SUMMARY OF A BUDGET WORK SESSION HELD BY THE MAYOR AND COUNCIL OF THE TOWN OF CHAPEL HILL, NORTH CAROLINA, WEDNESDAY, MAY 20, 1998

 

Mayor Waldorf called the meeting to order at 5:35 p.m.  Council Members in attendance were Flicka Bateman, Joyce Brown, Joe Capowski, Pat Evans, Kevin Foy, Julie McClintock, Lee Pavao and Edith Wiggins.  Also in attendance were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Finance Director James Baker, Public Works Director Bruce Heflin, Public Works Superintendent Bill Terry, Personnel Director Pat Thomas, Transportation Director Bob Godding, Fire Chief Dan Jones, Library Director Kathleen Thompson and Town Clerk Peter Richardson.  Mayor Waldorf asked whether the Council wanted to hold another budget work session on Monday, June 1st at 5:30 p.m.  There was Council concurrence to hold the meeting on Monday, June 1st.

 

Vehicle Fleet Replacement Program

 

Public Works Director Bruce Heflin introduced consultant Paul Lauria  to make a brief presentation regarding recommendations for replacement of the Town’s vehicle fleet replacement program.   Mr. Lauria stated that his firm was recommending that the Town implement a lease-purchase and reserve fund program for future vehicle replacements.   Council Member Capowski inquired about the consultant’s inflation assumptions.  Mr. Lauria said that an average annual inflation rate of three percent had been assumed.  Council Member Capowski inquired whether any assumptions had been made about future growth in size of the Town’s vehicle fleet.  Mr. Lauria said that the information did not address an increase or decrease in the size of the Town’s vehicle fleet.   Council Member Capowski asked how the fleet replacement recommendations related to the Town’s requirement of having a fund balance of eight to twelve percent.  Mr. Horton said that implementation of the proposal would make the Town’s costs more predictable over a long time period.

 

Council Member Foy inquired whether or not there had been any kind of historical analysis of how funds had been expended on Town vehicles in the past.  Mr. Lauria said Town staff had indicated that between $600,000 and $700,000 per year had been spent on buying new vehicles in recent years.  Mr. Horton noted that future charges and assessments would be made to specific operations and departments in the future.

 

Council Member McClintock inquired whether Mr. Lauria was aware of any communities which were purchasing electric vehicles or alternative fuel vehicles.  Noting that alternative fuel vehicles cost an average of forty percent more than traditional vehicles, Mr. Lauria said that some communities were folding alternative fuel vehicles into their fleets.  Council Member Andresen said she favored the Town setting a standard of purchasing some prototype alternative fuel vehicles.  Mr. Lauria said that the United States Department of Energy might have some grant funds available for local governments to purchase electric and alternative fuel vehicles.  Council Member Andresen asked whether or not any other Council Members were interested in following up about the Town’s use of alternative fuel vehicles.  Council Member Brown said she thought that the Town should further pursue this matter.  Mr. Horton said that Town staff could investigate the availability of grant funds through sources such as the Advanced Energy Corporation. 

 

Council Member Capowski asked why buses were not included in the consultant’s report.  Mr. Horton said that the Town had existing capital equipment budgets for the Town’s Landfill and Transportation Funds.

 

Council Member Bateman inquired whether the consultant recommended the use of time or mileage as a yardstick for vehicle replacement periods.  Mr. Lauria said that either measure was appropriate in most cases.  He noted that a major advantage to shifting to a lease purchase vehicle program tied to a reserve fund was that the backlog for vehicle acquisitions would be gradually smoothed out over time.  Mr. Lauria also stated that local governments could always borrow at a lower rate than their rate of return on investments.

 

Council Member Brown inquired about the impact of the proposal on insurance and other vehicle-related costs.  Mr. Lauria said that it would cost less to operate and maintain the fleet.  Council Member Foy asked whether or not the Town currently leased any vehicles.  Mr. Horton said that some vehicles in the Public Works and Fire Departments were acquired using lease purchase plans.  He added that the funding for the implementation of a combined vehicle lease purchase using a reserve fund was built into his recommended budget.  There was no Council objection to proceeding with this proposed course of action.

