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052206 CC WS Min CITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, MAY 22, 2006 5755 COUNTRY CLUB ROAD CONFERENCE ROOM 7:30 PM, or Immediately following the Regular City Council meeting MINUTES 1. CONVENE WORK SESSION MEETING Mayor Love called the meeting to order at 7:32 P.M. A. Roll Call Present: Mayor Love, Councilmembers Callies and Wellens; Administrator Dawson; Finance Director Burton Absent: Councilmembers Lizee and Turgeon B. Review Agenda Without objection from Council, Mayor Love proceeded with the Agenda for the meeting. 2. COMPENSATION STUDY Administrator Dawson stated Council had reviewed the compensation study performed by Ann Antonsen with Labor Relations Associates, Inc. (now Springsted Inc.) at an April 24, 2006, City Council Work Session meeting. One of the purposes of the study was to replace the City's rigid tenure-based step system for salaries with a system that was designed to reward performance and provide flexibility for salaries at time of hire. The study reviewed internal pay equity (to ensure compliance with the Pay Equity Act) and the external market. Administrator Dawson stated Ms. Antonsen would review three alternatives for implementing market rate adjustments while maintaining internal equity, recognizing it was Council's ultimate decision to implement. He preferred that Council focus on the first two alternatives. He then stated the City had the resources to implement the adjustments effective July 1, 2006. Staff had not determined what portion of the adjustments would come from the General Fund and what portion would come from enterprise funds. He noted generally 10 - 20% of the adjustments would be funded from enterprise funds, and thus lessen the tax impact. Ms. Antonsen eXplained the three alternatives. 1. Alternative 1: All employees would receive a 2% economic adjustment on July 1, 2006. In addition, the salaries for those employees with longevity of five years or more and a salary less than market rate would be increased to market rate effective July 1,2006. She noted one incumbent had one year of tenure in that position and would follow the new approach for reaching the market rate (i.e. for a person that consistently meets performance expectations it would take five years to reach market rate). The total increase in cost for the market rate adjustment including FICA and PERA would be approximately $50,000 for the remainder of the year. CITY OF SHOREWOOD WORK SESSION MEETING May 22, 2006 Page 2 of 3 2. Alternative 2: All employees would receive a 2% economic adjustment on July 1,2006. Those employees with a salary less than 6% below market rate would also be increased to the market rate on July I, 2006. Those employees with a salary more than 6% below market rate would be adjusted to market rate with half the adjustment occurring July 1, 2006, and the other half of the adjustment occurring January 1, 2007. The total monthly increase in cost for the market adjustment in July was $4,341.40 including FICA and PERA for the remainder of the year. The total monthly cost for the January market adjustment was $2,905.22 including FICA and PERA. Note, the January cost did not reflect any economic adjustment. 3. Alternative 3: All employees would receive a 2% economic adjustment on July 1,2006. Those employees with a salary less than 6% below market rate would also be increased to the market rate on July I, 2006. Those employees with a salary more than 6% below market rate and less than 10% below market rate would be adjusted to market rate with half the adjustment occurring July 1,2006, and the other half of the adjustment occurring January I, 2007. Those employees greater than 10% below market rate would receive adjustments on July 1,2006, January 1,2007, and January 1,2008. Administrator Dawson explained the $50,000 increase was slightly more than 1 % of the General Fund. He stated Staff recommended alternative I. Mayor Love stated the implementation approach specified in alternative 3 was too long. Councilmember Wellens stated it was the employees' responsibility to determine if they were under-paid. Ms. Antonsen explained in the public sector market studies are generally conducted every 5 - 7 years to ensure they are staying competitive with the market place. She also explained because of the Pay Equity Act it is not possible to adjust only one position and maintain internal equity. Councilmember Wellens stated there was no turnover rate with the City Staff; therefore, he did not see any problem with paying less than market rate. Ms. Antonsen stated employees may be staying with the City because it was a nice place to work; but, if a similar position was available somewhere else that paid substantially higher they could well leave. Wellens stated that should be dealt with if the situation arose. Administrator Dawson stated there was a cost to employee turnover, and the City would like to keep good performers. Wellens again stated he did not believe there was a reason to increase salaries if there was no turnover. Ms. Antonsen stated if the City did not maintain a competitive position in the market place with regard to compensation it would be difficult to recruit qualified individuals, as was the case with the City Engineer position. Director Burton stated part of the reason to change the compensation system was to replace the rigid tenure-based step system with a more flexible system and a system that rewards exceptional performance. Administrator Dawson noted there had been previous discussion with regard to giving bonuses, but state law prohibits giving bonuses as part of the compensation for employees. In response to a question from Councilmember Wellens, Administrator Dawson explained salary ranges provided flexibility with the hiring salary rate, and with rewarding exceptional performers. Dawson noted it made the entire performance assessment system more meaningful. He also noted the new compensation system would not affect the union staff, and the union wages were also considered in the analysis to ensure all wages would be compliant with the Pay Equity Act. CITY OF SHOREWOOD WORK SESSION MEETING May 22, 2006 Page 3 of 3 Mayor Love stated from his perspective it was important to understand how the City compared to other cities with regard to compensation. He then stated he would prefer to implement either alternative 1 or alternative 2 market rate adjustments. Councilmember Callies stated there was some merit to Council member Wellens's statement that there was no need to increase the wage rate if the employees are content. She then stated there may not be a lot of market mobility in today's environment. She also stated she did not want Shorewood to be known for paying the lowest wages. Councilmember Wellens stated that was wonderful for the taxpayers and that was who he represented. Mayor Love stated in the private sector it was often the strongest performers that left a company first, which in turn caused morale issues resulting in more turnover. He thought it prudent to pay wages that were competitive, which resulted in good value for the taxpayers because quality staff would be retained. He then stated he was astounded by the quality of the City Staff, and he would like to ensure future Council's and residents could continue to benefit from the quality of the Staff. Director Burton stated money was available for alternative 1 (i.e., a July 1, 2006, full implementation), and she recommended that alternative. She stated the existing payroll system could handle the one-time adjustment more easily than the staggered adjustments. Administrator Dawson explained the Council would have to formally adopt the implementation strategy at a future meeting along with the formal acceptance of the final compensation study report. Councilmember Wellens stated he could support alternative 2. Councilmember Callies stated with other types of payments the City did attempt to make the payments as late as possible. Mayor Love recapped there appeared to be consensus with the alternative 2 implementation strategy. Administrator Dawson thanked Council for its support during the long and participative study. 3. OTHER None. 4. ADJOURN Wellens moved, Callies seconded, Adjourning the City Council Work Se siQ~ Meeting of May 22, 2006,8:08 P.M. Motion passed 3/0. uul.; RESPECTFULLY SUBMITTED, . Christine Freeman, Recorder Woody Love, Mayor ATTEST: