Okay, council, we're gonna get started.

Michael and Chris, are you still there?

It's right here.

Thank you.

Okay, I will call our special called budget work session to order and turn it over to Jay Choppa.

So we're gonna try to get through this pretty quickly since we know we've been here all day.

We have a few, a couple of uh presentations to really respond to previous budget issues that were brought forward, and then also the actually one of them the group health fund updates.

But we also wanted to touch on the classification and compensation updates a year ago or a little bit over 18 months ago, the city started a compensation study, and so we have the outcomes from that.

So I'm gonna turn it over to Chris uh Kristen Smith, our HR director, and it's her show today.

Good afternoon, Mary and Council.

I will talk really fast.

I know y'all have had a very long day.

All right, so as um the city manager mentioned, the first presentation is about classification and compensation and what we are projecting for potential contributions in this area.

But just for a little bit of background, our employees move throughout our pay structures in just really a couple of ways.

So at initial placement, so that includes at higher or at promotion.

Uh their base pay is set.

We do periodically look at market driven data, and by market I mean our labor market.

So we tend to look at you know larger cities.

We have kind of a mix of 10 cities that we look at, but we also look at aggregate data from private sector employers as well to make sure that we have a good gauge on where people should be placed.

But these types of studies are infrequent, they happen over several years as opposed to things that you know happened year over year.

Annually, we do have our performance management process, which includes a merit increase or pay for performance, which it's called here.

So that's another opportunity for an employee to grow their base.

And outside of just their initial placement and what they trend upwards as far as their performance, outside of ad hoc, excuse me, or one-time kind of you know, special merit type processes, our employee pay stays fairly flat.

So best practice with compensation is to make sure that you are competitive.

Sometimes it is based on indicators.

If you have more turnover, are you having to you know kind of pay more to attract a certain level of talent that lets you know that it may be time for a market study?

But regardless, employers, you know, historically will periodically do reviews of their salary structures to make sure that they're competitive and that they're paying at a rate that's um attracting and retaining the level of talent that's needed for the organization.

So the classification and compensation study was a comprehensive uh project that started in 2025, looking at overall base pay, our salary structures, uh alignment on position levels, meaning if you are you know a planner one, then planner two, planner three is a good example, and then also any impacts to compression across our structures uh due to the change to the $18 an hour minimum wage, so our initial study findings uh really show that our compensation structures, so our salary grades are pretty closely aligned with market, but what the primary uh area of opportunity is is our employees in their seats and where they sit in their salary grades are falling behind market.

So overall, from minimum to maximum, our salary grades are competitive, but the placement of our employees taken into account things like years of experience, span of control, breadth of responsibility, our employees are generally falling behind in that area.

So given the FY27 financial outlook, our recommendation is to focus on keeping our salary structures as is for this current fiscal year, but really focusing on the employee placement in those grades since that was the largest gap that was identified in the study.

But this was again a very comprehensive study.

It will also allow us time to look at a multi-year implementation plan of what the full study looks like, and so that includes wage progression, really incremental adjustments based on years of years in position, years of experience, other indicators, but also creating a governance model around pay placement so that we have consistent and competitive practices for our employees.

So based on those recommendations and again the highest priority area from the class and comp study, we are looking at between eight to ten million dollars towards those market adjustments, and then you know plan to come back with further recommendations around a multi-year strategy to implement the full classification and compensation study.

So the city does have a citywide performance management process for general employees, so non-civil service, and that typically follows a merit increase based on where employees are placed.

So right now, our performance management process slates employees overall as accomplished or valued or underperforming.

And for the last year, which was a little bit of an unusual year because of the Med Star transition, we had a 41% accomplished, 57% valued, and the overall average increase was about 3.8%.

Starting on this fiscal year, we are uh revamping the performance management process.

This is all as a result of feedback from our department heads wanting to be able to identify talent and have a broader scale to address that.

So we are moving to a five-point scale for our performance management process.

Currently, it is a two-part process, and I'm gonna pause for a minute because it may be a little bit complicated to explain.

But we have our performance review process, which is pretty standard, and then following that, based on the allowable budget, uh our uh anyone that has a direct report is able to calibrate their merit.

So let's say I have five employees and I have a you know bucket of a certain amount, I can kind of adjust those employees.

I may give one 5%, one four, one, three, one, two.

So the that decision right now is at the individual supervisor level.

So another change that we're implementing for FY26 is expanding the review process, but once that performance management process ends, providing city management with a report of all of our overall rankings and city management will determine the merit distribution.

So it allows for more consistency citywide.

It also allows city management to drive the timing of when merit is actually allocated based on allowable budget and other conditions that may need to be considered.

So we will be working on lots of education and prep for our employees and our reviewers, our hiring managers, and supervisors in this area.

But again, the review process and having expanded criteria was directly related to feedback from our department heads, and you know, again, looking for consistency in our processes.

So, in summary, the labor market adjustments and being responsive to our classification and compensation project, between eight and ten million dollars for the next fiscal year, and then the pay for performance uh allocation is roughly 12.5 million.

Questions from council?

Yeah, Councilman Flores and then Chris.

Um, yeah, a couple of questions.

So on the compensation of the compensation.

I know we had talked about this a couple years ago, and uh well, I think when Dr.

Williams was here, we talked about the pay increases, and our goal was to get to uh starting pay at 20 dollars, and we negotiated uh or worked around to get eight eighteen eighteen dollars.

And so when you talk about the eight to ten million dollar uh look of those that are in positions, is this including the high-tier employees as well?

I think we kind of talked about um we thought a best practice was to work from bottom to top, and so where you have the top tier, maybe the top department heads are um in the ranges of north 150 or 200,000 versus your smaller tier employees that are making 16 at that time now are making eighteen dollars.

So when you include this eight to ten million dollars, who are who's all included in this amount?

Yes.