 

Compensation and Related Personnel Issues

 

Council Member McClintock said that it was imperative that the Town have a compensation and a cost of living system which was easy to understand and have an award system separate from the pay system.  Mayor Waldorf asked whether Council Member Andresen’s proposal was to make merit pay a bonus, rather than being added to base pay.  Council Member Andresen said that this was correct, adding that the majority of compensation increases would be set aside for cost of living adjustments.  Council Member Wiggins suggested that the Council receive the consultant’s report before making any final decisions regarding specific elements the Town’s compensation system, such as separating the cost of living element from the award/bonus element. 

 

Council Member McClintock said it would make things simpler and fairer to have two separate elements.  Council Member McClintock also said that she favored giving the consultant clear direction to keep these two components separate.  Council Member Brown expressed her concurrence with keeping the two components separated.  Council Member Wiggins emphasized the importance of keeping in mind the impact of each dollar on employee’s future retirement plans.  Council Member Capowski suggested that the Council direct the consultant to place an emphasis on disproportionately increasing the salaries of the Town’s lower-paid employees.

 

Council Member Foy requested a five-year projection of anticipated salary cost adjustments for Town employees.  Mr. Horton said that prevailing economic conditions, especially in the local labor market, would serve as the general guideline for future salary adjustments.  Council Member Wiggins said she hoped that the consultant would use available indicators to forecast various scenarios for adjusting the compensation of  Town employees.  Council Member Foy noted that salary compression was not the only inequity that the Council might consider addressing.

 

Council Member Brown suggested that a consultant evaluate the Town’s existing evaluation systems and make recommendations to the Council.  Council Member McClintock said that it was a good idea to the Town’s compensation and evaluation systems, with a link between the two systems.  She also suggested that a percentage, such as ninety percent, be set aside for cost of living adjustments.  Council Member Evans suggested that the majority of funds, rather than a specific percentage, be identified for cost of living adjustments.  Council Member McClintock said that cost of living adjustments would depend on the local economic situation.

 

Mayor Waldorf suggested that the Town continue its practice of comparing several job classifications within the existing employment market.  Council Member Foy suggested the possibility of broader market surveys to get more information from the private sector.  Ms. Thomas said that it was sometimes difficult to secure local private sector wage information.  Council Member Andresen said it was important to recognize longer term Town employees.  Mayor Waldorf inquired whether the Council wished to maintain the Town’s existing longevity system.  There was no Council objection to maintaining the existing longevity system.

 

Council Member Brown suggested that the Council ask the consultant the evaluation systems of all Town departments. Council Member Pavao said it was important to have evaluation systems which were easy to understand.  Council Member Wiggins inquired whether or not the consultant would be able to address the concerns who had reached the top of their individual pay ranges.   Mr. Horton said he was certain that the consultant could provide some recommendations regarding these concerns.

 

Mr. Horton added that both of the personnel consulting firms with proposals before the Council this evening were very competent firms, either of which Town staff would be pleased to work with regarding review of the Town’s compensation system.  Council Member Andresen noted that the Slavin consulting firm had bid $25,000 for the project, while the Hay consulting firm had submitted an informal bid of $50,000.00.  Council Member Andresen inquired whether or not Town staff could estimate the amount of time and cost for review of the Town’s compensation and evaluation systems.  Mr. Horton said that he had no specific information with regard to these matters.

 

Mayor Waldorf inquired whether or not pay and evaluation reviews had to be done concurrently.  Ms. Thomas said that the two reviews could occur concurrently or separately.  Mr. Horton stated that the review of evaluation systems was much more complex than the review of pay systems.  Council Member Capowski asked whether or not the Council would have sufficient time to make decisions for next year if it chose to delay review of the Town’s evaluation systems.  Council Member  Brown inquired about the outside limit for getting information from the two consulting firms.  Mr. Horton said that the Town could likely proposals for the evaluation systems by

June 1st.

 

COUNCIL MEMBER FOY MOVED, SECONDED BY COUNCIL MEMBER MC CLINTOCK, TO AWARD A CONTRACT IN THE AMOUNT OF $25,000 TO SLAVIN AND ASSOCIATES FOR REVIEW OF THE TOWN’S PAY SYSTEM.   THE MOTION WAS ADOPTED UNANIMOUSLY (9-0).

 

Council Member Wiggins inquired about the Council’s sentiment about Ms. Burnett’s proposal for all employees performing satisfactorily to receive an increase of at least 4.75%.  Ms. Thomas said that the Manager’s recommendation would help somewhat in reducing salary compression.  She noted that Ms. Burnett’s proposal would result in longer-term employees receiving slightly greater compensation increases.  Council Member Evans inquired about the levels of salary increases proposed by other local government employers.  Ms. Thomas said that proposed increases would be in the range of four to five percent.

