BUDGET WORK SESSION OF THE CHAPEL HILL TOWN COUNCIL

MONDAY, JUNE 1, 1998 AT 5:30 P.M.

Mayor Waldorf called the meeting to order at 5:30 p.m.

Council Members present were Flicka Bateman, Joyce Brown, Joe Capowski, Pat Evans, Kevin Foy, Julie McClintock (arrived at 5:40 p.m.), Lee Pavão, and Edith Wiggins.  Staff members present were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Assistant to the Manager Ruffin Hall, Finance Director Jim Baker, Planning Director Roger Waldon, Personnel Director Pat Thomas, Solid Waste Administrator Gayle Wilson, Public Works Director Bruce Heflin, Interim Parks and Recreation Director Bill Webster, Solid Waste Planner Blair Pollock, Public Works Administrative Analyst Randy Ballard, Long Range Planner Claudia Payne, Fire Chief Dan Jones, Library Director Kathleen Thompson,

Urban Forester Curtis Brooks, and Deputy Town Clerk Joyce Smith.

Mayor Waldorf noted that this evening’s session might be the last budget work session before Council adoption of the Town’s 1998-99 budget.

Town Manager Cal Horton stated the Council had directed him to investigate methods in which revenue and expenditure adjustments could be made in order to have no need for a property tax increase.  Mr. Horton noted a number of ways this might be accomplished, including raising cable franchise fees by $10,000.  He commented that revenues were estimated to total about $100,000, $30,000 more than originally projected.  Mr. Horton said that Planning fees had also been adjusted to recover a higher percentage of expenses, about a $25,000 increase.  He commented that motor vehicle fees were expected to be adjusted to $40,000.  Mr. Horton said that court cost collections were up about $15,000.  He also stated that revenue adjustments totaled about $185,000, equivalent to 0.065 cents on the tax rate.  Mr. Horton stated that the Council could elect to reduce its contingency fund by $68,000 to $50,000.  He remarked that Shaping Orange County’s Future program need total was $57,000 rather than $75,000 previously reported, so an adjustment could also be made to this item.  Mr. Horton suggested delaying the addition of a Landscaper position for at least the first two quarters.  Mr. Horton noted his belief that the Town could get funding for at least three-quarters of the cost of a police officer position to respond to citizen complaints.

Mr. Horton said he recommended one addition to the budget, which was to increase the linear footage of proposed sidewalks to do a better job of curb and gutter work, for an additional expenditure of $31,000.   He also noted the inclusion of $15,000 for a one-time capital grant for the YMCA program.   Mr. Horton recommended allocation of $100,000 that could be used for personnel or a consultant or a combination of the two to proceed with Comprehensive Plan review.  Mr. Horton added that through a combination of actions, some additional expenditures may be possible for programs we believe are worthy of the Council's consideration.

Council Member Brown asked about the $100,000 for the consultant.  Mr. Horton said the allocation of a planner would be necessary even without the review of the Comprehensive Plan.  Council Member Brown asked if this was in addition to the $50,000 already recommended.  Mr. Horton said yes.  Council Member Brown asked did he anticipate that another $100,000 may be needed in future years.  Mr. Horton said possibly, but he does not have adequate information at this time.

Council Member Brown asked about the motor vehicles tax.  Mr. Horton replied that Durham had had experienced difficulty with the system in past years, but the new system has corrected many of those problems.  Mr. Baker indicated that with the new system, taxes paid by Chapel Hill citizens who live in Durham County are now easier to collect.

Council Member Evans asked in regard to vehicles belonging to persons who commute to Chapel Hill, was there a way to collect some fees for their use of our facilities.  Mr. Horton said some funds are recovered through parking space rental or use of parking lots.  Council Member Evans asked if any discussion had taken place with the University regarding the impact of students on our roads.  Mr. Horton answered no.

Regarding the Fund balance account, Council Member Foy asked if it was in essence a savings account.  Mr. Horton said yes.

Mayor pro tem Capowski asked if the new zero budget increase recommendation still maintains the proposed employee pay increase.  Mr. Horton said yes.

