City Manager Mike Ortega presented the 2006/2007 budget to the city council Wednesday in which he outlined some of the budgetary issues the council will have to decide upon within the next month.
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"Over the last few weeks, several of you have inquired about various issues relating to staff salaries and positions," Ortega said. "As you may recall, I mentioned to you several months ago that my focus in the budget was going to be staffing issues, including salaries and positions.
"As a result, you will be faced with making several decisions related to personnel expenses as a part of your consideration of the FY 07/08 Operating Budget.
"Although the discussions may seem difficult, how we distribute what appears to be the most money we have been able to afford toward staffing issues, is a good problem," Ortega said.
Ortega said that traditionally, the city has focused on capital improvements and other operational costs. This year, he is proposing to allocate nearly $1,000,000 to staffing issues alone. Ortega said the operation costs have been held constant or even reduced in some cases to give more for staff salaries.
Douglas Mayor Ray Borane asked for a three percent pay increase on top of the seven percent that was proposed in the budget for police officers.
The Finance Committee reviewed the budget on May 15 and May 17, 2007. The Committee has recommended approving the budget as presented, but included a change to one of Ortega's recommendations with regard to how the cost of living adjustment (COLA) is distributed.
Before going through the COLA distribution, Ortega summarized the personnel related expenses recommended as a part of the budget.
ˆ Allocating the funding for 5 public safety positions that had previously been held vacant (3 Fire, 2 Police). $ 250,954
\ Classification Maintenance Review (CM R) adjustments for Police and Fire positions of 7% and 6%, respectively, $ 203,297
ˆ Classification Maintenance Review (CMR) adjustments for other miscellaneous positions. 49,710
ˆ Implementation of salary range steps F (22-26 years) and G (27+ years) on 1/1/08. $ 88,878
ˆ 4% cost of living adjustment (COLA) to be distributed across the board, $ 406.154
ˆ Total personnel related increases over FY 06/07 levels Included in FYO7/08, $ 998,993
Following is a review of each item listed above:
Ortega had previously recommended holding these Public Safety positions vacant since changing the Certificate of Necessity (CON) to exclude inter-facility transport, thus reducing the revenue from ambulance collections and somewhat reducing the call load. With regard to the Police Department, the city had traditionally had at least 4-6 vacancies and Ortega saw no need to continue to carry positions fully funded when it was unlikely that they would be filled during the fiscal year.
Calls for service in Fire and EMS have continued to increase over the last several years and as a result, Ortega is recommending filling all three vacancies to cover this increase. Ortega asked the council to note that the city needs to fill all three positions because of the way staffing is allocated to each of the three shifts (equally).
During this past year, the council authorized the filling of one of the frozen police positions. In addition to full funding for this position, Ortega is also recommending the city fund the other vacancy. In addition to the calls for service, the city sees the opportunity to fill all vacancies. Although the department has seen some attrition in the last few months, the city is expecting to fill the vacancies by the end of calendar year 2007.
The staff has performed a classification maintenance review for the police and fire positions and found them to be below market average. Specifically, the police officer classifications are approximately 12% below market. The sergeant classification is 23% below market and the lieutenant positions are even further behind at 29%. As a result, Ortega developed a plan to increase all sworn positions by 7% in FY 07/08 and an additional 5% in FY 08/09.
Sergeant and lieutenant positions will still be below market even after these adjustments. The police officer positions should be competitive given the excellent benefits package the City of Douglas offers all of its employees.
The firefighter and paramedic positions are similarly below market. Firefighter positions are below 10%, while the Engineer and Captain Classifications are below 17%. Ortega has recommended an adjustment of all fire position salaries of 6% in FY 07/08 and 4% in FY 08/09. The Engineer and Captain positions will need to be addressed in future years as they will continue to be below market.
These adjustments are in addition to any COLA that may be given this year or next. Ortega recommended that the council approve this two year plan as a part of the FY 07/08 budget. The approval is necessary to show Public Safety staff that there is a commitment to address this issue.
In addition to adjusting the salaries of the public safety staff, Human Resources staff prepared CMR's for other positions because of changes in job duties, reorganization of functional areas, and the need to stay competitive with the market. Positions that are recommended to receive salary adjustments are as follows:
Change in
range or % #of CMR Cost Position increase positions w/ERE's Police Admin Assist 14-16 1 $ 3,335
Dispatcher 15-16 6 $ 2,096
Sr Dispatcher 17-18 1 $ 1,878
IT Director 29-32 1 $ 10,997
HR Analyst 21-22 1 $ 2,269
Maint Tech I 13-14 3 $ 4,379
MaintTechll 15-16 3 $ 5,194
Maint Tech Ill 16-17 2 $ 3,698
Maint Tech IV 17-18 1 $ 1,933
Maint Worker I Cem 12-13 2 $ 3,978
Maint Worker II Cem 13-14 1 $ 1,605
Housing Director 28-29 1 $ 3,185
Housing Rehab
Spec ialist 20-2 1 1 $ 1,763
House Prog. Sp 17-18 1 $ 1,905
Occupancy
Specialist 15-16 1 $ 1.497
$ 49,710
The total cost of these additional CMR's is $49,710.