 

Council Member Foy said that his preference was to have greater levels of pay raises for the Town’s lower-paid employees.

 

Stating that it was hard to replace long-term staff with background knowledge and other skills, Council Member Evans said  she was comfortable with the proposed average increase of 4.75%.

 

Mayor Waldorf inquired whether there was general Council agreement on raising the ranges for the three lowest pay grades. There was Council concurrence to raise these pay ranges.

 

Council Member McClintock inquired about the impact on average pay raises if the Council wished to have a budget requiring no tax increase at all.  Mr. Horton said that he would provide the Council with a number of options for implementing a no tax increase budget.  Ms. Thomas noted that the average pay increase for Town employees last year was 3.75%.

 

Council Member Wiggins said she would like to maintain an average increase of 4.75%, with the Manager identifying other options for having a no tax increase budget.  She urged the Council to pay Town employees as much as possible to continue receiving higher overall service levels.  Stating that employees were the Town’s biggest asset, Council Member Capowski said he was not happy to potentially reduce proposed pay increases for Town employees.

 

Expressing agreement that Town employees did a commendable job, Council Member Foy said that he did not think that having an average increase of 4.25% was being unfair to Town employees.  Council Member Foy stated that the Council was also responsible to Town taxpayers for sidewalks, infrastructure and the provision of other Town services.

 

Council Member Brown said that it would be most desirable to provide good levels of worker compensation while not raising property taxes.  Council Member Brown said she wanted to see the Managers’ recommendations on these matters prior to any Council action.  Mr. Horton said he could bring some options to the Council.  Council Member Wiggins asked whether it was correct that a one-cent tax increase averaged out to an average annual tax increase of $15 per property owner.  Mr. Baker said this was correct.  Noting that Orange County and other local governments were proposing property tax increases, Council Member Foy said that the Council should do its part to keep tax increases to a minimum.

 

Council Member Wiggins said that she had no problem with the Town giving a higher percentage increase to its employees than other area employers.  Council Member Bateman said she favored following the Manager’s recommendation regarding salary increases.  Council Member Brown said she favored receiving the Manager’s recommendation regarding options for having a no tax increase budget.  Council Member Bateman said she was interested in seeing a list of potential new positions which might not be needed during the Town’s 1998-1999 fiscal year.

 

Council Member Foy said that having an average increase of 4.25% instead of 4.75% was not being particularly unfair to Town employees.  Council Member Wiggins said she was concerned about the long term ramifications of potentially reducing the average level of salary increases for employees.  Council Member Foy said this was one of the reasons why the Council was considering a restructuring of the Town’s pay system.

 

Mayor Waldorf asked whether there was any objection to the Manager’s recommendation regarding revision of the Town’s callback pay policy.  There were no Council objections to accepting the proposed policy as presented.  There was likewise Council concurrence to bring all employees with two years of good performance to ten percent above the minimum salary for all pay grades.

 

Transit Issues

 

Council Member Capowski asked whether or not having advertising logos on buses would make it more difficult to clean the buses.  Mr. Godding said that there were no safety or maintenance issues involved with having semi-transparent materials on buses for advertising purposes.  Council Member Foy inquired whether or not there would be opportunities for public input on this matter.  Mayor Waldorf noted that the Transportation Board strongly advocated this proposal.  Council Member Capowski said that he would rather have a two-year test on ten buses than have to raise bus fares.  Council Member Evans expressed her concurrence.  Council Member Capowski inquired who would decide what to advertise on buses.  Mr. Godding said it was possible for the Town to place restrictions on the types of advertisements which would be considered acceptable.

 

Council Member Brown inquired about the possibility of design criteria for the advertisements.  Mr. Horton said that options in this area were somewhat limited.  Council Member Brown inquired about the possibility of having a six month, rather than a two year, trial period.  Mr. Godding said that advertising firms preferred to have longer term ad contracts for periods such as

five to ten years.

 

Mayor Waldorf noted that there had been Council concurrence at a prior work session to install bicycle racks on two Town buses.  Mr. Horton reported that proceeds from an increase in the Town’s vehicle tax could be used to fund the provision of  Town bus service to the Southern Orange Human Services Center on Homestead Road and to fund a portion of the transportation capital replacement program.  Mayor Waldorf  suggested that the Council think about these matters.  The work session concluded at 8:05 p.m.