city of palo alto (ca) pension, and health care issues (2012)

7/31/2019 City of Palo Alto (CA) Pension, and Health Care Issues (2012)

1/37

City of Palo Alto (ID # 3219)City Council Staff Report

Report Type: Meeting Date: 10/15/2012

City of Palo Alto Page 1

Summary Title: Public Discussion of Employee Pension, Health Care,

Compensation and Other Benefits

Title: Public Discussion of Employee Pension, Health Care, Compensation and

Other Benefits and Strategies for the Future

From: City Manager

Lead Department: Human Resources

Executive Summary

In a Colleagues Memo dated June 15, 2012 and approved by the Council, a series of public

sessions by the Council were to be scheduled to discuss how to ensure that Palo Alto has a

flexible workplace with highly skilled employees with a passion for public service, balanced by a

sustainable model of employee compensation, retirement, and benefit options. This report lays

a foundation for those discussions and any subsequent policy direction from Council regarding

compensation and benefits, alternatives in health benefits, pensions, compensation and otheraspects of employment.

Many of these issues are subject to collective bargaining with the Citys recognized bargaining

units. Many issues are subject to legislation including the California Public Employee Pension

Reform Act (PEPRA) that was just passed by the Legislature and signed by the Governor,

effective Jan. 1, 2013. One purpose for these public sessions is to ensure broader

understanding of what ability the City has in making changes and where the City Council is

restricted in its decision making authority by State Law, court rulings, or the requirements of

membership within CalPERS.

Council invites input at these sessions from resident, employee, and city management

perspectives.

9


2/37


Recommendation

Staff recommends that the Council receive input and provide guidance, over the course of three

(3) public discussions, on issues related to the Citys strategy for reforms and innovations inemployee pension, medical, compensation and other benefits related to employee

engagement, recruitment and retention strategies. Staff requests Council direction over the

course of the three discussions including:

1. Exploration of the dynamic between salary, benefits, and other employee motivators,with residents, experts, and representatives from the Citys staff and represented and

non-represented employee groups

2. Education of the public and our employees about the recently enacted pension reform,and enumerate what the City is able to accomplish or not, given our participation in the

CalPERS system

3. Exploration of alternatives in offering savings, retirement, health care, employeewellness, paid time off, and other flexible benefits

4. Creation of or updating a set of policies to plan for pension and health benefitcontingencies such as reserves, flexible benefits and deferred compensation

5. Exploration of strategies to retain, attract and engage employees who are passionateabout city work and want to make a difference in the community

Organization of the Report

The three (3) topics covered in the Colleagues Memo, Employee Engagement, Pensions, and

Health Care will be covered in separate reports and discussions with the Council. The first

report, Employee Engagement, Productivity and Culture, will be followed by Pensions on Nov.

13 and Health Care on December 10. This report and Council discussion will review the

pressures for pension reform and benefit restructuring, an initial review of the Pension

Reform legislation passed by the State, and a review of the changes the City of Palo Alto has

instituted. We will explore further changes in those areas in subsequent sessions.

We turn though to the subject of Employee Engagement, Productivity and Culture for in-depth

discussion at the start because despite the fiscal pressures to make benefit and compensation

adaptations, in the end we are concerned with not only managing costs but support for a high

quality of life in Palo Alto through the delivery of quality services. This requires an effective and

committed workforce of skilled employees. The Citys ability to attract, retain and


3/37


appropriately compensate and reward its employees, not just financially but in the nature of

work itself and through the environment and culture of our organization are key to high

performance, job satisfaction, and service to the community. Restructuring of compensation

and benefits, and the financial pressures of structural cost and revenue challenges put pressure

on services, workforce size, and workload and productivity. Therefore, understanding of

adaptation in jobs, work culture, and practices that will be required to foster more innovation,more productivity and less bureaucracy, and higher employee and citizen satisfaction is the

appropriate starting point for these Council sessions.

