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HomeMy WebLinkAboutStaff Report 4.B 05/20/2013 • ARC'' 'Tteni #4.3 r DATE: May20, 2013 TO: Honorable Mayor and Members of the City Council FROM: John C.Brown, City Manager SUBJECT: Resolution To Establish the Living Wage Ratefor-the.2013-2014 Fiscal Year. RECOMMENDATION Staff recommends:that the City Council determine Council policy and+adopt one of the two attached Living Wage Resolutions,;as appropriate. One Resolution increases the Living Wage by 2.2 percent, and the second Resolution leaves the Living Wage at the current level. BACKGROUND The Living Wage Ordinance was approved andsadopted effective_December 20, 2006. The Ordinance established an initial wage of$11.70 per hour with an employer contribution of at least $1,50 per hour per employee toward medical benefits, and$13.20 per hour without contribution:toward benefits.. Petaluma Municipal Code Chapter 8.36 (the Living Wage Ordinance),at Section 836.060(D) provides that the initial rate: "be increased annually an,July 1, in accordance with,any increase due to a cost of living adjustment for City employees, equal to the average cost of living adjustment (excluding equity pay increases) for all City non-safety, non-management employees as of the date of the most recentadjustment of the pay of non-safety, non-management-employees, but no more than the most recent December to December. Consumer Price Index for San Frandisco'Oakland-San Jose (CPI=U), published by the Bureau of Labor Statistics". The;Ordinance also provides that the City Council may review the impact of the cost of living adjustment (COLA) on an annual basis to assess any potential adverse impact and may modify or suspend adoption of a COLA otherwise allowed by this subsection. Pursuant to the Living Wage Ordinance, any adjust'rneht would be effective on July L Last year, based;on the December 2010 to December 2011 increase in the Consumer Price Index for the San Francisco-Oakland-San Jose (CPI-U), the City Council adopted Resolution N 0..2012- 069 N.C.S which;increased the Living Wage rate by percent effective July 1, 2012. Agenda Reve city.Attornej Finance Dire tor ��• City Managda 1 Under the Ordinance;,any annual adjustment applies only to the base wage. An inflator does not apply to the $1.50 contribution to medical benefits. That amount remains constant regardless of changes in the cost of medical coverage. If an employer chooses to pay the higher hourly wage, however, the entire wage-is;subject.to CPI adjustment. History of Living Wage:Adjustments ;LW.Rate LW Rate - Effective %. With Medical without Increase; Medical Contribution Medical Contribution Rate Contribution $11.70 $1.50 $13.20 12/20/2006. Established $12.14 $1.50 $13.64 1/1/2008* 3.30% $12.46 $1.50 $13.99 7/1/2010 2.60% $12.65 $1.50 $14.20 7/1/2011 1.50% $13.02 $1.50 $14.61 7/1/2012 2.90% $13.31 $L50 $14.93 7/1/2013 2.2 0A** * City used-Oct to Oct 2007 to adjust CPI; Dee to Dec 2008 CPI Was 0% ** Proposed adjustment in staff report DISCUSSION The December 2011 to December 2012 changein the CPI-U for the San Francisco-Oakland-San Jose area is a 2.2 percent increase: If the Council approves this COLA, the Living Wage will increase-to $13.31 per hour With an employer contribution toward medical benefits and $14193 per hour without that contribution'. While the Ordinance-provides-thatthe Council may conduct an annual;review of the Living Wage to assess any potential adverse impact and may modify or suspend COLA based on that review, the Ordinance neither defines "adverse'impact'', nor dictates how a review must be conducted or what factors should be taken into consideration.. This provision was drafted to provide the Council discretion-to suspend COLA's for"any reason,the Council believes to be pertinent. In addition, Section 8.361050 (H), which governs waivers, indicates in part: "The City Council may also waive the requirements of this chapter if a majority of its members determines that mi emergency,exists which requires a waiver:"' The Ordinance does not define an emergency. The ending-General Fund operating balance'is•projected at $1.4 million at June 30 2013. That . balance is projected to be completely;eliminated by the end of the FY 14-15 fiscal year, and, without revenue.growth ore further expense reductions, fund balance is expected to be negative $2.3 