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2001-01-10 AdjournedJanuary 10, 2001 (Adjourned Meeting) (Page 1) An adjourned meeting of the Board of Supervisors of Albemarle County, Virginia, was held on January 10, 2001, at 4:30 p.m., Room 235, County Office Building, McIntire Road, Charlottesville, Virginia. The meeting was adjourned from January 3, 2001. PRESENT: Mr. David P. Bowerman, Mr. Lindsay G. Dorrier, Jr., Ms. Charlotte Y. Humphris, Mr. Charles S. Martin (arrived at 4:45 p.m.), Mr. Walter F. Perkins and Ms. Sally H. Thomas. ABSENT: None. OFFICERS PRESENT: County Executive, Robert W. Tucker, Jr., County Attorney, Larry W. Davis, and Clerk, Ella W. Carey. Agenda Item No. 1. The meeting was called to order at 4:33 p.m., by the Chairman of the Board of Supervisors. Since the School Board had not had its organizational meeting, Dr. Ward asked if, according to School Board Policy BDDD, he could call the School Board to order. School Board members agreed, and Dr. Ward called the School Board to order. Dr. Ward then introduced Ms. Mary Rodriguez, the newly appointed Rio District representative on the School Board. SCHOOL BOARD MEMBERS PRESENT: Mr. Kenneth C. Boyd; Mr. R. Madison Cummings, Jr.; Mr. Gary W. Grant; Mr. Stephen H. Koleszar; Ms. Diantha H. McKeel; Ms. Mary C. Rodriguez; and Dr. Charles M. Ward. SCHOOL BOARD MEMBERS ABSENT: None. OFFICERS PRESENT: School Division Superintendent, Dr. Kevin C. Castner; Deputy County Attorney, Mark Trank; Assistant Superintendent for Support Services, Dr. Frank E. Morgan; Director of Human Resources, Michael Thompson; and Acting Clerk, Jennifer Johnston. ________________ Agenda Item No. 2. Compensation and Benefits Strategy. Ms. Karen G. Collins, of Palmer & Cay Consulting Group, said she would first give a brief back- ground of the Consulting Group’s charge, for the benefit of the new School Board member. She was hired by the two Boards to work with the Task Force, which is representative of both Boards, as well as the community, and representatives from the school system and general government. Their goal was to try to agree on a compensation strategy, an external competitiveness review and a source as direction to follow when developing a salary budget process. The Task Force has been meeting every two or three weeks for approximately two to four hours, and its members deserve a lot of credit, because the meetings ran from very informative to sometimes very tedious. She said these are very controversial issues, and it is a very diverse group of people involved in this matter. At the end of the last meeting, members of the two Boards charged Ms. Collins to come back to this meeting and propose a base salary structure adjustment, which involved a consensus from the Task Force, as to how they could adjust the County’s base salary structure to get at market level. Ms. Collins said as far as the proposed process for addressing pay compression, one of the issues that came forward from the External Competitiveness Analysis is that the County is behind market level. She commented that County officials would like to make sure they don’t just change their salary structure, but they also want to examine the situation for tenured employees as far as pay compression is concerned. A cost analysis associated with these first two items cannot be considered as far as just how it impacts salaries, but benefits that are linked to salaries also have to be examined. She added that sometimes if an item is increased $1.00, the budget is actually increased by $1.17 because 17 percent is linked to salary related benefits. She said a proposed source for a budget increase for 2001-2002, which could be used in subsequent years, is also desired so the County would not be going through a five month process and a dozen meetings to just get to a starting point figure. Ms. Collins then called attention to the overall Compensation Benefits Strategy which is to support the goals and interest of the general government and school system. County officials want to attract and retain high performing employees in order to go forward with their initiatives. The schools’ goals are to accredit all 25 (including the new elementary school just being built) of the County’s schools; increase the standards of learning scores; decrease the gap between minorities and whites, and increase the number of minority school teachers. She stated that the general government will need the best and brightest people to achieve its initiative. She said to motivate and empower employees to these initiatives the joint Boards have put forth to the community the goal to reward innovation and performance, maintain internal equity and external competitiveness, support teamwork and promote ease and flexibility. She pointed out that she is referring to paying employees when she talks about promoting ease and flexibility, and it is not a complicated procedure. She said everybody has a base salary, and a decision has to be made about an increase each year. She stated that increases depend on what the market is doing and what the County can afford. Ms. Collins went on to say that for specific initiatives within this Compensation and Benefits Strategy, this diverse group reached consensus on certain points which were supported by the joint Boards at the last meeting. As far as the competitive labor market is concerned, schools of similar size within the entire State of Virginia have been counted, as well as counties and schools located nearby within driving distance regardless of size. The base salary should be set at market level, and this refers to the median and should be targeted at market level. She commented that focus needs to be put on internal equity, as well as benefits. County benefits are running about five percent above market level which should be January 10, 2001 (Adjourned Meeting) (Page 2) maintained for employees. She remarked that this was also supported by the joint Boards at the last meeting, as well as the focus groups of employees, and the Task Force. Ms. Collins next noted that the External Competitiveness Review was presented at the last meeting of the joint Boards. The Compensation Benefits Strategy was established, and this was a result of the External Competitiveness Review. She stated that data can be examined in any way, but this data was examined in every way possible, so nothing would be left out. She said the averages used show the County further behind market level. She added that averages are always weighted toward highs and lows. However, the median is considered a pure number when it comes to compensation, because it discards the highs and lows, and it is the exact middle of all the data points. She said the median was used in terms of the consensus within the Task Force. She noted that there was also a discussion about salary differentials and geographic differentials. She stated that when data is pulled across the state, there are some cities where the cost of living is different from the cost of living here, and this is called geographic differentials. The salary differentials relate to the cost of labor by taking the average salary paid in a certain place and the average salary paid here to find the differential. She said the Charlottes-ville and Albemarle County area is one of those odd places where there is a geographic differential, and the cost of living is higher than the salary differential. This means people get paid less money to live here, although it costs more. She emphasized that she would not discuss the cost of