HomeMy WebLinkAbout2004-04-20; City Council; 17599; Mid year budget amendmentsn
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TITLE:
MID YEAR BUDGET AMENDMENTS FOR ERAF
PLAN AND WORKER’S COMPENSATION COSTS
INCLUDING THE APPROPRIATION OF FUNDS
AB# 17,599
MTG. 04/20/04 PAYMENTS, THE MANAGEMENT COMPENSATION
DEPT. FlNlHR
DEPXD. I-u--
CITY Am. e- MGRx
RECOMMENDED ACTIONS:
Adopt City of Carlsbad Resolution N~.~~~~-~~~authorizing transfers from various City funds
to the Worker’s Compensation fund and appropriating funds.
Adopt City of Carlsbad Resolution N0.2004-13lsetting the percentages for the Management
Compensation and Benefits Plan for Fiscal Year 2004-05.
Adopt Carlsbad Housing and Redevelopment Commission Resolution No. 380 ,
authorizing payments to the ERAF fund as directed by the State and to the City of Carlsbad’s
Worker’s Compensation fund and appropriating funds.
Adopt Carlsbad Municipal Water District, Resolution No. 1205
to the City of Carlsbad’s Worker‘s Compensation fund and appropriating funds.
authorizing a transfer
ITEM EXPLANATION:
WORKER’S COMPENSATION FUND
The City is self-insured for worker’s compensation claims. Due to changes in State law and overall
increases in health care costs, the City has seen its worker’s compensation claims increase
significantly over the past two years. Based on information provided by Tristar, the city’s claims
administrator, actual expenses per claim increased on the average 62% in fiscal year (FY) 2003, and
are estimated to increase an additional 30% in this fiscal year. This, coupled with increases in the
administrative costs and excess insurance premium costs, resulted in a 95% increase in total worker’s
compensation expenses in FY 2003 and an anticipated 25% total cost increase in FY 2004.
Due to the increased costs, the Worker’s Compensation fund has experienced a $1.4 million loss in
fiscal year 2003 and staff anticipates it will incur another $1.8 million loss for FY 2004. The drastic
increase in costs was unanticipated when the 2003-04 budget was being prepared in the early months
of 2003.
The Worker’s Compensation Fund is an internal service fund; thus, the revenues to pay the claims
come from charging other City funds. The losses indicate that the other funds were undercharged for
the past two years for their worker’s compensation costs. In order to provide sufficient funds for the
payment of current and future claims, staff recommends appropriating and transferring $2.5 million
from the various funds that use the worker’s compensation services into the internal service fund. The
distribution between the funds for this transfer is shown in Exhibit 5.
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Page 2 of Agenda Bill No. l7 * 599
EMF PAYMENT
As a result of the State’s budget shortfalls in recent years, legislation was passed requiring
redevelopment agencies to shift $135 million in property tax revenues to K-12 schools and community
colleges during the 2003-04 fiscal year allowing the State to reduce its funding to schools. Although
this was initially discussed as a one-time action, this is the 2nd year the payment has been required
and the Governor has proposed shifting a similar amount next year and possibly making it permanent.
The ultimate outcome will not be known until the State’s budget is adopted later this year.
Each redevelopment agency must make the special payment in an amount determined by the State
Director of Finance to the County Auditor for deposit to the Education Revenue Augmentation Fund
(ERAF) on or before May 10, 2004. The Carlsbad Redevelopment Agency’s share of property tax
revenue to be paid to the County Auditor is $143,718. The attached resolution will appropriate the
funds to make the payment.
MANAGEMENT COMPENSATION AND BENEFITS PLAN
On November 18, 1997, the City Council authorized the City Manager to administer a formal
Performance Management and Compensation System for employees in management classifications.
One component of the Performance Management System involves the establishment of performance
goals and the determination of how performance will be measured against goals. In the past, goals
were written at three performance levels (Threshold, Target and Optimum) and incentive awards were
earned based on achievement of goals at one of these three levels. After over six years of working
with the current system, the City Manager has authorized a modification to the program: moving from
three performance levels to two levels (Threshold and Target). This modification has been made to
the Management Compensation and Benefits Plan (Exhibit 6).
Each year the City Council must determine the annual amount to be budgeted for management
incentive pay. For fiscal year 2003-04, the rates were 6% for Optimum achievement, 4% for Target
achievement and 0% for Threshold. With the change to two performance levels, staffs
recommendation for the 2004-05 fiscal year is to reduce the maximum amount that a management
employee can earn in incentive compensation from 6% to 5% of base pay with the Threshold level
remaining at 0%.
