MINUTES OF THE METRO COUNCIL BUDGET & FINANCE COMMITTEE

Tuesday, April 4, 2000

Council Chamber

Members Present:  Susan McLain (Chair), Bill Atherton (Vice Chair), Jon Kvistad, Rod Monroe

Members Absent:  None

Also Present:    David Bragdon

Chair McLain called the meeting to order at 1:38 p.m.

1.  Ordinance No. 00-847, For the Purpose of Adopting the Annual Budget for Fiscal Year 2000-01, making appropriations, and levying ad valorem taxes, and declaring an emergency.

Chair McLain said the committee would concentrate today on the Metropolitan Exposition-Recreation Commission (MERC). The Committee would start where they left off April 3, 2000, with questions and response regarding the Software Support Coordinator position in Council Analyst Questions Regarding the MERC Budget and Analyst Recommendations Related to Proposed FY 2000-01 MERC Budget. Both documents are included in the public record.

Councilor Monroe asked if the Committee finished discussing the $903,000 vs. $671,000 question on administrative expenses. Chair McLain said that she understood that Mark Williams, MERC General Manager saw the difference as savings. The Committee had asked Mr. Williams about the accuracy of their budgeting and how they regarded unfilled positions. They had indicated there were two positions that they had not filled. Later, they hired for those positions. She asked the committee if members had any other comments relevant to that discussion. He requested John Houser, Council Analyst, to analyze and review the issue for the past 3-4 years.

Councilor Monroe asked staff it was a one-time situation or if there was a history of apparent over-budgeting. Mr. Houser said he wrote the question related to the Portland Metropolitan Exposition Center (Expo) and their historic pattern of personnel expenditures. He had gone over the three most complete fiscal years for which there was data (FY 1996-97, 1997-98 and 1998-99). During those three years, the Expo’s actual personal services expenditures were 71%, 76% and 80% respectively, of the total amount budgeted. Under-spending was $236k, $179k and $161k, respectively. That was as far as he had gotten in analyzing the issue.

Mr. Williams, said they tried to cut expenses so dollars flowed back into the facility’s bottom line. He applauded the extremely successful work performed by Expo's manager, who had controlled costs very carefully. As an enterprise unit, they differed somewhat in that they did not receive budget money from the General Fund. He saw Councilor Monroe’s point regarding over-budgeting. But, unlike a unit that received money from the General Fund, Expo funds were dedicated to specific areas. Therefore, if the manager prudently controlled expenses, any dollars not spent in the Expo budget would flow back to the Expo bottom line and could be used for projects such as Hall D. That was how repairs were financed, and Hall D maintenance. Funding was provided by revenue, not tax assistance.

Councilor Monroe supported saving money, applauded their efforts, and said often agencies spend less than full line item funding. However, usually such savings were not of the magnitude realized by Expo. In the past, Mr. Williams had expressed serious concern about the amount MERC paid for excise taxes, etc. Councilor Monroe expressed concern that a pattern of over-funding might have developed. He suggested that the situation had serious implications and that the MERC budget needed to more closely reflect their need. A cost savings in the 5-10% range was acceptable, but a 25% savings, year after year, was either over-budgeting, or under-spending.

Chair McLain said it was a philosophical issue the Committee should discuss further. However, as it did not affect a particular line-item amendment or suggestion, she would delay the conversation until a later date. Councilor Atherton mentioned MERC’s use of leftover funding for maintenance and repair of facilities. There had never been a line item in the budget to establish a reserve account. He agreed that budget items should be more clearly identified.

