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Home My WebLink About1995-06-14.. I t t FILED I:' the Office ot the Seer. County Sanitation Oistne:.. Y o\s) ~ 04 '3. ~ v. 211. 13 ~ County Sanitation Districts of Orange County, California P.O. Box 8127 • 10844 Ellis Avenue JUN 2 81995 Fountain Valley, CA 92728-8127 fJ. y Telephone: (714) 962-2411 ~Y. -/'" DRAFT MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Wednesday. June 14. 1995, 5:30 P.M. A meeting of the Finance, Administration and Human Resources Committee of the County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California was held on June 14, 1995 at 5:30 p.m., at the Districts' Administrative offices. (1) ROLL CALL The roll was called and a quorum declared present, as follows: Committee Directors Present: John C. Cox, Jr., Joint Chairman George Brown, Chairman Jan Debay Burnie Dunlap John M. Gullixson Wally Linn Thomas Saltarelli Roger R. Stanton, Vice Chairman William G. Steiner Peer Swan Committee Directors Absent: James H. Flora Staff Present: Don Mcintyre, General Manager Blake Anderson, Assistant General Manager Gary Streed, Director of Finance Ed Hodges, Director of Maintenance Bob Ooten, Director of Operations Ed Torres, Director of Technical Services John Linder, Director of Engineering Mike White, Controller Steve Kozak, Financial Manager Others Present Tom Woodruff, General Counsel (2) APPOINTMENT OF A CHAIRMAN PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS No comments were made. (4) REPORTS OF THE COMMITTEE CHAIR. GENERAL MANAGER. ASSISTANT GENERAL MANAGER($), DIRECTOR OF FINANCE/TREASURER. DIRECTOR OF HUMAN RESOURCES AND GENERAL COUNSEL (a) Report of the Committee Chair George Brown, Chairman, reported that a change to current remarketing Minutes of Finance, Ac' Page2 \ and Human Resources Commit ' June 14, 1995 agreements was requested by one of the parties to the previously authorized reassignments. A vote was taken to add consideration of this change to the agenda, and to take action as a part of the Report of General Counsel. (b) Report of the General Manager General Manager Don Mcintyre, reminded the Committee of the Directors' orientation and tour to be conducted Saturday, June 17, 1995. (c) Report of Assistant General Manager(s) Assistant General Manager Blake Anderson updated the Committee on recent events regarding the resolution of the County bankruptcy and the potential impact on the Districts and a quick settlement. (d) Report of the Finance Director/Treasurer Finance Director!Treasurer Gary G. Streed reviewed the report included with the agenda package and updated the Committee on the status of the Orange County Investment Pool and the Districts' self-managed bank and investment accounts. The December 6, 1994 reserves receivable from the County will be reported as a long-term receivable and not as an investment in the future. (e) Report of the Director of Human Resources None. (f) Report of General Counsel Thomas L. Woodruff, General Counsel, gave a status report on previous action taken by the FAHR Committee and Joint Boards relative to changing the Remarketing Agents on all three of our current outstanding financing programs. He advised that the Series A and C have been fully completed, with all documents executed. The Agreements and documents relating to 1993 Series Refunding are complete and approved by all parties, however Societe Generale would like clarification on a provision relating to obligation to pay the 1993 Series Refunding Remarketing Agreement. It was moved, seconded and duly carried to accept the requested amendment of Societe Generale to the 1993 Series Refunding Remarketing Agreement that provides that if the Certificates are converted to a fixed mode "at the direction of the Bank, the Bank will pay the reasonable fee." Minutes of Finance, Ac' Page 3 June 14, 1995 and Human Resources Commi~ (5) APPROVAL OF MINUTES It was moved, seconded and duly carried to approve the draft minutes of the May 10, 1995, meeting of the Finance, Administration and Human Resources Committee. (6) Consideration of motion recommending approval of the proposed 1995-96 Joint Works Budgets and forwarding them to the Executive Committee as follows: