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HomeMy WebLinkAbout101512_Salary Commission_Approved as amendedCOUNTY OF KAUAI Minutes of Meeting OPEN SESSION Board /Committee: SALARY COMMISSION Meeting Date October 15. 2012 Location Mo'ikeha Building — Meeting Room 2AB Start of Meeting: 9:08 a.m. End of Meeting: 9:59 a.m. Present Chair Robert Crowell; Vice -Chair Charles King; Members: Randy Finlay, Michael Machado, and Sheri Kunioka -Volz Also present: Deputy County Attorney Mona Clark; Board & Commissions Office Staff. Support Clerk Mercedes Youn; Administrator Paula Morikami, Director of Finance Wally Rezentes, Jr., and Budget /Purchasing Director Ernest Barreira. Excused Commissioner Jo Ann Shimamoto Absent SUBJECT DISCUSSION ACTION Call To Order Chair Crowell called the meeting to order at 9:08 a.m. Approval of Regular Open Session Minutes of September 27, 2012 Minutes Commissioner Kunioka -Volz indicated that there were a few corrections that needed to be made on page four (4) and seven (7) of the meeting minutes. Page four (4), second paragraph, line seven (7) should state "Ms. Kunioka- Volz further explained that the retirement plan is determined by the employee's job category. " Also on the same paragraph, line ten (10) should state "the new employees would earn 2 percent ". Page four (4), third paragraph, line five (5) should state "Ms. Kunioka -Volz further explained that the employee's contributory plan contributes an average of 7.8% and the newer Hybrid Plan employee contributes 6% of their earnings ". Page seven (7), third paragraph, line two (2) should state "managers who cannot manage the overtime in their department". Salary Commission Regular Meeting - Open Session October 15, 2012 Page 2 SUBJECT DISCUSSION ACTION With no further corrections, Chair Crowell called for a rnotion. Commissioner Finlay moved to approve the minutes as amended. Vice -Chair King seconded the motion. Motion carried 5:0 Business Discussion and deliberation on establishing future salary caps including, but not limited to, fringe benefits of council members and all officers and employees included in Section 3 -2.1 of the Kauai County Code. (On- going) (a) Communication dated September 28, 2012 from Chair Robert Crowell inviting Mayor Bernard P. Carvalho, Jr., and requesting the presence of the Director of Finance Wally Rezentes, Jr., to discuss the budget forecast for fiscal year 2013 -14. Communication dated October 11, 2012 from Mayor Bernard P. Carvalho, Jr., to Chair Crowell and Members of the Salary Commission, regarding review of Administrative Salary Caps was distributed to the members prior to the start of the meeting. Chair Crowell called for a motion to receive the communication dated Commissioner Finlay moved to receive the October 11, 2012. communication dated October 11, 2012. Commissioner Machado seconded. Motion carried 5:0 Finance Director Wallace Rezentes, Jr., and Budget and Purchasing Director Ernest Barreira provided information relative to the County's budget forecast for fiscal year 2013 -14, including the Mayor's position on the salary cap increases for fiscal year 2013 -14. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 3 SUBJECT DISCUSSION ACTION With regard to Mayor Carvalho's letter dated 10/11/12, Mr. Rezentes indicated that Mayor Carvalho is basically requesting that the Salary Commission freeze the salary cap increases for the department heads and deputies effective 07/01/13. Mr. Rezentes indicated that Mayor Carvalho's request to freeze the salary caps was based on a report analysis which compared the executive pay rates for both state and county. Secondly, the real property tax revenues would likely be flat in the coming fiscal year when at the same time the County's operating expenses would continue to rise. Mr. Rezentes stated that the real property tax revenue which the County receives each year totaled approximately $180 million dollars of which 80% of the revenues represent the General Fund for the County. Another area of concern was the projected increase in the employee's benefit cost relative to the employment retirement system and the employee's health fund. Mr. Rezentes also discussed the Transient Accommodation Tax (TAT). He indicated that a few years ago, the Hawaii State Legislature capped all counties at pre - described levels and that the County of Kauai was capped at 13.48 million dollars compared to the previous years when the County received somewhere in the neighborhood of 17 million dollars when tourism was at its peak. Even if there have been increases in visitor arrivals, the cap still exist. Mr. Rezentes stated that in recent years, the grant revenues from the state and federal sources have been on the decline. The County has opted, in many instances, to pick up the cost through the County's Salary Commission Regular Meeting - Open Session October 15, 2012 Page 4 SUBJECT DISCUSSION ACTION General Fund or other Operating Funds, in order to maintain the level of service at prescribed levels. These are factors that led to the Mayor's request for consideration that the Salary Commission maintains the 2008 salary levels for the department heads and deputies. Mr. Rezentes stated that as far as what the County could foresee from a revenue source standpoint, the County is not in a position where it can accurately assess where it would stand on the real property taxes. The County has made a number of systemic changes in its real property tax system; most noticeably is the fact that the County is now going to categorize each real property tax exemption based on the use of the property and not by the underlying zoning. He indicated that these new changes could mean that there would be a number of shifts from one category to another category. Mr. Rezentes further indicated that the County has mailed out a total of 18,000 to 20,000 surveys to island residences and businesses asking them how they are utilizing their property and for what purpose. Mr. Rezentes stated that with this information, the County would more than likely see a shift from a higher tax category to a lower tax category. He explained that it is part of human nature if you knew that you could move to a lower tax category simply by declaring it in a survey. Mr. Rezentes expressed his appreciation by thanking the staff of the Real Property Tax Division for taking on such an enormous task. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 5 SUBJECT DISCUSSION ACTION Mr. Rezentes explained that once the surveys are received, the County would know more or less where it stands and then can make the appropriate decision or recommendation to the County Council regarding the new tax rate and when it should commence under each category. He noted that when the time comes to reset the tax rates, the County is not looking to increase taxes but rather looking at having a flat revenue picture. Mr. Rezentes mentioned that from a coffers perspective it would take about two to three years before the County would actually see the added benefits of that cycle because the values and assessments are based on historical data. He stated that it is a good sign that the hotel industry seems to be improving and that the average daily room rate throughout the State has improved in the last couple of years, which produces a trickling affect in other segments of the economy. Mr. Rezentes stated that he remains hopeful that the County of Kauai will soon be back on track as far as the economy is concerned; however, at this point in time he is unable to accurately predict where the County is going to stand going forward into the next fiscal year. Commissioner Kunioka -Volz asked whether there was a minimum or a guaranteed amount of what the County would actually receive, or is the cap set by the State. Mr. Rezentes explained that due to the lackluster of the State's economy the Hawaii State Legislature placed a cap on the county's entire share of the TAT. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 6 SUBJECT DISCUSSION ACTION Commissioner Kunioka -Volz commented that essentially the State would end up keeping 3.5 million dollars compared to the previous years when the Hawaii State Legislature gave the County of Kauai its share of 17 million dollars. Mr. Rezentes said yes, and that the State is the beneficiary of the TAT not only for Kauai but for the other counties as well. Commissioner Kunioka -Volz pointed out that even though the hotel room rate is on a rise, the County is still being capped. Mr. Rezentes said yes, and indicated that it is still unclear whether the Hawaii State Legislature would sunshine it in a year or two, or whether they would extend it further. He stated that during the Administration's discussion with the State Legislators, it seemed that the Legislators are not in a position to give the counties its fair share of the TAT. Commissioner Kunioka -Volz questioned whether the State's justification for not being able to give the counties its fair share of the TAT is because the counties are better off financially than the State. Mr. Rezentes stated that is pretty much the gist of it because the State felt that they were much more in dire constraints than the counties which prompted their decision not to give the counties its fair share of the TAT. Vice -Chair King stated that he cannot recall whether the County tried to set higher property tax for the Timeshares. Mr. Rezentes replied that was only talk and that the Timeshares are still in the same category with Hotel & Resort. Mr. Rezentes stated that Maui County took a different approach by creating a separate tax rate category for the Timeshares and that the tax rate is considerably higher compared to the Hotel & Resort tax rate. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 7 SUBJECT DISCUSSION ACTION Commissioner Finlay asked Mr. Rezentes to characterize the County's budget for last year as being in a deficit or with a surplus and whether it had some significance. Mr. Rezentes explained that the County is a month away from completing its audit for fiscal year 2012. In 2011 -2012 expenditures have exceeded its revenues but the County was fortunate to have a fund balance and a reserve set up in which the County could fall back on at that time and potentially in the future depending on what the audit reveals and how the County ended its fiscal year. Commissioner Finlay said that the County of Kauai is quite fortunate to have had a little bit of a surplus to work with, even though in the last few years the expenditures have exceeded the County's revenues and that it seemed that would be a similar forecast for the County next year. Mr. Rezentes agreed. Vice -Chair King asked Mr. Barreira if his position as the County's Budget /Purchasing Director was a new position. Mr. Barreira answered with a yes and a no. He explained that he still wears the hat of the Assistant Chief Procurement Officer and that in January 2012 the Mayor wanted to look into replacing now retired Alvin Honda, who served as the County's Budget Administrator for 42 years. As a result, the Mayor decided to bring both functionalities together under one position and now his duties and responsibilities include being the Director of Purchasing and Budget Operations for the County. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 8 SUBJECT DISCUSSION ACTION Commissioner Finlay commented that he liked that idea because it was a cost reduction move for the County. Mr. Barreira said that the move proved very significant because if the County had to fund both positions it would have cost the County somewhere in the amount of $90,000 plus fringe benefits. Commissioner Kunioka -Volz asked what percentage of the County's budget reflects the administrative salaries. Mr. Rezentes said that he does not have that information with him. Commissioner Finlay said that any increase in the salary cap tends to correlate a salary increase across the board for other positions. Vice -Chair King gave a rough estimate that the administrative salaries reflect 3 to 4 percent of the County's budget. Commissioner Machado asked if a portion of the County's budget is allocated for litigation costs. Mr. Rezentes said that cost for litigations are budgeted in the County Attorney's Office and that the amounts used towards litigations have varied in the past depending on the actual result. He indicated that it can be pretty hard to estimate a budget number when you don't know what all of the exposures are and when the settlement is likely to occur. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 9 SUBJECT DISCUSSION ACTION Commissioner Machado asked if the County adjusts its budget for each fiscal year depending on the previous year litigation costs. Mr. Rezentes said that during the course of the year if the County Attorney knows that it is going to exceed the budgeted amount they would have to obtain approval from Council into order to receive additional funding for settlement claims, etc. Chair Crowell asked whether the County of Kauai is the only county where the rank and file was placed on furlough that included a 5 percent pay reduction. Mr. Rezentes said the furloughs and the 5 percent pay reduction lasted for a period of 6 months. Chair Crowell asked if the County's decision to end the furloughs and the 5 percent pay reduction was based on a good showing in the County's revenues. Mr. Rezentes further explained that the other reason the County ended the furloughs and the 5 percent pay reduction was because the County was in a better fiscal position then its counterparts. Furthermore, because the Mayor and the Council had shared concerns about service delivery they decided to end the furloughs. Mr. Barreira pointed out that the report on the comparative executive pay rates for both state and county proved to be a very valuable piece of information because it showed that the County of Kauai is about one -third the size and scope of Maui and the Big Island counties.. He noted that the salaries for the County's executive branch of government are compensated higher than the other counties. Mr. Rezentes and Mr. Barreira exited the meeting at 9:35 a.m. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 10 SUBJECT DISCUSSION ACTION Commissioner Finlay commented that the additional insight from Mr. Rezentes and Mr. Barreira proved to be very worthwhile because it seems that the County was running on a deficit for the past couple of years but was fortunate enough to be in a strong fiscal position where it could absorb the negative spending. The budget planners would have a difficult time to budget for salary increases amongst all of the other issues they were faced with in this budget. Vice -Chair King commented that the Director of Finance clarified the Mayor's position that he does not want any salary increases. Commissioner Machado asked whether all of the department heads salary caps have reached its peak. Ms. Morikami clarified that there are still some department heads that have not yet reached their caps. Chair Crowell said that based on the information he could only assume that the other counties did not get more than their established salary cap. He questioned whether their salary caps are even accurate. Vice -Chair King asked that if the Commission decided not to grant any salary cap increases, would the Commission need to amend its current resolution because of the fact that there is a salary increase slated to become effective on 07/01/13. Deputy County Attorney Clark said yes. Commissioner Finlay felt that the Commission should not amend the current resolution because it has been amended so many times. He indicated that it might be prudent for the Commission to submit a new resolution that would state that there would be no salary increases for the reasons stated in the Mayor's letter and to hold status quo on the salary increases slated for 07/01/13. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 11 SUBJECT DISCUSSION ACTION He stated that when the Commission is ready to move forward in its discussion on whether to maintain, adjust or increase the salary cap, the Commission may not want to use the salaries that are pending anyway because it could base its decision using the facts that the Commission had already reviewed in order to get the right numbers. Chair Crowell asked whether a new resolution would override the current resolution. Deputy Attorney Clark said that it would be appropriate for the Commission to have a new resolution that would only cancel the salary increases scheduled for 07/01/13. She advised the Commission not to cancel the entire resolution because it contained the evaluation procedures, but most importantly, Council may decide to contest the resolution should the Commission decide to cancel the prior resolution. Commissioner Machado asked if the new resolution would affect the salary increase that was granted to the Police and Fire Chiefs and their deputies. Commissioner Finlay said that was a separate resolution and it should not affect the salary increases. Ms. Morikami noted that the new resolution would take into effect the salary increases for the Police and Fire Chiefs and their deputies. Deputy Attorney Clark suggested to the Commission that they work on drafting a simple resolution which would clearly state the Commission's position which is to cancel or delete the increases in maximum salaries scheduled to become effective on 07/01/13, and except as expressly amended herein in Resolution 2012 -2, that Resolution 2012 -1 shall remain in full force and effect. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 12 SUBJECT DISCUSSION ACTION Commissioner Finlay pointed out that he wanted to put a stop to the hanging salary increases and that having a new resolution would fix that. He stated that the new resolution would state the Commission's position which is no salary increases for fiscal year 2013 and that the projected salary increases be rescinded and that the Salary Commission would review the issue in the future. He also suggested that he wanted to include in the new resolution the paraphrase from the Mayor's letter that says "we needed to be accountable to the taxpayers of Kauai ". Chair Crowell asked whether the Commission would consider looking into the salaries of the County Attorneys and the County Engineer. Commissioner Finlay said that he appreciated Chair Crowell's inquiry regarding the salary for the County Attorney and he agreed that adjustments needed to be made, but he also felt that it might be difficult thing to do because some of the salaries might have to be adjusted upward and others have to be adjusted lower. He asked the Commission whether they would consider waiting for another year before making any adjustments to the department heads and deputies salaries. Chair Crowell said that he noticed that the salary for the County Engineer looked comparable, but felt that the salary for the County Attorney (although it falls in the middle of the two other jurisdictions) might need some upward adjustment. He wondered whether the Commission felt that now was a good time to consider an adjustment to the County Attorney's salary; either way he was fine with whatever the Commission decided. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 13 SUBJECT DISCUSSION ACTION Commissioner Machado said that he noticed that the salary for the County Attorney is higher than the Big Island and just a little bit more than Maui. Commissioner Machado asked Commissioner Finlay whether he was considering any salary reductions. Commissioner Finlay said that any reductions at this point in time would be considered a sore subject, but also felt that fairness and equity should be applied to the department heads and deputies when considering any increases or decreases in the salaries. Commissioner Finlay stated that the best way for the Commission to accomplish its goal without any reductions is to wait to a point to where the Commission can all agree to do across the board changes such as upward adjustments or hold the salaries flat. Commissioner Machado thought that would be a better approach. In regard to the report, Commissioner Finlay stated that he had a hard time finding anyone in particular who was so far out of the averages that really needed immediate addressing. Commissioner Machado stated that the information on the salary caps for each county was very helpful and he requested for another update for next year. He suggested that the Commission should pursue the idea on whether the numbers in the report are caps or actual salaries; he felt that maybe the caps are higher than what is shown in the report. Chair Crowell stated that it would be good for the Commission to know whether the salaries are just caps or actual salaries. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 14 SUBJECT DISCUSSION ACTION Commissioner Finlay pointed out that the salary for Kauai's County Clerk versus Big Island and Maui showed some real disparities which would suggest that an adjustment is needed. Commissioner Finlay stated that as difficult as it is to do any downward adjustments it would be the appropriate time to make those adjustments because when all of the other salaries are going up, the Commission could also maintain other salaries. Chair Crowell stated that it is his understanding that Council has held the County Clerk to a lower salary that what is shown in the report. Commissioner Finlay stated that if that is the case then it would be painless to lower the cap because of all of the positions in the report the County Clerk showed the most disparity. In regard to the proposed Charter amendments to the Kauai County Charter that are on this year's election ballot, Chair Crowell asked when the amendments would take effect. Deputy Attorney Clark said that the amendments would take effect in December 2012. Chair Crowell asked whether Council would have to approve the amendments. Deputy Attorney Clark said no, the voters do. She added that there is a question on the ballot relative to whether the waiting period be eliminated before the council's salary changes become effective. Ms. Morikami added that another question that was placed on the election ballot asks should the Salary Commission establish maximum salaries for officers, which shall include the Prosecuting Attorney and all deputies, and allow for elected officers to accept salaries lower than the maximum. Salary Commission Regular Meeting - Open Session October 15, 2012 Page 15 SUBJECT DISCUSSION ACTION Commissioner Finlay added that another amendment was to clarify that the Salary Commission sets the Mayor's salary and not the County Council because at this point it remains ambiguous. Ms. Morikami stated that another question that is on the election ballot asks should the waiting period be eliminated before the council's salary changes become effective. She indicated that because the Salary Commission now sets the salary for Council, there is no point to have to wait. Vice -Chair King asked whether it would be appropriate for the Commission to make a motion to have the Deputy Attorney draft a new resolution. Deputy Attorney Clark stated that the Commission should state its request and then have the item on the next meeting agenda for review and possible approval. For clarification, Chair Crowell restated that the Salary Commission's position is to hold the salaries status quo for the department heads and deputies, including the Council and Prosecuting Attorney. Announcements Next meeting — Friday, November 16, 2012 at 9:00 a.m. at the Mo'ikeha Buildin , in Meeting Room 2A/2B. Adjournment With no further business to discuss, Chair Crowell called for a motion to Vice -Chair King moved to adjourn the meeting adjourn the meeting. at 9:59 a.m. Commissioner Finlay seconded the motion. Motion carried 5:0 Salary Commission Regular Meeting - Open Session October 15, 2012 Submitted by: Mercedes Youn, Staff Support Clerk Page 16 Reviewed and Approved by: ( ) Approved as circulated. (X) Approved as amended on 11/16/12. See minutes of 11/16/12 meeting. Robert Crowell, Chair