million by the end of"the fiscal year ending June 30, 2017. City staff has completed preliminary work-on the 2013-1 4 budget and the City will ultimately need to resolve the projected deficits and rebuild reserves. • As of mid-year FY 2012-13, revenues are\anticipated'to be up $911,608 and expenditures are expected to be up $756,347. That has an overall,positive impact to projected fund balance of $155,261. However, the City's operating fund balance remains precariously low at approximately 4% of expenditures,in the General Fund. Council's""recent policy direction calls for total reserves equal to 17% ofekpenditures. Council has directed $1,084,777 of recently received.one-time revenues to go,into a,designated reserve..As'of Juhe;30, 2014 the total General Fund balance (designated undesignated) is projected to be $1.7 million. This represents 5% of expenditures and-is a far cry from dthe recently directed policy of 17%. It is important to note that an unexpected revenue shortfall or expenditure increase could deplete fund balance. All budgets, especially salaries and benefits, remain very tight. Except for employees subject to the Living Wage and the positions benchmarked to those positions, no new COLA adjustments have been granted,to any City employees since 2008. There is no provision for employee cost of living adjustñiehthlri in the budget or financial forecast. Future financial challenges includersignificant PERS rates increases and possible health care cost growth beyond the City's assumed rate of 9%. An updated cost allocation plan, along with internal service fund cost allocation;studies are planned in the upcoming-fiscal year. The forecast does not contain any provision for impacts realized as a result of those.studies. The City's.Liability Insurance Fund has recently incurred significant expenses for claims paid. This fund may need a contribution fain) all funds, includingahe General Fund, in order to pay for future claims. Staff believes these factors justify Tdecision on the Council's part to maintain the Living Wage at existing levels for the coming year A resolution supporting policy choice:is provided, if that is the Council's preference. Past Council decisions supported increasing the Living Wage despite the City's otherwise difficult:financial position. If Living Wage were increased by 2.2' percent, this decision currentlywould affect nineteen einployeesin.Living Wage positions and twenty-nine employees in part time Recreation„Services positions benchmarked to living wage positions. Together, these positions represent a combined 2012 payroll of$350,814. This would increase to $358,533 if the-2 2 percent COLA were applied. Also attached, for the Council's approval is a resolution maintaining`the living wage, iffrit is the Council's pleasure to exercise that alternative this year. FINANCIAL IMPACTS Increasing the living wage byi2,2 percent will result in an estimated total increased cost to the City in FY 2013-2014 of$7,718, $3,792 for Living Wage positions, and $3,926 for benchmarked part-time,Recreation Services positions. The General Fund's share of this cost is $6,461. In the alternative, there is no cost'associated with maintaining'the living wage. ATTACHMENTS 1. Resolution— Setting the Living,Wage for FY 201 3-2014 2. Resolution–Maintaining°the Living Wage�+forFY2013-2014 Resolution No. 2013- N.C.S. Of the City of Petaluma, California SETTING THE CITY OF PETALUMA LIVING WAGE RATE AT $13.31 PERtHOUR;W_ITH AN EMPLOYER CONTRIBUTION TOWARD MEDICAL BENEFITS AND $ 14.93 PER.HOUR WITHOUT AN EMPLOYER CONTRIBUTION TOWARD MEDICAL BENEFITS-, FOR THE 2013-2014 FISCAL YEAR WHEREAS, the City Council of the City of Petaluma established a Living Wage Required for Specified City-Funded Contracts and City Employees, by adopting Ordinance No. 2256 N:C.S., effective December 20, 2006; ("the Living Wage Ordinance"); and, WHEREAS, the Living Wage Ordinance is codified at Chapter 8.36 of the.City of Petaluma Municipal Code; and, WHEREAS, Municipal Code Section 8.36.060.D, provides that the Living Wage rate shall be increased annually on July 1, in accordance with.any increase due to a cost of living adjustment tfor City employees, but no more than the most recent December to December Consumer Price Index for San Francisco-Oakland-San Jose(CPI-U); and, WHEREAS, Section 8.36.060.D further provides that the