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HomeMy WebLinkAboutMINUTES-01/13/2009-AdjournedJanuary 13,2009 COUNCIL OF THE CITY OF FORT COLLINS, COLORADO Council -Manager Form of Government Adjourned Meeting - 6:00 p.m. An adjourned meeting of the Council of the City of Fort Collins was held on Tuesday, January 13, 2009, at 6:00 p.m. in the Council Chambers of the City of Fort Collins City Hall. Roll Call was answered by the following Councilmembers: Hutchinson, Manvel Ohlson, Poppaw, Roy and Troxell. (Councilmember Brown has been excused from Council meetings from October 28, 2008 through April 7, 2009, per Resolution 2008-104.) Staff Members Present: Atteberry, Krajicek, Roy. City Manager Atteberry stated a citizen has requested that Council add the name "Louis Brown, Jr. Parkway" to its list of street names and the request will added the agenda that will be presented at the next Council meeting on January 20. Ordinance No. 004, 2009, Adopting the 2009 Classified Employees' Pay Plan, Adopted on First Reading The following is staff's memorandum on this item. "EXECUTIVE SUMMARY The City of Fort Collins 2009 Pay Plan establishes a structure for employee compensation. It is the framework that sets the minimum and maximum pay for City positions. The methodology used by the City has evolved based on compensation best practices. The 2009 Pay Plan uses average actual salary data collected from a redefined market for benchmark positions to determine pay range midpoints within occupational groups. BACKGROUND Prior to 2007, the philosophy used to develop the City's annual pay plan was based on setting pay range maximums, within occupational groups, at the 70th percentile of the market. Accordingly, the City benchmarked approximately 79 jobs against 18peer organizations, including Front Range municipalities, counties, and the State of Colorado. Pay ranges were developed using pay range maximum data collected from the 18 peer organizations and limited private sector data. The philosophy ofsetting pay range maximums at the 70th percentile is no longer considered a best practice. Therefore, the City redefined its philosophy for establishing the City's Pay Plan. In addition, pay data was gathered for the newly defined market, which more accurately reflects the market we compete in for talent. 361 January 13, 2009 The 2008 Pay Plan represented a transition toward the new compensation philosophy. Rather than using pay range maximums to develop the pay structure, average actual pay data was collected from the same 18 benchmark organizations. The 2008 budget included creation of a Compensation Analyst position to help further implement the new pay philosophy. In 2008, staff attended a course, "Market Pricing - Conducting a Competitive Pay Analysis, " to learn about best practices in compensation, benefits and total rewards. Staff used the recommended methodology to design the 2009 Pay Plan. 2009 PA Y PLAN DE VELOPMENT Step 1— Market Identification Twenty-two meetings were held with Service Area/Unit Directors, Department Heads, and Division Managers to identify the appropriate market for the City's benchmark jobs. This market identification process addressed Council 's direction to ensure that the City's Pay Plan more closely aligned with the actual markets the in which the City competes (both the public and private sectors). During this process, the City identified 157 benchmark jobs for which market pay data could be gathered. Benchmarkjobs now represent approximately 40% ofall Cityjobs. The Colorado Front Range, extending from Fort Collins south to Colorado Springs, was identified as the market for professional and technical jobs. Northern Colorado, including Lorimer and Weld Counties was the market identified for administrative support and some labor trade jobs. Salary data for these two markets includes Cities and Counties with populations ranging from approximately 50,000 to 550, 000, and private sector date, where available. Step 1— Market Data Collection and Analysis Once the market was defined, average actual salary data was collectedfor the benchmarkjobs using surveys from Mountain States Employer's Council ("SEC) and the Colorado Municipal League (CML). Average actual salary (also referred to as the mean) is the sum ofall reported pay for every employee in a benchmark job divided by the number of incumbents in a given job. Because the salary data was collected in March 2008, staff "aged" the data by multiplying survey salaries by an Employment Cost Index (for government jobs) to arrive at effective pay rate to be implemented in March 2009. PRIMARY DATA SOURCES Mountain States Employer's Council (MSEC) Colorado Compensation Survey MSEC Colorado- Compensation Survey represents Colorado employers of all sizes. Data was collected from 436 respondents situated all across the State of Colorado, including the four geographic areas of Denver/Boulder, Northern