5.1. ERMUSR 11-16-2010/i
Elk River --~
Municipal Utilities
7 3069 Orono Parkway • P.O. Box 430
Blk Rivex, MN 55330-0430
UTILITIES COMMISSION MEETING
Phone: 763.441.2020
Pax: 763.441.8099
TO: FROM:
Elk River Municipal Utilities Commission Troy Adams, P.E. - Director of Operations
John Dietz, Chair
Jerry Gumphrey, Vice Chair
Dar 1 Thom son, Trustee
MEETING DATE: AGENDA ITEM NUMBER:
November 16, 20]0 5.1
SUBJECT:
2011 Wage Proposal
BACKGROUND:
The process for annual wage increase proposals is handled over two separate commission
meetings. During the first meeting, management provides industry comparisons, economic
trends, and financial impact to the Utilities. Included is a metro average survey of seven
predetermined peer utilities. Also, the Consumer Price Index (CPI) is provided. At the request
of the commission, additional information maybe provided for the second meeting. The
employees are provided the opportunity to bring suggestions and requests to management. This
information will be reviewed and considered by management and then may be included in the
presentation to the commission. At the discretion of the commission, employees will be afforded
the opportunity to address the commission during this first meeting. These statements from
employees may be taken into consideration by the commission during their decision making
process. After the commission has collected the information needed for their decision, the topic
will be tabled until the following utility commission meeting at which the commission will make
their decision.
DISCUSSION:
For the past 2 decades, ERMU has used a survey of neighboring utilities to gauge the industry
for purposes of compensation comparison. For ease of comparing, the lineperson position has
typically been used as the benchmark because job duties and position requirements are very
consistent from one utility to another. The utilities used in this survey had been agreed upon
because of their proximity to ERMU. Also, these are the utilities which ERMU is in direct labor
competition with. This process of using the average benchmarked wages from the identified
utilities also provides some mitigation to market labor cost volatility. This metro average wage
had been used to determine ERMU wages until 2009. Because of the economic downturn and
because of public perception, in 2009 the Utilities had a 0% wage increase. In 2010, the Utilities
again chose to not award the 2.73% metro average because of the economy and awarded a 1.5%
increase. This has set the Utilities behind in competitive wages. The metro average survey is a
i
system that has worked well and management supports working towards reestablishing the metro
average.
At this time, there are 3 of the 7 utilities used in the survey that have not finalized their 2011
wages. These are Great River Energy (GRE), North St. Paul, and Anoka. The contract
negotiations at GRE are currently being conducted, but may not be finalized until December. It
is expected that GRE will approve a similar wage increase to last year and is tentatively included
in the survey at 2.91 %. North St. Paul and Anoka have not finalized their wages for 2011. Both
aze expecting no increase in hourly wage but possibly other positive compensation changes.
Attached are the Metro Average Wage Survey table and graph. ERMU would be at a negative
wage differential from the metro average. It would require a 6.13% increase for ERMU to reach
the metro average. In 2011, Connexus will be paying $4.20 more per hour for the equivalent
Journeyman Lineperson position. Also, ERMU would be the lowest hourly rate of all the 7
utilities used in the metro average survey if no wage increase is approved. On one hand, to not
have a wage increase would put ERMU at a wage disadvantage. On the other hand, to get back
to the metro average in 2011 would be a significant wage increase. A realistic solution falls in
between and should involve a commitment towazds reestablishing the metro average pay over a
given time period. This plan to reestablish the metro average wage would not necessarily require
the timeline to be set in stone. It may need flexibility to allow exceptions to accommodate any
unknowns in the economy and variations in the finances of the Utility.
Based on the conservative assumptions previously noted, the percent change in the metro
average wage from 2010 to 2011 has an increase of 2.03%. This year the CPI is 2.33%. The
summary of the CPI for this region is attached for commission review. This CPI increase is
somewhat corrective for the 2009 CPI "over compensation" for fuel costs in 2008. Both the
2.03% increase in the metro average and the 2.33% increase in CPI generally represent the cost
of living increase and adjustments to the industry market. These two components represent what
it takes for ERMU to not lose ground in competitive wages. In addition to this cost of living
component, there would also need to be an additional adder component to "chip away" at the
differentia] in pay and work toward reestablishing the metro average. If the Utilities initiated a
plan to annually award the percent change in metro average (2.03% in 2011) and annually
awazded a 1.03% increase component for reestablishing the metro average, the metro average
would be reestablished in 4 years. This schedule could be shortened as the economy recovers.