Report I, Employee Engagement, Productivity, and Culture includes:

o Employee demographics and designing benefit packages for those with varying needso Attracting and retaining employees to devote their career to public serviceo Review of recent research about employee motivation in public serviceo How training, job flexibility, at-will employment, and seniority could operate to foster a

desirable workplace during changes to traditional benefits

o Alternative considerations on establishing a healthy work place, fostering jobsatisfaction and saving costs thru non-economic employee benefits

Background The structure and level of salary, benefits and non-monetary rewards are a key

component in the Citys ability to recruit, engage, and retain the high-performing workforce

needed to accomplish City goals. A good measurement of employee engagement is the rate of

voluntary turnover. Palo Altos rate of voluntary turnover, aside from retirement, is low at

between 1% to 2%. Employees generally stay with the City until they retire.

Employment. Employees are grouped into regular, full time benefitted, regular part-time

benefitted and hourly employees with limited benefits. Per the FY2013 Adopted Budget, Palo

Alto has 1,014 (not including hourlies) full time equivalent positions and including budgeted

vacancies. Exhibit A shows current actual headcount next to the Adopted Budgeted FTE

numbers.

Demographics of current and future employees show that there will be a nearly complete

turnover in staff over the coming ten years. Looking at the period from 2007 to today, half ofthe City employees have retired and been replaced. The average age of City employees is 45.4,

with almost 30% already retirement eligible. Given these anticipated levels of turnover, it will

be prudent for the City to consider employee benefits that are pertinent to employees with

varying lifestyles and challenges, especially for those who replace retirees.


4/37


Recruitment. Opportunities with the City are sought after, as evidenced by high numbers of

applicants:

an average of 80 applicants for each job opening

Interviewing panels and background checks ensure quality candidates.

The City currently has 45 open recruitmentsRecruitments take on average 90 days to fill

Critical hard-to-fill positions such as dispatchers, utility operators, planning and,

finance/budget administration take longer to fill

Palo Altos total compensation, consisting of salary, employee and family health coverage ,

pension and retiree/family health care, is at market rate according to a 2011 compensation

survey commissioned by the HR department. However, Palo Alto has been a leader among

neighboring benchmark cities in pursuing pension and health care employee contributions.

Once PEPRA is fully implemented in 2018, however, Palo Alto will be on a similar footing with

neighboring agencies for new employee pension formulas, for those in the new Tier III uponPEPRA implementation. However, those in Tier II could get a better pension deal in cities that

have higher than 2@60 pension formulas.

Value of Salary, benefits and pension.

The average employee in the City receives:

o Salary $85,715o Medical and non-salary benefits $29,034o Defined-benefit pension $21,308.

Exhibit B shows employee salary and benefits broken down by employee group: fire, fire

management, police, police management, SEIU, Utility management and non-represented

Management & Professionals.

Cost trends. In recent years, the cost of providing employees with competitive salaries,

benefits, and pensions has risen dramatically for the City. The proportion of dollars paid for all

employee benefits to salaries rose from 23% in 2002 to 54% in 2010, to 63% in FY2012. This

means, for example, an employee in 2002 with a salary of $50,000 received benefits valued at

$11,500. Those benefits are valued at $31,500 today. Appendix D shows the trending costs of

benefits.

Benefits Benchmarking. The International Public Management Association (IPMA) published a

2011 benchmarking study of 430 agencies titled Benefits in the New Economy. This report

states that public sector jobs generally pay less but require more education on average


5/37


compared to private sector jobs. Public employees are twice as likely to have college or

advanced degrees. Relevant findings are:

o 25% report that their cities will experience layoffs in 2012o 34% are reducing benefits or shifting costs to employeeso 38% made changes to their pensions, raising the employee contribution, increasing the

retirement age, or increasing time to vest in the pension

o 66% of respondents have cut training budgetso Use of Paid Time Off (PTO) programs in lieu of separate sick and vacation banks, have

grown in the public sector by 50% from 2002 to 2012

o 25% indicated that they have a voluntary telework program for some employees andpositions, and 66% offer flexible work schedules or alternate work schedules to

potential hires. Alternative work arrangements are a win-win since they provide

work-life balance and are cost-neutral.

Palo Alto has already addressed shifting medical and pension costs to employees by asking

employee groups to pay the full employee share of PERS and make a 10% contribution towards

medical expense, including into retirement. Palo Alto has chosen to invest in employee

training and development, having added $50,000 each to the General Fund HR training budget

and the Enterprise Fund training budget for FY 2013. In Palo Alto, sick leave can be

accumulated to 600 hours; however, it is not paid out upon retirement nor is it added to the

last years salary for pension purposes, except for a very few employees who were hired prior

to 1983 (and for these few it is paid out only, not added to retirement).