Mr. Williams said they proceeded with a Hall D replacement that would be revenue-based. They directed the Expo manager to pinch pennies, increase revenues, cut expenses and use the savings to fund the major capital portion, either through an initial contribution to pay off the Intel debt, or to fund the debt service. He added that MERC recently sold the bonds to pay for the Expo project at a 5.65% interest rate from Oregon Economic Development Department. He agreed that Metro did not allot funding in the Expo Center budget specifically for maintenance and/or repair. There was a line item for capital maintenance. However, for this major capital replacement MERC essentially did an ad-hoc budget modification to create the whole Expo Hall D bond repayment fund, and handled a huge piece of future capital needs in that fashion. It may not have been a perfect method from a budgetary standpoint, but bottom-line, the revenue Expo generated and the expenses they cut were dedicated to constructing the new building.

Councilor Atherton asked if Mr. Williams understood the arrangement looked like over-budgeting. Mr. Williams said he did.

Peggy Coats, Council Analyst, summarized the pay for performance plan questions and answers which, she said, were answered satisfactorily.

Chair McLain said she understood that the Council office pay increases were limited to 4% and asked what the percentages were across the Agency. Ms. Coats said instructions to managers across the Agency directed them to strive for 4% increases for the coming fiscal year. Chair McLain asked what the increase had been over the past 3-4 years. Ms. Coats said that she would have to check. Chair McLain said she had questions regarding consistency since Metro was striving to establish equity throughout the Agency (including the Metro Regional Center building and other facilities). She questioned MERC's 6% average in that light. Kathy Rutkowski, Metro Financial Planning Analyst, said percentages depended on which bargaining unit employees were part of. For example, AFSCME (American Federation of State County and Municipal Employees) had 5% step increases. If they wished to create detailed salary forecast by person, they used a 5% step increase from a person’s hiring date.

Chair McLain asked if they were talking about merit. She thought it was a 2+2 for a total of 4%. Ms. Rutkowski said merit pay was for non-represented employees. The pay plan or Metro Code allowed for a 0-8% increase. The average had been 4-5% during the last several years. Chair McLain asked if 5% was still below what MERC was currently asking for. Ms. Rutkowski said yes.

Mr. Williams said MERC did not award cost of living adjustment (COLA) for staff covered by the pay for performance plan. He understood that Metro handled it differently with COLA; the inconsistency between the two groups was deliberate. MERC funds were dedicated to each facility and could not be moved, due to a host of restrictions. Therefore, the MERC Commission had decided to treat each facility as a separate enterprise unit. Each facility director made recommendations each year to the commission regarding what the specific facility could afford to pay for pay for performance purposes. Facilities that had more to spend on capital because of deferred capital needs and fewer dollars available, tended to spend less on pay increases for staff, while other facilities tended to budget more.

Mr. Williams said that it was possible to make it consistent. At one time the decision was made to completely stop all merit increases for a period of three years due to financial problems at one facility. As a result the Commission decided this was not a good procedure, and directed that each facility should have to live within its means and analyze what it could pay. He described how MERC calculated the amount for each facility. The Civic Stadium had a high rating but only had seven full-time staff members. If one added their average pay increase to the other MERC facilities it would skew the results. Therefore, MERC took the amount the Commission budgeted for pay for performance as a percentage of full-time salaries. What they calculated for FY 2000 and FY 2001 were 3.9% and 4.6% totals. Compared to the combined merit and/or step increase with a COLA, it was a favorable result.

Chair McLain and Councilor Monroe asked staff to chart MERC’s salary figures (COLA, merit, lump sum and everything else) to verify accuracy and fair accounting comparisons.

Councilor Atherton asked how many years MERC has had the pay for performance program. Mr. Williams said the agency was entering their second full year in the program. Before, as he mentioned, MERC froze all merit increases for 3 years. MERC had to do two things to address their staff situation: 1) Recognize staff development over time because people were frozen in pay ranges and 2) Avoid a costly longevity step program where raises were automatic. Those considerations led them to adopt the pay for performance program.

Councilor Atherton asked if the merit increases applied only to non-represented employees, and how MERC handled represented employees. Mr. Williams said MERC, unlike Metro, did not have a wall-to-wall bargaining agreement or any unionized white-collar staff. The unionized staff was limited to a small percentage of utility and other employees at OCC, operating engineers and some others. Therefore, MERC had a much larger non-represented workforce than Metro. MERC handled its represented workforce in a manner similar to Metro. The major difference was that MERC did not have longevity steps past the first year or two. Employees progressed to the journeyman rate early, with no further step increases, just COLA.