FISCAL IMPACT:
WORKER’S COMPENSATION FUND TRANSFERS
Adoption of the attached resolutions will appropriate funds and authorize a transfer of $2.5 million
from various City funds into the Worker’s Compensation fund. This fund can only be used to pay the
costs of the worker’s compensation system. The transfer amounts were calculated on a pro-rata basis
based on this year’s rates. The rates were determined based on the personnel budget and past
claim’s experience of the individual fund. A summary of the recommended transfers is shown below.
A detailed schedule showing all of the recommended transfers by fund and amount is in Exhibit 5.
General fund $2,054,733
Carlsbad Municipal Water District 183,833 Carlsbad Redevelopment Agency and Housing Authority 17,700
All other funds 243,734
Total $2,500,000
Page 3 of Agenda Bill No. 17,599
ERAF PAYMENT
Adoption of the attached resolution will appropriate funds from the Redevelopment Agency’s Debt
Service Fund and approve payment to the County Auditor, resulting in a decrease in the Agency’s
available funds by $143,718. There is no impact to the City’s General fund.
MANAGEMENT COMPENSATION AND BENEFITS PLAN
The conversion from three performance levels to two levels is expected to have minimal or no actual
fiscal impact. Departmental budgets for future years will be adjusted to reflect a one percent decrease
in the amount of incentive pay that can potentially be earned by management employees from 6% to
5%’ but the final cost to the City depends on the level of goal achievement and is expected to remain
consistent with past years.
EXHl BITS :
1 . City of Carlsbad Resolution N~.~~~~-~~~authorizing the appropriation of funds and transfers from
various City funds to the Worker’s Compensation fund
2. City of Carlsbad Resolution No.2004-131 setting the percentages for the Management
compensation and Benefits Plan for fiscal year 2004-05.
3. Carlsbad Redevelopment Agency Resolution No. 380 , authorizing the Finance Director to
appropriate and make payments to the County of San Diego and to the City of Carlsbad’s
Worker’s Compensation fund.
4. Carlsbad Municipal Water District, Resolution No. 1705 authorizing the appropriation of
funds and a transfer to the City of Carlsbad’s Worker’s Compensation fund.
5. Worker’s Compensation Fund - Allocation of Budget Shortfall
6. Management Compensation and Benefits Plan, pages 1 through 4
DEPARTMENT CONTACT: Lisa Hildabrand (760) 602-2430, Ihild@ci.carlsbad.ca.us
Julie Clark (760) 602-2440, jclar@ci.carlsbad.ca.us
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RESOLUTION NO. 2004-130
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD, CALIFORNIA AUTHORIZING
TRANSFERS FROM VARIOUS CITY FUNDS TO THE
WORKER’S COMPENSATION FUND AND
APPROPRIATING FUNDS
WHEREAS, the City of Carlsbad is self-insured for Worker‘s Compensation costs; and
WHEREAS, Worker‘s Compensation costs have risen dramatically over the past two years;
and
WHEREAS, the City of Carlsbad operates an internal service fund to account for the cost of
worker’s compensation and to charge each fund its appropriate share; and
WHEREAS, due to the significant increases in worker‘s compensation claims, the various
funds in the City have been undercharged by the City’s worker’s compensation fund for their share
Df those costs.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad as follows:
1. That the above recitations are true and correct.
2. That the Finance Director is authorized to appropriate the amounts shown in Attachment
9 from the fund balance of the various funds operating budgets and pay a like amount to the
JVorker’s Compensation fund in payment of actual and anticipated claims ow the past two years.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Board of Directors held
m the 20th day of April , 2004 by the following vote, to wit:
AYES: Council IIembers Lewis, Finnila,
NOES: tione
ABSENT: None
ATTEST:
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(SEAL)
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Attachment A
WORKERS COMPENSATION FUND
ALLOCATION OF BUDGET SHORTFALL
FISCAL YEARS 2003 AND 2004
Certain City Funds
General Fund
COPS Fund
Affordable Housing Trust
Storm Water Prot. Pgm
Trees
Medians
Street Lighting
Sr. Nutrition
CDBG
Sanitation
Solid Waste
Wrkrs.Cmp.
Risk Mgmtl Liab. Ins.
Records
Vehicle Maint.