The financial impact to the Utilities is approximately $22,000 per percent of wage increase.
The philosophical component to this topic is that of perception and vision. In difficult economic
times there is negative public perception to wage increases funded by fees. The flip side is that
of long term vision. In this industry, these skill sets aze a commodity and a utility needs to
remain competitive even in difficult economic times to help promote employee retention. Short
term vision can result in higher long term costs due to training. The solution falls somewhere in
between and is a balance of many considerations.
ACTION REQUESTED:
Management recommends approving a plan to reestablish the metro average over 4 years and
approving a 2011 wage increase of 3.06%.
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Years for
reestablishing
Metro Average
A%zo„ ~%zo„ /Years
to reestablish
the Metro Ave
%MACurvezo„ Resulting 2011
%Increase for
ERMU Approximate
2011 Cost to
ERMU
1 4.10% 4.10% 2.03% 6.13% $ 135,300
2 4.10% 2.05% 2.03% 4.08% $ 90,200
3 4.10% 1.37% 2.03% 3.40% $ 75,020
d 4.10% 1.03% 2.03% 3.06% $ 67,540
5 4.10% 0.82°/a 2.03% 2.85% $ 62,920
%MA=The % increase in wages required for ERMU to equal the Metro Average
%MACurve =The % change in the Metro Average compared to the pervious year
D%zo„ _ %MA20„ - %MACurvezoi,
C®nsumer Price Index Trend
(%Increase from Base Year 2000)
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Consumer Price Index Minneapolis-St. Paul, MN-WI CPI
J-^'
IJ.S. Bureau of Labor Statistics
Midwest Information Office
For release: 9:go a.m. CT, Friday, August 1g, 2010
BLSInfoChicagola~bls eov
General Information: (31z) 353-1880
Media Contact: Paul LaPorte (312) 353-1138
Page 1 of 4
CONSUMER PRICE INDEX, MINNEAPOLIS-ST. PAUL, MINN: WIS., MSA -FIRST HALF 2oto
The Consumer Price Index for All Urban Consumers (CPI-U) in the Minneapolis-St. Paul area rose o.6 percent in the
first half of 2010, the U.S. Bureau of Labor Statistics reported today. Charlene Peiffer, the Bureau's acting regional
commissioner, stated that the indexes for food (0.6 percent) and energy (6.2 percent) increased in the first half of
zoto. The index for all items less food and energy was nearly unchanged (0.1 percent). Within the all items less food
and energy category, the indexes for medical care and education and communication were higher while the indexes for
apparel and shelter were lower.
Compared to the first half of zoo9, the Minneapolis area all items CPI-U rose z.3 percent. The energy index was up
ty.o percent since the first half of zoo9, primarily due to increases in gasoline prices Followed by electricity and utility
(piped) gas service. The all items less food and energy index was up t.5 percent compared to the first half average of
zoo9.
Food
Food prices rose o.6 percent in the first half of zolo after falling o.7 percent in the last half zoo9. Between the two
components of the food index, the price for food at home rose t.o percent and the food away from home index was
unchanged.
From the first half of 2009 to the first half of 2oto, the index for food was nearly unchanged (-0.1 percent). In the
previous annual period ended in the first half of zoo9, food prices in the Minneapolis area rose 3.t percent.
Energy
The energy index rose 6.z percent in the first half of zoto after rising 102 percent in the last half zoo9. Within the
energy category, the index for utility (piped) gas service (to.6 percent) and gasoline (8.3 percent) were higher
compared to their last half 2009 average while the index for electricity was lower (-r.3 percent) compared to its last
half zoo9 average.
The indexes for gasoline (30.o percent), utility (piped) gas service (4.3 percent), and electricity (3.o percent) were all
higher compared to their first half 2009 averages, resulting in a r7.o percent rise in overall energy costs from the first
half of zoo9 to the first half of zo1o.
All items leas food and energy
The index for all items less food and energy was nearly unchanged (0.1 percent) in the first half of zo1o. Amung the
index's components, increases were recorded in medical care (1.9 percent) and education and communication (0.4
percent). Decreases were recorded in the indexes for apparel (-4.3 percent), recreation (-0.9 percent), household
furnishings and operations (-o.g percent) and shelter (-o.q percent) in the first half of zmo.
Over the year, the index for all items less food and energy increased 1.5 percent. Higher costs for medical care (33
percent), education and communication (z.r percent), and shelter (1.~ percent) were partially offset by lower costs for
apparel (-3.9 percent) and household furnishings and operations (-3.t percent).