living because the cost of goods and services are not being discussed. She is talking about the cost of labor so she is discussing the salary differential which is the cost of labor here versus the cost of labor in other cities. She indicated that this is why the median with salary differentials of 4.4 percent was highlighted because this percentage was examined with some caveat to the 4.7 percent median. These were the actions that reached con-sensus with the terms of Compensation and Benefits strategy, as a result of the External Competitiveness Review. She stated that she would go through the details of the numbers, and she would show the costs, which means that this has to do with salary and benefits that are linked to salary. She said the schools were a little over 17 percent and the general government was slightly over 16 percent. She commented that if general government is increased $1.00, it actually increases the budget by slightly over $1.16. Mr. Boyd asked if medical benefits is the only thing left out of the Compensation and Benefits Strategy. Ms. Collins answered affirmatively, because the cost for medical expenses is not linked to salary. She said the increase in medical expenses has to do with health care providers and the usage percentages, etc. Mr. Boyd then pointed out that it seems nine percent is being lost in the equation for the overall benefits. Ms. Collins disagreed. She noted that the increase relates to salary, but medical costs will stay the same, unless there is an increase in the County’s medical care coverage. She said just because the salary budget is increased, it does not mean medical benefits are increased at all. Mr. Boyd inquired if total compensation would be inflated because of the medical costs. Ms. Collins answered that this is not necessarily so. She explained that medical costs are already being paid, and they will not increase just because salaries are increased. She said they could go up, for example, if the number of employees is increased. If employees’ salaries up to midpoint were adjusted for general government, which is the pay compression issue, it relates to an increase in salaries currently being paid and the effect it has on benefits. She said the total increase for general government by addressing pay compression at midpoint is $378,594. Mr. Boyd emphasized that although medical benefits may not be tied to this equation, it is certainly an expense that increases and decreases, and it is part of the benefits package the County provides to its employees. He noted that this year the cost of medical expenses is projected to increase by 13 percent. Ms. Collins concurred. However, she reiterated that although it is a cost of compensation, it is not related to salaries. She again stated that compensation relates to cash and benefits. Ms. Collins noted that the increase to which she is referring is based on the Task Force recom- mendations of $378,594 for salaries plus benefits for general government. She said the adjustment at midpoint for classified school system employees is $247,975. She added that the cost associated with the teachers’ scale adjustment, which puts it at market level and involves the competing school systems with the application for salary differential, is an overall salary structure adjustment of $668,000, including benefits. She said this is slightly over one percent. She emphasized that the total increase to address pay compression to get the County to market levels for general government and the school system, based on the Task Force recommendations, is approximately $1,295,000. This does not include the increase for next year, which is a Board related issue. She said the issue for the Task Force was to recommend an adjustment to the pay scales and address pay compression as far as the impact on the County’s budget. She stated that these are conservative numbers, and in no way did the Task Force pick the highest number possible. She said when it came to addressing the scale for general government employees, the Task Force adjusted the scale by four and one-half percent which was in line with the median with the salary differential. She commented that if the External Market numbers are considered, they could be over seven percent. She explained that some people were advocating for addressing pay compression all the way to the maximum, and some people wanted to address it up to the 75th percentile. She commented that others, including herself, wanted to consider it up to the midpoint, and consensus was finally reached on spreading employees to the midpoint. She remarked that a new employee should be at the minimum, and if an employee has seven or more years he or she should at least be at midpoint. She explained that she is talking about years in a position and not years with the County. She said an employee may have been a manager for one year, but that person could have been with the County for 20 years. In this type of situation, he or she would only get credit for one year when it relates to pay compression. She said the Task Force was very conservative and impressive, and they didn’t base their recommendations on costs. She stated that it took a lot of discussion about the right and externally competitive thing to do. Ms. Collins remarked that the current base salary structure figure of four and one-half percent has to be adjusted now to get to market level. She said when a scale is adjusted, no employee should fall below the minimum for a job. The cost associated to reinforce the minimum is $63,000, not including the January 10, 2001 (Adjourned Meeting) (Page 3) teachers’ scale. She said there was discussion that this might exacerbate the fact of pay compression, and the question relates to whether the employee is at market level if that person has been with the County ten years and is at the minimum. This is the reason pay compression was addressed. She noted that in Albemarle County a classified employee is anybody who is not a teacher. However, in other states, teachers are considered to be classified employees. An initial adjustment of employees based on years in position was established, but there was a lengthy argument related to years with the County and years in position and whether or not prior years should be considered. For example, if an employee had ten years experience before coming to the County, should it also be counted. She is giving all of the background information so Board members will not think these things were not discussed at length when an issue arose. The thought was to focus on people within Albemarle County, and not what they had done before employment here. She remarked that years in position within Albemarle County was considered because it would not be fair if someone else had been a manager for five years, but a ten year employee was being paid more than the person who had been a manager for five years. This is another form of pay compress- ion. The group finally settled on years in position and decided to spread employees from minimum to midpoint. She said last Wednesday there was one last heated discussion of whether or not this arrange- ment would be in line with the market level or if people would have to be spread up to the 75th percentile. She indicated that she made the argument again that when years in position are considered and people get beyond the midpoint of their range, anything beyond that should really be based on performance. Ms. Collins again discussed the total cost for benefits and base salary for classified employees in the