Council Agenda - City of Burbank

Tuesday, February 28, 2006

Agenda Item - 4


 

City of Burbank

 

MEMO

 

 

 

 

 

Management Services Department

 

 

DATE: February 28, 2006
TO: Mary J. Alvord, City Manager
FROM: Judie Sarquiz, Management Services Director
SUBJECT: APPROVAL OF COMPENSATION PACKAGES FOR THE EXECUTIVES, APPOINTED OFFICERS AND UNREPRESENTED MID-MANAGEMENT EMPLOYEES  FOR FISCAL YEARS 2005-2008 AND AMENDING THE FISCAL YEAR 2005-06 BUDGET


 

PURPOSE:

 

The purpose of this report is to request City Council consideration of the proposed resolutions approving the compensation packages for the Unrepresented Mid-Managers and Executives for Fiscal Years (FY) 2005-2008. 

 

BACKGROUND:

 

Beginning in March 2005, the City began the FY 2005-06 negotiations with the Burbank Police Officers Association (BPOA), the Burbank Fire Fighters (BFF), the International Brotherhood of Electrical Workers (IBEW), the Burbank City Employees Association (BCEA), and the Burbank Management Association (BMA). 

 

For many years, it has been the City�s policy to look at four basic cornerstones when considering compensation issues for its employees:

  • The condition of the economy as reflected by the Consumer Price Index (CPI) for the Los Angeles-Riverside-Orange County Urban Wage Earners and Clerical Workers from April 2004 to April, 2005.  This year that CPI was 4.9%.

  • The capacity in the City�s approved budget.

  • Commitment to pay for performance is an on-going philosophy for the City.  In order to recruit and maintain qualified employees to serve the needs of the community and citizens it is vital that the City maintain this commitment even in the face of fiscal adversity.

  • Equity in the marketplace as determined by market survey is the fourth criteria the City utilizes in setting compensation for employees.  The City continues to grapple with the ability to pay market wages due to budgetary constraints.  However, the City had a tremendous amount of trouble recruiting and retaining people this past year in large part due to our salary and benefit packages. 

For instance, prior to settling the BPOA contract, the City had 12 Police Officer vacancies, despite intensive recruitment efforts.  It became evident that in order to fill those vacancies, parity in the marketplace was a critical issue that needed to be addressed.

 

Further, prior to settling with the IBEW and BCEA, Burbank Water and Power (BWP) was struggling to maintain pipefitters and line mechanics as well as many other critical utility workers due to other agencies such as the Los Angeles Department of Water and Power offering better salaries and benefits including lifetime medical.

 

It is within this framework of both financial and market considerations as well as taking into account the recruitment and retention issues the City has been facing that the following contracts were approved by the Council:

  • A two year BPOA Memorandum of Understanding (MOU) was approved on July 12, 2005 which provided for a 16.5% total package.  This included a 9.0% salary increase in year one, and a 6.0% salary increase effective July 1, 2006.

  • A one year BFF MOU was approved on July 19, 2005 which provided for a 4.5% total package.  The salary increase, effective July 1, 2005 was for 4.0%.

  • A three year IBEW MOU was approved on January 17, 2006 which provided for a 20.46% total package.  This included salary increases in each year pursuant to survey, increased cafeteria benefits including additional dollars for medical insurance premiums and a vision and dental plan, a $44 per month retiree medical contribution from the City to each member, and the agreement to change the City�s Miscellaneous PERS retirement formula from 2% at 55 to 2.5% at 55 effective June 16, 2008.

  • A three year BCEA MOU was also approved on January 17, 2006 which provided for a 16.95% total package.  This included salary increases in each year, increased cafeteria benefits including additional dollars for medical insurance premiums and a vision and dental plan, and the agreement to change the City�s Miscellaneous PERS retirement formula from 2% at 55 to 2.5% at 55 effective June 16, 2008.

  • The City and BMA are still in negotiations for the FY 2005-06 MOU.

Negotiations with each of the unions has been extremely challenging this year.  Due to past financial budget constraints, the City has not been in a position to keep pace with the compensation and benefit packages of other agencies.  While FY 2005-06 found the City in a much better financial position than what had been the case during the past few fiscal years, the General Fund is still facing significant budgetary shortfall over the next five years.  These factors are being addressed through long range financial planning/budgeting. 

