Audit Subcommittee Discusses Independent Draft Compensation Study

March 1, 2018

Audit Subcommittee Discusses Independent Draft Compensation Study

SANTA MONICA, Calif. – At its meeting last night, February 28, 2018, the City of Santa Monica Audit Subcommittee met to review the draft staffing and compensation study from the firm Moss Adams.

The study, which began in June 2017, reviews policies and practices related to City employee compensation and staffing levels. The report provides observations and recommendations organized in the following categories: Wage and benefits packages, drivers of compensation and public safety overtime. 

The Audit Subcommittee reviewed the report and its twelve recommendations:

  1. Enhance awareness and understanding of personnel costs by making this information readily accessible to the general public and provide explanations of each component of total compensation. 
  2. Develop and implement a formal compensation philosophy, including, but not limited to, compensation and benefits components, levels, and market competitiveness, to guide labor negotiations and set employee expectations with respect to compensation.
  3. Evolve the in-house position-level compensation market study methodology to include medians and percentiles in accordance with best practices, accounting for labor relation requirements.
  4. Continue to take steps whenever possible to mitigate the financial threat that pension liability places on the City.
  5. Evaluate options to stabilize per-employee health care costs.  
  6. Consider staggering labor contracts and expanding the duration of all contracts to multiple years to reduce the burden of negotiations on the City.
  7. Develop financial and operational strategies to prepare for possible future recessions, since the City may not be able to absorb a future recession as easily.
  8. Explore strategies for mitigating personnel costs, such as hiring personnel at lower steps, and leveraging training programs to equip personnel to take on greater responsibility earlier in their career.
  9. Implement an evaluation framework to assess the life cycle costs of proposed new programs and services, and evaluate outsourcing options, where applicable.
  10. Continue initiatives already underway to develop a strategic plan, comprehensive performance indicators, and leverage the City’s data for decision-making.
  11. Continue to evaluate police staffing levels and use of overtime.
  12. Conduct a staffing study to determine if additional firefighters are warranted to reduce the frequency of mandatory overtime.

The conversation focused on the need to create a plan to implement these recommendations as well as a strategy to curtail the City's unfunded CalPERS pension liability.

“The compensation study provides concrete recommendations that will help guide staffing and compensation decisions in the future to protect Santa Monica’s fiscal health,” said Councilmember and Audit Subcommittee Chair Sue Himmelrich. “The members of the advisory subcommittee supported the recommendations and emphasized the importance of protecting line level staff and tackling our CalPERS liability.”

The report will be finalized and presented to the Audit Subcommittee at its next meeting on April 17, 2018. The Audit Subcommittee expects to vote on whether to present the report to the City Council in May, at which time Council could provide direction to staff to implement the recommendations.

The report was informed by interviews with staff, labor unions and eleven peer cities, including data volunteered by Anaheim, Beverly Hills, Torrance and Pasadena, among others. Data was gathered from the peer cities and from the State Controller’s Office Government Compensation in California, and private sector cash compensation data was sourced from Economic Research Institute. This report includes observations and recommendations based on comprehensive data analysis. A previous draft provided to the Audit Subcommittee included early data that has now been refined and in some cases corrected. This has resulted in revisions to the report when compared to the November draft, such as police response times and staff workloads.

While the report indicates that every effort was made to get comparable data, not all information can be compared equally. Factors that contribute to this include differences in operating budgets, performance measurements, community priorities, level of outsourcing, geography, and departmental organization.

For more information about the Audit Subcommittee, meeting details and to view the report, visit https://www.smgov.net/departments/council/content.aspx?id=53159 

About the Audit Subcommittee

The Santa Monica City Council adopted a resolution establishing an Audit Subcommittee in July 2015 to assist the City Council in fulfilling their oversight responsibilities for the financial reporting process, the framework for internal control, and the audit process. The Subcommittee consists of three members of the City Council and two City residents qualified to serve by virtue of their experience and expertise with governmental accounting and internal financial controls.

In May 2017, the Santa Monica City Council adopted a resolution establishing the Compensation Study Advisory Committee to act in an advisory capacity to the Audit Subcommittee and staff in matters pertaining to critically reviewing and objectively considering the City's methodologies related to compensation. The Committee is made up of seven Santa Monica residents, appointed by the City Manager.  At least one member must have substantial work experience in the public sector.  The Compensation Study Advisory Committee will meet jointly with the Audit Subcommittee for a limited term.

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