Fort Walton Beach Council agenda — 05-15-2007 special agenda - budget policy — reading text

balance amount should consider how much of fund balance is unreserved- designated. 2. Over the past five years, the General Fund' s level of unreserved- undesignated fund balance has been healthy in terms of several measures: Fiscal Year 2003 2004 2005 2006 2007 est. As % of Operating Revenues 35. 9% 33. 8% 28.9% 47. 6% 46. 2% As % of Annual Expenditures 32.4% 31. 2% 27. 6% 36. 5% 39. 8% As % of 3 Months Expenditures 129. 5% 124. 9% 110. 5% 145. 8% 159. 1% Policy Impact 1. Recurring revenues should fund recurring expenditures. Fund balance should only be relied upon for one- time outlays or capital projects. 2. An appropriation from undesignated- unreserved fund balance is generally required to balance the General Fund budget. However, position vacancies and delays in capital projects have permitted the General Fund to not dip into reserves in recent years. 3. Under the Fair Labor Standards Act ( FLSA), police officers and firefighters must receive overtime for hours worked in excess of the work schedules adopted by the employer. In both cases, overtime rates of pay are to be calculated including add pays ( e. g. incentive pay for higher education, EMT/ paramedic duties, and the like). In 1995 when the HTE payroll module was designed, add pays were not included in the calculation of overtime for these employees. This error was recently brought to the city' s attention by the Fire Department. Under FLSA regulations, a two- year payback period is required. Staff estimates it will take approximately two months to recalculate each police officer and firefighter ( current and former employees) paycheck for the past two years. Although the amount is not yet known, the total amount of the repayments could be $ 60K - $ 1 OOK. 4. The Department of Revenue recently notified the City of a $ 1. 7M overpayment in Communications Services Tax ( CST) revenue during the 28- month period June 2004 - September 2006. The FY 2007- 08 budget will be adjusted to reflect the $ 1M reduction in annual revenue, but staff recommends using fund balance to fund the $ 1. 7M repayment over a 28- month period ($ 715K annually.) 5. The unreserved- undesignated fund balance in the General Fund is anticipated to be $ 7. 8M on September 30, 2007, and will be reduced to $ 6. 0M after the full impact of FLSA and CST issues. Fiscal Year After FLSA & CST repayments As % of Operating Revenues 35. 5% As % of Annual Expenditures 30.6% As % of 3 Months Expenditures 122. 3% Recommendation Maintain unreserved- undesignated General Fund reserves at 30% of annual operating expenditures. 17 of 36 FY 2007- 08 Budget Policy Workshop tj\,,, Pi- 01:., Ir;j<. 18 of 36 FY 2007- 08 Budget Policy Workshop EMPLOYEE COST -OF- LIVING ADJUSTMENT STRATEGIC PLAN GOAL - Economic Health/ Financial Viability: Alternative Compensation/ Benefit Systems Policy Decision Should there be an annual cost of living increase effective October 1, 20077 Backqround 1. Employees have traditionally received a cost of living ( COLA) adjustment October 1 each year. FY 2002- 03 FY 2003- 04 FY 2004- 05 FY 2005- 06 FY 2006- 07 General 1. 85% 1. 85% 2. 00% 2. 25% 2. 99% Police 1. 85% 1. 85% 5. 50% 2. 25% 9. 00% Fire 2. 50% 1. 85% 8. 50% 4. 00% 2. 99% CPI 1. 80% 2. 10% 2. 60% 4. 10% 1. 80% Notes: In addition to the COLA in FY 2005- 06, general employees received a 1. 0% adjustment as a result of the comprehensive pay plan and police officers received a 5. 3% adjustment to remain In FY 2003- 04 the collective bargaining agreement provided a competitive with the Sheriff. 1. 85% COLA; however the average adjustment was approximately a total of 9. 15% due to the transition from a 3% to a 3. 5% step plan. 2. The purpose of the COLA is to ensure wages keep pace with inflation, exclusive of any additional reward for performance. 3. In addition to a cost of living increase every October 1, employees are eligible for a performance increase on anniversary date. General employees receive 3% and police officers and their firefighters receive 3. 5% contingent upon a satisfactory performance evaluation. Discussion 1. As a government entity, the largest source of expenditures is personnel- related with regard to service delivery programs: police and fire protection, parks maintenance, infrastructure maintenance, trash collection, and water/ sewer services. The most important element of service delivery is the people who provide the service, as evidenced by Council' s commitment to providing exemplary service through recruitment and retention of qualified and experienced personnel. 