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City of Palo Alto (ID # 3219)City Council Staff Report
Report Type: Meeting Date: 10/15/2012
City of Palo Alto Page 1
Summary Title: Public Discussion of Employee Pension, Health Care,
Compensation and Other Benefits
Title: Public Discussion of Employee Pension, Health Care, Compensation and
Other Benefits and Strategies for the Future
From: City Manager
Lead Department: Human Resources
Executive Summary
In a Colleagues Memo dated June 15, 2012 and approved by the Council, a series of public
sessions by the Council were to be scheduled to discuss how to ensure that Palo Alto has a
flexible workplace with highly skilled employees with a passion for public service, balanced by a
sustainable model of employee compensation, retirement, and benefit options. This report lays
a foundation for those discussions and any subsequent policy direction from Council regarding
compensation and benefits, alternatives in health benefits, pensions, compensation and otheraspects of employment.
Many of these issues are subject to collective bargaining with the Citys recognized bargaining
units. Many issues are subject to legislation including the California Public Employee Pension
Reform Act (PEPRA) that was just passed by the Legislature and signed by the Governor,
effective Jan. 1, 2013. One purpose for these public sessions is to ensure broader
understanding of what ability the City has in making changes and where the City Council is
restricted in its decision making authority by State Law, court rulings, or the requirements of
membership within CalPERS.
Council invites input at these sessions from resident, employee, and city management
perspectives.
9
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City of Palo Alto Page 2
Recommendation
Staff recommends that the Council receive input and provide guidance, over the course of three
(3) public discussions, on issues related to the Citys strategy for reforms and innovations inemployee pension, medical, compensation and other benefits related to employee
engagement, recruitment and retention strategies. Staff requests Council direction over the
course of the three discussions including:
1. Exploration of the dynamic between salary, benefits, and other employee motivators,with residents, experts, and representatives from the Citys staff and represented and
non-represented employee groups
2. Education of the public and our employees about the recently enacted pension reform,and enumerate what the City is able to accomplish or not, given our participation in the
CalPERS system
3. Exploration of alternatives in offering savings, retirement, health care, employeewellness, paid time off, and other flexible benefits
4. Creation of or updating a set of policies to plan for pension and health benefitcontingencies such as reserves, flexible benefits and deferred compensation
5. Exploration of strategies to retain, attract and engage employees who are passionateabout city work and want to make a difference in the community
Organization of the Report
The three (3) topics covered in the Colleagues Memo, Employee Engagement, Pensions, and
Health Care will be covered in separate reports and discussions with the Council. The first
report, Employee Engagement, Productivity and Culture, will be followed by Pensions on Nov.
13 and Health Care on December 10. This report and Council discussion will review the
pressures for pension reform and benefit restructuring, an initial review of the Pension
Reform legislation passed by the State, and a review of the changes the City of Palo Alto has
instituted. We will explore further changes in those areas in subsequent sessions.
We turn though to the subject of Employee Engagement, Productivity and Culture for in-depth
discussion at the start because despite the fiscal pressures to make benefit and compensation
adaptations, in the end we are concerned with not only managing costs but support for a high
quality of life in Palo Alto through the delivery of quality services. This requires an effective and
committed workforce of skilled employees. The Citys ability to attract, retain and
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City of Palo Alto Page 3
appropriately compensate and reward its employees, not just financially but in the nature of
work itself and through the environment and culture of our organization are key to high
performance, job satisfaction, and service to the community. Restructuring of compensation
and benefits, and the financial pressures of structural cost and revenue challenges put pressure
on services, workforce size, and workload and productivity. Therefore, understanding of
adaptation in jobs, work culture, and practices that will be required to foster more innovation,more productivity and less bureaucracy, and higher employee and citizen satisfaction is the
appropriate starting point for these Council sessions.
Report I, Employee Engagement, Productivity, and Culture includes:
o Employee demographics and designing benefit packages for those with varying needso Attracting and retaining employees to devote their career to public serviceo Review of recent research about employee motivation in public serviceo How training, job flexibility, at-will employment, and seniority could operate to foster a
desirable workplace during changes to traditional benefits
o Alternative considerations on establishing a healthy work place, fostering jobsatisfaction and saving costs thru non-economic employee benefits
Background The structure and level of salary, benefits and non-monetary rewards are a key
component in the Citys ability to recruit, engage, and retain the high-performing workforce
needed to accomplish City goals. A good measurement of employee engagement is the rate of
voluntary turnover. Palo Altos rate of voluntary turnover, aside from retirement, is low at
between 1% to 2%. Employees generally stay with the City until they retire.
