MEMORANDUM 06-160

TO: Mayor Hornaday and Homer City Council

THRU: Walt Wrede, City Manager

FROM: Sheri Hobbs, Personnel

DATE: September 19, 2006

RE: 2005 Salary and Benefit Survey

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Section 3.3.2 of the City of Homer Personnel Regulations requires the City to review our position classification system every five years and compare our positions to similar positions in the private and public sector. Our last external salary and benefit survey was completed in 2000.

In April 2005 surveys were sent to twenty nine cities and boroughs and six large local employers. Only a few cities responded to the initial requests due in May. In June a second request was sent. Fourteen responses were received from cities and boroughs by September. None of the local employers responded to the survey. Salaries and job descriptions have been reviewed and matched as closely as possible to determine an average salary for a comparable job description. The Parity Study was provided to Council in November for review. At that time due to budget discussions the Council requested we resubmit in 2006.

In 2006 the majority of job descriptions were reviewed and several salaries increased as a result. The salary increases and 2% Cola on January 1st have been included in this updated 2005 Parity Survey. No other information was updated.

Included are recommendations and a resolution for Council to approve and authorize the City Manager to incorporate the recommendations into the 2007 budget. I have also included some historical data for reference.

RECOMMENDATION: Approve Resolution 06-134.

FISCAL IMPACT: $275,211for 2007 budget.

2005 SALARY AND BENEFIT SURVEY

RECOMMENDATIONS AND FINDINGS

Recommendation #1: 3% COLA effective 1-1-07 estimated budget cost for 2007, $210,546.

Finding #1: Entry wages were 78% below average with 22% above average. Overall Homer’s entry salaries were between 0-10% lower than other cities. In the last 10 years the Anchorage Consumer Price Index has risen 21.5% while City cost of living increases totaled 11%.

To recruit and retain qualified employees Homer needs to provide competitive salaries and annual Cola’s to meet the cost of inflation. The average length of City employment is 7.5 years. 43% of the city workforce is over 51, 35% is over the age of 41. The City can expect a large turnover of employees during the next five years as 23% of city employees are eligible to retire.

The City has been able to recruit employees in the past even with lower salaries due to our excellent retirement and health insurance benefits. That has changed with the new Tier IV retirement program. Tier IV basically offers the same type of retirement program available in the private sector. With the adoption of Tier IV employees will have an 8% mandatory contribution to PERS (Tier I, II, III contribute 6.75%, except police and fire who contribute 7.5%). With the reduction of benefits in the retirement program the city needs to insure our salaries remain competitive to be able to recruit employees.

In the 2005 initial parity recommendation an 8.5% Cola was suggested to increase salaries to meet the Anchorage CPI for the last 10 years. The Council added a 2% Cola in the 2006 budget. After reviewing the updated salary averages and considering the impact of the increased PERS rate for 2007 a 3% Cola is being requested for 2007.

Recommendation #2: Revise the wage schedule to change merit/longevity steps increases from every two years to annually. Estimated budget cost for 2007, $36,281.

Finding #2: Ending salaries are higher than most cities but Homer has more salary steps (15) and requires a longer period of time to reach the end of the salary range. Homer has 9 one year steps and 6 two year steps. The average wage schedule was 10-15 years, Homer’s 19 ½ years. The largest discrepancies in salaries appeared to be among Directors with entry salaries 10-17% lower.

In several skilled positions such as Directors in order to attract qualified applicants the City has offered salaries 4-6 steps above the entry wage. New employees reach the end of the annual pay scale within 3-5 years and thereafter only receive pay increases every two years. Currently 40% of city employees are in longevity and receive salary increases every two years. Compressing the wage schedule allows employees to move up the pay scale faster to provide competitive salaries to retain skilled employees.

We have discussed eliminating the first four entry salary steps but there are already several positions in the city that have comparable entry wages to the private and public sector. Eliminating the first four steps would also require reviewing existing employee salaries to ensure that new hires were not being paid more than current employees with 1-3 years of service.

We recommend against eliminating these entry salary steps. The current policy of increasing steps based on need or skill requirements for each particular position is more practical.

Recommendation #3: Provide a 40 hour of sick leave bank for employees. No estimated budget increase for 2007.

Finding #3: Employee leave time is low compared to most cities except for long term employees. Several cities have separate leave and sick banks. In 1986 the City combined sick and vacation banks into one annual leave bank. Employees are reluctant to use their leave bank for sick time and often come to work sick. The sick bank could not be cashed out when an employee resigns and only 40 hours per year would be allowed. Not all employees would use 40 hours annually.

Recommendation #4: Provide pro-rated leave and holiday pay for regular part-time employees at date of hire. Estimated budget cost for 2007 $10,584.

Finding #4: Currently the city provides pro-rated leave and holiday pay for regular part-time employee’s after they complete 5 years of employment. Regular part-time employees are those defined as working regular schedules of 20, 24 or 28 hour workweeks. We have 7 part-time employees. Four currently receive pro-rated leave and holiday pay. This recommendation would provide regular part-time employees with pro-rated leave and holiday benefits from the date of hire without waiting five years. Benefits would be based on the same schedule as full-time employees but pro-rated based on the hours a part-time employee is scheduled to work. Providing leave and holiday pay gives the city a valuable tool in recruiting and retaining part-time employees.

Recommendation #5: Increase on-call pay from $2.00 to $3.00 per hour. Estimated budget cost for 2007, $17,800.

Finding #5: We currently pay $2.00 an hour for on call pay. Employees are on call in the Police, Fire, Port and Public Works Departments. Scheduled employees are required to be available 24 hours a day, 7 days week 365 days a year to respond to call outs for all types of emergencies such as, police and fire calls, winter plowing and sanding, water and sewer line breaks, flooding and water and sewer treatment plant alarms. The on call pay policy was adopted in 1984 with only one increase in 2001.