Joint Works Operating/Working Capital Workers' Compensation Self-Insurance Public Liability Self-Insurance Dental Health Plan Trust Self-Insurance Joint Works capital Outlay Revolving $54,380,000 307.000 272.000 437.000 33.530.000 After discussion on this item, it was moved, seconded and duly carried to recommend that the Executive Committee approve the proposed Joint Works Operating, Joint Works Capital and Self-Insurance Fund Budgets for 1995-96. (7) Consideration of Planning. Design and Construction Committee recommendation PDC(6)(d): and Ooerations. Maintenance and Technical Services Committee recommendation OMTS95-027 Re: Consideration of Motion to Authorize the General Manager to Approve Expenditure of Funds up to $50.000 for Contracts. Services and Purchase Orders. Excluding Public Works Contracts Governed by State Law and Professional Services Agreements Governed by Board Resolution 95-9 After discussion on this item, it was moved, seconded and duly carried to recommend that the Executive Committee recommend the Boards of Directors: Authorize the General Manager to approve expenditures of funds up to $50,000 for contracts, services and purchase orders, excluding public works contracts governed by State law; and professional services agreement governed by Board Resolution 95-9. (8) OLD BUSINESS FAHR95-25 Classification. Compensation. and Other Terms. Conditions. .Rules and Regulations of Employment After discussion on this matter, staff was directed to return this item, including examples and amounts, for future consideration. Minutes of Finance, Ad 'l and Human Resources Commit' r Page4 June 14, 1995 FAHR95-26 Consideration of Motion for Renewal of All-Risk Insurance (including Fire. Flood and Earthquake Coverage) for FY 1995-96 After discussion on this matter, it was moved, seconded and duly carried to recommend the Executive Committee approve renewal of the Districts' All-Risk insurance program including earthquake, flood, personal property and business interruption, in the amounts of $200 million All-Risk, and $30 million earthquake with deductibles of $25,000 for all perils except earthquake and 5% per unit ($250,000 min.) for earthquake, for a total premium not to exceed $1.4 million. FAHR95-29 Consideration of Motions to Select External Money Manager and Custodial Services Bank for the Districts' Investment Program After discussion on this matter, it was moved, seconded and duly carried to recommend the Executive Committee: 1. Select the firm of Pacific Management Investment Company to serve as the Districts' external money manager, and authorize staff to negotiate a professional services agreement. 2. Select Mellon Trust Company as master custodial services bank, and authorize staff to negotiate a professional services agreement. (9) NEW BUSINESS FAHR95-30 Consideration of Motion to Make Revisions to MPRP (Management Performance Review Plan) Performance Incentive Values After discussion on this matter, it was moved, seconded and duly carried to recommend that the Executive Committee approve the following multi-phased approach, in order to realize the initial objectives of the MPRP program to provide an incentive for consistent meritorious performance: 1. Effective in July 1995, authorize funds totaling $173,000 beyond the 3.0 percent of payroll Merit Pool Fund approved last year sufficient to address the more critical range position issues now occurring. Payments will be made in 1995-96. 2. Establish a Target Merit Pool Fund of 5.0 percent of payroll (totaling $453,QOO) for implementation in July 1996 sufficient to incentivize performance as recommended by Ernst & Young. This fund would be distributed based on performance (see Attachment 1) as in the past, and would be in addition to the already authorized 3.0 percent fund which would Minutes of Finance, Ar Pages June 14, 1995 and Human Resources Commit' be used to provide a cost-of-living adjustment to those employees whose performance at least met expectations. Payments would be made in 1996-97. 