school system and general government and she explained that this is an adjustment in base salary and the impact on salary related benefits. She thinks these are very reasonable numbers because in the beginning the figures were much higher, and now they are in line with the County’s strategy for getting to market levels. Ms. Collins said credit should be given to Albemarle County teachers. She remarked that she deals a lot with teachers’ unions across the country. The firefighters union is considered to be the best negotiator, but the teachers are just below that when it comes to advocating. She stated that the County teachers were very realistic because usually if an adjustment is made to one step on the teachers’ scale, every single step has to be adjusted the same amount. This was difficult with the County’s salary scale because different points on the scale were different from the external market. She remarked that an overall scale adjustment of a certain amount would not accomplish the goal, because it would have overpaid some teachers and underpaid others. It was finally decided to take the actual teachers’ scales from the competitive market of ten to thirteen school systems and get the median for Step Zero which is the first step, as well as setting five year increments. The median is based from the salary differential which means most scales were adjusted downward as if the person was working here. Every fifth step was then set at market level to the dollar. She said an even displacement of the five steps in between the increments was also done. There was an overall salary structure adjustment of 1.25 percent and it put the teachers’ scale at market level. the approximate cost of cash and benefits was $668,746. She stated that the first step is set at $30,000, and the market median was actually $29,600. She noted that this is the same as the City of Charlottesville. She added that a differential was created on Steps One through Three, since now a person stays at the same step for three years. This did not seem a way of attracting and retaining the best and brightest people. She noted, though, that every fifth step is still at market level. Mr. Koleszar asked if the figures mentioned would take effect on July 1, 2001. Ms. Collins replied, “yes.” the numbers she has been discussing are where the County should be on July 1, 2001, but it is independent of any salary increase given for FY 2001-2002. She noted that this will get the County to market levels. However, if it can’t be done 100 percent in one year, then it could be implemented over two years. Although, if it is spread over a two-year period, employees should be informed of the County’s goal and why it cannot be reached in one year. She recognizes that everyone has budgets, just as her private sector clients and Fortune 500 firms have budgets. She added that nobody has an unlimited amount of money to spend, and everybody is constrained by the money available. She emphasized that the numbers shown are where the County should be, as well as what it will cost to get to market levels. Mr. Dorrier inquired as to how much of the figure will be correlated to the cost of living in future years. Ms. Collins answered that this is a heated question. She explained that hours of work went into the figures, and a cost analysis was done for every single employee, including their starting dates in their current positions. Ms. Collins stated that the next question relates to how to avoid months of meetings and discussions to arrive at a starting point for a salary budget increase, as well as the source to be used. She added that the general consensus was WorldatWork, which used to be called the American Compensation Association. The Task Force, the County Executive and the Superintendent of Schools all wondered what type of criteria should be used when it comes to predicting the starting point as it relates to what the general market is going to do for its salary budget increase. She noted that the American Compensation Association (WorldatWork) was founded in 1955, and it is a not for profit association. Its sole purpose is to collect and disseminate data as it relates to cash benefits and the work environment. She said sitting on its Board on a rotating basis from year to year has always been people from Fortune 500 and Fortune 100 firms. The reason the Association was formed as a not for profit association is because all they do is collect data and disseminate it. She said starting about 12 years ago, the Associ-ation put together an entire curriculum, and it is the only recognized source when it comes to certifying compensation and benefits professionals. She remarked that the Association is also locally recognized. Mr. Grant asked if the information provided from WorldatWork is also for public use. He wondered if such information would be available from a public library, or if the person requesting the information would have to be a subscriber. Ms. Collins replied that a person would have to be a member of Worldat- Work to get the data. As far as salary budget increases, there is no free source for citizens. She said free information relates to economic indicators and cost of living indicators, etc. The cost associated with this January 10, 2001 (Adjourned Meeting) (Page 4) information is $75.00 on an annual basis. Mr. Thompson remarked that in the private sector most employees and managers can get this information. Mr. Grant stated that he was only trying to determine if the public has access to the information. Ms. Collins explained that when it comes to salary surveys, members of the public have access to information based on what the County is giving them. The survey for the County is public domain, and people can examine it. Compensation information, unless a person is in the compensation profession, is not generally accessible to the public unless they are paying for it. The consultants tried to look for a credible source, and WorldatWork has been used by the private sector. She said there are over 3,000 participants annually in this salary budget survey. The salary budget survey was put together 28 years ago, and every year the same 3,000 entities are asked what they actually gave last year in terms of cost of living, merit and total cash related increases. She said it is then broken out by region and industry, and it is used by every type of client she has ever had. It has only been during the last six or seven years that the public sector has gotten heavily involved in WorldatWork, and the reason is because the public sector has really changed, and it is growing more and more like the private sector every day. In the late 1980s and early 1990s, reinventing government, accountability in schools, etc., and attracting the best and brightest came into view. These were all new concepts in the public sector and with that the pay related to the public sector started to change and get more like the private sector. She stated that now competency based pay, broader bands, and performance based pay are popular, and public and private sectors are moving away from the term, “merit.” She said rather than cost of living, salary budgets are discussed. She pointed out that there used to be an inaccurate perception of people who worked for the public sector, and it was thought that they got paid less, and the benefits were not as good. In reality this is not true, and it soon became known in the early 1990s. She mentioned that the County’s budget is substantial, and large numbers of employees are