Approved Minutes - 2002-01-15 Special°1 EKE oswt
% CITY COUNCIL MORNING MEETING MINUTES
January 15, 2002
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Mayor Judie Hammerstad called the special City Council meeting to order at 7:34 a.m. on
January 15, 2002, in the City Council Chambers.
Present: Mayor Hammerstad, Councilors Turchi, Graham, McPeak, Hoffinan, Rohde and
Schoen.
Staff Present: Doug Schmitz, City Manager; David Powell, City Attorney; Robyn Christie, City
Recorder; Janice Deardorff, Human Resources Director; Stephan Lashbrook,
Community Development Director; Joel Komarek, Interim City Engineer;
Richard Seals, Financial Planning Manager; Jane Heisler, Associate Planner;
Chris Jordan, Assistant City Manager
3. REVIEW EVENING AGENDA
Mayor Hammerstad asked Councilor McPeak to review the consent agenda this evening. She
mentioned the presentation of The First 90 Years of Herald and Virginia Campbell, compiled by
Patricia Rovainen, to the library.
The Council asked staff to provide a clarifying explanation of Item 5.1.1, the contract award,
tonight.
Mayor Hammerstad noted two corrections to the minutes:
• p. 51, 6th paragraph, change "Lake Oswego as the last city" to "Lake Oswego as one of the
last cities"
• p. 52, 6`h paragraph, change "zoning density" to "zoning"
Item 8.1 Density Guidelines
Mayor Hammerstad mentioned that she asked for clarification on the relationship of the
numbers in the analysis of parcels subject to the minimum density of partitions (page 171).
Stephan Lashbrook, Community Development Director, indicated that staff would clarify the
numbers this evening.
Councilor Rohde suggested that Mayor Hammerstad make it clear to the citizens at the hearing
tonight that only one person could speak as the neighborhood representative for the ten minutes,
as there has been confusion about that in the past. Mayor Hammerstad indicated that she
would also clarify that they would strictly adhere to the testimony time limits.
Mayor Hammerstad explained to the Council that her intent tonight was for the Council to ask
questions, get additional information or deliberate but it would not make a decision. She said
that at the subsequent meeting, the Council would deliberate, discuss and vote but there would
be no public testimony. She indicated to Councilor McPeak that tonight was the best time to
make an amendment, although a Councilor could do so on the night that the Council made the
decision. She pointed out that they would need to take testimony again on any substantive
changes.
Mayor Hammerstad indicated to Mr. Lashbrook that she intended to leave the record open for
one week for written testimony. She commented that she thought that this process gave them the
opportunity to give thoughtful consideration to the issues and to be clear about what the Council
wanted to do.
Mayor Hammerstad mentioned that the City received a letter from OLCC regarding
applications for liquor licenses, stating that Lake Oswego's process was fine (Item 8.2).
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January 15, 2002
Item 9.1 Information from the Council
Doug Schmitz, City Manager, clarified to Councilor Graham that Phase 3 (Item 9.1.1, page
220) had no funding and staff has not scheduled it. He confirmed that Phase 1 of the
recommendation was taking out the crosswalk and the orange crossing flags. Mayor
Hammerstad indicated that they would want to discuss that this evening.
Councilor Rohde mentioned that he had a JPACT report. Councilor Graham indicated that
she had some items also.
4. REVIEW FUTURE AGENDA ITEMS
Mayor Hammerstad observed that they were in the process of scheduling items discussed at the
retreat. She recalled that during Mr. Schmitz's evaluation, they had talked about doing the 5
Traits of Leadership for the whole Council, but they did not discuss it at the retreat. Janice
Deardorff, Human Resources Director, reported that the cost was just under $4,000 for the
entire Council.
Mayor Hammerstad spoke to this program as a training opportunity. She recalled the
Council's discussion about some Councilors, who were not going to Washington, D.C., attending
other meetings that the Council felt might be more valuable. Ms. Deardorff described the
program as providing an individual profile of personality and management style. She observed
that the consultant would also look at the Council's management style as a group, if all the
Councilors participated, and give feedback on areas of strength and areas needing development.
Mayor Hammerstad recommended that the Council go through the program. She said that they
would write a proposal for Council's consideration at a future date.
Mayor Hammerstad mentioned that Councilors McPeak and Graham would take the Hart
House tour this week.