Employment. Employees are grouped into regular, full time benefitted, regular part-time
benefitted and hourly employees with limited benefits. Per the FY2013 Adopted Budget, Palo
Alto has 1,014 (not including hourlies) full time equivalent positions and including budgeted
vacancies. Exhibit A shows current actual headcount next to the Adopted Budgeted FTE
numbers.
Demographics of current and future employees show that there will be a nearly complete
turnover in staff over the coming ten years. Looking at the period from 2007 to today, half ofthe City employees have retired and been replaced. The average age of City employees is 45.4,
with almost 30% already retirement eligible. Given these anticipated levels of turnover, it will
be prudent for the City to consider employee benefits that are pertinent to employees with
varying lifestyles and challenges, especially for those who replace retirees.
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City of Palo Alto Page 4
Recruitment. Opportunities with the City are sought after, as evidenced by high numbers of
applicants:
an average of 80 applicants for each job opening
Interviewing panels and background checks ensure quality candidates.
The City currently has 45 open recruitmentsRecruitments take on average 90 days to fill
Critical hard-to-fill positions such as dispatchers, utility operators, planning and,
finance/budget administration take longer to fill
Palo Altos total compensation, consisting of salary, employee and family health coverage ,
pension and retiree/family health care, is at market rate according to a 2011 compensation
survey commissioned by the HR department. However, Palo Alto has been a leader among
neighboring benchmark cities in pursuing pension and health care employee contributions.
Once PEPRA is fully implemented in 2018, however, Palo Alto will be on a similar footing with
neighboring agencies for new employee pension formulas, for those in the new Tier III uponPEPRA implementation. However, those in Tier II could get a better pension deal in cities that
have higher than 2@60 pension formulas.
Value of Salary, benefits and pension.
The average employee in the City receives:
o Salary $85,715o Medical and non-salary benefits $29,034o Defined-benefit pension $21,308.
Exhibit B shows employee salary and benefits broken down by employee group: fire, fire
management, police, police management, SEIU, Utility management and non-represented
Management & Professionals.
Cost trends. In recent years, the cost of providing employees with competitive salaries,
benefits, and pensions has risen dramatically for the City. The proportion of dollars paid for all
employee benefits to salaries rose from 23% in 2002 to 54% in 2010, to 63% in FY2012. This
means, for example, an employee in 2002 with a salary of $50,000 received benefits valued at
$11,500. Those benefits are valued at $31,500 today. Appendix D shows the trending costs of
benefits.
Benefits Benchmarking. The International Public Management Association (IPMA) published a
2011 benchmarking study of 430 agencies titled Benefits in the New Economy. This report
states that public sector jobs generally pay less but require more education on average
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City of Palo Alto Page 5
compared to private sector jobs. Public employees are twice as likely to have college or
advanced degrees. Relevant findings are:
o 25% report that their cities will experience layoffs in 2012o 34% are reducing benefits or shifting costs to employeeso 38% made changes to their pensions, raising the employee contribution, increasing the
retirement age, or increasing time to vest in the pension
o 66% of respondents have cut training budgetso Use of Paid Time Off (PTO) programs in lieu of separate sick and vacation banks, have
grown in the public sector by 50% from 2002 to 2012
o 25% indicated that they have a voluntary telework program for some employees andpositions, and 66% offer flexible work schedules or alternate work schedules to
potential hires. Alternative work arrangements are a win-win since they provide
work-life balance and are cost-neutral.
Palo Alto has already addressed shifting medical and pension costs to employees by asking
employee groups to pay the full employee share of PERS and make a 10% contribution towards
medical expense, including into retirement. Palo Alto has chosen to invest in employee
training and development, having added $50,000 each to the General Fund HR training budget
and the Enterprise Fund training budget for FY 2013. In Palo Alto, sick leave can be
accumulated to 600 hours; however, it is not paid out upon retirement nor is it added to the
last years salary for pension purposes, except for a very few employees who were hired prior
to 1983 (and for these few it is paid out only, not added to retirement).
