City Council Approves Implementation of Employee Compensation Study Recommendations

May 9, 2018

City Council Approves Implementation of Employee Compensation Study Recommendations

SANTA MONICA, Calif. – At its meeting last night, May 8, 2018, the Santa Monica City Council endorsed recommendations in an employee compensation study prepared by private auditing firm Moss Adams. The study came to Council after extensive review by the Audit Subcommittee. Council approved a motion asking staff to explore additional opportunities to tackle pension liability. Council also directed staff to proceed with an implementation plan to prioritize and meet the objectives of each recommendation. Staff will return to Council in six months and annually thereafter until the implementation actions are completed.

The City of Santa Monica initiated the report in response to public concerns and media reports regarding employee compensation. The independent study collected and analyzed pay, benefits, and workload data from comparable cities and, where appropriate, the private sector to find opportunities for improvement in the policies and practices for employee compensation as well as public safety overtime.

“The compensation study was thorough and provides substantive guidance on changes the Council supports implementing," said Mayor Ted Winterer. "With this, we recognize that the biggest fiscal threat in front of us is our pension liability and that's why Council supports further exploration into options for paying down this debt, which is a threat to municipalities across the state and the nation."

The report provides observations and recommendations broken out into three categories: Wage and benefits packages, drivers of compensation, and public safety overtime. Key findings include:

  • Wage and benefit setting practices and total personnel costs are similar to peers.
  • Santa Monica’s average cash compensation for staff is comparable to the average of peer cities.
  • Santa Monica is a “full service plus” city, with several unique services, with the highest number of staff among peer cities.
  • Median management compensation is the highest among peers.
  • The City does not have a formal compensation philosophy to guide strategy development and decision-making.
  • Council values of providing a living wage and insourcing services impact total cost of compensation.
  • Unlike peer cities, Santa Monica did not appreciably change employee compensation practices or staffing levels during the recession.
  • SMPD and SMFD overtime has increased proportionally to operating costs in recent years.
  • Currently, an hour of overtime costs less than the complete compensation package for a full-time employee.

The 13 recommendations are:

  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 negotiating labor contracts in the next cycle to expire at different times and cover longer durations to reduce the burden of negotiations on the City.
  7. Regularly assess the City’s charter, municipal code, and civil service rules to ensure they are aligned with contemporary personnel practices and meet the evolving business needs of the City.
  8. 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.
  9. 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.
  10. Implement an evaluation framework to assess the life cycle costs of proposed new programs and services, and evaluate outsourcing options, where applicable.
  11. Continue initiatives already underway to develop a strategic plan, comprehensive performance indicators, and leverage the City’s data for decision-making.
  12. In accordance with best practice, continue to evaluate police staffing levels and use of overtime.
  13. In accordance with best practice, conduct a staffing study to evaluate on-duty staffing demand, staffing levels, and use of overtime.

"The inclusion of citizen volunteer members of the Audit Subcommittee and those who served on the advisory committee for this study played a key role in asking the right questions for what is probably the most comprehensive study done in recent years by a city in Southern California," said City Manager Rick Cole. "We welcome the recommendations and the Council direction to implement all of them. They will ensure we get the greatest value out of the public investment in our staff and the services they provide. There is room for improvement – as well as savings we can apply to the unfunded pension obligations that clearly need to be addressed – by Santa Monica and every city in California."

The approved implementation plan breaks priorities into high and medium priority categories with various departments assigned to each. Review the matrix in the staff report.

Background on the Compensation Study

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.

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.

Staff Report >

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