City Council may review the impact of the cost of living adjustment (-"COLA") on.an annual basis to assess any potential adverse impact-and may modify or suspend adoption of a COLA otherwise allowed by the subsection; and, WHEREAS, the initial Living.Wage rate in 2006 was $11.70 per hour with an employer contribution of at least $1.50 per hour per employee toward medical benefits and $13,20 per hour without said contribution; and, WHEREAS, the current Living Wage pu'r'suant to Chapter 8.36 is $13.02 per hour if a contribution of at least $1.50 per hour per employee is paid by the employer towardthe.costof'medical benefits; and $14.61 per hour without said contribution toward medical benefits;,and, 1-+ WHEREAS, the December to December Consumer Price Index for San Francisco-Oakland-San Jose (CPI-U) indicates an overall increase of 2.2 percent in Bay Area consumer prices from December 2011 to.December 2012. NOW, THEREFORE,.BE IT RESOLVED that pursuant to Petaluma Municipal Code Section 8.36.060.D, the City Council adopts a 2.2 percent COLA adjustment to the Living Wage and effective July .1, 2013 the Living Wage is $13.31 per hour with an employer contribution toward medical benefits of at least $150; per hour per employee; and $14.93 per hour without said contribution. 3 Resolution No. 2013- N.C.S. Of the City of Petaluma, California. MAINTAINING THE CITY'OF PETALUMA LIVING WAGE RATE AT $13.02 PER HOUR WITH AN EMPLOYER CONTRIBUTION TOWARD MEDICAL BENEFITS AND $14.61 PER HOUR WITHOUT AN EMPLOYER CONTRIBUTION TOWARD MEDICAL BENEFITS, FOR THE 2013-2014 FISCAL YEAR WHEREAS, the City Council of the City of Petaluma established a Living Wage Required for Specified ;City-Funded Contracts and City Employees; by adopting Ordinance No. 2256 N.C.S., effective December. 20, 2006; ("the Living Wage Ordinance"); and, WHEREAS, the.Living Wage Ordinance is codified at Chapter 8.36 of the City of Petaluma Municipal Code; and, WHEREAS, Municipal Code Section 8.36.060.D, provides that the Living Wage rate shall be increased annually on July 1, in accordance with any increase due to a cost of living adjustment for City employees, but no more than the most recent December to December Consumer Price Index for San Francisco-Oakland-San Jose (CPI-U); and, I WHEREAS, Section 8.36.060.D further provides that the City Council may review the impact of the cost ofliving;adjustment ("COLA"),on,an.annual basis to assess any potential adverse impact,and may modify or suspend adoption of a,COLA otherwise allowed by the subsection;':and, WHEREAS, the initial Living Wage rate in 2006 was $11.70 per hour with an employer contribution of at least $1.50 per hour per employee toward medical benefits and $13.20 per hour without said contribution; and, WHEREAS; the current Living Wage pursuant to Chapter 8.36 is $13.02 per hour if a contributionof,at least $1.50 per hour per employee, is paid by the employer toward the cost of medical,benefits; and $14.61 per hour without said contribution toward medical benefits; and, U/ WHEREAS, the December to December Consumer Price Index for San Francisco-Oakland-San Jose (CPI-U) indicates an overall increase of 2.2 percent in Bay Area consumer prices from December'201 Ito December.2012;,and, WHEREAS, the 2013-14 budget will require the City to resolve projected deficits and to begin to re-establish reserves;..and WHEREAS, except for•employees subject to the Living Wage and the positions benchmarked to those positions,:no new COLA adjustments have been granted to any City employees since 2008. There is.no provision for employee cost of living adjustments in the budget or financial forecast; and, WHEREAS, increasing the Living Wage for 2013-20.14 will add to the currently projected imbalance between revenues and expense . NOW, THEREFORE, BE IT RESOLVED that the City Council finds that increasing the Living Wage 'established pursuant to .Petaluma Municipal Code Chapter 8.36 by any amount for 2013 Would have an adverse.impact on the City. BE IT FURTHER RESOLVED that pursuant to Petaluma Municipal Code Section 8.36.060.D, the City Council declines to adopt a COLA adjustment to the Living Wage and maintains the Living Wage for 2013 at the current level of $13.02 per hour with an employer contribution.toward medical benefits of.at least $1.50 per hour per employee; and $14.61 per hour without said contribution.