Palo Altos use ofthe 9/80 scheduling is a time tested recruitment advantage. Employees are
able to achieve greater personal balance while giving the traditional 80 hours to work over two
weeks. The 9/80 schedule also supports Councils goal of environmental sustainability as
commute days are reduced.
Private Sector Comparison. Municipalities are frequently cited for spending a high percent on
employee benefits. By way of comparison, the Bureau of Labor Statistics (BLS) reports that
overall, organizations in 2011 spent an average of 49% of an employees annual salary on
benefits: 19% on mandatory benefits (such as unemployment, workers compensation, Social
Security), 19% on voluntary benefits (such as medical plans, dental plans, prescription coverage,
flexible spending accounts, vision plans, survivor benefits) and 11% on pay for time not worked
benefits (regular rate of pay for a nonworking period of time, such as vacations, holidays,
personal, bereavement and sick leave). It should be noted that only one in five employers in
the private sector offer a defined benefit retirement plan. The BLS Study is attached as Exhibit
C.
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City of Palo Alto Page 6
Employee Engagement
Palo Alto seeks to attract and engage employees who are passionate about municipal work and
want to make a difference in the community. According to the Corporate Leadership Council,
the various elements of employee engagement should each be maximized. These include the
extent to which employees enjoy and believe in what they do, and feel valued for doing it.
Many factors can influence engagement including:
The package of total compensation
Commitment to the citys purpose
Satisfying work environment
Satisfaction with the individual job itself
Fully engaged public sector employees are twice as likely to stay in their current job, 2.5 timesmore likely to feel they can make a difference, and 2.5 times more likely to recommend their
workplace to others.
Total Compensation. Elements commonly associated with total compensation include cash
salary and benefits to provide for personal well-being, safety and security of the workplace.
Additional factors include wellness programs to provide preventive health measures, exercise,
and positive mental health, flexible work scheduling and telecommuting.
Commitment to purpose. Serving the public with integrity was cited as the most
distinguishing engagement factor for public sector employees, according to a recentInternational Public Management Association (IPMA-HR) Employee engagement study. The
Study is attached as Exhibit D.
Satisfying work environment. Satisfying work entails good job design, accountability (owning
the piece of the work), appreciation for a job well done, and recognition from ones peers and
supervisor. Job design can affect work satisfaction by providing some level of autonomy
(meaning accountability for ones work), skill mastery and continuous learning. Some ways to
provide a satisfying work environment include feedback and regular check ins with supervisor,
the ability to make and implement suggestions, and continuous learning offered to employeesthough classes, stretch assignments, participation in task forces or other departmental
exchange work and participation in process improvement efforts. The ability to work in flexible
ways such as telecommuting or flex schedules also contributes to a satisfying work
environment. In Palo Alto many staff are challenged by long work hours, heavy job demands
after layoffs, and the number of night meetings.
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City of Palo Alto Page 7
Satisfaction of the work itself. According to research, the top reason given for staying in an
organization is Work. I like the work that I do. This finding is in line with career development
research, which indicates that the people look for work that is meaningful or challenging before
considering tangibles like finances or promotions. The secondary reason is My job conditions.
I have flexible hours, good commute, etc. In contrast, the number one reason for leaving anemployer is My career. I dont have the opportunities to grow or advance here. Thus
engaged employees stay for what they can give they like their work and are able to
contribute. Conversely, disengaged employees may stay for what they can get a secure job in
an unfavorable economic environment.
Research shows that when asked to name one thing that would improve job satisfaction, the
top three categories are more opportunities to do what I do best, Career development
opportunities and training, and more flexibility, control over how my work is done, flex time,
etc. The research cited above is summarized in Exhibit E.
Staff intends to use insights from these studies in order to develop a recruitment and retention
strategy that focuses on a high-performing workforce and combines appropriate levels of
training, education, job flexibility, and at-will employment to build a 21st
century employment
program in Palo Alto during a time of changes to traditional benefits. Staff intends to continue
open dialog with employees about the factors that promote engagement and retention,
including surveys, focus groups and interviews.
