Budget Advisory 1996/09/18a
MEM0RAN1)4
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CITY OF ANAHE P,�'q3#�
FINANCE DEPARTMEE
DATE: OCTOBER 17, 1996
TO: CITY CLERK
FROM: CHARYL MC qfULLY
SUBJECT: BUDGET ADVI�SY COMMISSION MINUTES
The attached Minutes from the Budget Advisory Commission meeting of September 18,
1996 were approved at the October 16 meeting, and are being submitted for filing.
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BUDGET ADVISORY COMMISSION MINUTES CDSEPTEMBER 18, 1996 - 3:30 P.M. !
SIXTH FLOOR CONFERENCE ROOM
OCT ! 0 06 '
MEMBERS PRESENT: Gene Brewer, Jeff Farano, Phil Knypstra, Dani,'•,K
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Jimmy Kennedy, Shirley McCracken, Bill O'Connell
MEMBERS ABSENT: None
STAFF PRESENT: David Morgan, William G. Sweeney, David Hill, Jeff Stone,
Kristine Thalman, Charyl McCully
GUESTS PRESENT: John O'Malley, Orange County Employees Association
The meeting was called to order by Chairman Brewer at 3:36 p.m..
APPROVAL OF THE BUDGET ADVISORY COMMISSION MINUTES:
Having asked for comments and hearing none, Chairman Brewer authorized approval of the Minutes
of the July 17, 1996 meeting as submitted.
ELECTION OF CHAIRPERSON AND VICE CHAIR
Ms. McCracken moved to re-elect Gene Brewer to the Chair for 1996/97. Seconded by Mr.
Kennedy. MOTION CARRIED (5 - 0 - 0 ). Messrs. O'Connell and Van Dorpe were absent for
voting.
Mr. Farano moved to elect Dan Van Dorpe Vice -Chair for 1996/97. Seconded by W. Knypstra.
MOTION CARRIED (5 - 0 - 0 ). Messrs. O'Connell and Van Dorpe were absent for voting.
SUMMARY OF AB 1934 AND AB 2797
Kristine Thalman, Intergovernmental Relations Officer, distributed and explained a report
concerning the status of current legislation which addresses the issue of the return of property tax
revenues to the cities, counties and special districts. In a two-year period, approximately $3
billion in property tax revenues were shifted to the State in an effort to balance the budget. With
the improvement in the economy, interest in legislation to return those monies resulted in two
bills having been introduced this session. Currently on the Governor's desk are AB 2797 (Aguiar)
which would allow agencies to retain the growth on the property tax and revenues transferred to
the ERAF (Educational Revenue Augmentation Fund) beginning in 1996/97. It does not,
however, return revenues lost for previous years, and there would be a cap on the total return.
AB 1934 states the Legislature's intent to open discussion on the loss of property tax revenue,
gradually restore the local property tax base (on an annual basis), and aid all local governments in
proportion to their losses, regardless of their rate of property tax growth. This Bill was intended
as groundwork for future efforts to win back the remainder of property tax dollars. In response to
Budget Advisory Commission, September 18, 1996 Page 2
Mr. Farano, Ms. Thalman stated that the Governor's main concern is the $150 million loss in
growth to the General Fund should he sign these Bills.
PUBLIC/PRIVATE COMPENSATION ISSUE
Mr. Hill explained the City's current strategy to control labor costs. Miscellaneous employees of
the City represented by the Anaheim Municipal Employees Association (AMEA), and those
represented by the International Brotherhood of Electrical Workers (IBEW), have had no recent
increases in their salary ranges. This has been by agreement with those organizations. The labor
agreements with AMEA and the IBEW expire in October, 1996 and April, 1997, respectively.
Mr. Hill presented the 1996 Executive Summary of the Orange County Private/Public
Compensation Comparison Survey, prepared by Ralph Anderson & Associates under the direction
of the Orange County Division of the League of California Cities. The objective of this study was
to collect and summarize private sector wage trends in Orange County for jobs readily found in
the public sector. The survey included forty-nine employers, thirty benchmark jobs, and 6,610
positions. The report implied that the deviation in compensation between the public and private
sector has lessened and is now relatively small. The Study projects a continuation of this trend.
City policy is to be at the median of rates paid whether the competition is public only or
public/private. Mr. Hill stated that, according Anaheim actuals, the City is beginning to fall
below some of the public maximums. Anaheim's position in the market varies significantly by
occupation. He stressed the importance of using a variety of surveys to get information, and
stated that careful analysis is essential because of different methods of reporting.