Palo Altos use ofthe 9/80 scheduling is a time tested recruitment advantage. Employees are

able to achieve greater personal balance while giving the traditional 80 hours to work over two

weeks. The 9/80 schedule also supports Councils goal of environmental sustainability as

commute days are reduced.

Private Sector Comparison. Municipalities are frequently cited for spending a high percent on

employee benefits. By way of comparison, the Bureau of Labor Statistics (BLS) reports that

overall, organizations in 2011 spent an average of 49% of an employees annual salary on

benefits: 19% on mandatory benefits (such as unemployment, workers compensation, Social

Security), 19% on voluntary benefits (such as medical plans, dental plans, prescription coverage,

flexible spending accounts, vision plans, survivor benefits) and 11% on pay for time not worked

benefits (regular rate of pay for a nonworking period of time, such as vacations, holidays,

personal, bereavement and sick leave). It should be noted that only one in five employers in

the private sector offer a defined benefit retirement plan. The BLS Study is attached as Exhibit

C.


6/37


Employee Engagement

Palo Alto seeks to attract and engage employees who are passionate about municipal work and

want to make a difference in the community. According to the Corporate Leadership Council,

the various elements of employee engagement should each be maximized. These include the

extent to which employees enjoy and believe in what they do, and feel valued for doing it.

Many factors can influence engagement including:

The package of total compensation

Commitment to the citys purpose

Satisfying work environment

Satisfaction with the individual job itself

Fully engaged public sector employees are twice as likely to stay in their current job, 2.5 timesmore likely to feel they can make a difference, and 2.5 times more likely to recommend their

workplace to others.

Total Compensation. Elements commonly associated with total compensation include cash

salary and benefits to provide for personal well-being, safety and security of the workplace.

Additional factors include wellness programs to provide preventive health measures, exercise,

and positive mental health, flexible work scheduling and telecommuting.

Commitment to purpose. Serving the public with integrity was cited as the most

distinguishing engagement factor for public sector employees, according to a recentInternational Public Management Association (IPMA-HR) Employee engagement study. The

Study is attached as Exhibit D.

Satisfying work environment. Satisfying work entails good job design, accountability (owning

the piece of the work), appreciation for a job well done, and recognition from ones peers and

supervisor. Job design can affect work satisfaction by providing some level of autonomy

(meaning accountability for ones work), skill mastery and continuous learning. Some ways to

provide a satisfying work environment include feedback and regular check ins with supervisor,

the ability to make and implement suggestions, and continuous learning offered to employeesthough classes, stretch assignments, participation in task forces or other departmental

exchange work and participation in process improvement efforts. The ability to work in flexible

ways such as telecommuting or flex schedules also contributes to a satisfying work

environment. In Palo Alto many staff are challenged by long work hours, heavy job demands

after layoffs, and the number of night meetings.


7/37


Satisfaction of the work itself. According to research, the top reason given for staying in an

organization is Work. I like the work that I do. This finding is in line with career development

research, which indicates that the people look for work that is meaningful or challenging before

considering tangibles like finances or promotions. The secondary reason is My job conditions.

I have flexible hours, good commute, etc. In contrast, the number one reason for leaving anemployer is My career. I dont have the opportunities to grow or advance here. Thus

engaged employees stay for what they can give they like their work and are able to

contribute. Conversely, disengaged employees may stay for what they can get a secure job in

an unfavorable economic environment.

Research shows that when asked to name one thing that would improve job satisfaction, the

top three categories are more opportunities to do what I do best, Career development

opportunities and training, and more flexibility, control over how my work is done, flex time,

etc. The research cited above is summarized in Exhibit E.

Staff intends to use insights from these studies in order to develop a recruitment and retention

strategy that focuses on a high-performing workforce and combines appropriate levels of

training, education, job flexibility, and at-will employment to build a 21st

century employment

program in Palo Alto during a time of changes to traditional benefits. Staff intends to continue

open dialog with employees about the factors that promote engagement and retention,

including surveys, focus groups and interviews.

