1. Call to Order. The budget workshop session of the Council of the City of Rogers was called to order by Mayor Grimm on Tuesday, September 8, 2009 at 5:30 p.m. at the Rogers Community Room, 21201 Memorial Drive, Rogers, MN, 55374.
Council present: Jason Grimm, Jay Bunting, Rob Bell, and Steve Rauenhorst.
Council excused: Jamie Davis.
Staff present: Gary Buysse, Liquor Manager; Jeff Carson, City Attorney; Stacy Doboszenski, Assistant City Administrator/Clerk; Brad Feist, Fire Chief; Jeff Luther, Police Chief; John Seifert, Public Works Supt.; Steve Stahmer, City Administrator; and Lisa Wieland, Finance Director.
2. Staff Reduction and Severance Package Discussion
Administrator Stahmer provided an outline for the budget workshop and stated the Council will need to adopt the preliminary levy at the regular meeting.
Stahmer then proceeded to discuss staffing reductions and severance package options. Discussed at length at the last meeting was the elimination of the Engineering Tech IV position and the half time reduction to the AP/Payroll Clerk. There was also discussion at last meeting regarding severance packages. The Council also received the advice from the city’s labor attorney regarding severance packages. The staffing reductions are included in the draft budget and draft levy. Stahmer then proceeded through severance option one:
Reductions recommended to be included in draft budget and draft levy
Severance Option 1:
• Two week notice
• Two weeks severance pay per year of service
• $2,000 toward employment-related education reimbursement (to be reimbursed to the eliminated/reduced employee upon successful completion of the course/training and submittal of proof of payment).
Stahmer stated the options include 100% of the eliminated position, but they do assume a 50% package if it were to be offered to position of AP/Payroll if reduced. Realizing this may not be standard, but staff wanted to give you the highest dollar figure impact to the budget. 50% reduction is subject to unemployment. Stahmer stated staff didn’t think of asking at the last work session if the severance was intended for both positions or just the fully eliminated position.
Stahmer then discussed severance option two:
Severance Option 2:
• 60 days notice
• One week severance per year of service
• $2,000 toward employment-related education reimbursement
The costs of both options were also reviewed:
Cost of #1: Total potential severance cost including elimination of Engineering Tech IV and half-time reduction of Payroll/AP = $11,527 to the general fund ($16,637 to all funds including utilities)
Cost of #2: Total potential severance cost including elimination of Engineering Tech IV and half-time reduction of Payroll/AP = $20,997 to general fund. This figure includes the costs of an additional 32 days on payroll, above and beyond the two weeks from Option 1. It is not a final severance payout, but rather the total costs of the payout plus the payroll costs associated with the 60 day notice.
Stahmer stated in comparing Option 1 to Option 2, Option 2 will cost the City an additional $9,470 to the general fund due to the additional time on payroll. In addition, unemployment costs under either scenario are estimated at approximately $16,000 for the general fund ($23,000 total).
Stahmer reminded Council the current union contract does not call for/require severance to be paid to employees beyond sick and/or vacation payout as detailed in City policy. Stahmer then distributed the City’s personnel policy language regarding severance. Sick time would be paid if the employees were with the City five or more years, 10 or more years of continuous service receives one day of pay per full year of service. The incumbents in this case would be below the 5 years.
Stahmer discussed since the union contract does not require a severance, the City is not obligated to negotiate upward from its initial offer. Because there are potential bumping scenarios, any severance offer should be stated to the employee to whose position should be eliminated along with a separation agreement. All would be offered to the employee who is out of the job at the end of any bumping.
Stahmer provided the following staff recommendation: eliminate position of Engineering Tech IV and reduce AP/Payroll Clerk to half time, to be done in regular meeting.
Grimm asked if along with the severance is a waiver of claim. Staff stated yes.
Grimm asked Attorney Carson that if not for the severance, no need for waiver? Attorney Carson stated probably not. Grimm stated he is in favor of option #1.
Stahmer then discussed the unemployment costs and stated there have been changes state laws requiring reimbursing employers to pay for unemployment for 46 weeks; up from 26 weeks, due to the rate of unemployment in the state. The budget has been calculated to include the 46 weeks and the potential impacts amount to just under $26,000 for both positions. The additional 20 weeks added $9,000 to $10,000 above the 26 week requirement.
Grimm stated he will entertain discussion regarding severance. Grimm stated having thought about it, his rationale behind the severance has always been for an individual who has been completely separated from the City. Appreciates what staff has done with the options, but he is looking for option one.
Bell stated he doesn’t know that severance for a reduced position is typical.
Rauenhorst stated he doesn’t think there should be a severance package.
Bell questioned why is it automatically assumed that it is included in a future contract? Would it give leverage to the union?
Stahmer stated if requested by the union or would go to arbitration it may come out there.
Grimm stated we need to weigh that against the number of employees that we are going to lay off. If we have more lay-offs, then let’s start talking about it right now.
Bell stated even if this becomes a precedent, the overall risk after time isn’t that dramatic. Bell still thinks it is important to do for the employee(s) affected.
Grimm commented on protecting the City by getting the signed waiver.