Councilor Hoffman referenced an e-mail he received regarding the development at the Durham
Quarry. He recalled their conversation at the retreat about the potential impacts of this
development on Lake Grove. He asked staff to contact Tualatin and Washington County to get
information on the plans, traffic studies and other retail information. He asked Mr. Lashbrook to
summarize the information and report to the Council on the development, as well as giving his
perspective on how it would affect the West End.
Mr. Schmitz announced that last night the School Board continued the Lakeridge girls' softball
field matter for 30 days in order to do a hydrology study on Sites 1 and 3. He indicated that this
was acceptable to Mr. Wright, the OCR complainant, and to Mr. Powers, Development Review
Board.
Mr. Schmitz indicated to Councilor Rohde that the District was not under a court order to have
this done by a certain date but they had wanted it online for the 2003 season. He observed that
with the delays and the time it took for the sod to mature to playing level, it would take longer.
He mentioned that Mr. Korach talked with OCR yesterday about the extension and was able to
negotiate something acceptable.
5. OTHER BUSINESS
5.1 Management Compensation Methodologies
Ms. Deardorff introduced Bill Erdle, Compensation Resources, LLC, a consultant who
specialized in compensation and classification work. She mentioned that she has worked with
Mr. Erdle since the 1980s. She noted that he did work at the City of Lake Oswego before her
arrival, based on his reputation in working in the public sector.
Ms. Deardorff mentioned that Mr. Erdle has been helping staff look at how to restructure the
City's management compensation program, with a particular emphasis on finding a way to link
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January 15, 2002
performance more tightly to compensation. She spoke of getting away from the annual cost of
living adjustment, which was somewhat of a shell game played with other organizations. She
noted that they could not get totally away from it because of the way that the market was set up.
Ms. Deardorff spoke to discussing the issue of compensation philosophically this morning,
following Mr. Erdle's presentation on compensation in general.
Mr. Erdle gave a slide presentation (see handout, Compensation Overview). He reviewed the
areas for discussion (page 2) and his background in industrial psychology and compensation (in
both the public and private sectors). He mentioned that the main focus of the majority of
programs that he set up was pay for performance, although he could set up whatever type of
program an organization wanted.
Mr. Erdle noted that compensation programs provided guidance for managerial pay decisions,
supported organizational goals, insured fairness in the pay program and provided for both legal
and regulatory compliance. He observed that the typical objectives for a compensation program
were to attract, retain and motivate employees.
Mr. Erdle discussed the two general areas of rewards in a compensation program: extrinsic and
intrinsic. He described extrinsic rewards as base pay, benefits and any variable compensation
while intrinsic rewards included recognition in the job, the work itself and the organizational
working conditions.
Mr. Erdle reviewed the factors to consider in setting up a compensation program. He
mentioned internal equity (the perceived worth of a job relative to other jobs in the
organization), external equity (the value of the job to similar jobs in other organizations),
individual equity (how employees perceived their level of pay relative to other individuals), and
process/program equity (the employee's perception of fairness in the organization's
compensation program).
Mr. Erdle recommended that organizations be open and explain their compensation programs
clearly to their employees. He cited an example of an organization that had a good program but
did not explain it clearly to its employees; consequently, the employees were suspicious about
what was going on.
Mr. Erdle mentioned other factors to consider (page 6), including performance and productivity
incentives (motivating and rewarding higher levels of employee performance). He cautioned
care in setting these up in order to avoid motivating or rewarding inappropriate behavior. He
mentioned compliance with state and federal laws, ease and flexibility of program administration
and cost-effectiveness.
Mr. Erdle reviewed a diagram demonstrating the process an organization went through in
determining what to pay an employee (page 7). He explained that job analysis involved
information about what the job itself entailed (usually collected through questionnaires or
interviews), which was followed by job documentation (writing up job descriptions).
Mr. Erdle explained that the next two simultaneous steps - external pay comparison and internal
job evaluation — involved identifying the appropriate markets for the various jobs outside the
organization and determining the relative value of the job within the organization. He noted that
internal job evaluation systems, which used four factors of skill, effort, responsibility and
working conditions, were categorized as quantitative and non -quantitative (page 8).