Colorado, Southern Colorado, and the Western Slope and representing 49,404 employees. Although government employers are included in this survey, they represent only 16.5% of the employers. MSEC surveys 343 benchmark jobs. 362 January 13, 2009 Mountain States Employer's Council (MSEC) Information Technology Compensation Survey Data is collected from 341 respondents. There are 5,634 employees and 76 benchmark jobs. Information is not broken down by geographic region or type of industry. Mountain State Employer's Council (MSEC) Public Employers Compensation Survey Data is collected from 130 respondents. There 34,414 employees and 317 benchmark jobs. Colorado Municipal League (CML) CML reports compensation from many jurisdictions in the State of Colorado, including municipalities, counties, and special districts. Step 3 — Establish Pay Ranges Average actual salaries were used to set the City's market or midpoint for each pay grade within the eight occupational groups that make up the Classified Employees' Pay Plan. In order to determine pay grade midpoints (the pay structure), staff used regression analysis to establish the best line offit for the average actual salaries and paygrades. Midpoints were then used to establish the minimum and maximum of the pay range (40% spread). Each pay grade was analyzed. The result of this effort is the recommended 2009 Classified Employee Pay Plan. " City Manager Atteberry stated Council is considering the 2009 Employee Pay Plan. In 2003, the City began evaluating employee health care benefits and costs have been significantly reduced. The employee health care benefits were far out of market for other cities across the north Front Range. The City now pays 75% of employee premiums and 25% of the premium is paid by the employee. Out-of-pocket expenses have been adjusted and this year the City has seen a reduction in claims. The benefits are now at market average. At the Council's direction, the pay philosophy has been changed, the definition of the market has been redefined and the City has moved towards performance -based pay. Amy Sharkey, Compensation, Benefits and Human Resources Manager, stated the new pay philosophy states the City's compensation program will be competitive in attracting and attaining the quality employees needed to execute the City's mission and vision. The pay philosophy directs that the pay ranges established within the pay plan will use a redefined market and the average actual salaries of those markets and that the pay employees receive will be at or slightly above the market. The redefined market used for the 2009 Plan varies with the type ofjob within the City. A Service Area/Unit Director job has a national and Front Range market. Professional technical jobs were compared to the market along the Front Range, using both private and public data. Administrative support and some labor trade markets were compared to the private and public market in northern Colorado. A national market primarily looks at the western region of the United States. Front Range is Fort Collins to Colorado Springs and northern Colorado is Larimer and Weld counties. All data provided by private organizations to compensation surveys was used for the analysis. Data from 363 January 13, 2009 public organizations with a population of 50,000 to 550,000 was used. The 2009 Pay Plan provides a foundation for establishing employee pay, using the market data, and sets the pay ranges. A pay range is established using the average actual salary data from published surveys. The data is used to set the midpoint of pay ranges. The minimum and maximum of the pay range are figured based on the midpoint. The pay for performance system implemented by the City in 2008 lets the City differentiate rewards for employees, based on performance. A performance evaluation system was created to aid supervisors and managers in implementing the performance based pay system. Pay increases are based on individual employee performance and the market. Not all employees will be receiving the same pay increase. City Manager Atteberry stated Council's role in the process is to adopt a budget that appropriates the funds needed to pay for the Pay Plan. The 2009 budget contains a 4% increase for employees, on average. Council also adopts the classified employees' Pay Plan that establishes the minimums and maximums of the pay ranges for each job type. The City Manager's role in the process is to take the Pay Plan adopted by Council and the money that is appropriated and implement the Plan in the most effective way. With the market redefinition and pay philosophy, it has been apparent that a significant number of City employees are behind the average of the market. The City Manager's recommendation to Council is to keep the 4% pay increase and add 1.4% to phase in the market adjustments over the next 3 years. The Finance Committee did not support that recommendation, given