involved. County officials need to make sure they are paying their employees right, and that their benefits are right and that there is accountability among employees. She stated that there has been a whole different idea when it comes to the public sector for the last three or four years. As a result, the IPMA has merged with WorldatWork within the last six months. She explained that the IPMA was the association for the public sector to bring more accountability to managing pay in the public sector. She said it is an indisputably credible source to start with for the County’s data, unless the County is only interested in giving cost of living increases. It is very rare if only a cost of living increase is given because it usually involves other things. She said the total salary budget is usually a compilation of things. Mr. Boyd referred to the External Competitiveness Review, and he asked if the published survey data of 12.4 percent is a WorldatWork figure. Ms. Collins replied, “no.” She explained that WorldatWork does not develop average salary information. Instead, it is a resource for people who develop compensa- tion programs and resource programs. The only survey WorldatWork runs every year is the linkage of pay to performance. It examines how people are paid versus shareholder returns, performance measures, etc., and it considers salary budget surveys. She said for teachers, actual scales were used. Mr. Boyd stated that it appears WorldatWork is an estimate based on a survey of people as far as what they are going to pay their employees in the future. It is really not hard data. Ms. Collins remarked that it really is hard data. She said people are asked what they pay their employees currently in terms of their salary budget increase, and what is predicted for next year. Mr. Boyd then asked if the information from the consultants is what is predicted to be paid next year. Ms. Collins replied affirmatively. She said County officials asked for this information. Next, Mr. Boyd noted that WorldatWork does not have a scenario built around what is defined as Albemarle County’s market. He added that the information is regional and can change based on the different regions. Ms. Collins responded that she has a ranking for the State of Virginia. However, a source for predictions for next year just for the State of Virginia in hard data doesn’t exist. The City of Franklin is one of her clients, and it is doing a survey involving the State of Virginia which inquires about pay for employees this year and what is predicted for next year. This survey began a couple of weeks ago, and there have been 13 responses. The highest budget increase for next year was six percent, and the lowest was two and one-half percent. The median was four percent and the average was 3.88 percent. Prince George County had the highest budget increase, and out of the 13 responses, five reported four percent. When it comes to figuring out a salary budget for next year, there will never be one number which stands out because there is a whole host of things that are involved. Her figures indicate that if the County was going to give a cost of living increase the range should be anywhere from 2.2 to 3.3 percent. She added that public administration is more consistent. She said Florida is a low paying state for education. She said it is very rare to just give a cost of living increase. When County employees are asked about their increases, they will tell you they have not had a salary increase for three years. When she points out to them the salary increase they actually received, they will say it was just a cost of living increase, and they did not get an increase in salary. As far as attracting, retaining and motivating employees, just a cost of living increase will not do it because they do not see it as an actual increase in their pay. They see it as just keeping up with the cost of living. She indicated that this is why very few public or private sector organizations just give a cost of living increase unless they have to do so because of budgetary concerns. For a merit increase, Ms. Collins stated that if the County chose an eastern sector-type of blending of education and public administration it would be around 3.5 to 3.6 percent. However, using a southern sector scenario, it would be approximately 3.7 percent. The national percentage is 3.7. The total increase is when the same entities are asked what they anticipate their total cash increase to be, which is a salary budget survey. She emphasized that the information on the grid is a credible source for the joint Boards, and it can be located every year. She stated that it will help County officials to make an informed decision as far as what they will do for salary increases. The grid gives a lot of information broken out by region, education, public administration, COLA/merit, and total cash, which is what County officials requested from the Task Force. She said they wanted a source that would provide such a grid, and then the joint Boards can make a decision as far as the amount of increases the County can afford. The source is really where the Task Force’s charge ends. She also noted that anyone who participates in the survey can get the survey for free. She advised that if Albemarle County became a participant, the survey with last year’s data January 10, 2001 (Adjourned Meeting) (Page 5) and next year’s data broken out by region and industry would be available as free information. Mr. Boyd inquired if the percentages include benefits. Ms. Collins responded negatively. She explained that it is only a salary budget survey. Ms. Collins stated that, according to the City of Franklin survey, a 3.75 percent budget increase is the average for Virginia, and four percent was the median. The 3.88 percentage figure shown came from a survey for the City of Deerfield Beach in Florida, and she apologized for the inflated number. She said the numbers are consistent, and it is just a matter of what source to access. A host of things can be examined with the grid because in addition to the grid, as a compensation consultant, numerous things can be derived from it. The school system may want to relate its charge to the grid which is to have all 24 schools accredited toward the Standards of Learning by 2002. The state has mandated it by 2007, and if these milestones are being achieved, then the high part of the spectrum should be examined. If the gap is being decreased between minorities and whites when it comes to test scores, then the County should be on the high end. She added that if the number of minority teachers is increasing and they are being retained because of their work environment, then the County should be on the high end of the spectrum based on performance. She said, though, if the schools are not achieving these goals, then the County should be on the lower end. If this is the case, County officials should indicate that it is because of budget constraints and the County cannot hit performance targets so the scale will be lowered. She stated that the County can relate performance because it has the grid. In terms of general government, the police force was just accredited so it has reached a major milestone. The Parks and Recreation Department is getting high marks in terms of keeping the playing fields clean and working closely with the school systems. The County funds not-for-profit agencies that provide services to adults and senior citizens, etc., and it is opening a new firehouse and working closely with the City of