Information Technology
Total
2,054,733
19,867
3,867
11,867
25,300
1 2,466
5,300
2,667
3,133
49,733
567
2,100
4,467
28,933
40,467
33,000
2,298,467
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RESOLUTION NO. 2004-131
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD, CALIFORNIA SETTING THE
PERCENTAGES FOR THE MANAGEMENT
COMPENSATION AND BENEFITS PLAN FOR FISCAL
YEAR 2004-05
WHEREAS, the City Council has authorized the City Manager to administer a
Performance Management and Compensation Plan for employees in management
classifications; and
WHEREAS, the City Manager has authorized a change to the Plan so that,
effective fiscal year 2004/2005, management goals will be written at two levels
(Threshold and Target) instead of three levels (Threshold, Target and Optimum); and
WHEREAS, incentive awards will be earned based on achievement of goals at
one of these two levels; and
WHEREAS, the City Council must determine annually the amount to be
budgeted for management incentive pay.
NOW, THEREFORE BE IT RESOLVED by the City Council of the City of
Carlsbad as follows:
1. That the above recitations are true and correct
2. That the incentive payout percentages for goal achievement at Threshold and
Target are hereby established at zero percent (0%) and five percent (5%) of base pay
respectively for fiscal year 2004/2005.
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Page 2 City Council Resolution No. 2004-131
PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad
City Council held on the 20th day of April ,2004 by the
following vote, to wit:
AYES: Council Plembers Lewis, Finnil
NOES: None
ABSENT: None
ATTEST:
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ORRAINE M. WOOD, City Clerk B""' (SEAL)
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RESOLUTION NO. 380
A RESOLUTION OF THE HOUSING AND
REDEVELOPMENT COMMISSION OF THE CITY OF
CARLSBAD , CALI FORN 14 AUTHORlZl NG PAYMENTS
TO THE ERAF FUND AS DIRECTED BY THE STATE
AND TO THE CITY OF CARLSBAD’S WORKER’S
COMPENSATION FUND AND APPROPRIATING FUNDS.
WHEREAS, recent California legislation (Health and Safety Code
Section 33681) requires redevelopment agencies to shift $135 million in property
tax revenues to K-12 schools and community colleges during the 2003-04 fiscal
year; and
WHEREAS, in accordance with this legislation, the Carlsbad
Redevelopment Agency must make a special one-time payment of $143,718, as
determined by the State Director of Finance to the County of San Diego Auditor
for deposit in the Education Revenue Augmentation Fund on or before May 10,
2004; and
WHEREAS, the Carlsbad Redevelopment Agency participates in the City
of Carlsbad’s self-insurance fund to pay for Worker’s Compensation costs; and
WHEREAS, Worker’s Compensation costs for the Carlsbad
Redevelopment Agency have risen dramatically over the past two years resulting
in underpayments to the City‘s Worker’s Compensation fund; and
WHEREAS, as a result of these events, amendments to the
Redevelopment Agency budgets are required.
NOW, THEREFORE, BE IT RESOLVED by the Housing and
Redevelopment Commission of the City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. That the Finance Director is authorized to appropriate $143,718 from
the Redevelopment Agency Debt Service Funa for the purpose of making a
special payment to the County Auditor of San Diego for deposit into the Education
Revenue Augmentation Fund on or before May 10, 2004.
3. That the Finance Director is authorized to appropriate the following
amounts from the Redevelopment Agency‘s Funds and pay them to the Worker‘s
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Exhibit 3
Page 2 Housing and Redevelopment Connission Resolution No. 380
Compensation fund in payment of actual and anticipated claims over the past two
years:
Section 8 $ 10,167
Village Redevelopment Area - Debt Service 4,467
1,000
1,633
434
Village Redevelopment Area - Low/Moderate Income
South Carlsbad Coastal Redevelopment Area - Debt Service
South Carlsbad Coastal Redevelopment Area - Low/Moderate
PASSED, APPROVED, AND ADOPTED at a regular meeting of the
Housing and Redevelopment Commission of the City of Carlsbad, California, held
on the 2othday of A3ril , 2004 by the following vote, to wit:
AYES: Commissioners Lewis, Fifinila, Kulchin, Hall and Packard
NOES: None
ABSENT: None
"EtAiicii d LE~IS, Chairperson
ATTEST:
RAYMOND R. PATCHETT, Secretary
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RESOLUTION NO. I2O5
A RESOLUTION OF THE BOARD OF DIRECTORS
OF THE CARLSBAD MUNICIPAL WATER
DISTRICT, CALIFORNIA, AUTHORIZING A
TRANSFER TO THE WORKER'S COMPENSATION
FUND AND APPROPRIATING FUNDS
WHEREAS, the Carlsbad Municipal Water District participates in the City of Carlsbad's
self-insurance fund to pay for Worker's Compensation costs; and
WHEREAS, Worker's Compensation costs have risen dramatically over the past two
years; and
WHEREAS, the Carlsbad Municipal Water District has been undercharged by the City's
Worker's Compensation fund for its share of those costs.