Attachments:
Exhibit A - Employee Head Count (PDF)Exhibit B - Citywide Average Salary & Benefits FY 2013 (PDF)
Exhibit C - BLS Study (PDF)
Exhibit D - IPMA Study (PDF)
Exhibit E - Blessing White Study (PDF)
Attachment A 07-02-2012 CCM EXCERPT ITEM 9 BENEFITS (PDF)
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DepartmentFull-Time
(positions)
Part-Time,
Benefitted
ositions
All Hourly
(positions)
Tota l
(positions)
FY 2013
Adop ted Full-
Tim e FTEs**
City Attorney 8 4 12 9
City Aud itor 6 6 4
City Clerk 5 1 1 7 6.75
City Manager 8 8 10.05
ASD 53 3 13 69 39.15
CSD 60 8 *343 411 73.75
Fire 109 19 128 119.24
HR 16 3 19 16.00
IT 29 7 36 31.55
Libra ry 34 4 53 91 41.25
Planning 38 1 7 46 47.55
Police 140 2 31 173 154.00
PWD 185 2 17 204 161.38
Utilities 221 6 22 249 253.76
Cap ita l 26.07
Print/ Mail 1.67
Spec ia l
Revenue2.65
Vehicle
Re lacem ent16.53
TOTAL 912 27 520 1459 1014.35
** Includes bud gete d but unfilled vac anc ies
EMPLOYEE HEAD COUNT BY DEPARTMENT AS OF 09/ 20/ 12
as of 09/01/ 12. Number of CSD hourlies can go as low a s 299. (Tota l number of filled
positions in CSD can rang e from 367 to 411)
Exhib it A
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CATEGORYMgmt/
Professional
Utilities
Mgmt/
Professional
FireChief
AssociationFireFighters
PoliceMgmt
AssociationPAPOA SEIU
Weighted
AverageNotes
FullTimeEquivalent(FTE) 200.35 41.00 4.00 100.00 7.00 82.00 580.00 1,014.35
%ofCity 20% 4% 0% 10% 1% 8% 57% 100%
Salary* $113,864 $123,266 $150,098 $93,569 $143,972 $102,529 $70,490 $86,877 salary,includes11holidays
InLieuHoliday n/a n/a n/a $5,124 n/a $3,042 $3,834 $2,943 inlieuholiday
IncentivePay n/a n/a n/a $768 n/a $3,213 $349 $535
FLSAcharges;nightshift
differential;K9pay;fieldtraini
premium
Overtime n/a n/a n/a $16,244 n/a $8,958 $4,288 $4,777 overtime
ManagementLeave $4,379 $4,741 $5,773 n/a $5,537 n/a n/aannualmanagementleave 80
hours/year
PERSEmployer Misc22.97%;Safety30.05%
$26,155 $28,314 $45,104 $28,117 $43,264 $30,810 $16,192 $21,308citycontribution
PERSEmployee
Mgmt0%;SEIU0%
PMA9%;PAPOA0%
FCA&IAFF0%
$0 $7,396 $0 $0 $12,957 $0 $0 $388
employeecontributionpaidby
Medicare $1,651 $1,787 $2,176 $1,357 $2,088 $1,487 $1,022 $1,260 1.45%ofsalary
Medical $10,937 $26,073 $16,842 $13,949 $11,108 $14,037 $13,338 $13,494
basedonemployeecensusaso
spring2012;includesoptout
expense
Dental/Vision $1,959 $1,982 $2,357 $2,192 $1,585 $1,921 $1,905 $1,948basedonemployeecensusaso
spring2012
RetireeMedicalLiability $6,578 $6,578 $13,079 $13,079 $11,861 $11,861 $6,578 $7,708
portionofARCforactive
employeesonly;assumedcost
basedonpercentageoflabor
group
Workers'Comp $1,499 $1,109 $0 $11,109 $0 $10,735 $1,792 $3,329
basedonprioryear'sactuals
assumeFire'swasIAFFandmo
ofPDwasPAPOA;allocated
remainingbased
on
split
betwe
percentagesplitofmgmtandS
LIFE/LTD/SUI $405 $467 $460 $460 $460 $460 $460 $449 lifeinsurance,longtermdisabi
stateunemploymentinsurance
NonsalaryBenefits** $3,054 $4,054 $2,554 $54 $4,054 $54 $54 $846 excludedtheadmincosts
AverageSalary&Benefits $170,481 $205,767 $238,443 $186,022 $236,886 $189,107 $120,302 $145,861
*SalaryforthePoliceManagementAssociationisbasedonaveragecontrolpoint.Thisamountdoesnotincludetheassociatedpaydifferential
betweenmanagersanddirectreports.
