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03-21-1990 CC MIN - SPECIAL e SPECIAL MEETING OF THE ELK RIVER CITY COUNCIL HELD AT THE ELK RIVER CITY HALL CONFERENCE ROOM WEDNESDAY, MARCH 21, 1990 Members Present: Mayor Tralle, Councilmembers Holmgren, Kropuenske, Dobel and Schuldt Members Absent: None Staff Present: Shannon McCambridge, Personnel Consultant; Lori Johnson, Finance Director; Pat Klaers, City Administrator 1. Call Meetin~ to Order Pursuant to due call and notice thereof, the special meeting of the Elk River City Council was called to order at 6:00 p.m. by Mayor Tralle. 2. Consider 3/21/90 SDecial City Council A~enda COUNCILMEMBER HOLMGREN MOVED TO APPROVE THE 3/21/90 SPECIAL CITY COUNCIL MEETING AGENDA AS SUBMITTED. COUNCILMEMBER DOBEL SECONDED THE MOTION. THE MOTION CARRIED 5-0. tit 3. EmDloyee Benefits Committee Presentation A City Staff Employee Benefits Committee has been formed. Members of the Committee are Lori Johnson, Finance Department; Terry Bye, Street/Park Department; Tom Tyler and Kathy Anderson, Police Department. Lori Johnson indicated that the Committee was formed, because during approval of the 1990 City Budget, there was a great deal of discussion regarding employee benefits. The City Council has funds included within its City Council contingency fund to provide greater benefits to employees if such a program is approved by the City Council. The purpose of the Committee was to evaluate the City of Elk River's current situation as compared to other communi ties and to determine what options are available in order to provide greater flexibility for all employees while also allowing additional benefits for the employees which select "single" coverage as these individuals do not utilize all of the funds the City makes available for insurance coverage. e Tom Tyler provided an overview for the City Council of the Committee's understanding of the current insurance situation. It was noted that the City provides up to $215 for the payment of health insurance for all employees. The cost of insurance for the employees selecting single coverage is approximately $115 per month. Accordingly, these employees receive approximately $1,200 less per year in City financed health benefits than what is received for the employees selecting family coverage. It is the feeling of the Committee that this is an unequal benefits situation and that, in effect, individuals selecting single premiums are supplementing costs for dependent premiums. The City of Elk River has 28 employees selecting single coverage and 16 City Council Minutes March 21, 1990 Page 2 e selecting dependent coverage. In 1989, the cost of insurance escalated to such a point that the City switched policies from Blue Cross/Blue Shield to Physicians Health Plan (PHP). This switching of coverage was approved by the employees, mainly the single coverage employees, in order to reduce the cost of family coverage for employees selecting that package. It was noted that the City's cost could be substantially higher than it currently is if more employees selected dependent coverage. I t was also noted that the City's payment for benefits is somewhat below the average of the communities that were surveyed by the Committee. Finally, Mr. Tyler noted that approximately 15% of the cities surveyed offered equal benefits to all employees. e Kathy Anderson distributed a sheet to the City Council which reflected the results of the survey conducted by the Committee. This sheet is attached to the minutes. It was noted that a survey was sent to 98 cities. Of these 98 cities, the City received 83 surveys back. This is an exceptionally high rate of return. It was noted that the average benefi ts paid for health insurance for family coverage was $238, and that the average cost of single insurance coverage was $112. This corresponds very closely to what the City of Elk River provides; however, 13 communities surveyed provided what was termed equal benefits. Additionally, the average cost of insurance premium was $289 for dependent coverage. This is lower than the City of Elk River and the rationale for this lower premium was that the communities surveyed may have had more employees or a better loss ration which lowered the overall cost of the package. Ms. Anderson continued with her presentation of the community survey results by indicating that over half of the communities surveyed provided dental insurance options to its employees. Additionally, approximately half of the communi ties contribute to the cost of this dental insurance. Other results included the fact that approximately 1/2 the communities provided disability insurance option to their employees; the average life insurance policy offered was $18,000 (the City of Elk River offers $8,OOO); that deferred compensation was offered in only 37% of the communities (this compensation is offered in Elk River); that less than 10% of the communities surveyed offered cash options or insurance premium rebates to the employees; and that only 1/4 of the communities provided Section 125 benefits (the City of "Elk River provides this benefit). In summary, Ms. Anderson