Attachments:

Exhibit A - Employee Head Count (PDF)Exhibit B - Citywide Average Salary & Benefits FY 2013 (PDF)

Exhibit C - BLS Study (PDF)

Exhibit D - IPMA Study (PDF)

Exhibit E - Blessing White Study (PDF)

Attachment A 07-02-2012 CCM EXCERPT ITEM 9 BENEFITS (PDF)


8/37

DepartmentFull-Time

(positions)

Part-Time,

Benefitted

ositions

All Hourly

(positions)

Tota l

(positions)

FY 2013

Adop ted Full-

Tim e FTEs**

City Attorney 8 4 12 9

City Aud itor 6 6 4

City Clerk 5 1 1 7 6.75

City Manager 8 8 10.05

ASD 53 3 13 69 39.15

CSD 60 8 *343 411 73.75

Fire 109 19 128 119.24

HR 16 3 19 16.00

IT 29 7 36 31.55

Libra ry 34 4 53 91 41.25

Planning 38 1 7 46 47.55

Police 140 2 31 173 154.00

PWD 185 2 17 204 161.38

Utilities 221 6 22 249 253.76

Cap ita l 26.07

Print/ Mail 1.67

Spec ia l

Revenue2.65

Vehicle

Re lacem ent16.53

TOTAL 912 27 520 1459 1014.35

** Includes bud gete d but unfilled vac anc ies

EMPLOYEE HEAD COUNT BY DEPARTMENT AS OF 09/ 20/ 12

as of 09/01/ 12. Number of CSD hourlies can go as low a s 299. (Tota l number of filled

positions in CSD can rang e from 367 to 411)

Exhib it A


9/37

CATEGORYMgmt/

Professional

Utilities

Mgmt/

Professional

FireChief

AssociationFireFighters

PoliceMgmt

AssociationPAPOA SEIU

Weighted

AverageNotes

FullTimeEquivalent(FTE) 200.35 41.00 4.00 100.00 7.00 82.00 580.00 1,014.35

%ofCity 20% 4% 0% 10% 1% 8% 57% 100%

Salary* $113,864 $123,266 $150,098 $93,569 $143,972 $102,529 $70,490 $86,877 salary,includes11holidays

InLieuHoliday n/a n/a n/a $5,124 n/a $3,042 $3,834 $2,943 inlieuholiday

IncentivePay n/a n/a n/a $768 n/a $3,213 $349 $535

FLSAcharges;nightshift

differential;K9pay;fieldtraini

premium

Overtime n/a n/a n/a $16,244 n/a $8,958 $4,288 $4,777 overtime

ManagementLeave $4,379 $4,741 $5,773 n/a $5,537 n/a n/aannualmanagementleave 80

hours/year

PERSEmployer Misc22.97%;Safety30.05%

$26,155 $28,314 $45,104 $28,117 $43,264 $30,810 $16,192 $21,308citycontribution

PERSEmployee

Mgmt0%;SEIU0%

PMA9%;PAPOA0%

FCA&IAFF0%

$0 $7,396 $0 $0 $12,957 $0 $0 $388

employeecontributionpaidby

Medicare $1,651 $1,787 $2,176 $1,357 $2,088 $1,487 $1,022 $1,260 1.45%ofsalary

Medical $10,937 $26,073 $16,842 $13,949 $11,108 $14,037 $13,338 $13,494

basedonemployeecensusaso

spring2012;includesoptout

expense

Dental/Vision $1,959 $1,982 $2,357 $2,192 $1,585 $1,921 $1,905 $1,948basedonemployeecensusaso

spring2012

RetireeMedicalLiability $6,578 $6,578 $13,079 $13,079 $11,861 $11,861 $6,578 $7,708

portionofARCforactive

employeesonly;assumedcost

basedonpercentageoflabor

group

Workers'Comp $1,499 $1,109 $0 $11,109 $0 $10,735 $1,792 $3,329

basedonprioryear'sactuals

assumeFire'swasIAFFandmo

ofPDwasPAPOA;allocated

remainingbased

on

split

betwe

percentagesplitofmgmtandS

LIFE/LTD/SUI $405 $467 $460 $460 $460 $460 $460 $449 lifeinsurance,longtermdisabi

stateunemploymentinsurance

NonsalaryBenefits** $3,054 $4,054 $2,554 $54 $4,054 $54 $54 $846 excludedtheadmincosts

AverageSalary&Benefits $170,481 $205,767 $238,443 $186,022 $236,886 $189,107 $120,302 $145,861

*SalaryforthePoliceManagementAssociationisbasedonaveragecontrolpoint.Thisamountdoesnotincludetheassociatedpaydifferential

betweenmanagersanddirectreports.