**NonsalaryBenefitsincludeprofessionaldevelopment/tuitionreimbursement,employeeassistanceprogram,commuterprogram,and
managementexcessbenefit.ExcludedadministrativefeesfortheGeneralBenefitsandWorkers'CompensationFund
SummaryofChangesfromtablepresentedinAdoptedBudget(p.25)
MGMT:increasesalary3%;eliminatedcitypaidemployeepensioncontributionof6%;reducedprofessionaldevelopmentby$1,000
savingswillbereducedfromthebudgetduringthemidyearbudgetprocess
FCA:eliminated
city
paid
employee
pension
contribution;
eliminated
tuition/training
reimbursement;
eliminated
VMC
savingsisincludedintheFY2013adoptedbudget
PAPOA:reducedsalaryby1.33%;eliminatedcitypaidemployeepensioncontributionof9%;eliminatedtuition/training;reduced3holidays
$1.5MsavingsisincludedintheFY2013adoptedbudgetasabudgetoffsetintheGeneralFundNonDepartmentalbudget.Thissavings
willbeallocatedtothePoliceDepartmentduringthemidyearbudgetprocess.
SEIU:increasedsalary1.65%;adoptedbudgetalreadyassumed10%medicalcontribution;reducedmedicaloptoutexpenseeffective10/1;
eliminatedcitypaidemployeepensioncontributionof2.25%
savingswillbereducedfromthebudgetduringthemidyearbudgetprocess
ExhibitB
CitywideAverageSalary&BenefitsFiscalYear2013
AdjustedAssumes
Full
Year
of
Cost
Under
Revised
Labor
Agreements
(as
of
September
2013)
10/10/2012
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Exhibit C
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ExhibitD
IPMAStudy
Areviewofrecentresearchaboutemployeemotivation.ASeptember11,2012studyby
ADP andthe InternationalPublicManagementAssociation forHumanResources (IPMAHR) surveyedcurrent levels ofemployeeengagementamongpublic sector employeesat
the stateand local level. The survey,whichpolled over 2,200public sector employees
foundthatjust58percentofpublicsectoremployeesarefullyengagedintheirjobs.In
addition,38percentofallrespondentssaidtheywereeithervery,orsomewhatlikely,to
leavetheirjob,ifworkingconditionsdontimprove.Ahighernumberofyoungworkers
47percentofthose34yearsofageandyoungersaidtheywereeithervery,orsomewhat
likely,toleavetheirjob,ifworkingconditionsdonotimprove.
Thestudywasconductedtobetterunderstandwhichcomponentsarevitaltoengagement.
Withnumerousstudiespointingtoastrongcorrelationbetweenworkerengagementand
organizational productivity, performance and talent retention, its clear that employee
engagementisoneofthetopissuesconfrontingHRdecisionmakerstoday,saidTerrence
McCrossan, general manager, ADP Human Capital Management. Just as in the private
sector,publicsectororganizationscanbenefitfromhavingaclearerunderstandingofwhat
motivatesandsatisfiestheirworkforce,andfromhavingasysteminplacetotrackwhether
theirengagementlevelsaretrendingupwardornot.
Basedonmorethan2,200individualonlinesurveyresponsescollectedinJune,2012,the
studycanvassedabroadbaseofgovernmentemployees,includingmanagementandstaff,unionandnonunionemployees, key government verticals and functions, and state and
localities. As numerous studies have shown, there is a direct correlation between
employeeengagementandhighperformanceintheworkplace,aswellastalentretention,
said Neil Reichenberg, executive director, IPMAHR. Opportunities exist now for public
sector HRprofessionals tobetter understandwhatmotivates and inspiresworkers,and
thenformulatestrategiesforenhancingengagementatalllevels.
