Fort Walton Beach Council agenda — 04-19-05 — reading text

represent initial requests for II Revenues II Expenses FY 2005- 06 and future years reflect anticipated revenues adjusted for rate increases and expenses adjusted for inflation.) 8 FY 2005.Q6 Budget Policy Workshop EXPENSES Despite rising personnel costs and augmented service levels, the City' s FY 2004- 05 adopted for budget is 3. 5% or $ 1. 1 million less than the adopted budgeted of ten years ago adjusted inflation based on the Consumer Price Index. For three consecutive years, the City Manager has presented a budget to Council with an increase of less than 1 %. Personal Services - The most important Personnel - FTEs element of quality service delivery is the people 390 who provide the service. Personal services 385 including wages, Social Security tax, Medicare 380 tax, health insurance, retirement, and worker' s 375 370 compensation) comprise 54% of total expenses 365 and 73% of General Fund expenses. While the 360 number of full-time equivalent ( FTE) employees 2001 2002 2003 2004 2005 has decreased 3.2% from 382. 94 to 370.52 Budget over the past five years, the cost of personal services has increased 29% or $ 3. 7 million over the same period. WAGES Continuing its commitment to provide Personal Services exemplary service with respect to public safety, 18 the City signed a three- year collective 15 12 bargaining agreement with the firefighters union 9 in February 2004 providing a 22.5% adjustment iE $ 6 over four years. A combined 16. 5% cost of 3 living adjustment was provided in fiscal years 0 2003- 04 and 2004-05 and another 6% increase 2001 2002 2003 2004 2005 will occur over the next two years. In Budget comparison, the combined adjustment in fiscal officers and 3.85% for general years 2003-04 and 2004-05 was 7. 35% for sworn police employees. In addition to these cost of living increases, upon satisfactory performance evaluation on their anniversary date, public safety personnel ( police and fire) are eligible for a 3. 5% increase and general employees are eligible for a 3% increase. The total cost of the wage 460,431 in FY adjustments and step increases to retain experienced personnel is budgeted at $ 2004- 05. RECRUITMENT & RETENTION Industry standards recommend comprehensive pay, benefit, and classification study be a conducted every three to five years. The last such study was conducted and implemented in 2000. The City has contracted with MGT of America, Inc. to conduct a compensation and classification study. The purpose of the study Turnover Rate 25% is to ensure the City' s salary schedule is competitive with the marketplace and provides 20% internal equity so the City is able to recruit and retain qualified employees. Compensation is 15% most commonly noted as the reason for leaving according to exit interviews. The City' s 1 0% turnover rate averages 21 %, which is higher 2003 2004 2005 2001 2002 than the average of national 15% for Budget governments according to the Bureau of Labor Statistics. The City' s turnover rate declined in 2004 because we were unable to fill positions 9 FY 2005-06 Budget Policy Workshop that typically have a high turnover rate ( e. g. service workers, refuse collectors). The cost of employee turnover may be conservatively estimated at 25% of the position' s compensation including benefits. The cost of compensation adjustments as a result of this year' s study is currently being developed and will be presented to Council when completed. HEALTH INSURANCE Affordable health insurance providing quality coverage is an important part of the City' s benefits but the package. Between 2000 and 2004, health premiums grew an average of 59% nationally 12.4% according to Kaiser Family Foundation. In order to average employee' s earnings rose maintain a competitive edge, over the past five Health Insurance years the City has tried to provide the same 1. 6 level of healthcare coverage while minimizing the impact to the employee. Despite the health 1. 2 insurance plan design changing several times, c 0. 8 the City' s contribution to health insurance premiums has increased 34% or $ 376, 587 from 0.4 FY 2001 to FY 2005. 0. 0 In order to keep the cost of health insurance 2001 2002 2003 2004 2005 affordable for both the City and its employees, Budget three health plans were approved offering a base plan and the option for employees to " buy up" or " buy down" to another plan based on desired coverage. As a result, 86% of employees elected to participate in the base plan, 10% elected the buy up, and 4% elected to buy down. Nevertheless, the cost of health insurance is anticipated to increase another 12% or $ 178,000 in FY 2005- 06. Currently, the City contributes 75% of both employee and dependent health coverage Cities premiums. A recent survey of 87 jurisdictions conducted by the Florida League of revealed that 75% of jurisdictions pay 100% of employee health coverage and 59% of jurisdictions pay 50% or less of dependent health coverage. PENSION & RETIREMENT FY 2005-06 contributions to the City' s general, police, and fire pension plans are expected to increase 16% or $ 141, 292 over the current year based on actuarial reports. Low investment returns have contributed to the need for increased City funding. An early- out retirement program for employees Pension Plans Contributions who are at least 52 years old with 25 years of 1. 0 service was offered in 1999 and is again under 0. 8 consideration. Benefits of offering such a (/) 0.6 program include rewarding long- term ~ $ costs due to ~ $ 0.4 employees, reducing personnel vacant positions being filled atpaylower 0.2 grades, and improving retention by providing 0. 0 opportunities for advancement for other 2001 2002 2003 2004 2005 employees. Budget II General III Police II Fire ODerations & Maintenance - Comprising 27% of total expenses and 16% of General Fund and maintenance, utilities and expenses, this category includes materials and supplies, repair fuel, insurance, and other charges. This expense category is mainly impacted by program and 10 FY 2005-06 Budget Policy Workshop service delivery levels and fixed costs such as utilities, fuel & oil, and insurance, over which the City has little control. The City uses Fixed Cost Increases approximately 96, 500 gallons of gasoline and 1. 2 70, 300 gallons of diesel per year. 1. 0 0.8 Over the past five years, fuel and oil expense f) has increased 21 %, utilities expense has 0.6 increased 38%, and insurance has increased 0.4 65%. A gallon of gasoline cost $ 1. 1875 in April 0.2 2001, whereas the current cost is $ 1. 9420 - a 0.0 2001 2002 2003 2004 2005 64% increase. Similarly, diesel cost $ 0. 8060 in Budget April 2001 and currently costs $ 1. 6780 - a II Fuel/ Oil II Insurance II Utilities 108% increase. These upward trends are anticipated to continue due to rising petroleum prices, which affect both fuel expense and utility expense. The FY 2005- 06 budget could increase $ 115, 000 over the current year budget if gasoline is projected at $2. 25/ gal and diesel projected at $ 1. 90/gal. CaDital Outlav - Includes vehicles and equipment with a cost of $ 500 or more and a useful life Fund expenses, greater than two years. Totaling 1 % of total expenses and 2% of General these expenses are limited to replacing essential, ageing vehicles and equipment. This of the City' s fleet is 8. 5 years. expense category averages $ 500, 000 annually. The average age CaDitallmDrovements - Includes physical assets,