Councilor Atherton asked Mr. Williams if he had the figures and the overall percentage for the represented staff. He asked if it compared favorably to Metro’s 5 percent. Mr. Williams said they had done COLAs for represented staff without step increases. Metro’s represented staff, until they topped out, received COLA and a 5% longevity step unrelated to merit increases every year. Depending on inflation, it ran from 6-8%. When represented employees topped out at either 5 or 7 years, they were only eligible for COLA.

Michael Morrissey, Senior Metro Council Analyst, questioned how the flexibility in the hiring process and the pay for performance program fit at the point of hiring with non-exempt staff. Mr. Williams said MERC never set any of their employee’s initial salaries higher than market target. Employees that were part of the pay for performance plan could advance through the salary range until they reached market target, referred to in a more typical plan as the midpoint salary. Once employees reached market target for their positions, they were eligible for bonuses that had to be re-earned every year. MERC adjusted the initial bonus amount where necessary to recruit successfully. MERC never hired someone above the market target figure.

Chair McLain asked if he was saying that the base pay or market target was an employee’s salary every year and then there was flexibility in the size of the bonus amount from one year to another. Mr. Williams said no, under the pay for performance plan, the maximum salary increase any employee could receive was 12%. Chair McLain noted two exceptions. Mr. Williams said there were not two exceptions; rather the fiscal operations position was vacated, and the next year MERC budgeted the position at market target. The incumbent who left was not at market target. There was not a pay increase for a specific individual. Instead, there was a budgeting decision to adjust the position to market target as a recruiting tool; there was no pay increase for the individual. Mr. Morrissey said that when the individual was hired, MERC had indicated what the bonus would be at the end of a certain time period. Therefore, MERC established the employee’s bonus pay before they assessed the employee’s performance. That was the point he questioned, because he had not seen that done before.

Mr. Morrissey commented that the 16% figure left a lot of room for flexibility and asked Mr. Williams to explain. Mr. Williams said the MERC Commission controlled his salary by contract and set it by formal Commission action, effective July 1, 1998, and had not increased it since. He had not discussed increases in his salary with the Commissioners nor did he plan to. The Commission set the general manager’s salary by contract each year, and simply did not authorize an increase based on their determination of available funds. Chair McLain asked if Mr. Williams negotiated his salary every year with the Commission. Mr. Williams said yes, but such negotiations occurred less frequently than yearly.

Mr. Morrissey continued with the MERC Human Resources (HR) Manager position and questioned whether the position required a specialist or generalist. Chair McLain said there was a difference of opinion regarding what was considered a generalist and what some of the other services were. She asked if Metro HR would continue to provide general services to MERC including recruiting, selection, classification and staff development. Mr. Williams said MERC had always contracted with Metro to perform a wide variety of human resources functions. For time-sensitive or crucial positions, HR tasks would be handled by MERC in-house. The position would handle general HR duties for MERC and all of its facility directors, as necessary, plus all labor relations issues. Previously, the agency purchased a dedicated Metro HR generalist through an add-on agreement with advice from the Metro HR. MERC had identified additional HR needs and ultimately decided it could provide those services more effectively in-house. MERC terminated the extra add-on portion of the package (a one-year pilot). Therefore, it was not a new position.

Chair McLain said understanding exactly what a person in this position would do was a crucial part of the issue. She indicated there would still be situations that would require MERC to contract with Metro for the generalist HR functions she mentioned earlier. The position would also be responsible primarily for labor relations and performing other unnamed HR tasks for other MERC facilities. She asked how much of the person’s time and effort would be consumed by those duties. Mr. Williams said the position would not involve labor relations duties primarily; that would be one function. MERC was entering a bargaining period that would involve negotiating new contracts for a variety of employees simultaneously. However, this situation was unique, and would not always occur. There was an immediate workload issue in that specific area, but it did not change the position’s focus, to provide general HR services for MERC. The position would also revamp MERC's personnel procedures, and monitor and improve the pay for performance plan. Metro HR would continue to handle many of the bulk activities, including recruiting, which would continue to be a large piece of work.