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Carlsbad
Municipal Water District as follows:
1. That the above recitations are true and correct.
2. That the Finance Director is authorized to appropriate the $183,833 in the Carlsbad
Municipal Water District's operating budgets ($1 79,700 from the potable fund and $4,133
from the reclaimed water fund) and pay a like amount to the Worker's Compensation
fund in payment of actual and anticipated claims om the past two years.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Board of Directors
held on the 20th day of April , 2004 by the following vote, to wit:
AYES: Board llembers Lewis, Finnila, Kulchin, Hall and-kard
NOES: None
ABSENT: None
ATTEST: n
flORRAIPIE M. WOOD, Secretary (SEAL)
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Exhibit 5
WORKERS COMPENSATION FUND
ALLOCATION OF BUDGET SHORTFALL
FISCAL YEARS 2003 AND 2004
All Funds
General Fund
COPS Fund
Affordable Housing Trust
Storm Water Prot. Pgrn
Trees
Medians
Street Lighting
Section 8
Sr. Nutrition
CDBG
Water Operations
Water Reclamation
Sanitation
Solid Waste
Wrkrs.Cmp.
Risk Mgrnt/ Liab. Ins.
Records
Vehicle Maint.
Information Technology
Village Redev Operations
Village Low/Mod
SCCRA
SCCRA Low/Mod
Total
2,054,733
19,867
3,867
11,867
25,300
12,466
5,300
10,167
2,667
3,133
179,700
4,133
49,733
567
2,100
4,467
28,933
40,467
33,000
4,466
1,000
1,633
434
2,500,000
Exhibit 6
MANAGEMENT COMPENSATION AND BENEFITS PLAN
SECTION 1: INTRODUCTION
This attachment constitutes the Management Compensation and Benefits Plan, which contains
three parts: 1) an introduction, 2) a brief overview of how management performance will be
evaluated and how compensation levels will be determined, and 3) a schedule of management
benefits .
A. Definitions
1. Management Employees - Management employees are defined as those employees
whose classifications are listed on the Management Salary Structure
2. City Council Appointed Employees - The City Manager and City Attorney are hired
by and responsible directly to the City Council. The salaries for these positions shall
be set by the City Council. The City Manager and City Attorney will not be subject to
the provisions of the Performance Management and Compensation program as
outlined in Section 2 of this attachment. The schedule of management benefits (as
outlined in Section 3 of this attachment) will apply to these positions, except as
otherwise provided by the City Council.
SECTION 2: PERFORMANCE MANAGEMENT AND COMPENSATION SYSTEM
OVERVIEW
The City Council has delegated its authority to the City Manager (and City Attorney, for
management employees in the City Attorney’s Office)’ to administer a Performance Management
and Compensation System for management employees under the following general guidelines.
The system is comprised of two major components:
0 Performance Management - emphasizing an employee development approach to
performance appraisal, comprised of:
Alignment of individual contributions with organizational direction,
3 Development and demonstration of competencies in the job, and
3 Measurement of levels of accomplishment of goals
Hereafter, all references to the City Manager include, with regard to management employees in the City Attorney’s I
Office, the City Attorney.
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0 Compensation - based on a market driven approach to compensation, comprised of:
2 Market based salary structure
3 Basepay
Incentive Pay
PERFORMANCE MANAGEMENT
The Performance Management Cvcle
The Performance Management Cycle coincides with the fiscal year and includes three separate
phases: Performance Planning, Performance Update, and Performance Review.
Maior Components of Performance Manapement
The two major components upon which a management employee’s performance is based are:
0
0 the accomplishment of goals.
the development and demonstration of specific competencies, and
Management Competencies -
All management employees are reviewed and evaluated based on how well they can
develop and demonstrate specific competencies. Competencies are the knowledge, skills,
abilities, and behaviors that are essential to the success of each management employee.
