CITY OF SIGNAL HILL. Waive further reading and adopt the following resolutions, entitled:
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1 December 12, 2014 CITY OF SIGNAL HILL 2175 Cherry Avenue Signal Hill, CA AGENDA ITEM TO: FROM: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL CHARLIE HONEYCUTT DEPUTY CITY MANAGER SUBJECT: RESOLUTIONS APPROVING MEMORANDUM OF UNDERSTANDING WITH THE SIGNAL HILL EMPLOYEES ASSOCIATION, MANAGEMENT RESOLUTION, AND EMPLOYEE PERS CONTRIBUTIONS Summary: Representatives from the Signal Hill Employees Association (SHEA) have completed negotiations on a successor Memorandum of Understanding (MOU). Resolutions approving the MOU, the revised management salary ranges and increased PERS contributions made by employees are presented for City Council consideration. Recommendations: Waive further reading and adopt the following resolutions, entitled: NO APPROVING A MEMORANDUM OF UNDERSTANDING PURSUANT TO THE CALIFORNIA MEYERS-MILIAS-BROWN ACT BY AND BETWEEN THE CITY OF SIGNAL HILL AND THE SIGNAL HILL EMPLOYEES ASSOCIATION
2 Page 2 of 6 Fiscal Impact: NO , REVISING MANAGEMENT SALARY RANGES TO CORRESPOND WITH CHANGES TO THE SIGNAL HILL EMPLOYEES ASSOCIATION MEMORANDUM OF UNDERSTANDING NO SPECIFYING THE CITY S CONTRIBUTION TOWARDS THE REQUIRED NORMAL MEMBER CONTRIBUTION FOR THE 2%@55 AND THE 2%@60 RETIREMENT FORMULAS PROVIDED BY THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM NO SPECIFYING THE CITY S CONTRIBUTION TOWARDS THE REQUIRED NORMAL MEMBER CONTRIBUTION FOR THE 3%@50 AND THE 3%@55 RETIREMENT FORMULAS PROVIDED BY THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM The estimated fiscal impact of the Memorandum of Understanding for all impacted employees for FY and FY , provided that the economic thresholds are met in FY , is $410,000. Those costs are shared between the General Fund, Fleet Fund, and the Water Fund as shown below. The costs reflect the additional contribution that the employees will be paying toward their pension costs. General Fund $411,400 Water Fund $55,000 Fleet Fund $10,700 Less Additional Employee Paid PERS Contribution ($67,100) Estimated Total for FY and FY $410,000 Background: City management and representatives for the Signal Hill Employees Association (SHEA) have completed negotiations on changes to the terms and conditions of the Memorandum of Understanding (MOU), which expired on June 30, 2014.
3 Page 3 of 6 An agreement has been reached on a two-year contract effective for the period of July 1, 2014 through June 30, The MOU addresses salary competitiveness and requires higher contributions by employees toward their pension costs rising pension costs. The MOU also includes a cost of living adjustment, affords eligible employees the ability to receive a merit/step increase, and provides a modest increase toward health benefit premiums and to standby pay, and the formal recognition of the City s policy regarding training pay. The MOU also contains economic thresholds that must be met before granting certain benefits in the second year of the contract. The thresholds provide a level of protection in case of an unforeseen economic occurrence such as the loss of a significant sales tax generating business. The changes to the terms and conditions are explained in more detail later in this report. Economic Outlook Between 2008 and 2012, the City faced extraordinary economic challenges associated with the Great Recession. The City was forced to reduce budget expenditures by nearly seven percent, freeze salaries on a year-by-year basis, initiate a hiring freeze on all positions except police officers, and asking employees to begin paying a share of their pension and retiree healthcare benefit costs. Fortunately, the City s aggressive economic development program resulted in the addition of new revenue generating businesses that included In N Out, Applebee s, Ross Dress for Less, Fresh & Easy, EDCO Transfer Station, and the expansion of the Signal Hill Auto Center with the addition of Hooman Nissan and Boulevard Cadillac and the expansion of Boulevard GMC. The cost savings measures combined with the City s economic development efforts played a major role in helping the City withstand the economic impacts of the recession. More recently, the local economy and City revenues are showing signs of slow but steady improvement. Looking forward, the City will benefit from the recent opening of the Costco Gas Station and the expansion of the BMW and Mini dealerships. Additionally, staff has been notified that the State Department of Finance has approved the City s Long Range Property Management Plan. This approval will enable the City to pursue other economic development opportunities, particularly the development of the 700 Spring Street site across from the Gateway Center. The positive economic outlook has placed the City in a better position to work with SHEA to address the competitiveness of the compensation of its non-safety and management positions. Economic Thresholds As stated earlier in this report, the MOU contains thresholds for cost-related items proposed to be granted in the second year of the contract (FY15/16) with the exception of the equity adjustments. The thresholds provide a level of protection in case of an unforeseen economic occurrence such as the loss of a significant revenue generating