stated that the City of Elk River provides good benefits to its employees but the City of Elk River is below the norm and there are many communi ties that provide more benefits than the City of Elk River. e Terry Bye presented the City Council with some of the positive points of view for providing equal benefits to all employees regardless if they select dependent or single coverage. Some of the positive aspects of providing additional benefits to the individuals who select single coverage include increased employee moral, attracting and retaining quality applicants/employees, and the fact that providing more options to all the employees would make a better insurance package available to everyone. City Council Minutes March 21, 1990 Page 3 e Finance Director, Lori Johnson, summarized four basic options for the City Council to review. These four options included making no changes; to the other end of the scale of offering complete equal benefits to all employees. An in-between step included increasing the payment by the City for family and single insurance and allowing the single insurance employees to select additional insurance items. A fourth option is to have the City contribute to the Section 125 Account for all employees which would benefit everyone provided that they had medical expenses. After discussion on the options and the pros and cons for each option, the Finance Director distributed a handout showing the history of the health insurance costs in Elk River and the City's current annual cost to provide insurance benefits; she then reviewed this with the City Council. It was noted that employee and dependent insurance costs have escalated far faster than the City's contribution to the employee insurance package. Additionally, it was noted that the City switched coverage in August of 1989, and this resulted in a dramatic decrease in the cost of insurance. It was noted that the financial impact to the City of changing benefits was a major concern. e Members of the Employee Benefits Committee reiterated to the City Council that they are not making a recommendation on which option should be selected by the City Council but were simply trying to present the facts as they see it and to provide options to the City Council to increase insurance options to all employees. e The Mayor indicated that a major concern for the City at this time is financial. It was noted that the State Legislature may withhold some previously committed State funds and this would have a significant bearing on whether or not funds would be available within the 1990 budget for increasing insurance options to the employees. Additionally, it was noted that the rising cost of insurance is a major problem, not only to the City of Elk River but also to all employers, and is not only a statewide problem but also a national problem. Mayor Tralle indicated that no decision can be made on increasing insurance options for employees at this meeting, but that he supports, if finances are available, some type of additional benefits for the single insurance people and also doing whatever is reasonable to keep the cost at an acceptable level for the dependent coverage employees. The City Administrator indicated that a significant concern to him was the discrimination factor and that the current practice of the City has not been determined by the courts to be discriminatory in nature. However, if the City starts providing additional benefits to the single coverage employee, which are financed by the City, and these insurance options have to be financed solely by the dependent coverage employee, then we may be entering into a discriminatory situation. The City Administrator likewise felt that the City could do something additional for all employees, but is uncertain at this point, without further review of the options, which method the City should adopt in order to provide better and more benefits to the employees. City Council Minutes March 21, 1990 Page 4 e Shannon McCambridge, Personnel Consultant, indicated that cost containment is a significant issue for all cities and that currently, most employers are looking for ways of cutting back on the cost of insurance. Employers are finding that as insurance costs increase significantly, other steps must be taken in order to keep expenses at a reasonable level. These other options include adoption of wellness programs and increasing the deductibles for the insurance options. At this time, the Mayor and the City Council thanked the Employee Benefits Committee for their information and input. It was noted that this issue would be further discussed once the Legislative Session has concluded. Additionally, it was noted that the Employee's Committee may be requested to come back to discuss this issue with the Council at a later date. The City Council took a ten minute break at this time. 4. Review of Personnel Ordinance/Shannon McCambrid~e e Ms. McCambridge began her presentation by indicating that the entire Personnel Ordinance as proposed was reviewed by the City Council at its 1/29/90 meeting. At that meeting the singular issue which could not