Several years ago, the Mayor and Council authorized the expansion of the salary schedule to include 5% between steps within a given range and the addition of steps F and G. The intent of steps FIG was to increase the difference between starting salaries and potential ending salaries within a range. In some instances only a $1,000 difference existed between a new employee and one that had been employed with the City for more than 20 years, yet both were in the same type of job and classification. Due to funding constraints, these additional steps were never funded.
The FY 07/08 Budget includes the inclusion of steps F and G as follows:
ˆ Step F would be available for all employees that have at least 22 years of service as of July 1, 2007.
ˆ Step G would be available for all employees that have at least 27 years of City service as of January 1, 2008.
The timeframes for eligibility to receive F and G can change over the years, but Ortega recommended them as a starting point to accomplish two things; address salary adjustments for the most tenured employees that have not seen step increases in over 10 years in some instances and to include them as a part of the budget easing the affect of lowering the timeframes in the future.
Lastly, Ortega included $406,154 for a COLA. His recommendation was for this amount to be used for a 4% COLA for all permanent and temporary employees. The Finance Committee, as a part of their recommendation for approval of the budget, has recommended considering a flat rate distribution for all employees. If only permanent employees are given an adjustment, the amount will be $1,693. If all employee salaries are adjusted including limited status employees, the amount would equate to $1,549.
The Committee deliberated and ultimately voted to apply a fIat amount to the salary schedule using the total amount allocated for the 4% COLA. Their reasoning was based on the fact that the lower paid employees receive less of an increase using percentages than do the higher paid employees. Their thought was that a straight across amount for all employees appeared to be fairer, particularly to those with lower salaries.
Aside from the appearance of fairness, a flat rate distribution in essence has the affect of a regressive benefit, since those that earn less would receive a larger percentage increase to their base salary, compared to those earning more than the average. Ortega said he understands the well-intentioned reasons and the apparent positive side of this approach, but believe it important to list the following negative impacts a flat rate distribution would have in the short and long term:
A flat amount distribution will compress the current salary schedule, which is contrary to the City Council's decision when Council voted to decompress the salary schedule as part of the FY 2000/2001 budget to allow for a 5% span between all steps within ranges. At the time, this compression created tremendous problems for the city in the recruitment of new personnel and the cost of the decompression alone was $53,000. The main issue was that there was little difference between starting salaries and more tenured employees within the same range. To apply a flat amount distribution to all steps within ranges will cause compression once again, decreasing percentages between steps to approximately 4.7%.
As a part of the City's strategic planning process, the city has been striving to achieve competitive employee salaries at 3% above market. Compression of the salary schedule would hinder this process as salary ranges are less marketable, particularly at the higher steps of the range.
c. The flat rate approach would give the exact benefit to a more tenured employee as to the employee that started employment today. This will cause an apparent inequity since there will be no distinction amongst employees regardless of their years of service.
d. It is unlikely that employees negatively impacted by this flat rate approach would leave City service, but when they do as a part of normal attrition the City will then have to adjust and increase the salary upon recruitment nevertheless in order to fill the position. This is key to the conversation about long term sustainability of salary increases since the amount of any increases needed to be funded to fill future vacancies would have to be covered in future budgets causing a burden to the operations budget at that time. Consequently, the end result is "pay now or pay later."
The City's current range and step process values employees with higher levels of qualifications, skills, responsibilities and tenure. By applying a flat rate distribution, the message to the higher paid employee is that they are not valued the same as the lower paid employee. This inequity will more than likely cause morale issues amongst professional and leadership staff.
ˆ Of 212 positions (194 permanent and 18 limited), 125 would benefit from a flat amount of increase versus a percentage increase in salary. The average increase for these employees per year equates to $312.74, which results in only an additional $12.00 per pay period (approximately $8.00 after taxes). Based on this amount, Ortega said the benefit is greater than the challenges caused by this approach.
ˆ Overtime costs would be increased with the flat rate adjustment, as opposed to a percentage adjustment, as base salaries for hourly employees would be higher than the equivalent of a 4% increase.
ˆ Ortega said he did not recommend approving any type of flat rate distribution. He suggested that council consider changing the structure of the COLA and instead allocate a 3% COLA for all employees and redistributing the remaining 1% evenly amongst all employees in the form of a bonus (approximately $387 per employee), but not adding it to the base salary schedule. Ortega did not recommend this option, but offered it as a possible compromise.
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