Bunting stated he agrees with Grimm on reduction of liability. It needs to be made clear going forward, the City is under a very unique circumstance, and this is non-negotiable by union – it will be stated and they will say yes or no. Bunting stated he would advise the staff to just walk away if they wanted to negotiate.
Rauenhorst stated in the private world you can get away with doing this, not something that is done in government. There are contracts for department heads, but a severance is not something that happens, and the idea of creating a precedent on giving a severance is opening a door that we do not want opened. The idea was to lower expenses, not create expenses. The severance package is costing the taxpayers more money. It feels good, but feeling isn’t what is right here.
Bunting commented on bringing in policies from private corporations that makes sense in a city. This is one of those things that will cost us money. Every professional corporation has offered severance. Bunting stated he would rather error on the side of giving them severance.
Rauenhorst, when in government not private, you don’t give money – its taxpayer money. Rauenhorst stated when people are terminated from their job, and they are not doing their job, you don’t give them money. Rauenhorst commented on the need to look out for the best interest of the City.
Bunting commented on the waiver of claims giving the City some security.
Bell stated to the point of adding expense, we are doing this to protect budgets in future years. There was discussion between Bell and Rauenhorst of the benefits seen over future years.
Rauenhorst commented on the cost of over $23,000.
Grimm commented that it has cost the City a lot more in the past to get rid of employees.
3. Health Insurance Opt Out Discussion
Stahmer stated the LOGIS contract allows for a $50 maximum opt out option for employees per month.
Stahmer explained the maximum stipend of $910 per employee for health insurance premium costs per month. To opt out of the City’s plan with proof of coverage under another plan, the employee could be compensated $50 per month. Stahmer stated a possible policy that could be implemented and provided explanation of some opt out policies he has seen however, they were not under contract with LOGIS.
Stahmer pointed out the way the city controls its cost is with the $910 figure. Staff has been given preliminary information that premium increases will be 15 to 16%. With 0% on the benefit from the City, the City’s cost stays at $910 maximum. Any increase is at the employee’s expense.
Doboszenski stated an HSA meeting has been scheduled for the end of the month where employees can learn more about an HSA, sign up for individual meetings, and be more in control of their out-of-pocket health care costs.
Bunting was in agreement to go ahead with the $50 opt out option.
Stahmer stated staff can work on putting together a policy.
4. Preliminary Levy Discussion
Stahmer stated Council needs to adopt a preliminary levy prior to September 15th. Council provided direction at the last meeting on what to include in the budget and levy; including the following:
Intentional use of fund balance
Existing budget modifications
No refill of the planner position
Implementation of the proposed public works reorganization
Consensus of the Council to discuss two levy options: (1) a flat levy for 2009 and (2) flat levy + $100,000. The flexibility of the $100,000 is a 2.7% increase over the 2009 levy, for any unforeseen circumstances.
The intent of staff would be to try to go back down to the 2009 flat levy amount.
Stahmer stated the actual draft budget, not assuming severance cost, is $47,000 under the 2009 levy before adding in 20 additional weeks of unemployment and taking severance into account. Those additional costs would come off of the $47,000.
Staff is recommending levy option B, $3.693M, reflecting a 2.7% increase, and making it clear to the public that the final levy cannot be higher than the preliminary levy, but it can be lower.
Grimm stated the only reason he would be levying higher is for flexibility. If the budget can come in lower than the 2009 levy, then job well done for everybody.
Bell stated he is in favor of B to give insurance, with no intention of using it.
Grimm commented on the last resort options of using it; such as a loss of state aid.
Wieland stated Council could also look at option of additional use of fund balance.
Stahmer commented on the use of fund balance in 2009 being $300,000 and in 2010 proposing to use $30,000 of fund balance.
Bunting stated he doesn’t want to tie the Council’s hands, but make sure that the cushion doesn’t get used unless absolutely necessary.
Bell stated it is not intended to be a slush fund, but emergency insurance.
Rauenhorst stated if you are doing it for emergency, that’s why the reserve fund is there. Rauenhorst stated he doesn’t like the option. He wants to keep it flat.
Grimm stated this is truly just an option and he doesn’t think it will be flat, but reduced from 2009.
Grimm commented that everybody can come after him next year if we dip into the money.
5. Set Budget Workshops
The following future dates for budget workshops were discussed with Council:
• Tuesday, October 13th, 5:30 p.m. – Utility Rate Study and 2010 Enterprise Fund Budgets
• Tuesday, October 27th, 5:30 p.m. – Begin line item budget discussions
• Tuesday, November 10th, 5:30 p.m. – Continue line item budget discussion and move into
Capital Improvement Plan discussion
• Tuesday, November 24th, 5:30 p.m. – Complete budget discussions (if necessary)
• Tuesday, December 8th, 7:00 p.m., Regular City Council Meeting – Final Budget and
Levy Public Hearing and Adoption
Wieland stated the State is not requiring truth in taxation hearings, but rather a public hearing at a regular Council meeting to be held after November 24th. Wieland stated this can happen at the first regular meeting in December.
Motion by Bunting, seconded by Bell to adjourn at 6:12 p.m. Motion carried 4-0.
Assistant City Administrator/Clerk