be decided related to sick time leave benefits. Shannon indicated that her attached memo, dated 3/14/90, discusses the City staff consensus on an appropriate revised sick time policy for the City of Elk River. At this time Shannon reviewed the proposed sick time policy with the City Council item by item. It was indicated that the major components of the sick time policy includes: l)no changes in who is eligible for the sick time benefits; 2)no change in how much sick time is received annually (12 days per year); and 3)that there will continue to be no maximum amount on how much sick time can be accumulated. Shannon indicated that the two areas of the current Elk River sick time policy that are proposed to be changed relate to how the sick time can be used and providing an economic benefit to employees when they leave the City of Elk River for unused sick time. Shannon noted that Item 3.5, Subd. B, indicates that sick time can be used by employees for injury or illness to themselves and to their dependents or other family members who live with the employee. Addi tionally, sick time can be used to take their dependents or other family members who live with them to medical appointments. Finally, sick time may also be used for unusual circumstances where a family member is seriously ill. e Regarding providing employees a benefit when they leave employment with the City for unused sick time, Shannon indicated that the staff is proposing that after an employee is with the City for two years, they shall receive 10% of their unused sick time, up to 120 days accumulated, as a cash payment to them when they leave employment with the City. It was noted that the maximum benefit that this would provide employees is payment in cash of twelve days of wages. It was noted that this is a tremendous incentive and benefit for all employees to continue to not abuse sick time and to continue to be a good City Council Minutes March 21, 1990 Page 5 tit employee for the City of Elk River. It was noted that employees using sick time when they are not sick are a significant cost to the employer in terms of lost work productivity and in terms of having overtime become necessary in order to fill in for the missed shift of work. In this regard, the City is a significant winner by having employees not abuse sick time and the cost of providing 10% of the unused sick time, up to a maximum of 120 days accumulated, is a small cost when considering the cost of employees abusing the sick time leave policy. Mayor Tralle and Councilmember Kropuenske indicated that they felt 12 days of sick time per year was more than what was needed. The City Administrator stated that this amount is the norm for cities and that, as this is the current amount offered, the City should not reduce this leave benefit. Councilmembers Schuldt and Holmgren questioned the need and benefit to the City for "rewarding" the employee who does not abuse the sick time policy. Ms. McCambridge further explained the amount and method of payment to the employees. The City Administrator listed a number of cities (from the MN Cities 1989 Salary Survey) that provide their employees with a much larger benefit than the 10% of 120 days proposed for Elk River. e It was the consensus of the City Council that the sick time policy as presented in the 3/14/90 memo from Shannon was acceptable with minor changes for clarification purposes. At this time the City Administrator requested approval of a motion that would direct the staff to prepare the ordinance in final form. COUNCILMEMBER DOBEL MOVED THAT THE PROPOSED PERSONNEL ORDINANCE AS REVIEWED AND CHANGED AT THE 1/29/90 AND THE 3/21/90 CITY COUNCIL MEETINGS IS ACCEPTABLE TO THE CITY COUNCIL AND THAT STAFF IS DIRECTED TO PROCEED WITH PUTTING THE PROPOSED ORDINANCE AS REVIEWED INTO FINAL FORM FOR PRESENTATION TO THE CITY COUNCIL AT A LATER DATE. COUNCILMEMBER KROPUENSKE SECONDED THE MOTION. THE MOTION CARRIED 3-2. Councilmember Schuldt and Councilmember Holmgren opposed the motion. Councilmember Schuldt indicated that he was opposed to the motion as he felt it was an unnecessary procedural step. Councilmember Holmgren indicated that he was opposed to the motion because he is still in concept opposed to paying for good health (Item 3.5, Subd. C, v & vi - Sick Time Benefits). 5. Other Business There was no other business presented at this time. 6. City Administrator Update e The City Administrator advised the City Council that the School Board is considering eliminating the funding for one of the two jointly funded Juvenile Officers. The Administrator indicated that he would e e e City Council Minutes March 21, 1990 Page 6 send a letter to the School Superintendent and School Board indicating the City's opposition to this funding reduction. 7. Adjournment There being no further business, COUNCILMEMBER HOLMGREN MOVED TO ADJOURN THE 3/21/90 SPECIAL CITY COUNCIL MEETING. COUNCILMEMBER KROPUENSKE SECONDED THE MOTION. THE MOTION CARRIED 5-0. The meeting of the Elk River City Council was adjourned at approximately 9:00 p.m. Respectfully submitted, . ? ]?)(/JOL-P~ Patrick D.'Klaers City Administrator