Additionalkeystudyfindingsinclude:
Servingthepublicwithintegritywascitedasthemostdistinguishingengagementfactorforpublicsectoremployeesandisthesinglehighestperformingelementin
theentiresurvey,with98percenttotalagreement.
Serving the public with integrity was a nearly universal response; howeveremployees34yearsoryounger,employeesofallagesandtechnologyworkerswere
below average on identifying making a difference as a key component in
engagement.
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Fullyengagedpublicsectoremployeesare:o Twiceaslikelytostayintheircurrentjobo 2.5timesmorelikelytofeeltheycanmakeadifferenceo 2.5timesmorelikelytorecommendtheirworkplacetootherso Threetimesaslikelytoreportbeingverysatisfiedintheirjobs
ThisstudywasconductedbytheGoverningInstituteamongasampleof2,259randomly
selectedparticipantsacrossstateandlocalgovernments.
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ExhibitE
BlessingWhiteStudy
Blessing White, an international research firm, published The Employee Engagement
Report2011.Itreflectsinterviewswith11,000HRandlineleadersaswellasindividual
employees.Accordingtotheirresearch,Thetopreasongivenforstayinginanorganization
isWork.IliketheworkthatIdo.Thisfindingisinlinewithourcareerdevelopment
research,whichindicatesthatthepeoplelookforworkthatismeaningfulorchallenging
beforeconsideringtangibleslikefinancesorpromotions.ThesecondaryreasoninNorth
AmericawasMyjobconditions.Ihaveflexiblehours,goodcommute,etc.Incontrast,the
numberonereasonforleavinganemployerisMycareer.Idonthavetheopportunitiesto
groworadvancehere.
TheBlessingWhitereportsummarizessurveyfindingsbypositingthatengagedemployees
stayforwhattheycangivetheyliketheirworkandareabletocontribute.Conversely,
disengaged employeesmay stay forwhat they can get a secure job in an unfavorableeconomic environment, salary and benefits and other favorable job conditions. When
askedtonameonethingthatwouldimprovejobsatisfaction,thetopthreecategoriesU.S.
respondentschoseare:
27% moreopportunitiestodowhatIdobest
20% Careerdevelopmentopportunitiesandtraining
15% Moreflexibility,controloverhowmyworkisdone,flextime,etc.
Whenasked for anitemthatwouldmostimproveperformance,thetopthree responses
are:
28%moreresources
16%greaterclarityaboutwhattheorganizationwantsmetodoandwhy16%developmentopportunitiesandtraining
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CI TY COUNCI LEXCERPT
Page 1 of 4
Special Meeting
July 2, 2012
Colleagues Memo From Vice Mayor Scharff and Council Members Burt,Holman, and Schmid on Council Direction Regarding Benefits Strategy.
Council Member Burt reported the Memo attempted to lay the groundworkfor systematic and long range discussions on the reforms needed to create a
sustainable system of employee pensions, benefits, and compensations.Council Members wanted City services to continue at the level expected
while still having strong compensation and benefits for the workforce. TheMemo outlined a number of different policy directions for review, which were
aligned with the initiatives of the Governor and the California League ofCities (League). In addition, the Memo outlined a number of other areas
open to exploration. Council Members requested Staff return with anagendized Item in September for full Council discussion on these topics.Staff should answer the bulk of the questions to the extent reasonable and
feasible by September; those questions requiring research could beagendized for a subsequent meeting. Staff should also identify any legal
constraints to implementing initiatives and actions taken by other cities, the
League and the Legislature on related issues. Legislative action in thecoming weeks would likely affect future discussions, because State levelconstraints would need to be corrected to enact the Governor's proposed
reforms. That legislation would enable cities to adopt similar reforms.
Council Member Holman advised that most action regarding labor
agreements concerned negotiation and were held in Closed Session. Thiswas a method to have a public discussion and to educate and inform the
public about opportunities and constraints. She hoped labor groups wouldparticipate in public discussions, and looked forward to creative methods for
addressing employee retention and job satisfaction.
Council Member Schmid reported the engendering of this Memo wasGovernor Brown's pension reform proposal. He asked Staff to define thoseissues subject to the Council's discretion and those subject to State level
constraints and regulations. Staff and union input were critical to theprocess.