 

It is important to note that all of the bargaining groups have been team players during the past couple of years by coming to the negotiations with realistic expectations and ultimately settling for less than the average market survey for salaries and benefits which has assisted the City in getting to a more stable financial position.  However, as a result, the City�s compensation packages have been falling behind which has caused the City to experience some difficulties in recruiting and retaining employees, particularly at the Utility. The areas where the City has fallen most behind are in salaries and medical benefits (for both active and retiree).  Another challenge, totally out of the control of the City, is the high housing costs.  While this is great for the City from a property tax revenue perspective, this has caused a problem for potential employees from other regions who might otherwise consider moving to Burbank.     

 

As can be seen in the contracts negotiated with the BPOA, BFF, IBEW and BCEA there is certainly a desire by the City to begin making progress to move closer to the average market survey for employee compensation.  While it is a priority of the City to make this progress, it is being pursued cautiously with the City� financial outlook constantly considered.   

 

ANALYSIS AND CONCLUSION:

 

Following the completion of the labor negotiations, (with the exception of the BMA which is still in the negotiation process), staff completed the surveys for the Unrepresented Mid-Managers and Executives, including the appointed City Manager and City Attorney.  The surveys are based on a twelve city survey methodology. 

 

As was done with the IBEW and BCEA, staff is suggesting a three year approach to the Unrepresented Mid-Managers and Executives compensation packages.  This approach helps to maintain balance within the City�s General Fund budgeting and forecasting plans.  In addition, since a number of the benefits proposed for these groups are similar to those offered to the BCEA and IBEW, it makes sense to tie the proposals together.

 

Unrepresented Mid-Managers - Following is a detailed description of the proposed compensation and benefit package for the Unrepresented Mid-Managers:

 

Salaries:

  • Year 1: Effective March 1, 2006, salary ranges will be set based on the 2005-06 salary survey.  The projected salary range increases for these positions range from 5.49% to 27.23%.  These range increases will bring all of the positions in this group to the average market survey at a cost of 3.43% from March 1, 2006 to July 1, 2006 with a two year cost of 10.28%.  It is important to note that these changes refer to employee salary ranges.  Any movement in the actual salaries of these employees will be performance based and require a current performance evaluation.  Further, no middle management employee salary can be increased more than 10% in one year. It should be noted that the Police Captain salary proposal differs from the other Unrepresented Managers.  In an effort to maintain parity and address compaction issues, the Police Captains will receive the same amount as the BPOA which will be a 6.0% salary increase effective July 1, 2006.

  • Year 2: No salary range increases since all positions were moved to the average market survey effective March 1, 2006.

  • Year 3: Effective July 1, 2007, salary ranges will be increased on a prorated basis pursuant to the 2007-08 survey with the total salary impact to the budget capped at 3.0%.  Again, this change relates to salary range only.  Any movement in the actual salaries of these employees will be performance based and require a current performance evaluation.  Further, no mid- management employee salary can be increased more than 10% in one year.

Cafeteria/Medical Premium Amounts:

 

The City has agreed to continue providing each Unrepresented Mid-Management employee with $585.74 per month in their cafeteria plan.  However, due to the rising health costs and the fact that the cafeteria plan has not been increased for a number of years, an additional amount is proposed to assist employees with out of pocket medical premium insurance costs.  Thus, in addition to the stated cafeteria amount, the City will make contributions toward the cost of medical premiums for full time eligible employees as shown on the following charts.  Such contributions will be for medical premium costs only.

 

 Year 1 - Effective March 1, 2006

 

Type of Plan

City Contribution

Employee only

N/A

2 Party

Up to $129.71

Family

Up to $344.34

 

Year 2 - Effective December 1, 2006

 

Type of Plan

City Contribution

Employee only

N/A

2 Party

Up to $199.82

Family

Up to $435.48

 

Year 3 - Effective December 1, 2007

 

Type of Plan

City Contribution

Employee only

N/A

2 Party

Up to $276.80

Family

Up to $535.56

 

In addition to the aforementioned changes in the cafeteria plan, the City will also implement the following benefits:

  • Year 2: Effective July 1, 2006, the City will provide a vision plan at no cost to the employee.  The cost to the City will be capped at $6.50 per employee per month. If this amount will provide coverage for the employees dependents that will be acceptable; otherwise the employee will be responsible for any additional dollars to provide this coverage to their dependents.

  • Year 3: Effective July 1, 2007, the City will supply a dental plan at no cost to the employee.  The cost to the City will be capped at $118.00 per employee per month.  If this amount will provide coverage for the employees dependents that will be acceptable; otherwise the employee will be responsible for any additional dollars to provide this coverage to their dependents.