the current economic climate. He has spoken with every Councilmember and does not believe a majority of Council supports his recommendation, but he continues to make the recommendation to bring salaries to average actual salaries over a three year period. Since Council support is not provided, the best alternative is to keep intact the 4% already adopted in the budget and adopt the Pay Plan. Councilmember Ohlson stated the City's pay philosophy is to pay "at or slightly above average" and that wording needs to be changed. Employees that have worked for the City for along period of time and have been performing well have salaries that are significantly higher than average market. Sharkey stated the City does not currently have any merit employees at the maximum of their pay range. Length of time employed by the City is not a guarantee an employee will get to the top of the pay range. The employee must perform well. The Pay Plan is evaluated every year and if the market moves the pay ranges, employees can still only move through the pay range based on performance. City Manager Atteberry stated the previous pay philosophy was to pay employees at the 70% percentile maximum. The policy centered around the maximum pay grade, not the average actual and two-thirds of the work force was at pay grade maximum. With the new pay philosophy, most employees will be paid around the average actual and will not be at pay grade maximum. It is possible for an employee to reach the pay range maximum, but it will take a high performer some time to reach that level. Mayor Hutchinson noted the market average is the reference point for a range, it is not one employee's average pay, but is used to establish a range and the City Manager is required to stay within the ranges with pay for performance. 364 January 13, 2009 Councilmember Ohlson stated the phrase"at or slightly above average" should be changed but not the entire Policy. Assistant City Manager Williams stated the terminology was deliberately chosen to emphasize the pay philosophy. When the 70th percentile was used, the maximum pay was became the focus because, if an employee stayed with the City long enough and was a good performer, the assumption was the employee would reach the pay maximum. The philosophy now focuses on where the average employee will be paid and the goal is not to have people at the maximum of a pay range but to pay within the mid -point of a pay range. It will be much more difficult to move up within a pay range with pay for performance. Councilmember Manvel stated the distribution of pay will change with the new pay philosophy and will not be skewed to the upper end of pay ranges. Williams noted the ratings system in place for pay for performance has multiple layers of review to ensure the distribution of pay is examined each year. Councilmember Troxell stated developing a pay plan that is market -driven and performance based is an excellent strategy for the City and the market study showed approximately 300 positions are behind the market. He asked what funding was available to provide an extra 1.4% to those employees whose pay is below market. City Manager Atteberry stated the City has significant, ongoing savings from reduced claims cost for the employee and employer. Those dollars are appropriated and could be used for this purpose. Councilmember Poppaw asked how long can the City stay healthy if the economy continues to decline and she did not believe adopting the Pay Plan was a good fiscal decision. City Manager Atteberry stated his recommendation is fiscally sound and the City organization, through cost reductions and efficiencies, can afford to put the Pay Plan into effect. The forecast for the next year is conservative and Fort Collins is in much better shape than many other communities. The City will reduce costs with a hiring freeze and filling positions only ifjustification is provided by departments. This is an investment in the human capital of the City and without a world -class work force that is provided compensation at least at market, the City will not be able to keep up with the expectations of the community. Councilmember Poppaw asked if it was possible to postpone consideration of the Pay Plan until 2009 first quarter results are available. City Manager Atteberry stated the City has already delayed implementation of the Pay Plan for six weeks. A Plan is in place that is data -driven, the methodology is sound, is best practices, and adopting the Plan is the right thing to do. Councilmember Poppaw asked if the City can sustain the Plan if the recession continues for two years or more. City Manager Atteberry stated his belief that the City is in good financial condition but there is no guarantee the economy will not drop further. If further adjustments are necessary in the future, those will be brought to Council. It is not appropriate to make those adjustments at the expense of