3. Provide extensive training to all supervisors and managers in proper administration of the program, and particularly the review process as recommended by Ernst & Young. (10) CLOSED SESSION The Chairman reported to the Committee the need for a Closed Session as authorized by Government Code Section 54957.6 to discuss and consider the item that is specified as Item 1 O on the published Agenda. The Committee convened in closed session at 7:45 p.m. At 8:00 p.m., the Committee reconvened in regular session. It was moved, seconded and duly carried to approve the recommendations of the Management Staff contained in the report of June 14, 1995, relating to changes in job titles for certain confidential employees, the dissolution of the confidential employees bargaining unit, and the designation of certain job classifications as confidential employees. Confidential Minutes of the Closed Session held by the Committee have been prepared in accordance with California Government Code Section 54957.2 and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. (11) OTHER BUSINESS. IF ANY None. (12) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING None. (13) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND A STAFF REPORT None. Minutes of Finance, Ar -" and Human Resources Commi' ) Page 6 ' June 14, 1995 (14) CONSIDERATION OF UPCOMING MEETING DATES AND ITEMS TO BE DISCUSSED AT THOSE MEETINGS Committee Chairman George Brown requested the Committee refer to the calendar of future meetings on the back of the Notice of Meeting and reminded the Directors that the next Committee meeting is scheduled for Wednesday, July 12, 1995. He recommended the Committee also review the list of future meeting topics. The Committee will not meet in August, November and December 1995, as no Executive Committee meetings are scheduled, and no FAHR Committee recommendation could be carried to the respective Joint Board meetings. (15) ADJOURNMENT The meeting was adjourned at 8:00 p.m. GGS:lc J:\WPDOC\FIN\CRANE\FPC.MTG\FPC95'MNUTES'MFAHR6.95 1: ' \ STATE OF CALIFORNIA ) ) SS. COUNTY OF ORANGE ) Pursuant to California Government Code Section 54954.2, I hereby certify that the Notice and the Agenda for the Finance, Administration and Human Resources meeting held on June 14, 1995, was duly posted for public inspection in the main lobby of the Districts' offices on June 8, 1995. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of June, 1995. Posted: By: Penny Kyle, Secre Sanitation Districts County, California J:\WPDOC\FINICRANEIFPC.MTGIFPC95\CERTOF.POS\CERTPOS6.95 the Boards of Directors of County , 5, 6, 7, 11 , 13 & 14 of Orange 11 June 8, 1995 1 ~) COUNTY SANITATION D ISTRICTS OF ORANGE COUNTY, CALIFORNIA P.O. BOX 8127: FOUNTAIN VALLEY, CALIFORNIA 92728-8127 10844 ELLIS, FOUNTAIN VALLEY, CALIFORNIA 92708-7018 (714) 962-2411 NOTICE OF MEETING FINANCE. ADMINISTRATION AND HUMAN RESOURCES COMMITTEE COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11, 13 AND 14 OF ORANGE COUNTY, CALIFORNIA WEDNESDAY. JUNE 14, 1995 -5:30 P.M. DISTRICTS' ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708 A regular meeting of the Finance, Administration and Human Resources Committee of the Joint Boards of Directors of County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California, will be held at the above location, time and date. J:\WPOOC\FIN\CRANEIFPC.MTGIFPC95\NOTICE\NOT1CE6.95 June 8, 1995 COUNTY SANITATION DISTRICTS of ORANGE COUNTY, CALIFORNIA 10844 ELLIS AVENUE PO BOX 8127 FOUNTAIN VALLEY, CALIFORNIA 927, (714) 962-2411 FINANCE. ADMINISTRATION AND HUMAN RESOURCES COMMITIEE TENTATIVELY SCHEDULED MEETING DATES Finance, Administration and Action Items to Human Resources Executive Committee Action Items to Joint Committee Meetings Meeting Board Meeting June June 14, 1995 June 21, 1995 June 28, 1995 July July 12, 1995 July 19, 1995 July 26, 1995 August None Scheduled None Scheduled August 23, 1995 September September 13, 1995 September 20, 1995 September 27, 1995 October October 11, 1995 October 18, 1995 October 25, 1995 November None Scheduled None Scheduled November 22, 1995 December None Scheduled None Scheduled December 27, 1995 January January 10, 1996 January 17, 1996 January 24, 1996 February February 14, 1996 February 21, 1996 February 28, 1996 March March 13, 1996 March 20, 1996 March 27, 1996 April April 10, 1996 April 17, 1996 April 24, 1996 May May 8, 1996 May 15, 1996 May 22, 1996 J:\WPOOC\FIN\CRANE\FPC.MTG\FPC95\NOTICE\NOTICE6.95 FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE DATE 6 -14-95 COMMITTEE MEMBERS BROWN (Chair) ••••••••••.