Charlottes- ville. Again, if it is performance related, the County should be on the higher end of the spectrum, but if performance goals are not reached then the County would be on the lower end. The County needs to think about these performance issues as well as what the County can afford, because this is the type of thinking County officials should communicate to their employees and the community. The decision on the grid is performance related, and if the County is going to recognize performance and the milestones it wants to achieve, then it should be in the higher end. As a community member here, she would like to have access to information as far as what the County has done for her and why it is a great place for her child to go to school. She mentioned that the school system decreased its bus routes from over 160 to approximately 130, and more children are being picked up on time. She noted that there are less complaints from parents, and there are all sorts of posi- tive things to indicate the school system is reaching its performance measures. She said performance, budget constraints and the compensation benefit strategy should be considered and then a decision can be made. She commented that the grid’s range, as well as the level of performance based on initiatives for this year, should be communicated to employees. The grid is a wonderful thing, and it doesn’t allow a lot of room for contention about the amount of increase the employer is giving. She said the County employees are high performing, and the County is trying to give them as much as possible within reason to be at market levels. She added that everybody’s intentions are good, but the message is getting confused. Ms. Collins said she was skeptical of the Task Force at first, but they came together with a consensus on a very diverse topic. She emphasized that the consensus from the Task Force is that it would like to see the scale for classified employees adjusted by four and one-half percent; pay compress- ion should be addressed up to the midpoint; the teachers’ scale should be adjusted 1.25 percent to be at market level; the WorldatWork source should be used to make a determination for the salary budget increase for July 1, 2001; and then an appropriate number for employees for the fiscal year 2001-2002 should be developed. She pointed out that the numbers on the subsequent pages of the information represent a total increase of 4.2 percent and the impact of this on cash and benefits related to cash. In addition, it includes the matter of spreading pay compression to midpoint, as well as the teachers’ scale. Ms. Thomas asked if the figures to which Ms. Collins referred are in addition to the $1,200,000. Ms. Collins responded affirmatively. She explained that the $1,200,000 is to get the County at market levels, but then there has to be an increase for next year. She emphasized that the numbers were figured on the basis of a 4.2 percent increase as far as what it would cost. She noted, though, that this is cash and benefits related to cash. She pointed out that if medical rates increase, they are not incorporated in the figures, because medical rates are not really cash. They are related to the number of employees the County has, the number enrolled in the medical program, the usage and the fact that medical costs will most likely go up this year. Ms. Thomas wondered if the numbers on Pages Five and Fourteen should be added together to get the total cost. Ms. Collins informed Ms. Thomas that the total cost is shown on Page Fourteen. Mr. Bowerman stated that pay compression just took place in the Police Department, and he thought that compression had been dealt with in the past. Yet, there is a $500,000 problem identified in this information. Ms. Collins replied that in the past the County took care of the problem with only a select group of employees wherever it was worse. She said the information she is presenting indicates the cost if the problem is dealt with all at one time. Mr. Koleszar indicated that the County has already dealt with compression, but this information shows that the County is 4.5 percent below market levels, which will present another costly compression problem. He pointed out that this information indicates that there are $68,000 worth of people who are below starting points, and there are also people from zero to seven years experience who are below where they should be on the scale. He said the compression number is a new figure created by being four and one-half percent below market level and adjusting the County’s scale to market. January 10, 2001 (Adjourned Meeting) (Page 6) Mr. Bowerman commented that he does not understand the situation. He went on to say the County has already handled compression, but then if there is a salary adjustment, the County will have to compress again. Mr. Koleszar explained that it is a scale adjustment and this adjustment causes compression. Ms. Collins pointed out that the County has never tried to get its strategies to be at market level. The market is the median of the entities examined, so the scale needs to be adjusted to get to this point. She said the employees will then have to be moved to locate them at the correct point, and it is an all encompassing situation. She stated that always before, County officials have worked within their structure and took care of the worse situations. They have never done the combination of getting scales at market levels and then addressing employees within the scales. She commented that if this had been done in the past, it would not cost the County anything today. Mr. Bowerman remarked that it appears total compensation costs are up six percent over last year. He asked for the total cost if the expected increase to benefits is added to the $5,000,000 figure presented by Ms. Collins. Ms. Collins answered that an additional seven to eight percent would be needed which would be approximately $350,000 to $400,000. She noted, though, that this is a predicted figure. Mr. Boyd remarked that medical costs cannot be separated from the whole compensation issue. He said medical costs certainly drive the cost of living, so increases are given based on the cost of living, which is partially because of the increase in medical expenses. However, the County continues to pay for all the medical expenses. He emphasized that he is not advocating that this should not be done. The reality is that companies generally ask the question of whether to give bigger raises for a certain year or will they give smaller raises and continue to pay all of the medical insurance. He emphasized that this is part of the equation. Ms. Collins concurred. She added that the question relates to what County officials are predicting for their salary budget next year. She said the grid is the best source to use because it deals with salary budget increases. Mr. Boyd stated that he understands Ms. Collins has to separate these issues for the type of information she is presenting at this meeting. He just wanted to remind Board members that medical expenses are a serious cost of benefits that have to be considered. Mr. Martin suggested that the best estimate for medical expenses could be added to the figures Ms. Collins has presented, so this informa-tion is before both Boards at all times. Mr. Koleszar mentioned the reduction in the VRS rate which will be in the County’s favor. Ms. Collins said the figures could be rerun to show this information side by side. She stated that the variable number is the 4.2 percent merit pool because