Council Member McClintock stated on the potential one-time expenditures, she believes it is important to build in some money for the evaluation study and would like the Council’s opinion on this.  She said getting a good system in place that employees can understand should be a high priority.  Mr. Horton responded he agreed, and believed the Council could quite reasonably use the Fund Balance to fund this study.

Council Member Evans said the cost should not be any more than what was original budgeted.  Mr. Horton said he could not answer that at this time, adding that Police Officers and Firefighters could not be evaluated in the same manner as some other employees.  Council Member Evans asked if this study could piggyback on the consultant's study.  Mr. Horton answered yes.

Council Member Brown asked for the estimated cost of the consultant's study.  Mr. Horton replied around $30,000.  Council Member Brown asked if these funds were budgeted.  Mr. Horton said no, but would be included as a one-time expenditure.  Council Member Brown asked if the additional consultant’s fee for the evaluation would fall within this same general range and could it be funded without any problem.  Mr. Horton said it may be slightly more, but he believed the expenditure could be covered with Fund Balance.

Council Member Pavão asked if the cost would be for the entire evaluation review, or would it be separated out between different classes of employees.  Mr. Horton said it would be one figure for the entire study.

Council Member Bateman asked if there was any interest in funding for Orange County Partners for Children, subsidizing six children, and also funding for Child Care Services.

Mayor pro tem Capowski said these requests should have been submitted through the Human Services Advisory Board.

Council Member McClintock said she had no problem funding these groups, but they should make requests through the Human Services Advisory Board’s review process.

Mayor pro tem Capowski said all of the groups who had submitted applications to the Human Services Advisory Board did not receive funds, and it would be unfair to now add additional groups who did not go through the review process.

Mayor Waldorf asked if the Council would feel differently if the question was posed as, perhaps, can the Town subsidize the day care for five or seven or ten children who live in public housing, or is it strictly a question of principal.

Mayor pro tem Capowski said these two groups should be directed to go through the Human Services Advisory Board’s review process for funds.

Council Member Brown asked how the requested funds could be provided.  Mr. Horton said it could be considered a one-time expenditure, and for future years a modest adjustment in the tax rate may be necessary.  Council Member Brown said she believes every request is deserving of the Council's help, and did not believe funds should be dispersed in this way.

Council Member Evans said the process used by the Human Services Advisory Board works well, and does not believe it is wise to move from that process.

Mayor Waldorf said she had spoken to Carrboro's Mayor and the Orange County Board of Commissioners’ Chair about funds for Day Care Services, and both had indicated that because of the number of requests for funds this year, they did not believe additional funds would be appropriated for this cause.

Council Member Bateman asked if Day Care Services had been instructed to go through the Human Services Advisory Board’s review process when they requested funding?  If not, Council Member Bateman said we should have made sure she and others understood the process to follow.  Mayor Waldorf said she did not believe they were instructed to do so because their request was received too late in the process.

Council Member McClintock said she believes there are sometimes exceptions, but did not believe this was the case.

Council Member Wiggins said regarding the Transportation Fund, is it possible to request funds from the County to provide bus service to the new Human Services Center.  Mr. Horton said he had not discovered a successful way to do this.

Mayor Waldorf said when the County was asked for funding for Parks and Recreation, the Library and others; the rationale was that Town services were being provided to persons who do not live in Chapel Hill.  She said the persons residing on the bus lines who would travel to the Center are Chapel Hill citizens, so this reasoning could not be used.

Mayor pro tem Capowski reminded the Council that the Special Use Permit for the Center was approved over the objections of the Transportation Board because of the difficulty in providing mass transit to the site.

Council Member McClintock asked if the cost of providing bus service to the Center is in the recommended budget.  Mr. Horton said no.

Council Member Brown stated that the Landfill Owners’ Group had issued a recommended 1998-99 budget which she believed was excellent.  She noted she would like to see the Council accept this document.

Council Member Foy agreed that the Council should accept the recommended budget from the Landfill Owners’ Group, but the question is can we afford this concept?