•.•.•••••••••••••••• STANTON (Vice Chair) ••••••••.••••••.••••••••• DEBAY ••••••••••••••••••••••••••••••••••••••• DUNLAP ••••••••••••••••••••••••••••••••••••. FLORA •••••••••••••••••••••...•••...•.••••••• GULLIXSON ••••••••••••••••.••••.•...•••••••• LINN •••••..•..•••••••••.. , •••••••••..•••••••• SALTARELLI ••••••••••••••••••.•.•••.••••••••• STEINER •.•••••••...••••••••••••••••••••••••• SWAN (VJC) •••••••••••••••.•••.•••••••••••••• COX (JC) ••••••••••••••.••••••....•..••••••••• OTHER DIRECTORS _________ ....................... .. ---------······················ STAFF DON MCINTYRE, GENERAL MANAGER •••••••••••••••••••••••. BLAKE ANDERSON, ASST. GENERAL MANAGER •••••••••••••.. GARY STREED, DIRECTOR OF FINANCE •••••••••••••••..••••• GARY HASENSTAB, DIRECTOR OF PERSONNEL •••••••••...... ED HODGES, DIRECTOR OF MAINTENANCE •••••••••••••.••... BOB OOTEN, DIRECTOR OF OPERATIONS •••••••••••••••••••• JOHN LINDER, DIRECTOR OF ENGINEERING ••••••••••••••••.• ED TORRES, DIRECTOR OF TECH. SERVICES •••••.•.••••••••• STEVE KOZAK, FINANCIAL MANAGER •••••.••••••.••..••••••• MIKE WHITE, CONTROLLER ••..•••••..•••••••••••••••••••••• OTHERS TOM WOODRUFF, GEN'L. COUNSEL •••••••••••••••••••••••••• --------····································· ROLL1.95 TIME 5:30 P.M. ADJOURN ___ _ I ' June14, 1995 AGENDA FINANCE. ADMINISTRATION AND HUMAN RESOURCES COMMITTEE COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11, 13 AND 14 OF ORANGE COUNTY, CALIFORNIA DISTRICTS' ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708 REGULAR MEETING WEDNESDAY. JUNE. 141 1995 -5:30 P.M. In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted in the main lobby of the Districts' Administrative Offices not less than 72 hours prior to the meeting date and time above. All written materials relating to each agenda item are available for public inspection in the Office of the Board Secretary. In the event any matter not listed on this agenda is proposed to be submitted to the Committee for discussion and/or action, it will be done in compliance with Section 54954.2(b) as an emergency item or that there is a need to take immediate action which need came to the attention of the Committee subsequent to the posting of the agenda, or as set forth on a supplemental agenda posted in the manner as above, not less than 72 hours prior to the meeting date. !. ................ ,.. ................................ ~ .............................................................................................. , ................................................ .; ........................ 1. .......... .., ........ :.: ....... ;.. .............. ..; ............. _ ( 1 ) Roll Call (2) Appointment of Chairman pro tern, if necessary. (3) Public Comments: All persons wishing to address the Committee on specific agenda items or matters of general interest should do so at this time. As determined by the Chairman, speakers may be deferred until the specific item is taken for discussion and remarks may be limited to five minutes. Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by the Committee except as authorized by Section 54954.2(b ). June 14, 1995 (4) The Committee Chairman, General Manager, Assistant General Manager(s), Director of FinancefTreasurer, Director of Human Resources and General Counsel may present verbal and/or written reports on miscellaneous matters of general interest to the Committee Members. These reports are for information only and require no action by the Committee Members. (a) Report of Committee Chairman (b) Report of General Manager (c) Report of Assistant General Manager(s) (d) Report of Director of FinancefTreasurer ( e) Report of Director of Human Resources (f) Report of General Counsel (5) Approval of draft Finance, Administration and Human Resources Committee Minutes for Meeting of May 10, 1995. (6) Consideration of motion recommending approval ofthe proposed 1995-96 Joint Works Budgets and forwarding them to the Executive Committee as follows: Joint Works Operating/Working, Capital