Attachment A
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EXCERPT
Page 2 of 4City Council Special Meeting
Excerpt 7/2/12
Vice Mayor Scharff welcomed a public discussion of the issues and
constraints. The Memo raised many issues, and now was the time forCouncil Members to raise other issues.
Council Member Shepherd reported the League was working to get a
proposal to the Legislature to make significant changes. It would addressmany items in the Memo.
Mr. Keene stated many laws restricted local governments' abilities to makedecisions about benefits and costs. The League's main focus was ensuring
the Governor's proposed reforms were extended to local governments.State laws, California Public Employees' Retirement System (CalPERS)
regulations and interpretations, and State-wide pension and healthcareprograms precluded the City's ability to make decisions, even when
employees were willing to make changes. Existing regulations did not allow
the City to do anything to the taxpayers' and employees' benefit. The Memowas aligned with the League's initiative. The League had draft legislation inconference committee at the Legislature, and would know whether or not itwould be scheduled for floor sessions before the recess. Otherwise, it would
come back when the Legislature reconvened on August 6, 2012.
Mayor Yeh believed public discussion was important. Staff should considermethods to achieve the most productive and constructive discussions. He
asked Staff to provide a categorization or grouping of questions that lentthemselves to open session meetings.
Mr. Keene reported there was a logical grouping of the questions, and otherscould emerge during Staff review. One apparent grouping was based upon
actions within the Council's current local authority and discretion versusactions dependent upon legislative or regulatory change at another level of
government. Staff would return to the Council in mid or late Septemberwith the understanding that they would not necessarily have answered every
question. There would be meetings subsequent to the September meeting.
Mayor Yeh stated this was an invitation for creative solutions from employeeand employer perspectives. He asked for Staff's thoughts regarding creating
an open climate to invite and achieve honest discussions.
Mr. Keene indicated one of the primary roles of the Human Resources
Director was to help elevate and deepen the conversation and sharedresponsibility between the City and employees. That aligned with having an
open public conversation regarding the realities faced by the City.
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Kathy Shen, Director of Human Resources reported employees wanted to be
heard. Employees had opinions about their value to the City and how theCity compensated, rewarded and engaged them. She would compose
questions to obtain input while minimizing emotions. There weregenerational differences in our employees in terms of what they wanted to
get out of the work and the value proposition of working for the City.
Mayor Yeh looked forward to any model presented in September.
MOTI ON: Council Member Schmid moved, seconded by Council Member
Holman to direct Staff to agendize by the end of September 2012 thediscussion of the items contained in the Colleagues Memo on sustainable
pensions, retiree healthcare, other benefits, and incentives for careeremployment.
Council Member Holman introduced the phrase tipping point. It was oftenreferred to in the physical environment as what caused a change in actionsand reactions. It also related to responses to different interactions,conditions, and situations.
Council Member Shepherd asked how the City could support the League's
proposed legislation, especially if action was needed while the Council was inrecess.
Mr. Keene reported the Council's discussion and alignment of the Memo with
the League's proposals gave Staff the general guidance under legislativepolicies to respond on behalf of the Council. If Staff received a request forinformation during the recess, they could advance the City's support for
topics aligned with the Memo.
Council Member Shepherd indicated the proposed legislation would allowemployees to move from city to city and would reduce the difficulty in
negotiating contracts.
Council Member Burt stated the Council was not in a position to adopt theMemo in principle. He was not sure the discussion and Memo could be used
as a basis to authorize Staff to support legislation.
Mr. Keene felt Staff could express support for local discretion to be extended
to cities in determining benefit levels and for fewer restrictions imposed byregulations.
Molly Stump, City Attorney advised the League had emphasized the issue of
flexibility and local control. The Governor may have gone a bit further in
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EXCERPTadvocating a particular substantive policy where the League statement
advocated allowing local jurisdictions to determine specific policy. Staffcould anticipate the League's policies continuing along those lines. That was
the type of issue read into this Colleagues Memo at this point.
Mr. Keene assumed Staff could provide examples of experiences withrestrictions in order to support local discretion. That type of comment would
not express support for a particular change, but would express the desire tohave more freedom to resolve these difficulties through the Council.
MOTI ON PASSED: 8-0 Price absent