Chair McLain was concerned because MERC seemed to keep adding more duties to the position. She asked if they would have enough time to perform the labor functions for all of MERC’s facilities. Mr. Williams said it might be possible for the position to also handle labor relations for the rest of the organization, if it was the will of the Council and was a way to handle some of the outstanding issues. He suggested that some cross-fertilization between the two organizations, where each was working on joint problems, might be helpful in solving problems, especially in tight budget times.

Chair McLain asked Ms. Scott to describe services provided by the agency in the past. Ruth Scott, Human Resources Manager, said Metro had provided a base package of HR services (recruiting, selection, classification, compensation, labor management and relations) since she had come to the agency. The only two functions Metro did not provide were some staff development, (provided by Linda Lewis), and the pay for performance program. However, currently Metro was providing services in that area as well.

Councilor Monroe said it was cumbersome to have a system where much of MERC’s HR needs were serviced by Metro’s HR Department, yet some areas were serviced by separate individuals at MERC. He wondered whether it might be more efficient to service all of Metro and MERC’s HR needs through one central office. Mr. Williams suggested that Tanya Collier, MERC Human Resources Manager, might address Councilor Monroe’s comments and answer questions concerning how she typically spent her time.

Ms. Scott said, based on her experience, that Metro could provide all the HR services that MERC needed. Prior to the add-on package where Metro provided an HR generalist position on-site at MERC, Metro handled all MERC’s HR functions. Metro could continue to provide those services. Councilor Monroe asked if she believed that would be a more efficient arrangement than the operation currently budgeted. Ms. Scott said yes. Councilor Atherton asked if the HR function could stay at Metro’s shop and still accommodate MERC’s pay for performance program. Ms. Scott said yes. MERC’s pay for performance plan began a long time ago and was created by Metro HR by Judy Gregory and her. In the interim, when MERC had no HR staff, Metro administered MERC’s pay for performance program. Metro also interacted with the consultant who performed the study as well as with HR staff at MERC. Therefore, Metro managed MERC’s pay for performance for the entire time it existed.

Ms. Collier said transferring to MERC had been a tough choice but also a career opportunity. She had a generalist background, with a Master’s Degree in Public Administration with a focus on personnel management. She felt that as Metro performed general HR functions (including recruiting, selection, classification, and compensation) beautifully, it did not make sense to establish two systems. However, MERC was experiencing growth and changes that needed to be addressed with specific needs. For example, the three collective bargaining agreements MERC was currently negotiating were a one-time event. Once they were finalized, the issue could be settled for up to four years. She also mentioned recruiting a special position associated with MERC’s Portland Center for the Performing Arts (PCPA). This issue involved a large number of stakeholders, not just at Metro and MERC. This issue would help determine future funding at the facility. Plus, she had trouble finding time to teach supervisors to perform their basic duties (including supervision, discipline, discharge, workforce efficiency and effectiveness, and the fair and orderly management of personnel issues) because HR staff at MERC was so thin. She also mentioned that MERC needed to improve the pay for performance program. The difference between the general Metro HR manger and its counterpart at MERC was that the MERC manager was more of a specialist position within the MERC organization. The manager would be available on-site, day-to-day to handle problems, answer questions and help the organization operate smoothly.

Councilor Monroe asked if she meant to say that because Metro’s HR Department was so lean she could not handle some of the additional responsibilities she handled now since she moved to MERC. Ms. Collier said she could not perform the functions at Metro because she was the labor relations manager and could not handle all those additional issues. However, as part of the Metro HR team she had also helped other people at Metro with their functions and they helped her in return. Councilor Monroe asked if it would be functional if she retained her current assigned MERC responsibilities but operated from the Metro HR Department.