the others are given to get to market levels. If this percentage is used, the figures she is presenting will relate to July 1, 2001. She commented that using the grid, the Boards have to decide the amount of salary increases they want to give their employees. Mr. Boyd stated that he would like to present a scenario for clarification. He said an employee made $100.00, and he got a $10.00 raise. In addition to that an extra $5.00 is paid on his medical expenses because the cost increases. He inquired if this will be considered a ten percent or a fifteen percent increase. Ms. Collins replied that it depends on who is asked this question. Mr. Boyd then asked about the cost to the organization. Ms. Collins answered that it would cost the organization 15 percent, but the employee would not agree. She said attracting, motivating and retaining employees is desired. Mr. Martin stated that he thinks everybody understands this. Mr. Bowerman referred to the $300,000 in benefits that has not been included. He said the predicted amount seems to be low. Ms. Collins stated that the overall cost of benefits as a percentage of payroll represents an approximate 25 percent growth. She remarked that the benefits are linked to compensation which means that if the salary is increased $1.00, it will actually increase the budget by an additional 16.5 cents for general government or 17.1 cents for the school system. She can run firm figures on the benefits if the Boards would like for her to do so. She can do some best guess scenarios which would add another seven or eight percent to the predictions. Next, Mr. Bowerman inquired about the 5.1 percent increase. Mr. Koleszar responded that the 5.1 percent increase includes salaries plus FICA, VRS, unemployment and everything that is a direct percentage of salary. Ms. Collins concurred. She said this is a heated issue, and she does not know how best to address it. It is an issue she empathizes with, and she can help with the numbers. However, a good job of explaining to employees that benefits are not entitlement, and there is a cost associated with them, has not been done. She said benefits have only been in existence for approximately 20 years, and they used to be seen as a way of attracting and retaining people. She stated that now people assume they are a given with a job, which is ludicrous, but the public sector has been especially hit hard on this issue. Mr. Perkins mentioned the Hendricks Study where the midpoint on the salary scale was the market level for that job. He said people may never achieve the midpoint. Ms. Collins said if someone never reached the midpoint, then consideration should be given to his or her future employment. Mr. Perkins stated that it seems as though Ms. Collins is saying that the County has compression at midpoint, and if a person has been with the County six or seven years, they should be at 75 percent toward the maximum. Ms. Collins answered that in this scenario, the person should be at least at the midpoint which is the market median. This would represent a seven or eight year employee. Mr. Perkins remarked that he does not think the County employees understand how the salary scale works. They do not understand how a new employee can make almost as much as others who have been with the County a longer period of time. He thinks everybody expects to reach the maximum, but this is not the case. Ms. Collins agreed. She said salary scales change every year, and she mentioned that January 10, 2001 (Adjourned Meeting) (Page 7) she has been in her current position for seven years. Mr. Perkins commented that when the average is four percent, if someone is below midpoint, that person might get a five or six percent increase. Once the employee gets above the midpoint, then he or she may only get a two and one-half or three percent increase. Ms. Collins concurred. She said Mr. Perkins is referring to a percentage at midpoint increase. Mr. Perkins remarked that there will always be compression. Ms. Collins disagreed, although she said there would be some compression around midpoint. Mr. Perkins reiterated that he does not believe employees understand the situation. Ms. Collins again suggested that the situation be communicated better to employees. Compression around the midpoint is not bad. She added, though, that if someone has been in a job for seven years, and a new employee is hired at the same amount of money, then this works against being at market level in terms of strategy. She explained that her idea is to spread the tenured employees upward from the minimum. Mr. Perkins stated that this is a reality. He mentioned a situation where an engineer could be hired at a $58,000 starting salary, but there is a person who has been in the same type of position for five years who is making $60,000. He said this could happen because the longer employee was probably hired at $45,000 five years ago. Ms. Collins agreed that starting salaries have gone up significantly. She went on to say engi-neers, planners and senior planners have very high ticket, high turnover jobs in general government. She added that it is hard to attract and retain them. Pay compression at the midpoint is not an issue, which is why it was not suggested that people be spread up to the 70th percentile. She commented that pay compression around the minimum, which is ten percent below the market median of the 40th percentile, is an issue. This means that people who have been employed for eight to ten years are making the same amount as someone new just beginning employment. She reminded Board members again about the charge of the Task Force. County officials agreed to a compensation of benefit strategy, and they said they would like to see some numbers developed to consider pay compression. County officials also asked for a recommendation and the cost of it, and the Task Force came to a consensus on these issues. She said County officials requested a source that would provide a grid with a range of numbers, which would be a credible source for salary budget purposes. She noted that the 4.2 percentage was the number on which the Task Force decided, although there were major dissenters. She remarked that the issue of what to choose from the grid is an issue for the Superintendent, the County Executive and the joint Boards, and should reflect what is being done in terms of performance this year as far as achieving strategic plans. Mr. Martin remarked that the Committee was made up of a very diverse group of people and not just public employees and public managers, but also the private sector, the Chamber and other organized groups. He stated that members of the two Boards hoped that a consensus on various things could be reached so they would not have to continually argue about the same issues from year to year. He believes this has been done to the extent that agreement has been reached that would put the County at 100 percent at market level when it comes to salary so this should not create an argument next year. He added that agreement has also been reached on the percentage of benefits, so this issue should not have to be argued every year. He stated that agreement has been reached on a source for pulling data together although there are some communication problems in terms of making sure the information is more widely available. He said now it is up to the members of the two Boards to decide, using the budget and available revenue, as to the amount of increase employees will receive. He stated that in order to get there by July 1, 