the employees. Councilmember Roy asked for additional language to be added to the ordinance that would cap the increase at 4% instead of 5.4%. City Attorney Roy stated there is no place in the ordinance to address the percentage of increase that has been used to calculate the amount needed to fund the Pay 365 January 13, 2009 Plan. The ordinance will adopt a Pay Plan that is consistent with the amount budgeted. It is not necessary to address percentages and would not be appropriate. Mayor Hutchinson stated the City Manager has recommended a 5.4% benchmark average increase for the implementation of the Pay Plan and Council has indicated, given the economic difficulties, that it is considering supporting only the use of funding at the 4% level that is budgeted. He asked if the motion to adopt the ordinance should contain language directing the City Manager to cap the increase at 4%. Councilmember Troxell stated Council needs to address the Plan to provide for City employees and to take the first step in bringing many employees up to the average actual of their pay range. There are funds available to support the Plan. Council must consider if it wants to provide for a competitive staff and work towards the pay philosophy that was adopted. City employees should be paid appropriately and Council should prioritize programs in the tough economic times and drop those programs that are less important. City Attorney Roy stated language could be added to the fourth "Whereas" clause to say "Whereas the Pay Plan recommended by the City Manager is consistent with City Council objectives, including the philosophy of establishing pay ranges by using the average actual salaries for benchmark positions to set the mid -point of pay ranges for those positions and is consistent with the amount previously budgeted by the City Council for 2009 employee compensation increases at an average level of 4%." Councilmember Poppaw asked why an average pay increase of 3.5% was not considered to provide more funds in the future, if the downturn is much greater than anticipated and layoffs of employees occurs. City Manager Atteberry clarified that no layoff of City employees is anticipated. The City organization is very lean and is having a difficult time keeping up with Council and community expectations of the organization. If the economy worsens, a discussion about cuts will be held concerning what services can be eliminated and the jobs tied to those services. He did not expect that to happen in 2009. The City is a service organization and people are needed to deliver services who need to be paid. Best practices state that pay should be based on the market. Compensation is a significant part of the City's budget. Not funding the pay philosophy will undermine the work done to institute pay for performance. Assistant City Manager Williams stated reducing the average increase from 4% to 3.5% would save between $350,000 and $400,000. This is the first year of implementing performance -based pay and adequate compensation is needed to truly differentiatejob performance based on merit. Waiting until a future date to begin to bring employees up to market average that are currently behind the average exacerbates the problem and the cost of bringing those employees up to market will only be more expensive. City Manager Atteberry stated from 2003 through 2005, the City partially froze salaries. Part of the reason many salaries are so far behind market now is due to the pay freeze at that time. The City has never caught up to the market from that time and continues to fall behind. Councilmember Manvel stated the market has been redefined which has made a difference in comparing salaries. The question is whether it is true that an administrative professional job with 366 January 13, 2009 the City is directly transferable with an administrative job in the private sector. Williams stated the market data was collected earlier in 2008, before the economic downturn. When the market is reassessed next year, possible changes could be seen. Councilmember Manvel stated caution was needed and the figures from the first quarter needed to be examined before going forward. He did not support using the cost savings that were achieved from reduced claims cost for the employee and employer to pay an additional 1.4%. Councilmember Ohlson asked if comparing the pay ranges of city positions to private sector jobs pushed the pay ranges higher. Williams stated that was correct, particularly in the technical engineering area. Sharkey stated comparing City employee pay to similar private sector pay did not affect the pay ranges for lower pay grades within the occupational groups, but the technical and professional pay grades were affected by the comparison. Councilmember Ohlson asked what percentage of City positions had salary ranges that were higher than market average. Sharkey stated that information will be provided