Mr. Erdle mentioned that the job ranking system (non -quantitative) was the oldest type of
system and very simple. He commented that he called the quantitative systems `pseudo-
scientific' because they were also subjective, although they gave the impression that they were
not because they yielded a dollar value based on factors or points. He observed that all the
systems yielded about the same results.
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January 15, 2002
Mr. Erdle reviewed the next step, the internal and external reconciliation (page 10). He said
that the result of the reconciliation, a job worth hierarchy, translated into salary ranges.
Mr. Erdle reviewed an example of a salary structure using a 10% progression from mid -point to
mid -point (page 12). He described the process as identifying the market, deciding where an
organization wanted to pay in relation to the market, and setting up the salary structure to fit
those factors.
Mr. Erdle mentioned differences between the public and private sectors. The private sector
typically set the market rate for the jobs within a pay grade at the mid -point, while the public
sector typically set the market rate at the maximum point. The private sector kept an eye on the
market rate annually and adjusted its structure accordingly in order to remain competitive, while
the public sector was either behind the market at the end of the year (lag structure), at the market
at the end of the year (lead structure) or at the market mid -year and behind the market at the end
of the year (lead -lag structure) (page 13). The public sector went through the entire analysis
considerably less frequently than the private sector.
Mr. Erdle reviewed the different types of pay increases (page 14). He observed that across-the-
board increases were becoming less popular among private organizations, as where cost -of -
living increases, but the public sector and union contracts still used the cost -of -living increase.
He indicated that step and promotional increases were used in both sectors.
Mr. Erdle indicated that merit increases, or pay for performance, were the type of program that
he usually set up. He noted that a good performance evaluation system was critical in a merit
increase program. He observed that it was also a lot more work for an organization because of
the time commitment to employee performance evaluation and setting goals, etc.
Mr. Erdle reviewed the factors in maintaining a compensation program (page 15). He recalled
that when the City of Vancouver went from an analysis and review of its pay structures every
seven years to every two years, the number of employee complaints decreased significantly.
Mr. Erdle indicated to Councilor Turchi that a supervisor could adequately supervise five to
eight people and determine merit. He concurred that a Police Chief writing evaluations for 50
people and determining merit was in a difficult situation. He spoke to moving evaluations down
to the supervisory ranks. Ms. Deardorff indicated that in Lake Oswego the sergeants and
lieutenants did the employee evaluations; the Police Chief only did the captains and the
administrative personnel who reported directly to him.
Ms. Deardorff indicated to Councilor Turchi that a typical supervisor in the City supervised
between five to eight people. She confirmed that Councilor Turchi's situation at the school
district, where he supervised 53 people at an elementary school and wrote the merit evaluations,
would not exist at the City.
Councilor McPeak asked if there were guidelines to help define a market. She recalled that the
City had to change the market it used when recruiting for a position. Ms. Deardorff indicated
that the City changed from the metro local market (still used for the labor groups) to a statewide
market.
Mr. Erdle said that the guideline he used with the private sector was with whom was the
organization competing with for its employees. He commented that the market was not
necessarily the same industry, citing a high-tech company losing employees to a sports
manufacturing company. He said that typically agencies gathered that information through exit
interviews. Ms. Deardorff confirmed that the City did exit interviews and used the information
in its analysis.
Ms. Deardorff recounted what happened in the City's recruiting process for a Community
Development Director. She recalled that they ended up identifying the top 10 cities in Oregon as
their market. She observed that the market played itself out when Mark Schoening left for the
City of Eugene (No. 2 in population in the state).
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January 15, 2002
Councilor McPeak asked if the factors shifted fast or were predictable. Mr. Erdle said that
sometimes they were. He spoke to re-evaluating every year whether the market was still the
correct market, as some organizations would come in or drop out.
Ms. Deardorff commented that Lake Oswego lost its fire fighters to Tualatin Valley Fire &
Rescue and the City of Portland but it did not use those organizations as market comparators
because that market was so high that the City could not compete. She concurred with Councilor
McPeak that this was a case of a hierarchy of organizations and that Lake Oswego recognized
where it fit in the hierarchy, instead of in a level of competition.
Ms. Deardorff commented that Lake Oswego was an attractive employer within its current
market, citing the 48 interviews for police officers this week. She mentioned that Lake Oswego
has not taken a single position and used a different market than its typical market. She recalled
that at the City of Portland, they had jobs in a hot skills market and used a private sector market
for those jobs because that was whom they were competing against.