2. Surrounding jurisdictions have not yet finalized how much of a COLA to offer in 2007- 08. 3. The Consumer Price Index for March 2007 was 2. 8% higher than a year ago. Policv Impact 1. The cost of a COLA adjustment effective October 1, 2007 is based on 2006- 07 wages, reduced by position eliminates from CST budget cuts. 2. 0. 75% COLA for all employees - $ 102, 514. 3. 1. 00% COLA for all employees - $ 136, 685. 4. 1.40% COLA for all employees - $ 191, 359. 5. 2. 80% COLA for all employees - $ 382, 717. Recommendation Endorse a 1.4% cost- of- living adjustment for all employees effective October 1, 2007. 19 of 36 FY 2007- 08 Budget Policy Workshop EMPLOYEE COMPENSATION STRUCTURE STRATEGIC PLAN GOAL - Economic Health/ Financial Viability: Alternative Compensation/ Benefit Systems Policv Decision Should the annual evaluation system be modified to reward certain employees based on performance? Backqround 1. In 1995 the City conducted a pay and classification study which resulted in changing the compensation system from a merit based system to a step based system whereby employees progress throu!~h their assigned pay range by receiving a 2. 5% step increase per year if their overall performance evaluation was rated satisfactory or above. The step system involves a 20- step progression from minimum to maximum of the salary for each pay grade. 2. In 2001 the City reviewed its pay and classification system and the step compensation system was again recommended. The 2001 study also increased the 2. 5% step to a 3% step increase in an effort to compete with the local market for similar positions. 3. In 2005 the pay and classification study was again updated and it was recommended that the 3% step system be maintained. I- Discussion jij.,. 1. The Human Resources Department has conducted various salary surveys to determine how City pay ranges for different positions compare with similar jurisdictions across the State and in our local area market. The City annually participates in the Florida Public Personnel Association FPPA)/ Florida League of Cities ( FLOC) annual salary and benefits survey which provides salary and benefit data from public sector jurisdictions across the State. 2. Comparing the City of Fort Walton Beach to similar jurisdictions ( 400 to 600 employees and populations ranging from 20K to 50K) across the State who responded to the 2007 survey, there are many positiions throughout the City that are well below the minimum salary, maximum salary, and incumbent's actual salary as compared to the respondents' like positions in other public sector jurisdictions. 3. Compared to tile respondents who participated in the 2007 survey, the City' s average salaries are 14. 52% less than the average of the respondents for incumbents in the positions surveyed. 4. In April 2007 the Human Resources Department conducted a survey of jurisdictions in our local area and compared minimum, maximum, and actual salaries for like positions. In almost every instance, the survey concludes that our salary ranges and actual salaries paid for incumbents in these positions is less than similar salaries paid in our local market. Policy Impact 1. Staff has analyzed the step system currently in place for all City employees and recommends a modification to compensation system as follows effective October 1, 2007: a. Police and Fire personnel continue to use the current grade/ step system with 3. 5% step increases. b. Rank and file employees continue to use the current grade/ step system with 3% step increases. This will provide parity between general employees and those in the police and fire departments. In addition, maintaining the current grade/ step pay system for general employees will avoid a possible unionization of this group of employees. c. Department Directors, Division Directors, Managers, Supervisors, and professional staff convert to a performance based merit system for annual increases. These professional positions should be compensated based on their budgetary conformance, achievement of organization goals, and supervisory & management responsibilities. Employees in this pay system who receive an overall rating less than satisfactory would not receive a merit increase and those receiving an overall rating of satisfactory, above average, or superior would receive 1 % to 3. 5%.