Mayor pro tem Capowski said in the Manager's proposed budget, the tipping fees were recommended to increase from $35 to $38.  Mr. Horton said this was correct.  Mayor pro tem Capowski asked what was the recommendation for a construction and demolition landfill?  Mr. Horton said there was not a recommendation at this time.  Mayor pro tem Capowski asked how much revenue would a $1 increase generate?  Mr. Wilson said in mixed solid waste, about $58,500.

Council Member McClintock said then the tipping fee for construction and demolition landfill should be $38 as well.  Mayor Waldorf said yes.

Mayor Waldorf opened the floor to discussion on the pay system for employees.  She noted the Manager was proposing a budget with no tax increase.

Council Member Foy suggested that the Council attempt to generate a $125,000 savings by adjusting the proposed salary increase by allocating 4.75% to employees below $30,000, 3.5 % for employees between $30,000 and $40,000, and 2% for employees above $40,000.  He added that requests for new positions should be prioritized and the Council should do whatever was needed to make up the difference by deferring hiring of these employees.

Council Member Pavão stated he appreciated the effort, but he did not necessarily agree.  He said that most employees were performing at a high level and with the current labor market it was necessary to pay a competitive wage.  Council Member Pavão said he had a difficult time in holding an employee's salary down in order to compensate another employee.  He said the employees are our biggest asset, and stating that an employee is only worth 2% as opposed some other figure does not send a positive message.

Council Member Brown asked if Council Member Foy had made this suggestion before he knew that the Manager was offering a zero tax increase budget.  Council Member Foy answered yes. Council Member Brown said since this discussion comes up each year, maybe the consultant could address this issue and the issue of compression.

Council Member McClintock said she appreciated Council Member Foy's proposal, but believes the broader question is do we feel comfortable with an average of 4.75% increase this year, or should we reduce this amount and make an across-the-board increase.  She said she believes this percentage is high, and that the Council should be looking at something around 4%.  Council Member McClintock asked what the State was proposing as a pay increase for State employees.  Ms. Thomas answered a total of 5%.  Council Member McClintock said that in times of plenty we should give the taxpayers a break, and in tighter times the employees should be given the break. She asked what is the inflation rate.  Ms. Thomas said about 2%, but that does not take into account labor costs, which runs about 4 or 5%.   She added that turnover has not increased that much, but they were experiencing difficulty in filling positions, especially in lower level positions.  She said that sometimes we much advertise three of four times before suitable employees could be hired.

Council Member McClintock asked if Council Member Foy's proposal would increase the compression problem.  Mr. Horton said that one of the problems with recruiting a Parks and Recreation Director was that we advertised the starting salary.  He noted they then had to readvertise the upper range of the salary scale before suitable candidates applied for the position. Mr. Horton added that the classifications of positions are important, and it is taking a lot more effort to obtain and retain suitable employees.

Council Member McClintock asked for a brief review of the benefits package.  Mr. Horton said the benefits package is in the middle of the market.  Ms. Thomas stated the Town provides membership to the Local Government Retirement System, pays the cost of individual health insurance coverage, provides for short term and long term disability, provides 5% of salary to a 401(k) account, and well as providing 12 day of vacation and 12 days of sick leave yearly.

Council Member Foy reiterated that he made his recommendation of staggered pay increases before the Manager offered the Council a no tax rate increase recommendation.  He said they had received proposals which provided different weighting procedures for salary, and said that he did see some merit in looking at prioritizing now.

Council Member Wiggins said she hoped that the 4.75% increase could be retained for all employees.  She said she did not understand why employees who made more should receive less increase.  She said different persons performed different services for the organization, and if they did it well they should be rewarded.  Council Member Wiggins said she was never aware in her previous employment that persons above her in pay felt that they should receive less of a pay increase than she, or persons who were making less should receive more of a pay increase.  She said employees who are making over $40,000 are just as valuable as those making below $30,000. Council Member Wiggins said the Council should be careful of sending a signal that employees making over $40,000 are not as valuable as others.

Mayor pro tem Capowski said he believed the recommended pay increase of 4.75% was fair, when coupled with the benefits package, especially since it could be accomplished with no tax increase.