Mr. Erdle suggested considering a different salary structure when using a different market, such
as a structure that allowed employees to move along it at a different rate than others.
Councilor Schoen asked how Mr. Erdle's system differed from the Hay system, which was
based on accountability and decision-making. He observed that realistically Lake Oswego could
not complete with Eugene. He commented that he had a difficult time with the merit increases,
given the accountability issue and the budget as the biggest driving force in pay rates.
Mr. Erdle indicated that he tended to shy away from the Hay system because it was complex,
pseudo -scientific and required a large staff to administer. He said that he could include factors
from it in the internal evaluation of jobs portion of a performance system. He spoke to creating a
simple system that was easy to understand and use. He described the whole job ranking
approach that he used successfully with Norm Thompson's in developing a pay structure.
Mr. Erdle described how the salary range for a job (minimum to maximum) interacted with
appraisal ratings (meets sometimes/new to job, meets, exceeds) to determine a pay increase tied
directly to job performance level. He noted that studies have shown that people can only
differentiate between three different levels of performance.
Mr. Erdle said that this system gave managers a tool for figuring out what kind of increase to
give and organizations a tool for budgeting for increases. He explained that once the
organization knew what the employee performance levels were and where the employees were in
the salary structure, then it could develop guidelines for giving increases.
Councilor Rohde asked what an organization did when all the employees did a great job,
exceeding expectations and warranting a 5% increase but the organization's revenues only
increased 3% a year. Mr. Erdle discussed changing the expectations or criteria for the appraisal
ratings, including getting the managers together to reach a consensus on rating employees. He
mentioned `forced distribution,' which made make sure that there were a certain number of
exceeds or meets.
Mr. Erdle confirmed to Ms. Deardorff that forced distribution meant that not everyone would
necessarily get an increase.
Ms. Deardorff observed that the timing of bringing up this discussion was difficult in face of the
budget crisis and the need to reduce personnel costs. She pointed out that they did need to
maintain the City's compensation program in order not to lose people, which cost the City more
money in the long run.
Councilor Rohde clarified that he did not want to set up a program based on market and merit
that set up unreasonable expectations in a restricted revenue environment. Ms. Deardorff
concurred.
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January 15, 2002
Councilor Hoffman commented that staff's challenge might be to reduce managers. Ms.
Deardorff concurred. She indicated that they did take advantage of opportunities not to fill
positions vacated due to attrition. She mentioned that the Library Advisory Board felt that the
reduction in the number of supervisors at the library resulted in an understaffed library. She
observed that the Board did not consider that the library might have had too many supervisors
for too long, and this reduction brought the City in line with where it needed to be.
Councilor McPeak held that it was difficult to maintain a tough grading system, as
organizations tended towards grade inflation. She asked if it was possible in the public sector to
have an objective merit system. Mr. Erdle said that he did not know. He indicated that he did
not know of any one in the public sector using merit, although that did not mean that no one was
on the national level.
Mr. Erdle indicated to Councilor Schoen that he would recommend removing the step system
in a new system or moving to a combination system, which allowed rapid step movement during
a training period. He mentioned seeing the combination system in the private sector.
Ms. Deardorff referenced the handout "Year 2002 Compensation Program," which outlined the
transition steps staff intended to take during the year 2002. She noted that they would maintain
the current step and pay program for 2002. She explained that the resolution for a 2% cost of
living increase was before the Council today in order to keep the City on the market in the next
year.
Councilor Turchi asked why this program ran from January to January rather than with the
fiscal year. Ms. Deardorff said that she understood the history behind that fact as there had
been a desire 10 years ago to move the management non -represented group away from the
collective bargaining effective dates, which ran with the fiscal year.
Mr. Schmitz indicated to Mayor Hammerstad that he thought it was timely to pursue this
option, as they have talked about making the transition for several years.
Ms. Deardorff indicated that staff would work on developing the program over the next year
and present it to Council; at that point, Council could consider the financial situation and decide
whether to adopt it. She did not advise trying to sell widening the pay ranges to the public right
now. She spoke to having concrete evidence that the City linked performance to the pay ranges
before doing so.
Mr. Erdle commented that the City could gradually move into the system, as the Metro Area
Communications Commission did, and set the market at the mid -point. He mentioned his
personal opinion that the public would be receptive to a merit system, as most people already
worked under a pay for performance system.