Ms. Collier said no, because Metro provided services to the entire agency (including the Zoo, Planning and Parks) and could not devote services solely to MERC operations. Chair McLain asked how Ms. Collier could perform all of MERC’s labor relations duties and assume new duties. Ms. Collier said she did not know what the labor relations duties at MERC would entail. Chair McLain said that she had heard Ms. Collier mention the growing, changing MERC facilities; three collective bargaining agreements; the PCPA special hire; training of supervisors and managing the pay for performance program, and asked if that might be a complete job itself. Ms. Collier said yes.

Mr. Morrissey said that if Ms. Collier had not been hired at MERC, he assumed she would still be working at Metro HR as the agency’s lead labor negotiator. If this was so, how had Ms. Collier become part of the MERC staff and not part of the Metro staff. Mr. Williams said MERC always anticipated their HR manager would be on the labor relations bargaining team. Mr. Morrissey asked if, during the last labor negotiation process, the lead had been provided by someone from the Metro.

Mr. Williams did not believe MERC had a HR manager during the last labor negotiations period three years ago. However, it was always their intention that the MERC HR Manager would be the lead negotiator on MERC related labor agreements. However, he welcomed additional assistance from Metro.

Chair McLain asked Mr. Williams who did his labor relations during the last contract bargaining period. Mr. Williams responded that it was Phil Knutsen. Ms. Collier suggested that labor relations were not always the same. Routine labor relations were not as intense. Councilor Monroe asked if Metro and MERC staggered labor contracts to handle them one at a time. Ms. Collier and Ms. Scott both said they do. Councilor Monroe asked why so many were currently due at the same time. Mr. Williams said they staggered by facility to prevent disruptions in service (to prevent one bargaining unit from taking advantage of another labor negotiations). Councilor Monroe said that when he was a member of the school board, they staggered classified and certified contracts so the board did not have to bargain both during the same year.

Mr. Williams clarified his disagreement with Ms. Scott's view of MERC HR, saying that when MERC initially determined it would implement a pay for performance plan, he talked to Judy Gregory, then Metro HR Director, about whether Metro could include this work in the general services package. He said Ms. Gregory told him no, MERC would have to hire a consultant to develop the program. MERC hired Buck Consultants to design the plan. Therefore, the MERC pay for performance plan was not designed by Metro. However, MERC did discuss some ideas with Metro. He added that all the work on the pay for performance plan, which was rather constant and labor intensive, was done in-house by MERC staff. MERC also asked Ms. Scott to help the agency and work with the consultant to provide a periodic review of MERC’s overall wage rates. The consultant did that with assistance from Ms. Scott.

Ms. Scott said Metro assisted with the trend analysis. However, the consultant had not offered to provide help free forever, just the first year. Linda Lewis established the goals and objectives, which were the largest portion of the project. However, she and Ms. Gregory completed a large part of the beginning of the project and reviewed MERC’s options. Mr. Williams said he would talk to the consultant because he was told the consultant would provide the analysis free forever.

Mr. Morrissey said he was not sure what the long-term work plan implied. He recommended committee approval and suspected the role of the position, in part, would result from the council’s decision on the package of support services. He questioned whether MERC planned to use the position to supervise additional activities or people. Chair McLain asked if there was funding in this year’s budget for the compensation/classification study. Mr. Williams said MERC entered into a compensation/classification study this current fiscal year for some of represented staff. However, he did not believe MERC had budgeted for further plans for that this year. Chair McLain asked Mr. Williams if MERC would implement a compensation/classification study of the position in question. Mr. Williams said he was not sure because it sounded like a different question. Mr. Morrissey repeated Question 4, page 8 on the document. Mr. Williams said MERC had given a general answer as to whether it would ever use a consultant again. Maybe some day in the future MERC would do so.