Goals -
Goals describe how the individual’s contribution links and aligns with their department’s
goals and objectives and ultimately with those of the City Council. Goals are set at the
beginning of the performance management cycle, and employees are evaluated at the end
of the cycle as to how well they accomplished their assigned tasks for the year.
Link to Compensation
An employee’s performance, as evaluated against the selected competencies, is rewarded by a
base pay adjustment. Base pay adjustments are ongoing and are added to the employee’s annual
salary. An employee’s performance, as evaluated against the achievement of annual goals, is
rewarded by an incentive award. Incentive payouts are one-time cash payments to an employee
which do not recur automatically from year to year. Both the base pay increases and the
incentive payments comprise the cash compensation available to management employees.
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COMPENSATION
The Performance Management and Compensation System is based upon a market based
approach to compensation, comprised of:
0 A market based salary structure
0 A base pay program based on the development and demonstration of
competencies
0 An incentive pay program based on the measurable achievement of specific
goals
Market Based Salarv Structure - Base Pay Propram
The Management Salary Schedule, attached hereto as Attachment A, establishes a salary grade
for each management classification. The City Manager is delegated authority to place employees
at any salary within the range, as determined by the appointee’s knowledge, skills and abilities.
The area of the salary grade between the minimum and the bottom of the market range is
intended for inexperienced new hires.
The Human Resources Department will conduct an annual survey of a reasonable number of
comparable agencies in San Diego County. Job content, job classification and salary information
on each City of Carlsbad classification will be compared with appropriate classifications in the
comparator group. The City Council delegates to the City Manager the authority to assign job
classifications to a specific salary grade, based on both benchmark salary information and
.internal relationships within the organization. Changes to the “minimum” and “market range” of
each salary grade within this structure shall be approved by the City Council.
The City Council determines the budget amount to be spent on management base pay increases
for each fiscal year, and the base pay increase percentages will be determined after all of the
performance ratings have been determined. All base pay increases are prospective. Management
employees whose current salary is above the maximum of the market range for their assigned
salary grade shall continue to be paid at that base rate until their salary falls within the market
range, and until such time shall not be eligible for base pay increases.
INCENTIVE PAY PLAN
The Incentive Pay plan is provided in addition to the Base Pay plan.
All management employees are eligible for incentive pay, regardless of their position in the
salary range. All management employees’ salary above base pay is unfixed and uncertain until
completion of the evaluation and award process annually, in which the incentive portion, if any,
is determined for each management employee.
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Employees earn the incentive based on their achievement of goals established during the
performance management process. For each goal, achievement is rated based on one of two
performance levels: Threshold or Target.
Unlike base pay increases which are determined at the end of the performance management
cycle, the potential incentive percentages will be made public at the beginning of the
performance review cycle. Incentive awards are expressed as a percentage of base pay. The City
Council will determine the annual amount to be budgeted for management incentive pay, and an
Incentive Pay matrix will be distributed to all management employees. This matrix will change
from year to year based on the City's economics, market data, and demographics. At the end of
the fiscal year and upon completion of the review process, incentive awards will be granted to
employees based on their level of goal accomplishment during the performance management
cycle. No management employee shall be awarded incentive compensation in an amount greater
than 10% of that employee's base salary.
The City Manager will periodically provide the City Council with progress reports on the
operation of the Performance Management and Compensation System.
SECTION 3: SCHEDULE OF BENEFITS
Life Insurance
All management employees shall receive City paid life insurance in an amount equal to two
times the basic yearly earnings. To determine benefits, the amount of insurance is rounded to the
next higher $1,000 multiple, unless the amount equals a $1,000 multiple. Supplemental Life, at
an amount equal to City paid life insurance, is available at the employee's cost. Dependent life is
also available at the employee's cost.
Former CMWD management employees shall receive Group Term Life Insurance, Accidental
Death and Dismemberment, and Dependent Life Insurance as contained in their Individual
Agveemen t.
Retirement
All management employees shall participate in the California Public Employees' Retirement
System (CalPERS). The specific retirement formula applied will be determined based on
whether the position is deemed safety or miscellaneous. All positions not deemed eligible for
safety retirement will be deemed miscellaneous under the CalPERS system. Optional benefits
unique to the City of Carlsbad's contract with CalPERS are outlined in the Coverage Key of the
CalPERS Procedures Manual. A copy of this manual is kept on file in the Human Resources
Department .
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