Ms. Deardorff discussed the other side of pay for performance, what happened when someone
did not meet the performance criteria. She disagreed with the common perception that people in
the public sector could not be gotten rid of. She argued that it took a commitment to more
documentation and performance monitoring but it could happen.
Ms. Deardorff asked for the Council's concurrence to start talking to the directors, managers
and supervisors about their commitment to managing performance, setting performance
criteria/standards and evaluating performance. She observed that right now the City's system
was mixed in terms of doing performance reviews. She described it as a commitment to the
Council and the public that the public would be happy to know what the City was doing as an
organization.
Councilor Graham asked if it was common in the public sector to give severance pay to an
employee who clearly went beyond the rules. Ms. Deardorff said that it was not common in the
past but she thought that it was becoming more common. Mr. Erdle concurred but pointed out
that the City did not have to have a severance package at all. He mentioned seeing severance
City Council Morning Meeting Minutes Page 6 of 8
January 15, 2002
packages in layoff situations that were not due to the employee's performance, but not in a
performance based system.
Ms Deardorff mentioned that they were moving department heads into an `at will' status, which
meant that they were working `at the will' of the City Manager. She explained that the contract
typically provided for some sort of payment if they left the organization, although termination
for cause would be a lesser payment. She indicated that they did not have that structure for the
current supervisors, managers or other department heads but they set it up for new department
heads.
Ms. Deardorff observed that people were more litigious now than they have been in the past.
She mentioned that it could cost the City less to settle a payment on an employee suing the City
for whatever the employee felt he/she was owed than to go through the court process, which was
time-consuming and expensive. She described it as an unfortunate cost of doing business today.
Councilor Schoen asked if the City stated clearly in these contracts the 90 day and 120 day
performance reviews, and the option to let the employee go in the event that their performance
was unsatisfactory. Ms. Deardorff said yes. She mentioned a provision for an annual contract
renewal that included a review.
Ms. Deardorff indicated that their next management training for supervisors, managers and
department heads would include performance management from a legal context as well as
coaching in performance evaluation.
Ms. Deardorff indicated to Councilor Schoen that they projected a cost of between $5,000 and
$10,000 to develop the program. She said that she would comeback with a more exact figure.
She confirmed to Councilor Rohde that the cost was in the 2001/02 budget.
The Council agreed by consensus to direct Ms. Deardorff to proceed with developing the
program.
Councilor Turchi moved to approve Resolution 02-05, adjusting management confidential
salaries. Councilor McPeak seconded the motion.
Ms. Deardorff clarified to Councilor Turchi that people would get a 2% increase plus a step
increase (if they were in a position to get a step increase).
Richard Seals, Financial Planning Manager, indicated to Councilor Turchi that the staff
estimate of $100,000 for the salary increases included all related benefit increases.
Ms. Deardorff clarified to Councilor Schoen that the City was not doing any additional salary
adjustments in 2002, other than for those under Step 5 who were eligible for a merit increase; a
merit increase became effective on the employee's anniversary date. She confirmed that charter
officers were not included in this program.
A voice vote was taken and the motionas ssed with Mayor Hammerstad, Councilors
Turchi, Graham, McPeak, Hoffman, Rohde and Schoen voting in favor. [7-0)
6. EXECUTIVE SESSION
Mayor Hammerstad recessed the meeting at 8:50 a.m. to Executive Session pursuant to ORS
192.660(1)(a), consider the employment of a public officer or the evaluation of a public officer.
David Powell, City Attorney, reviewed the Executive Session parameters.
7. RETURN TO OPEN SESSION
Mayor Hammerstad reconvened the morning meeting at 8:53 a.m.
Councilor Schoen moved to adjust the municipal judge's salary by 2%. Councilor McPeak
seconded the motion. A voice vote was taken and the motionap ssed with Mayor
City Council Morning Meeting Minutes Page 7 of 8
January 15, 2002
Hammerstad, Councilors Turchi, Graham, McPeak, Hoffman, Rohde and Schoen voting in
favor. 17-01
8. ADJOURNMENT
Mayor Hammerstad adjourned the meeting at 8:55 a.m.
Respectfully submitted,
T�CZL�- -
Robyn Chrighe
City Recorder
February 5, 2002
e Hammerstad, Mayor
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January 15, 2002