Ms. Coats said regarding the Marketing and Communication Manager position that MERC’s responses were satisfactory. In discussions, MERC staff clarified that the position did not do marketing or coordinate marketing efforts at the agency’s individual facilities, and each facility had its own marketing plan and staff to manage marketing. She pointed out that the position might not have been appropriately classified as a manager, as managers normally supervised staff in addition to overseeing a major program area. David Biedermann, MERC Director of Administration, said they could change the title of manager if it was related to supervision. He said some of the position’s responsibilities involved concepts of marketing, such as creating a community/regional mindset and understanding of MERC’s facilities.

Councilor Atherton asked Julie Weatherby, MERC Marketing and Communications Manager, why her job description included an advocate role, when Metro had a contract with Portland Area Visitors Association (POVA). He asked if Metro had some control and what “advocate” meant. Ms. Weatherby said the term “advocating” referred to the back and forth maneuvering and "gray areas" surrounding POVA contract negotiations and duties. There was some flexibility in the contract.

Councilor Atherton asked why Metro needed POVA when they had an efficient advocate super lady. David Biedermann, MERC Director of Administration, said Metro used POVA to help increase marketing and public awareness of MERC’s facilities, including the Oregon Convention Center and the Expo Center. Chair McLain tried to summarize Councilor Atherton’s question, and asked if Metro had a $2 million contract with POVA to provide marketing for a combined group of MERC facilities, why POVA did not do their work without negotiations. Mr. Williams said POVA did not represent all of MERC’s facilities. MERC paid POVA to market for convention groups at the OCC. They also had some money from the lodging tax for cultural tourism in Oregon and had a staff member assigned to promoting that aspect, which benefitted MERC’s other facilities. However, POVA was not MERC’s general, all-purpose marketing and communications function. POVA's specific assignment was to bring room-generating conventions into the region, including MERC facilities.

Councilor Atherton asked if the contract with POVA was ever bid competitively. Mr. Williams said no, but there was a relationship to the lodging tax ordinance from Multnomah County, which referred to MERC and Metro’s use of the funds to market the facilities. Councilor Atherton said it seemed there was an intertwined web of interaction between the Multnomah County lodging tax, POVA and other interests.

Ms. Coats said that regarding the Accounting Technician position, the word “new” was a typographical error. There was no such new position.

Councilor Kvistad suggested the Committee simply review questions where the answers were not satisfactory. He also requested that the unsatisfactory answers be highlighted for easier reference. He felt the independent MERC Commission would handle these issues. In the past four years, he had not seen a Metro Committee deal so extensively with a department (MERC) that was semi-autonomous. Chair McLain said, in the past four years, there had not been so much detail. However, current circumstances justified the more detailed approach. Councilor Kvistad disagreed that it was justified.

Ms. Coats suggested that it was possible the need for two technicians might be reduced once the fiscal operations manager explored alternative ways of working more efficiently. Mr. Biedermann said the point was well taken.

Mr. Morrissey asked for a more detailed answer related to Materials and Services $12,500 amount. At some point, it seemed possible from their staffing report that there might have been in mind some larger plans for computer needs. The council might want to discuss where the support services agreement was going to end up and under what circumstances. At this point, he did not see a major change planned (which was confirmed by MERC). Regarding special events for seasonal parties and picnics, he recommended that MERC establish guidelines for these types of events, how they were paid for and who managed them. An event for volunteer recognition might be better arranged and managed by the volunteers or an outside group, exclusively. Metro analysts would like to see more clarity in terms of event guidelines.

Councilor McLain said the Committee would reconvene on April 5, 2000, at 3:30 p.m., with the rest of the questions and answers.

2.  Councilor Communications

Adjourn

Chair McLain recessed the meeting at 2:57 p.m..

Respectfully submitted,

Pat Weathers

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE MEETING OF APRIL 4, 2000

The following have been included as part of the official public record:

i:\minutes\2000\budget&finance/04040bdm.doc