2001, these are the numbers with which Board members will have to deal, plus the seven to eight percent for benefits not directly related to salary. Mr. Koleszar commented that agreement was also reached that this should be self-correcting in the sense that every year a survey should be done. He stated that the 4.2 percentage may prove to be too high or too low, but the survey will indicate whether or not the County is above or below the market level. He said the adjustment will then be made to the next year’s salary budget. Mr. Martin agreed that this should be kept as the County’s goal, and even though the goal may not be reached this year, there should be a diverse consensus of where everybody wants to be. Ms. Collins suggested that early in the budget process, all 17 survey participants should be called for information on their salary budgets. She said this is a half hour process and can be done in July or August. She stated that the median of these numbers should be used along with the grid from Worldat- Work which will show the necessary information for making an informed decision for the following year. It is easy to do, and the information can be made readily available to the public. She stated that it gives various information for COLA/merit, as well as market levels and the median of the market. County officials can then work from there, and they should make reference to where the County is in terms of meeting the strategic plan as joint Boards. As a community member, she wants to hear the linkage between what employees are receiving and what the County is accomplishing. Mr. Boyd remarked that Board members are considering three different things -- scale adjust- ments, the compression issue and salary increases for future years. He noted that the total figure of $5,100,000 Ms. Collins has shown is a large sum of money. He asked, from Ms. Collins’ experience of working with the public and private sector, if people normally commit themselves to such a large sum in one year. Ms. Collins answered, “no.” Mr. Bowerman wondered if once a number is mentioned if an amount less than the recommended one would disappoint employees. Ms. Collins again answered, “no.” Mr. Martin remarked that no amount of increase has been mentioned to employees yet, because the budget has not been developed. Ms. Collins said positive things need to be discussed with employees. She suggested sending out January 10, 2001 (Adjourned Meeting) (Page 8) an informational memo and having group meetings of employees to inform them that County officials examined where the County is in terms of salaries versus the market level. She said County officials could tell employees that they took the information seriously, and everybody has been adjusted up to midpoint to address pay compression. This is a wonderful thing to do and should not be considered as something that should have been done anyway. County officials should set a strategy and put employees in line with the strategy because they want to show them County officials value the work they are doing for Albemarle County, and money is being spent to prove it. A separate issue relates to the increase in addition to the salary increase. The joint Boards have a range of numbers to consider, and the source is WorldatWork. She said performance will also be considered, as well as keeping in line with the County’s strategy, and there are also budgetary constraints. In addition to the market adjustment, the County may start this year with a 3.9 or 4.0 percent figure, which is within range of the WorldatWork source, and in August examination will be done of the market to see what was paid in terms of the median. These things should be viewed as employees getting an increase that is at market, and they are performing. She remarked that employees should be made to feel they are part of a wonderful organization, and they do not get penalized. If anyone thinks this, the information is not being communicated properly. She noted that all jurisdictions have to work within budgetary constraints, and even though Prince George indicates it is going to give a six percent salary increase this summer, once the budgetary process is finished, this figure may decrease. The key is to always take a look at the available information to see if the County is heading in the right direction. She does not want to leave this meeting with people thinking that anything less than a 4.2 percent increase means they are not in line with the County’s strategy, or that they are not doing right by the employees. Mr. Dorrier inquired as to the percentage of localities in Virginia that are at 100 percent as far as salary and benefits are concerned. Ms. Collins answered that she is unsure. However, as far as her clients are concerned, Chesterfield County’s pay scales are slightly above the median. Henrico County always indicates it will pay more than anyone else. Falls Church is extremely high paying and tries to stay with the 75th percentile. Richmond is at the market median, but places in the southeast corner of the state all pay less money than Albemarle County. Mr. Dorrier wondered where Albemarle County fits in as far as the other localities are concerned. Ms. Collins stated that that Albemarle County is located in the middle of the state, and it is running approximately in the middle of the scale. It is consistent as far as the market median is concerned. Mr. Boyd voiced his appreciation of Ms. Collins’ comments about the proposal. He noted that the press is present, and that is why he was adamant at the last meeting that he didn’t want to see the 4.2 percent figure in the news. He wanted to see the range. He also asked where the 4.2 percent figure came from, because the Committee did not vote on this number. He asked if it was a staff recommenda-tion. Ms. Collins replied that it is not a staff recommendation. She explained that the 4.2 percent is her own personal choice, and it came forward because at the last meeting the Board members were asking about a starting point. She said she would work from the middle of the total increase for budgetary purposes. Mr. Boyd recalled that Ms. Collins was supposed to have a meeting with Paul Wright, an investment broker with the Conservative Coalition, the Friday after the joint meeting. Ms. Collins responded that she did have a conversation with Paul Wright. Mr. Bowerman inquired about the 4.5 percent figure. Ms. Collins answered that it is a scale adjustment. Mr. Boyd noted that if the Boards choose to use the 4.2 percentage, it is not guaranteed that the County will be at 100 percent of market levels. Ms. Collins concurred. Mr. Boyd said the Boards could make a decision to use a 2.8 or 3.5 percentage and be at market level. Ms. Collins said she did not think 2.8 percent would get the County to market levels. She believes 3.5 would be low and would still not be at market level. The reason she believes this is because of the data coming from the City of Franklin. There is probably a percentage between 3.5 and 4.2 that will allow the County to be at market levels. In answer to a question from Mr. Koleszar, Ms. Collins stated that the 4.2 percentage figure is not a consensus number. She reiterated that it is a figure she provided personally, and it is a high estimate. She said the best scenario would use the 4.2 percentage figure, and it would be a fact that the County would be at market levels. This is why she thinks it is a great starting point, especially for the school system. She stated that on the performance side, the