Other Changes:

  • The City�s merit pool for the Unrepresented Mid-Managers is currently funded at 2.5%.  This proposal would provide an additional 1.0% to the pool. This pool has not been increased since 1989.  All Unrepresented employees are eligible to receive merit provided they meet the goals and objectives determined by their department manager.  Employees can receive from 0.0% to 5.0% merit on an annual basis.

  • The City�s tuition reimbursement program provides Unrepresented Mid-Managers with 75% reimbursement up to a cap of $1,500.  This amount has not been changed since 1989.  With departmental training budgets decreasing, and educational requirements and schooling costs increasing, the tuition reimbursement amount needs to be increased to provide ample opportunity for employees to pursue training and educational advancement.  The proposed reimbursement would be set at 75% up to a cap of $3,200 annually.  This amount is $200 more than that offered to the IBEW and BMA.

  • Effective April 1, 2006, each employee will increase their contribution from $40.00 to $52.50 per month to the Burbank Employee Retirement Medical Trust (BERMT).  Effective that same date, the City will match the employee contribution of $52.50 per month to the Trust.  Effective April 1, 2007, employees will each contribute $65.00 per month to the BERMT.  Effective that same date, the City will match the employee contribution of $65.00 per month to the Trust.  (The Trust was created by the IBEW, BCEA and BMA three years ago to address the cost of retiree medical for miscellaneous employees.)

Executives: - Following is a detailed description of the proposed compensation and benefit package for the Executives, including the Appointed Officials:  (It is important to note that although the City Clerk and City Treasurer compensation packages are presented in a separate report on tonight�s agenda, the costing of their proposed compensation is included with the Executives.)

 

Salaries:

  • Year 1: Effective March 1, 2006, salary ranges will be set based on the 2005-06 salary survey.  The projected salary range increases for these positions range from 0.0% to 12.65%.  These range increases will bring all of the positions in this group to the average market survey at a cost of 3.27% from March 1, 2006 to July 1, 2006 with a two year cost of 9.81%.  Any movement in the actual salaries of these employees will be performance based and require a current performance evaluation from the City Manager (or Council public action for the Appointed Officials).  Further, no Executive�s salary can be increased more than 10% in one year.

  • Year 2: No salary range increases since all positions were moved to the average market survey effective March 1, 2006.

  • Year 3: Effective July 1, 2007, salary ranges will be increased on a prorated basis pursuant to the 2007-08 survey with the total salary impact to the budget capped at 4.0%. Any movement in the actual salaries of these employees will be performance based and require a current performance evaluation from the City Manger.  Further, no Executive�s salary can be increased more than 10% in one year.

Cafeteria/Medical Premium Amounts:

The City has agreed to continue providing each Executive with $775.05 per month in their cafeteria plan.  However, due to the rising health costs and the fact that the cafeteria plan has not been increased for a number of years, an additional amount is proposed to assist employees with out of pocket medical insurance premium costs.  Thus, in addition to the stated cafeteria amount, the City will make contributions toward the cost of medical premiums for full time eligible employees as shown on the following charts.  Such contributions will be for medical premium costs only.

 

Year 1 - Effective March 1, 2006

 

Type of Plan

City Contribution

Employee only

N/A

2 Party

N/A

Family

Up to $203.98

 

Year 2 - Effective December 1, 2006

 

Type of Plan

City Contribution

Employee only

N/A

2 Party

Up to $51.85

Family

Up to $299.92

 

Year 3 - Effective December 1, 2007

 

Type of Plan

City Contribution

Employee only

N/A

2 Party

Up to $132.89

Family

Up to $405.27

 

In addition to the aforementioned changes in the cafeteria plan, the City will also implement the following benefits:

  • Year 2: Effective July 1, 2006, the City will provide a vision plan at no cost to the employee.  The cost to the City will be capped at $6.50 per employee. If this amount will provide coverage for the employees dependents that will be acceptable; otherwise the employee will be responsible for any additional dollars to provide this coverage to their dependents.

  • Year 3: Effective July 1, 2007, the City will supply a dental plan at no cost to the employee.  The cost to the City will be capped at $118.00 per employee per month.  If this amount will provide coverage for the employees dependents that will be acceptable; otherwise the employee will be responsible for any additional dollars to provide this coverage to their dependents.

Other Changes:

  • The City�s merit pool for the Executives is currently funded at 5.0%.  This proposal would provide an additional 1.0% to the pool.  This pool has not been increased since 1989.  All Executives, with the exception of the City Manager and City Attorney, are eligible to receive merit provided they meet the goals and objectives determined by the City Manager.  Executives can receive from 0.0% to 10% merit on an annual basis.