The second half zolo Consumer Price Index for Minneapolis is scheduled to be released in February
2011.
http://data.bls.gov/cgi-bin/print.pl/ro5/cpimpls.htm 8/13/2010
Consumer Price Index Minneapolis-St. Paul, MN-WI CPI Page 2 of 4
Technical Note
The Consumer Price Index (CPI) is a measure of the average change in prices over time in a fixed market basket of
goods and services. The Bureau of Labor Statistics publishes CPIs for two population groups: (t) a CPI for All Urban
Consumers (CPI-U) which covers approximately 87 percent of the total population and (z) a CPI for Urban Wage
Earners and Clerical Workers (CPI-W) which covers 3z percent of the total population. The CPI-U includes, in
addition to wage earners and clerical workers, groups such as professional, managerial, and technical workers, the self
-employed, short-term workers, the unemployed, and retirees and others not in the labor force.
The CPI is based on prices of food, clothing, shelter, and fuels, transportation fares, charges for doctors' and dentists'
services, drugs, and the other goods and services that people buy for day-to-day living. Each month, prices are
collected in 87 urban areas across the country from about 4,00o housing units and approximately zs,ooo retail
establishments--department stores, supermarkets, hospitals, filling stations, and other types of stores and service
establishments. All taxes directly associated with the purchase and use of items are included in the index.
The index measures price changes from a designated reference date (t98z-84) that equals too.o. An increase of tbs
percent, for example, is shown as tt6.5. This change can also be expressed in dollars as follows: the price of a base
period "market basket" of goods and services in the CPI has risen from $to in 1982-84 to $n.bs. For further details
see the CPI home page on the Internet at www.bls eov/coi and the BLS Handbook of Methods, Chapter r7, The
Consumer Price Index, available on the Internet at www bls gpyfonub/hom/homeht~ a.htm.
In calculating the index, price changes for the various items in each location are averaged together with weights that
represent their importance in the spending of the appropriate population group. Local data are then combined to
obtain a U.S. city average. Because the sample size of a local area is smaller, the local area index is subject to
substantially more sampling and other measurement error than the national index. In addition, local indexes are not
adjusted for seasonal influences. As a result, local area indexes show greater volatility than the national index,
although their long-term trends are quite similar. NOTE: Area indexes do not measure differences in the level
of prices between cities; they only measure the average change in prices for each area since the base
period.
The Minneapolis-St. Paul, Minn.-Wis. metropolitan are covered in this release is comprised of Anoka, Carver, Chisago,
Dakota, Hennepin, Isanti, Ramsey, Scott, Sherburne, Washington, and Wright Counties and Pierce and St. Croix
Counties in Wisconsin.
Information in this release will be made available to sensory impaired individuals upon request. Voice phone: 2oz-69r
-5200; TDD message referral phone number: t-Boo-8'7'7-8339•
For personal assistance or further information on Consumer Price Indexes, as well as other Bureau products, contact
the Chicago Information Office at (3tz) 353-t88o from S:oo a.m. to 4:0o p.m. CT.
Table 1. Consumer Price Index for All Urban Consumers (CPI-U): Indexers for semiannual
averages and percent changes for selected periods
Minneapolis-St. Paul, MN-VYI (1982-84=100 unless otherwise noted)
Item and Group
Expenditure category
All Items
All items (1967=100)
Food and beverages
Food
Food at home
Percent change to
Semiannual average indexes 1st half 2010 from-
lsthalf 2nd half 1st half 1st half ', 2nd half
2009 2009 2010 2009 2009
206.167 209.611. 210.965 2.3~'. 0.6,
647.885'. 658.707 662.9641 - -
238.051 '. 237.540' 239.711 0.7' 0.9
233.8491 232.171 233.540 -0.1 0.6
226.452 221.282 223.487 -1.3 1.0