Council Member McClintock said the Council needed to remember that everyone would not get the 4.75%, and asked what the range would be.  Ms. Thomas said the range was from zero to 5.75%, but about 80 to 85% of employees would receive the 4.75%.  Council Member McClintock asked if the Council was happy with that, or should the Manager be given some direction on this issue?

Council Member Brown suggested that since we do have this discussion nearly every year, she would like the consultant to study Council Member Foy's suggestion.

Mayor Waldorf noted that in past work sessions, the Council had decided on every issue except for the actual percentage of pay increase.  She said the question is what actual percentage should be awarded?

Council Member McClintock said each employee who meets the expected level should receive the 4.75%.  Ms. Thomas said in the past several years, no more than 10% of employees received an outstanding rating, with the vast majority being rated as meets or exceeds expected performance. Mr. Horton added that they operate on the premise that most employees fall into the meets or exceeds category, but a small percentage do exceed that category, as well as a small percentage who fall below the acceptable level.

Council Member Evans said she was comfortable with the 4.75% suggested increase, and next year they would have the benefit of the consultant's study to make future year decisions.

Mayor Waldorf asked if a majority of the Council agreed with the suggested 4.75%?  A majority of the Council agreed by acclimation.

Council Member Bateman noted that Council Member Foy's suggestion of prioritizing the need for new positions was a good one.

Mayor Waldorf suggested looking at the new positions request at this time.

Council Member Wiggins noted the list was long, and believed it would be easier to discuss if it were prioritized.  She said an organization that has hundreds of positions always has room for reallocation of resources, and believes we should be doing that.

Mayor Waldorf said the Council had already discussed the need for each of these positions in previous work sessions.

Mr. Horton said one reason this list is substantial is that in past years they have attempted to reorder resources and put them in the most effective place.  He said we only have one person to look after the Town's computer inventory, and we have not been able to respond to the Council's needs for planning data.  He said he would not recommend eliminating any of them but the first to go would be the Transportation Operations Supervisor, the second would be the Internal Investigator in the Police Department, the third would be the Safety and Training officer, the fourth would be the elimination a one of the Groundskeepers, and the fifth would be to eliminate the Crisis Counselor. He said there were literally dozens of positions that were requested that are not on this list, and he would ask that the Council hear from the department heads before any position was cut from this list.

Council Member Pavão said he believes the departments had presented this list as the most important needs at this time.  He said he thought we may have been too frugal in the past, and was comfortable with the requested new positions.

Council Member Wiggins asked if these 19 positions were included in the new zero tax rate increase budget.  Mr. Horton said yes.

Council Member Brown said it was important to remember that with the addition of a new fire station, additional staffing would be necessary and we should be looking now at how to fund these future positions.  She said that since we would be faced with these new firefighter positions, we should look at cutting the add list now.

Council Member Bateman said she believed we should fulfill our promise to the taxpayers to provide a swimming pool at the Northern Community Park, and we should be planning now on how to provide that.

Council Member Evans said that she was sure that when taxpayers voted in favor of the bonds they expected a tax increase, and here we are offering a budget with no tax increase.

Council Member Foy said he believes we have unfunded issues that will require significant amounts of money in the future, and if we do not fund all of these positions the funds would go into the Fund Balance, which could be used to fund future firefighter positions or others.

Mayor pro tem Capowski said he did not believe taxes should be raised just to bank extra funds. He said if funds are available to funds these positions and they are necessary, then they should be added.

Council Member Brown said we have to be ready for these future positions, and keeping the Fund Balance at a necessary level was the way to accomplish this.

Council Member Evans said the staff does not plan just one year at a time, and with what is projected as revenue the needs of the public will be met.  Mr. Horton said some small tax increases will most likely be necessary in future years.

Mr. Horton said that the budget ordinance could be ready for adoption at the June 8th meeting.

Mayor Waldorf said she believed there was some interest in having an option put forward that would not include two of the recommended positions and having that amount of revenue set aside in Fund Balance.

Horton suggested that data on the lowest five priorities be presented on June 8th for the Council's consideration.

The meeting was adjourned at 7:24 p.m.