**NonsalaryBenefitsincludeprofessionaldevelopment/tuitionreimbursement,employeeassistanceprogram,commuterprogram,and

managementexcessbenefit.ExcludedadministrativefeesfortheGeneralBenefitsandWorkers'CompensationFund

SummaryofChangesfromtablepresentedinAdoptedBudget(p.25)

MGMT:increasesalary3%;eliminatedcitypaidemployeepensioncontributionof6%;reducedprofessionaldevelopmentby$1,000

savingswillbereducedfromthebudgetduringthemidyearbudgetprocess

FCA:eliminated

city

paid

employee

pension

contribution;

eliminated

tuition/training

reimbursement;

eliminated

VMC

savingsisincludedintheFY2013adoptedbudget

PAPOA:reducedsalaryby1.33%;eliminatedcitypaidemployeepensioncontributionof9%;eliminatedtuition/training;reduced3holidays

$1.5MsavingsisincludedintheFY2013adoptedbudgetasabudgetoffsetintheGeneralFundNonDepartmentalbudget.Thissavings

willbeallocatedtothePoliceDepartmentduringthemidyearbudgetprocess.

SEIU:increasedsalary1.65%;adoptedbudgetalreadyassumed10%medicalcontribution;reducedmedicaloptoutexpenseeffective10/1;

eliminatedcitypaidemployeepensioncontributionof2.25%

savingswillbereducedfromthebudgetduringthemidyearbudgetprocess

ExhibitB

CitywideAverageSalary&BenefitsFiscalYear2013

AdjustedAssumes

Full

Year

of

Cost

Under

Revised

Labor

Agreements

(as

of

September

2013)

10/10/2012


10/37

Exhibit C


11/37


12/37


13/37


14/37


15/37


16/37


17/37


18/37


19/37


20/37


21/37


22/37


23/37


24/37


25/37


26/37


27/37


28/37


29/37

ExhibitD

IPMAStudy

Areviewofrecentresearchaboutemployeemotivation.ASeptember11,2012studyby

ADP andthe InternationalPublicManagementAssociation forHumanResources (IPMAHR) surveyedcurrent levels ofemployeeengagementamongpublic sector employeesat

the stateand local level. The survey,whichpolled over 2,200public sector employees

foundthatjust58percentofpublicsectoremployeesarefullyengagedintheirjobs.In

addition,38percentofallrespondentssaidtheywereeithervery,orsomewhatlikely,to

leavetheirjob,ifworkingconditionsdontimprove.Ahighernumberofyoungworkers

47percentofthose34yearsofageandyoungersaidtheywereeithervery,orsomewhat

likely,toleavetheirjob,ifworkingconditionsdonotimprove.

Thestudywasconductedtobetterunderstandwhichcomponentsarevitaltoengagement.

Withnumerousstudiespointingtoastrongcorrelationbetweenworkerengagementand

organizational productivity, performance and talent retention, its clear that employee

engagementisoneofthetopissuesconfrontingHRdecisionmakerstoday,saidTerrence

McCrossan, general manager, ADP Human Capital Management. Just as in the private

sector,publicsectororganizationscanbenefitfromhavingaclearerunderstandingofwhat

motivatesandsatisfiestheirworkforce,andfromhavingasysteminplacetotrackwhether

theirengagementlevelsaretrendingupwardornot.

Basedonmorethan2,200individualonlinesurveyresponsescollectedinJune,2012,the

studycanvassedabroadbaseofgovernmentemployees,includingmanagementandstaff,unionandnonunionemployees, key government verticals and functions, and state and

localities. As numerous studies have shown, there is a direct correlation between

employeeengagementandhighperformanceintheworkplace,aswellastalentretention,

said Neil Reichenberg, executive director, IPMAHR. Opportunities exist now for public

sector HRprofessionals tobetter understandwhatmotivates and inspiresworkers,and

thenformulatestrategiesforenhancingengagementatalllevels.

Additionalkeystudyfindingsinclude:

Servingthepublicwithintegritywascitedasthemostdistinguishingengagementfactorforpublicsectoremployeesandisthesinglehighestperformingelementin

theentiresurvey,with98percenttotalagreement.

