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HomeMy WebLinkAboutStaff Report 4.B 05/21/2012 Ag-eii wItemv#4.3 2Ar p X85s DATE: May 21, 2012 TO: Honorable Mayor and Members of the City Council FROM: John C. Brown, City Manager SUBJECT: Resolution Maintaining the City of Petaluma Living Wage Rate at $12.65 Per Hour with Employer Contribution Toward Medical Benefits and $14.20 Per Hour Without Employer Contribution Toward Medical Benefits, for the 2012-13 Fiscal Year RECOMMENDATION It is recommended that the City Council adopt the attached Resolution Maintaining the City of Petaluma Living Wage Rate at $12.65 Per Hour with Employer Contribution Toward Medical Benefits and $14.20 Per Hour Without Employer Contribution Toward Medical Benefits, for the 2012-13 Fiscal Year. BACKGROUND The Living Wage Ordinance was approved and adopted 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 on 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 recent adjustment of the pay of non-safety, non-management employees, but no more than the most recent December to December Consumer Price Index for San Francisco-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 adjustment would be effective on July 1. Agenda Review: City Attorney Finance Director City Manager Last year, based on the December to December increase in the Consumer Price Index for the San Francisco-Oakland-San Jose (CPI-U) area between 2009 and 2010, the City Council adopted Resolution 2011-096 which increased the Living Wage rate by 1.5 percent effective July I, 2011. 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. DISCUSSION The December 2010 to December 2011 change in the CPI-U for the San Francisco-Oakland-San Jose area is a 2.9 percent increase. if the Council approves this COLA, the Living Wage will increase to $13.02 per hour with an employer contribution toward medical benefits and $14.61 per hour without that contribution. This adjustment is not recommended because of the adverse impact it will have on City finances. It will increase the wages of a limited number of positions at a time when, due to budgetary constraints, no other positions are receiving COLAs for the sake of cost containment. While the Ordinance provides that the Council may conduct an annual review of the Living Wage to assess any potential adverse impact and may modify or suspend a 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 8.36.050 (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 an emergency exists which requires a waiver." The Ordinance does not define an emergency. City budgets have been reduced each year, starting with 2008-09, to offset declining revenues. 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 during that time. During this same time, the City's General Fund reserves were exhausted. This leaves the City vulnerable to unforeseen circumstances, creates cash flow shortages and resulted in the downgrading of a City bond rating. Earlier this year the Council reviewed the updated Five-Year financial forecast. The forecast continues to project deficit between revenues and expenses, without the occurrence of significant correction.. Council directed staff to reduce expenditures by $1.6 million in 2012/13 to bring revenues and expenditures into line through the forecast period. These reductions have been made in the budget recommended for 2012/13 and, unfortunately, include terminating a limited term Police Officer position, freezing vacant patrol and dispatch positions, and laying off an Animal Control Officer. O-' Although increasing the living wage has a small impact on the City's overall finances, it is an expense the Council can choose to avoid, unlike health premiums and retirement benefit rates that are set outside the Council's jurisdiction. Avoiding added costsreduces the effort that must be made to balance revenues and expenses. By itself, the cost of increasing the Living Wage does not appear to have a detrimental impact on the City's finances. When viewed as part of a cumulative total of cost increases which threaten the City's ability to live within its means, however, any negative impact should be avoided. Therefore, to avoid cost to the General Fund at a time when further reductions are sought, it is recommended that the Living Wage be maintained at its current level of$12.65 per hour with employer contribution of at least$1.50 per hour per employee toward medical benefits and $14.20 per hour without employer contribution toward medical benefits, for the period from July 1, 2012 through June 30, 2013. This decision currently affects 46 part time City employees. Seventeen of these occupy Living Wage positions, the balance are benchmarked against the living wage positions. Together, these positions represent a combined 2011 payroll of$382,186. This would increase to $393,270 if the 2.9 percent COLA were applied. During the economic downturn, the Council has twice chosen to increase the Living Wage, indicating that those who are benefitted by the adjustment are viewed as being in a more precarious financial situation than are employees with greater compensation. Also attached, for the Council's approval is a resolution increasing the living wage by the 2.9 COLA, if it is the Council's pleasure to exercise that alternative again this year. FINANCIAL IMPACTS There is no cost associated with the recommended action. In the alternative, increasing the living wage by 2.9 percent will result in an estimated increased cost to the City in FY 2012-13 of $11,083. The General Fund's share of this cost is $9,497. ATTACHMENTS 1. Resolution—Maintaining the Living Wage for FY 2012-13 2. Resolution— Setting the Living Wage for FY 2012-13 Resolution No. 2012- N.C.S. Of the City of Petaluma, California MAINTAINING THE CITY OF PETALUMA LIVING WAGE RATE AT $12.65 PER HOUR WITH AN EMPLOYER CONTRIBUTION TOWARD MEDICAL BENEFITS AND $14.20 PER HOUR WITHOUT AN EMPLOYER CONTRIBUTION TOWARD MEDICAL BENEFITS, FOR THE 2012-13 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, 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 maymodify 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 $12.65 per hour if a contribution of at least 51.50 per hour per employee is paid by the employer toward the cost of medical benefits; and $14.20 per hour without said contribution toward medical benefits; and, WHEREAS, the December to December Consumer Price index for San Francisco-Oakland-San Jose (CPI-U) indicates an overall increase of 2.9 percent in Bay Area consumer prices from December 2010 to December 2011 and WHEREAS, after three years of budget reductions the City continues to struggle to bring expenses in line with revenues, and the City Council has directed staff to reduce expenditures by$4,000,000 in2011-12 to balance revenues and expenditures through 2014/15 and to begin to re-establish reserves; and WHEREAS, the City Council has directed staff to attempt to implement budget reduction strategies that include actions intended to curtail expenses through cost avoidance, and cost avoidance will reduce the wage concessions that may be needed from City Employees, and/or lay-offs that may otherwise be required, to balance revenues and expenses; and WHEREAS, increasing the Living Wage for 2012-13 will add to the currently projected imbalance between revenues and expenses. 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 2012 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 2012 at the current level of $12.65 per hour with an employer contribution toward medical benefits of at least $1.50 per hour per employee; and $14.20 per hour without said contribution. Resolution No. 2012- N.C.S. Of the City of Petaluma, California SETTING 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 2012-13 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, 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 pursuant to Chapter 8.36 is $12.65 per hour if a contribution of at least $1.50 per hour per employee is paid by the employer toward the cost of medical benefits; and $14.20 per hour without said contribution toward medical benefits; and, YJ WHEREAS, the December to December Consumer Price Index for San Francisco-Oakland-San Jose (CPI-U) indicates an overall increase of 2.9 percent in Bay Area consumer prices from December 2010 to December 2011 . NOW, THEREFORE, BE IT RESOLVED that pursuant to Petaluma Municipal Code Section 8.36.060.D, the City Council adopts a 2.9 percent COLA adjustment to the Living Wage and effective July 1, 2012 the Living Wage is $ 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.