ago. She said that the Council needed to look at the fact that the disposal of garbage was expensive and any change in the Town's collection system should be looked at in the context of waste reduction. She asked whether there were options other than a roll-cart system that would also garner savings for the Town. Council Member Brown said if the Town planned to hire a consultant to study the waste collection system, the Council should wait until this study was completed before making a decision on this program.

Council Member Powell agreed with Council Member Brown. She said she was not sure that the roll-cart system was feasible at this time. Council Member Powell stated that many people who were involved in the pilot program hired contractors to move their carts from the back yard to the front.

Mayor Broun said his views had shifted somewhat since it was originally proposed. He said whichever system was eventually used, going to the roll-cart system now would save money and should be seriously considered.

Council Member Chilton agreed with Mayor Broun. Council Member Chilton said he had a continuing concern that a year from now the study would be completed, so there might be certain problems involved with changing the system now, then possibly changing it again a year from now, which would cause confusion to Town residents. Council Member Chilton said the city of Seattle, Washington gave residents the option of paying a higher fee to have rear-yard service or a lower fee for front-yard service. He stated that the majority of residents chose the lower cost front-yard service. Council Member Chilton stated that due to inflation and other factors, the savings of this program would also increase. He stated that according to his calculations, the savings gained from going to this program equaled approximately 1 and 3/4 cents on the tax rate and merit consideration by the Council.

Council Member Capowski said he believed a pay by the unit collection system should be examined, meaning that each resident would be given the opportunity to pay a fee to have each bag of garbage picked up. He added that service could be curbside or rear-yard with such a system.

Council Member Brown stated that since the Town would actually be paying for the roll carts, the savings realized might not be as great as expected. Council Member Brown also said the Town should look at other communities currently using the fee-based system to gain more insight into its actual implementation.

Mayor Broun inquired which Council Members wished to further consider a roll-cart program. After a brief discussion, the Mayor instructed the Manager to not include a roll-cart program in the preliminary budget.

Item 4 Miscellaneous Items

Mayor Broun suggested that the Manager consider an increase in bus fares and provide the Council with information regarding these options. The Manager responded that he would do so.

Council Member Chilton stated that human service allocations had remained stable for several years. He requested that the Council consider increasing this allocation.

The meeting was adjourned at 9:50 p.m.