In response to Chairman Brewer, Mr. Morgan said that deregulation of the electric utility
industry will probably have more impact on the cost of generation and transmission than on
distribution. Mr. Morgan stated that Anaheim still has one of the highest bond ratings of any
Utility. The City continues to seek ways to keep costs low in order to pass savings on to the
consumer. Anaheim projects paydown of its estimated $350 million in stranded costs by 2003.
In response to Mr. Knypstra's question regarding compensation, Mr. Hill explained that pay scale
is considered on an industry basis for certain positions. Mr. Morgan explained that job specific
positions often commanded a higher salary due to specialization and the need to attract capable
people within those fields. Utility workers have had one 3 % salary adjustment in the last five
years and miscellaneous employees had a 4% increase two years ago.
Mr. Farano commented that, because the employment security factor in government work
historically offset the lower wages of the public sector, it doesn't seem necessary for the public
salaries to keep pace with the private sector. Mr. Hill stated that the policy issue revolves around
being more market driven and sensitive to occupational market positions rather than generalized
across the board salary setting. The issue of security was addressed in the Confidential
Benchmark Compensation Survey prepared for the City of Anaheim by KH Consulting Group,
the third in a series that began in 1994. This customized study shows that salary by occupation
varies significantly, and that differences between public and private sector appear to be coming
together. Benefits also appear to be achieving parity. Mr. Farano stated that to make the pay
scales equal to the private sector while providing job security will cause government growth.
Budget Advisory Commission, September 18, 1996 Page 3
Mr. Hill said that, although the generalized conception is that job security justifies lower salaries,
with recent downsizing in government, the security factor is about same as in the private sector.
Mr. Morgan suggested that future policy should be aimed at re -tuning salaries, but paying no more
than the positions warrant. We compete with large employers in the County, and an across the board
decrease could result in the loss of good employees. Mr. Morgan suggested that the Subcommittee
on Employee Compensation work with Human Resources on this issue. Chairman Brewer stated that
it is important to find a reasonable, rational position that is publicly defensible when salary
setting. He expressed agreement that good management dictates that salaries should be high enough
to get the kind of employee needed to do the job, but no higher.
DEVELOPMENT OF FY 1996/97 WORKPLAN
A draft Workplan was distributed and discussed. Subcommittees, meeting dates, and assignments
are: Privatization, October 16 (Van Dorpe, Farano, Kennedy); Anaheim Resort, October 16
(O'Connell, Farano, Van Dorpe); Economic Development, November 20, (Brewer, McCracken,
Van Dorpe); Employee Compensation, November 20 (Knypstra, Farano, O'Connell);
Redevelopment, December 18 (McCracken, Knypstra); Long -Range Financial Forecasting,
Budget Design, January 15, and February 19, 1997 (Brewer, Knypstra); and Budget Review
March, April, May, 1997 (Full Commission).
Mr. Kennedy moved that the 1996/97 Budget Advisory Commission Workplan be submitted as
adjusted. Seconded by Ms. McCracken. MOTION CARRIED (7 - 0 - 0).
PLAN FOR EVALUATION OF INFORMATION SERVICES PROPOSALS
Mr. Sweeney reported that RFPs were sent to thirteen companies, with proposals due on Friday,
September 20. A review team comprised of Jeff Stone, Susan Wheelock, Jim Donato, and Robb
McIntosh will review the proposals to determine their degree of responsiveness, and evaluate on
the basis of the ability of both public and private bidders to provide the required services in the
most cost effective manner. Their recommendation will be evaluated by the Finance Director,
and presented to the Budget Advisory Commission for its review and subsequent recommendation
to the City Council. In the discussion that followed, Mr. Van Dorpe requested that respondents
be invited to a meeting attended by Commissioners for the purpose of clarification of questions
and issues arising out of the proposals. Mr. Kennedy expressed his opinion that the Commission
should defer to staff for the initial review process, and evaluate staff's recommendation and the
proposals after the initial review is completed. Mr. Sweeney explained that several departments,
Human Resources, Finance, and Utilities among them, are major customers of the data
processing system. The review team has formulated a plan to assess the needs, problems,
suggestions of each user, in order to best evaluate the responsiveness of the proposals based on
actual need.
PUBLIC COMMENTS
Mr. O'Malley, when asked, strongly stated his opinion that staff should be allowed to do their job
and review the proposals, without the Commission's intercession.
Budget Advisory Commission, September 18, 1996 Page 4
AGENDA FOR NEXT MEETING
Information Services Privatization update; 1996/97 revised Workplan adoption and City Council
transmittal approval; Anaheim Resort Area update.
ITEMS BY COMMISSION MEMBERS - None
ADJOURNMENT
The meeting was adjourned at 6:07 p.m., by Chairman Brewer.
Respectfully submitted,
014.7� G
Charyl McCul y
Secretary
F/WORD/WP/BAC/MII IMSEP96/CPM