4 Page 4 of 6 business or a spike in pension costs. The thresholds are as follows: PERS employer rate increases for FY for the 2%@55 retirement formula do not exceed % and the rates for the 2%@60 retirement formula do not exceed 7.267% City does not receive notice of loss of General Fund revenue generator of $300,000 or greater Sales tax revenues meet or exceed $12,500,000. If all thresholds are met, the City and SHEA will meet and confer in FY15/16 regarding the release of a merit/step increase for eligible employees, a 2% COLA, additional funds provided for health benefits, and an increase to the standby pay program. Equity Adjustments One of the City s Strategic Plan priorities is to Retain and attract a highly qualified workforce and civic leaders. In order to achieve this goal, the Strategic Plan recommends the City assess the City s salaries and benefits to determine its competitiveness with other government agencies. In 2012, the Los Angeles Civil Grand Jury completed a review of the financial health of 23 charter cities in Los Angeles County including Signal Hill. The Grand Jury s report included a recommendation that city councils conduct a periodic review of salaries for employees and ensure appropriate salaries by relying on salary surveys. Signal Hill has periodically conducted salary surveys to determine the competitiveness of the compensation offered to employees. In 2013, the City completed a salary survey of its Police Officer and Police Sergeant positions. The survey determined that the positions were 11% below the market average. The City Council approved a two-year plan to correct the inequity. The City performed a salary survey of all non-safety and management positions this year. The last comprehensive survey and equity adjustment for non-safety and management positions was conducted in 2008, just prior to the recession. This year s salary survey determined that the salary ranges of fourteen (14) SHEA represented positions were out of market average from 3% to 13.65%. These positions will be adjusted to market average over the two year term of the contract with a maximum increase in FY 14/15 of 5%. Those positions out of market average by more than 5% will receive the remainder of their equity adjustment in FY15/16. In addition, the City conducted a salary survey for all department head and midmanagement positions. The survey determined that salary ranges for four midmanagement positions were below market average by 3.79% to 8.2%, and five department head positions were below market average by 3.48% to 10%, will be adjusted to bring the ranges to market average. These salary ranges will also be
5 Page 5 of 6 adjusted to market average. No increased compensation will be realized by department heads as a result of the equity adjustments. Cost of Living Adjustment In FY 14/15, a 3% cost of living adjustment (COLA) was negotiated for all SHEA represented employees. Mid-management employees are also eligible for the COLA. Department Heads will not receive the 3% COLA. In FY 15/16, all employees shall receive a 2% COLA, if the economic thresholds are met. Merit/Step Increases The SHEA MOU maintained the freeze on step increases implemented in During the second year of the agreement (FY12/13) certain economic thresholds were met and the freeze was lifted to grant eligible employees one merit/step increase in January The SHEA MOU maintained the freeze on merit/step program and no increases were granted. The successor MOU provides one merit/step increase for eligible employee s on their anniversary date in FY14/15. An additional merit/step increase for eligible employees on their anniversary dates in FY15/16. The FY 15/16 merit/step increase is contingent upon meeting the economic thresholds. Full CalPERS Pension Plan Contribution by Employees CalPERS has made significant changes to the method it uses to calculate the annual pension costs for participating agencies including the anticipated rate of return of its investment portfolio, recognizing the increased longevity of its members, and establishing a time period to fund each agency s unfunded liability. CalPERS has notified the City to expect increased costs over the next five years. A major accomplishment in this agreement is that all miscellaneous employees have agreed to cover the full employee share of their pension costs. Employees will increase their pension contributions from 5% or 6%, depending on date of hire, to the full employee share of 7% effective upon the adoption of the CalPERS resolution. All City Council members, department heads, mid-managers and miscellaneous employees will also contribute 100% of the employee share of their pension costs that range between 7% and 9%, depending whether they are in a safety or non-safety pension plan. The City Manager and the Deputy City Manager already pay their full 7% pension cost. Effective January 1, 2015, the furlough option that employees may select as their method of contribution toward their pension costs will be capped at a total of 20 hours per year, which represents 1% of the required employee contribution. Contributions over the 1% will be made via a pre-tax payroll deduction and/or vacation accrual reduction. Two resolutions are attached to this report that specifies the contributions made by the City and the employee, miscellaneous and safety members, and allows for a pre-tax payroll deduction. Effective January 1, 2016, the furlough option will be eliminated.
6 Page 6 of 6 Partial Cafeteria Plan Contribution Increase In FY14/15, the City will maintain the base contribution of $800 per month per employee for health insurance coverage and offer up to $250 per month (an increase of $50) for those who require the funds for health, dental, vision and Long Term Care premiums. In FY15/16, an additional $50 per month, for a total of $300 over the base contribution, will be provided if the economic thresholds are met. Training Pay The City will memorialize its current policy of providing 2.5% training pay for employees, whose regular duties do not include training are asked to train new employees. Training pay will be available, upon Department Head approval, for a maximum of six (6) months. Standby Compensation In FY15/16, employees who are required to serve on a stand by capacity and will receive an additional $5 for weekday and weekend shifts resulting in the following; $25/weekday shift, $40/weekend shift. This item is subject to the economic thresholds. The MOU being presented is a culmination of series of six meet and confer sessions since late September. The MOU has been accepted by SHEA and prepared pursuant to the Meyers-Milias-Brown Act. Adoption of the resolutions will allow the City to implement the negotiated changes to the SHEA MOU and the management resolution. Reviewed: Terri Marsh Approved: Kenneth C. Farfsing Attachments
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