  • The City�s tuition reimbursement program provides Executives with 75% reimbursement up to a cap of $1,500.  This amount has not been changed since 1989.  With departmental training budgets decreasing, and educational requirements and schooling costs increasing, the tuition reimbursement amount needs to be increased to provide ample opportunity for employees to pursue training and educational advancement.  The proposed reimbursement would be set at 75% up to a cap of $3,500 annually.  This amount is only $500 more than that offered to the IBEW and BMA.

  • Effective July 1, 2007, (same effective date as the IBEW) the City will contribute $44.00 per month to a retiree medical account (i.e. Retiree Health Savings Plan) for each Executive.

  • Effective April 1, 2006, each employee will increase their contribution from $40.00 to $52.50 per month to the Burbank Employee Retirement Medical Trust (BERMT).  Effective that same date, the City will match the employee contribution of $52.50 per month to the Trust.  Effective April 1, 2007, employees will each contribute $65.00 per month to the BERMT.  Effective that same date, the City will match the employee contribution of $65.00 per month to the Trust.  (The Trust was created by the IBEW, BCEA and BMA three years ago to address the cost of retiree medical for miscellaneous employees.)

Retirement Enhancement for Unrepresented Mid-Managers and Executives:

Through the negotiation process, the Council agreed to provide an enhanced retirement to the Miscellaneous employees of which the Unrepresented Mid-Managers and Executives are included.  The enhanced retirement was the most important issue to both the IBEW and BCEA.  More and more cities in the State have negotiated retirement enhancement provisions with their unions and this made it extremely difficult not to make this concession.

 

At this point, all agencies in the IBEW market survey with the exception of Pasadena have a better retirement than Burbank.  Moreover, in the surveys conducted for the BCEA, BMA, Unrepresented Mid-Managers and Executives, seven of the 12 cities have enhanced retirements.  The cities of Anaheim, Long Beach and Riverside have the 2.7% at 55 formula; the cities of Glendale and Garden Grove have the 2.5% at 55 formula; Torrance has a similar 2.5% at 55 formula administered through the Public Agency Retirement System (PARS); and Inglewood has the 3% at 60 formula. 

 

While it was the negotiations with the IBEW that led to the Council�s willingness to negotiate for an enhanced retirement, the City�s contract with the Public Employees Retirement System (PERS) requires that if the City is desirous of enhancing the benefit of the IBEW, all miscellaneous employees must also receive the enhancement.  In addition to the IBEW, the PERS miscellaneous group includes the BCEA, BMA, Unrepresented Mid-Managers, Executives and Elected Officers.

 

Although the City Council ultimately made the difficult decision to allow the enhanced retirement formula of 2.5% at 55, they decided to do so in a fiscally prudent manner.  The proposal has the employees and City sharing in the cost of the benefit and the implementation has been delayed for three years.

 

As part of the negotiation process, the City had an outside, independent contractor perform an actuarial to ascertain the value of the enhanced retirement benefit.  The actuarial value was stated at 4.8%.  The IBEW and BCEA have agreed in their Memorandums of Understanding to share equally in the cost.  The Unrepresented Mid-Managers and Executives will also share in the cost beginning March 1, 2006.  By having both the employees and the City share in the benefit cost through buying down the City�s current unfunded liability in PERS, the enhancement has been negotiated in a responsible manner.  It is believed that the additional 4.8% (2.4% employee contribution and 2.4% City contribution) that will be paid to PERS over the next three years will help to stabilize and/or reduce the City�s PERS employer rate once the enhancement is implemented.

 

To that end the City made a commitment to change the PERS retirement formula from 2.0% at 55 to 2.5% at 55 effective June 16, 2008 should all miscellaneous groups agree.  At this point, only the BMA has to complete their negotiations in order for all miscellaneous groups to be in agreement with the enhanced benefit approach.  Both the City and the Mid-Managers and Executives will begin contributing 2.4% effective March 1, 2006.  Should agreement be reached with all miscellaneous groups, staff will return with an amendment to the City�s PERS contract in early 2007.

 

FISCAL IMPACT:

 

The total maximum cost of the proposed three year compensation package for the Unrepresented Mid-Managers is 18.46% ($1,742,144)).  The total maximum cost of the proposed compensation package for the Executives is 18.73% ($534,161).   The total maximum cost may be less than these amounts depending on the results of the market survey in the third year.  It should be noted that these maximum costs include the 2.4% City contribution for the PERS 2.5% at 55 enhanced retirement formula.

 

RECOMMENDATION:

 

Staff recommends City Council adoption of the proposed resolutions.

 

 

Respectfully submitted,

Judie Sarquiz

Management Services Director