Serving the public with integrity was a nearly universal response; howeveremployees34yearsoryounger,employeesofallagesandtechnologyworkerswere

below average on identifying making a difference as a key component in

engagement.


30/37

Fullyengagedpublicsectoremployeesare:o Twiceaslikelytostayintheircurrentjobo 2.5timesmorelikelytofeeltheycanmakeadifferenceo 2.5timesmorelikelytorecommendtheirworkplacetootherso Threetimesaslikelytoreportbeingverysatisfiedintheirjobs

ThisstudywasconductedbytheGoverningInstituteamongasampleof2,259randomly

selectedparticipantsacrossstateandlocalgovernments.


31/37


32/37


33/37

ExhibitE

BlessingWhiteStudy

Blessing White, an international research firm, published The Employee Engagement

Report2011.Itreflectsinterviewswith11,000HRandlineleadersaswellasindividual

employees.Accordingtotheirresearch,Thetopreasongivenforstayinginanorganization

isWork.IliketheworkthatIdo.Thisfindingisinlinewithourcareerdevelopment

research,whichindicatesthatthepeoplelookforworkthatismeaningfulorchallenging

beforeconsideringtangibleslikefinancesorpromotions.ThesecondaryreasoninNorth

AmericawasMyjobconditions.Ihaveflexiblehours,goodcommute,etc.Incontrast,the

numberonereasonforleavinganemployerisMycareer.Idonthavetheopportunitiesto

groworadvancehere.

TheBlessingWhitereportsummarizessurveyfindingsbypositingthatengagedemployees

stayforwhattheycangivetheyliketheirworkandareabletocontribute.Conversely,

disengaged employeesmay stay forwhat they can get a secure job in an unfavorableeconomic environment, salary and benefits and other favorable job conditions. When

askedtonameonethingthatwouldimprovejobsatisfaction,thetopthreecategoriesU.S.

respondentschoseare:

27% moreopportunitiestodowhatIdobest

20% Careerdevelopmentopportunitiesandtraining

15% Moreflexibility,controloverhowmyworkisdone,flextime,etc.

Whenasked for anitemthatwouldmostimproveperformance,thetopthree responses

are:

28%moreresources

16%greaterclarityaboutwhattheorganizationwantsmetodoandwhy16%developmentopportunitiesandtraining


34/37

CI TY COUNCI LEXCERPT

Page 1 of 4

Special Meeting

July 2, 2012

Colleagues Memo From Vice Mayor Scharff and Council Members Burt,Holman, and Schmid on Council Direction Regarding Benefits Strategy.

Council Member Burt reported the Memo attempted to lay the groundworkfor systematic and long range discussions on the reforms needed to create a

sustainable system of employee pensions, benefits, and compensations.Council Members wanted City services to continue at the level expected

while still having strong compensation and benefits for the workforce. TheMemo outlined a number of different policy directions for review, which were

aligned with the initiatives of the Governor and the California League ofCities (League). In addition, the Memo outlined a number of other areas

open to exploration. Council Members requested Staff return with anagendized Item in September for full Council discussion on these topics.Staff should answer the bulk of the questions to the extent reasonable and

feasible by September; those questions requiring research could beagendized for a subsequent meeting. Staff should also identify any legal

constraints to implementing initiatives and actions taken by other cities, the

League and the Legislature on related issues. Legislative action in thecoming weeks would likely affect future discussions, because State levelconstraints would need to be corrected to enact the Governor's proposed

reforms. That legislation would enable cities to adopt similar reforms.

Council Member Holman advised that most action regarding labor

agreements concerned negotiation and were held in Closed Session. Thiswas a method to have a public discussion and to educate and inform the

public about opportunities and constraints. She hoped labor groups wouldparticipate in public discussions, and looked forward to creative methods for

addressing employee retention and job satisfaction.

Council Member Schmid reported the engendering of this Memo wasGovernor Brown's pension reform proposal. He asked Staff to define thoseissues subject to the Council's discretion and those subject to State level

constraints and regulations. Staff and union input were critical to theprocess.