to Council before Second Reading. Councilmember Troxell stated the Pay Plan was designed to bring performing employees to 50% of their peer actual average for their job class. The cost savings of $700,000 that is available to bring the employees to market average should be used to achieve that goal. Councilmember Roy made a motion, seconded by Councilmember Manvel, to adopt Ordinance No. 004, 2009 on First Reading with the proposed changes to the fourth "Whereas" clause. City Attorney Roy stated the phrase "that the staff believes" would be removed; the wording "and is consistent with the amount previously budgeted by the City Council for 2009 employee compensation increases at an average level of 4%" would be added. Mayor Hutchinson stated the new language added to the Ordinance clarifies that the amount to be used for the Pay Plan is the amount already in the approved budget and not the additional funding recommended by the City Manager. Councilmember Ohlson noted the salary increases in the proposed Pay Plan total $3.2 million and the pay for performance philosophy is being fully implemented. Fully funding the pay for performance aspect of the Pay Plan is the culmination of three years of work to develop a philosophy that is market -driven and data based. The motion, as presented, will fully fund the pay for performance. The downturn of the economy needs to be recognized and it is not prudent to make the extra adjustments recommended by the City Manager. Councilmember Poppaw stated the City is a lean organization but economic realities require great caution to be used with the City's finances. She expressed concerns that the funding will not be available in the future to fund the Pay Plan and layoffs would become necessary. This is not the time to consider 5.4% raises for anyone. 367 January 13, 2009 Councilmember Ohlson noted the increase will be 4%, on average. Top -performing employees may receive more and some employees will receive less. Councilmember Troxell stated the market analysis has shown that 300 positions are behind market average. Paying employees what the market shows is an average salary should be a priority. Councilmember Roy stated the City organization has made many sacrifices over the past 5 years that many other organizations have not made. $15 million has been cut from the budget over the past 5 years and 110 people were laid off. Council and staff have worked hard to make the organization function at a level that is efficient. It is right to fund the Pay Plan and pay for performance and the funds have already been appropriated. Councilmember Marvel stated 4% is a reasonable increase that has been budgeted and will fund pay for performance. Special circumstances do exist for certain positions that are not in line with market average so some extra adjustments will be made. He did not support using the $700,000 of cost savings for additional pay increases. Pay for performance is a huge investment and funding the results of the evaluations for pay for performance is important. Councilmember Poppaw offered a friendly amendment to the motion that would amend the increase from 4% to 3.5%. Councilmember Roy, maker of the motion, did not accept the amendment. Councilmember Troxell stated his support for the City Manager's recommendation to fully fund the pay for performance. The increase of 4% does not recognize the inequity that exists with 300 positions that are below market. Mayor Hutchinson stated the budget process has allowed for the City to set aside funds for the unknowns of the future. Adjustments have been made over recent years that were difficult but the end result is a lean organization. The uncertainty of the economy requires Council to be cautious but the funds have been budgeted to allow for a 4% increase, on the average and should be used to compensate employees. The vote on the motion was as follows: Yeas: Hutchinson, Manvel, Ohlson, and Roy. Nays: Poppaw, Troxell. THE MOTION CARRIED. Other Business Councilmember Ohlson made a motion, seconded by Councilmember Roy, to adjourn the meeting to the end of the work session to consider a possible executive session. Yeas: Hutchinson Marvel, Ohlson, Poppaw, Roy and Troxell. Nays: none. THE MOTION CARRIED. (* *Secretary's note: Council adjourned to the end of the work session and reconvened at 10:10 p.m.) 368 January 13, 2009 ' Executive Session Authorized Councilmember Ohlson made a motion, seconded by Councilmember Roy, to go into executive session, as permitted under Section 2-31(a)(2) of the City Code for the purpose of meeting with the City Attorney regarding potential litigation and to discuss related legal issues. Yeas: Hutchinson Manvel, Ohlson, Poppaw, Roy and Troxell. Nays: none. THE MOTION CARRIED. ("Secretary's note: The Council went into executive session at this point in the meeting.) Adjournment The meeting adjourned at 10:50 p.m. L �O Mayo ATTEST: City Clerk 369