County had some phenomenal measurable accomplishments this year, so she would recommend starting at the higher end of the scale. She said maybe the County cannot start with the 4.2 percentage, and it may have to go to the 3.9 percent or 4.0 percent, based on performance. Ms. Thomas pointed out that if there is a decrease in state funding, it will impact the County’s available monies for an increase drastically. This would affect everybody else in the state also, and the people who may have reported that they are going to give a five percent increase to their teachers may not be able to give more than a two percent increase. She mentioned that the 4.2 percent figure was derived from the projections of other local government officials who believe they will be able to provide this much of an increase. She said before very long, it may be discovered that this figure statewide is much lower. Albemarle County would then be very much at market level, if a lower figure was chosen. On the other hand, Ms. Thomas remarked that if state funding does come through, then the 4.2 percentage is Ms. Collins’ recommendation at this point, and it would get the County assuredly at market levels. Ms. Collins concurred. She reiterated that something less than that can be done for budgetary purposes, but all of this should be communicated to employees. She said it depends on the constraints of the budget, especially if medical costs increase drastically. She emphasized that the County will have the same constraints as the competitive market, and Board members have the caveat of making their own decision about pay increases based on the scale. They did not tell her or the Task Force to come back with a figure. They asked for a source and a grid, and that is what has been presented to them. She stated that there will be a phone conversation in late July or August with the data collector who will report actual January 10, 2001 (Adjourned Meeting) (Page 9) increases, and the County can compare the median to its increase. Mr. Bowerman remarked that the only thing wrong with the scenario is if the state withholds its funding, and everybody has the same problem. He said the perception locally does not take this into account. He pointed out that employees have an expectation based upon this information and regardless of external forces or budgetary constraints, anything less than what they have heard discussed becomes less than what they think they are entitled to receive. This could be true, and it then becomes a question of a cut rather than an increase. Ms. Collins suggested that employees should be told that the market level could be a range from 3.3 to 4.6. She emphasized that this is what the grid is indicating. Ms. Collins noted that the survey data indicates that the County’s median now is actually within the range. She said that anywhere within this range, the County will be at market levels, and there will also be the self-correcting process in August. The County will be doing right by its employees if pay compression is done plus an additional 3.3 to 4.6 percentage increase. Mr. Grant suggested that the County Executive and the Superintendent of Schools bring back a recommendation to the two Boards using this information. Mr. Bowerman said this is the direction that will be followed. Mr. Martin commented that the Committee gave the two Boards a source of information, and it will be up to the County Executive and the Superintendent to come back to the two Boards with a recommended budget. Mr. Frank Morgan mentioned that the staff actually used the 4.2 figure to run numbers for individual employees. He stated that it is on the high side and it is a tight number. Ms. Collins responded that it is also a very accurate number. Mr. Koleszar stated that last year the County had a controversial consultant, and the percentage approved for the budget was somewhat less than the consultant recommended. He believes the Worldat- Work data is good information and should be used. Mr. Boyd reported that he has worked with the numbers for these projections which translates to over $4,000,000 for the school system. If he takes the increase in projected revenues the County is expected to get, plus the amount already spent in recurring funds this year for next year’s budget, it is short approximately $300,000. He pointed out that the School Board would have to request additional funding from the Board of Supervisors, if this is the case, and he suggested that County officials examine closely the lower end of the percentage scale in working toward pay increases. Ms. Collins reiterated that the recommendation coming from this meeting is to address pay compression, which means moving employees from minimum to midpoint based on years of service, adjusting the teachers’ scale 1.25 percent and to use WorldatWork as a source. She said this source gives a range anywhere from cost of living increases up to total increases, and it breaks them out by three different regions. Mr. Koleszar asked about the 4.5 scale adjustment. Ms. Collins answered that the 4.5 scale adjustment is for classified people, which is everybody except for teachers. Mr. Dorrier asked if Ms. Collins recommends a committee to deal with these types of issues on a regular basis. Ms. Collins replied that she does not think this would be necessary. She also thinks there is too much involvement and input into the salary issue, since it is such a controversial issue. From this point forward, the County officials should be able to use the grid, as well as the survey of the actual entities, and there should not be a problem for the next three years. She remarked that then the Task Force can be called on again, especially if there is a big change in the economy. She suggested that the grid can be part of the communication process. Dr. Ward concurred. He noted that all of the County officials are responsible people. Ms. Collins suggested that committees be used for achieving the County’s strategic plan in putting forth performance measures to communicate to the citizens about the County’s accomplishments on a year to year basis. She said this is a tough task. Ms. Thomas concurred that it would help to communicate information on things the employees are accomplishing. She said perhaps words are not expressed often enough. She noted that the school system has been distributing reports, and everybody has a much better idea this year than five years ago as far as what the school system is accomplishing. Ms. Collins remarked that the more information put forward on performance measures of the phenomenal job the County employees are doing the better it is for everybody. She said as an employee it makes it better for him or her to work here just to hear those words out in the community. There were no further questions or comments. Ms. Collins thanked the Board members for their time. _________________ Agenda Item No. 4. Other Matters Not Listed on the Agenda. There were no comments __________________ Agenda Item No. 5. Adjournment. January 10, 2001 (Adjourned Meeting) (Page 10) At 6:06 p.m., there being no further business, Ms. Thomas adjourned the Board of Supervisors' meeting. Mr. Cummings then offered a motion, seconded by Ms. McKeel, to adjourn the School Board. Roll was called, and the motion carried by the following recorded votes: AYES: Mr. Boyd, Mr. Cummings, Mr. Grant, Mr. Koleszar, Ms. McKeel, Ms. Rodriguez and Dr. Ward. NAYS:None. ________________________________________ Chairman Approved by the Board of County Supervisors Date Initials