http://data.bls.gov/cgi-bin/print.pl/ro5/cpimpls.htm 8/ 13/2010
Consumer Price Index Minneapolis-St. Paul, MN-WI CPI
Item and Group
Food away from home
Alcoholic beverages
Housing
Shelter
Rent of primary residence
Owners' equiv. rent of residences
Ill (21
Owners' equiv. rent of primary
residence
lu Ill
Fuels and utilities
Household energy
Gas (piped) and electricity
Electricity
Utility (piped) gas service
Household furnishings and operations
Apparel
Transportation
Private transportation
Motorfuel
Gasoline (all types)
Gasoline, unleaded regular
(ll
Gasoline, unleaded midgrade
Illf41
Gasoline, unleaded premium
Ill
Medical Care
Recreation
ISJ
Education and communication
f5]
Other goods and services
Commodity and Service Group
All Items
Commodities
Commodities less food & beverages
Nondurableslessfood & beverages
Durables
Services
Special aggregate indexes:
All items less medical care
All items less shelter
Commodities less food
Nondurables
Nondurables less food
Semiannual average indexes
1st half 2nd half 1st half
2009 2009 2010
246.589 248.921 248.810
273.814 285.035 294.847
189.410 191.730 191.703
214.546 219.030 218.195
211.729 213.972 213.834
222.073 228.209 229.747
Page 3 of 4
Percent change to
1st half 2010 from-
- __ _ __ _-
1st half 2nd half
2009 2009
0.9 0.0
7.7 3.4
1.2 0.0
1.7 -0.4
1.0 -0.1
3.5 0.7
222 .073 228 .209 229.747 3.5 0.7
173 .369 173 .461 179.675 3.6 3.6
161 .961 162 .893 168.367 4.0 3.4
164 .455 165 .200 170.261 3.5 3.1
196 .991 205 .512 202.852 3.0 -1.3
140 .889 132 .842 146.989 4.3 10.6
130 .279 126 .925 126.268 -3.1 -0.5
126 .674 127 .308 121.772 -3.9 -4.3
173 .597 184 .024 191.345 10.2 4.0
159 .754 170 .385 177.544 11.1 4.2
171. 192 205 .237 222.829. 30.2 8.6
173. 279 208 .006 225.346 30.0 8.3
176. 153 211 .987 229.501 30.3 8.3
173. 409 207 .372 225.255 29.9 8.6
201. 575 238 .576 258.967 28.5 8.5
402. 858 408 .383 416.180 3.3 1.9
117. 067 117 .461 116.427 -0.5 -0.9
129. 399 131 .545 132.133 2.1 0.4
306. 063 313 .221 311.436 1.8 -0.6
206. 167 209. 611 210.965 2.3 0.6
171. 181 174. 749 177.024 3.4 1.3
139. 586 144. 445 146.653 5.1 1.5
173. 942 184. 422 186.710 7.3 1.2
107. 884 108. 271 110.332 2.3 1.9
237. 410 240. 773 241.274 1.6 0.2
197. 253 200. 606 201.699 2.3 0.5
203. 421 206. 575 208.949 2.7' 1.1
144.936 150. 035 152.517 5.2 1.7
205. 026 210. 671 212.934 3.9 1.1
181. 304 191. 870 194.695 7.4 1.5
http://data.bls.gov/cgi-bin/print.pl/ro5/cpimpls.htm 8;13/2010
Consumer Price Index Minneapolis-St. Paul, MN-WI CPI
Item and Group
Services less rent of shelter
121
Services less medical care services
Energy
All items less energy
All items less food and energy
Page 4 of 4
Percent change to
1st half 2010 from-
_ - -__
1st half 2nd half
2009 2009
274. 805 277 .214 279. 833' 1.8 0.9
223. 319 226 .661 226. 599 1.5 0.0
170. 033 187 .390 199. 022 17.0' 6.2
212. 618 214 .866 215. 249 1.2 0.2
209. 553 212 .369 212. 608 1.5 0.1
Footnotes
(1) This index series underwent a change in composition in January 2010. The expenditure class now includes weight
from sewndary residences and has been be re-titled "Owners' equivalent rent of residences." The item stratum "Owners'
equivalent rent of primary residence" excludes secondary residences.
(2) Index is on a December 1982=100 base.
(3) Special index based on a substantialty smaller sample.
(4) Indexes on a December 1993=100 base.
(5) Indexes on a December 1997=100 base.
- Data not available.
U.S. Bureau of Labor Statistics I Midwest Information Office, Suite 960, 230 South Dearborn Street, Chicago, IL 60604
www.bls.gov/ro5 ~ Telephone: 1-312-353-1880 I Contact Midwest Region (ROSI
Semiannual average indexes
__
1st half 2nd half 1st half
2009 2009 2010
http://data.bls.gov/cgi-bin/print.pl/ro5/cpimpls.htm 8/13/2010
Storm pay
Employees assigned to work a[ another distribwtion system to assist with
restoration following a storm, will receive time and one half (1/Z) (double time on
Sunday) for all hours worked. The Utility will use its best efforts to rotate and
distribute these assignments equally with priority on maintaining proper staffing '
levels at Elk River utilities.