Attachment A


35/37

EXCERPT

Page 2 of 4City Council Special Meeting

Excerpt 7/2/12

Vice Mayor Scharff welcomed a public discussion of the issues and

constraints. The Memo raised many issues, and now was the time forCouncil Members to raise other issues.

Council Member Shepherd reported the League was working to get a

proposal to the Legislature to make significant changes. It would addressmany items in the Memo.

Mr. Keene stated many laws restricted local governments' abilities to makedecisions about benefits and costs. The League's main focus was ensuring

the Governor's proposed reforms were extended to local governments.State laws, California Public Employees' Retirement System (CalPERS)

regulations and interpretations, and State-wide pension and healthcareprograms precluded the City's ability to make decisions, even when

employees were willing to make changes. Existing regulations did not allow

the City to do anything to the taxpayers' and employees' benefit. The Memowas aligned with the League's initiative. The League had draft legislation inconference committee at the Legislature, and would know whether or not itwould be scheduled for floor sessions before the recess. Otherwise, it would

come back when the Legislature reconvened on August 6, 2012.

Mayor Yeh believed public discussion was important. Staff should considermethods to achieve the most productive and constructive discussions. He

asked Staff to provide a categorization or grouping of questions that lentthemselves to open session meetings.

Mr. Keene reported there was a logical grouping of the questions, and otherscould emerge during Staff review. One apparent grouping was based upon

actions within the Council's current local authority and discretion versusactions dependent upon legislative or regulatory change at another level of

government. Staff would return to the Council in mid or late Septemberwith the understanding that they would not necessarily have answered every

question. There would be meetings subsequent to the September meeting.

Mayor Yeh stated this was an invitation for creative solutions from employeeand employer perspectives. He asked for Staff's thoughts regarding creating

an open climate to invite and achieve honest discussions.

Mr. Keene indicated one of the primary roles of the Human Resources

Director was to help elevate and deepen the conversation and sharedresponsibility between the City and employees. That aligned with having an

open public conversation regarding the realities faced by the City.


36/37

EXCERPT

Page 3 of 4City Council Special Meeting

Excerpt 7/2/12

Kathy Shen, Director of Human Resources reported employees wanted to be

heard. Employees had opinions about their value to the City and how theCity compensated, rewarded and engaged them. She would compose

questions to obtain input while minimizing emotions. There weregenerational differences in our employees in terms of what they wanted to

get out of the work and the value proposition of working for the City.

Mayor Yeh looked forward to any model presented in September.

MOTI ON: Council Member Schmid moved, seconded by Council Member

Holman to direct Staff to agendize by the end of September 2012 thediscussion of the items contained in the Colleagues Memo on sustainable

pensions, retiree healthcare, other benefits, and incentives for careeremployment.

Council Member Holman introduced the phrase tipping point. It was oftenreferred to in the physical environment as what caused a change in actionsand reactions. It also related to responses to different interactions,conditions, and situations.

Council Member Shepherd asked how the City could support the League's

proposed legislation, especially if action was needed while the Council was inrecess.

Mr. Keene reported the Council's discussion and alignment of the Memo with

the League's proposals gave Staff the general guidance under legislativepolicies to respond on behalf of the Council. If Staff received a request forinformation during the recess, they could advance the City's support for

topics aligned with the Memo.

Council Member Shepherd indicated the proposed legislation would allowemployees to move from city to city and would reduce the difficulty in

negotiating contracts.

Council Member Burt stated the Council was not in a position to adopt theMemo in principle. He was not sure the discussion and Memo could be used

as a basis to authorize Staff to support legislation.

Mr. Keene felt Staff could express support for local discretion to be extended

to cities in determining benefit levels and for fewer restrictions imposed byregulations.

Molly Stump, City Attorney advised the League had emphasized the issue of

flexibility and local control. The Governor may have gone a bit further in


37/37

EXCERPTadvocating a particular substantive policy where the League statement

advocated allowing local jurisdictions to determine specific policy. Staffcould anticipate the League's policies continuing along those lines. That was

the type of issue read into this Colleagues Memo at this point.

Mr. Keene assumed Staff could provide examples of experiences withrestrictions in order to support local discretion. That type of comment would

not express support for a particular change, but would express the desire tohave more freedom to resolve these difficulties through the Council.

MOTI ON PASSED: 8-0 Price absent

city of palo alto (ca) pension, and health care issues (2012)

Documents