Workers' Compensation Self-Insurance Public Liability Self-Insurance Dental Health Plan Trust Self-Insurance Joint Works Capital Outlay Revolving $54,380,000 307,000 272,000 437,000 33,530,000 (7) Consideration of Planning, Design and Construction Committee recommendation PDC(6)(d); and Operations, Maintenance and Technical Services Committee recommendation OMTS95-027 Re: Consideration of Motion to Authorize the General Manager to Approve Expenditure of Funds up to $50,000 for Contracts, Services and Purchase Orders, Excluding Public Works Contracts Governed by State Law and Professional Services Agreements Governed by Board Resolution 95-9. (8) Old Business. FAHR95-25 Classification, Compensation, and Other Terms, Conditions, Rules and Regulations of Employment FAHR95.:26 Consideration of Motion for Renewal of All-risk Insurance (Including Fire, Flood and Earthquake Coverage) for FY 1995-96 -2- I "" ,-----, June 14, 1995 FAHR95-29 Consideration of Motions to Select External Money Manager and Custodial Services Bank for the Districts' Investment Program (9) New Business. FAHR95-30 Consideration of Motion to Make Revisions to MPRP (Management Performance Review Plan) Performance Incentive Values (10) Closed Session . ............... _ ........................................... '"" .................................................................................................................................................................. ~ ............................................................................. .. Closed Session: During the course of conducting the business set forth on this agenda as a regular meeting of the Committee, the Chairman may convene the Committee in closed session to consider matters of pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.9, 54957 or 54957 .6. Reports relating to (a} purchase and sale of real property; (b} matters of pending or potential litigation; (c} employee actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Committee during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of information. (a) Convene in closed session. (b) Confer with Districts' representatives (General Manager, Assistant General Manager(s), General Counsel, Director of Personnel and Director of Finance) concerning status of negotiations with employee group representatives on salaries, benefits and terms of employment. (1) Confidential Employees (c) Reconvene in regular session. (d) Consideration of action, if any, on matters considered in closed session. (e) Report on discussion taken in closed session, as required. (11) Other business, if any. ( 12) Matters which a Director would like staff to report on at a subsequent meeting. -3- June 14, 1995 (13) Matters which a Director may wish to place on a future agenda for action and a staff report. ( 14) Consideration of upcoming meeting dates and items to be discussed at those meetings. (15) Adjourn. r···-····-······························-·-····-····-··-··············-··············-.··-··-···································-·············-··--·-· .. 1 i Notice to Committee Members: :::'. .. If you have any questions regarding the Agenda, or wish to place items on the Finance, Administration and Human Resources Agenda, Committee members should contact the Committee Chair or Secretary ten days in advance of the Committee meeting. Committee Chair: George Brown (310) 431-2185 ~ Secretary: Lenora Crane (714) 962-2411, Ext. 2501 i (714) 962-3954 (FAX) l ........................... :. .... -................................... ····-· ·-·-·-··,.·-··--· .... -.. ---·-···-............................. -··-·· :"'., .. ~-. ., .................................. -· ................. ·-· ... -'.. ... J:IWPOOC\FINICRANEIFPC.MTG\FPC95\AGENDA.FPC\AGENDA8.95 -4- FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR JUNE 14, 1995 ( 4) Treasurer's Report Summary On Friday, May 19, the Orange County Investment Pool released $295,958,030 of the Districts' pre-petition deposits. There is a balance of $110, 722,372 remaining. The released funds were used to purchase short-term U.S. Treasury Bills, in accordance with our interim investment policy, which settled on that day. A summary of the Districts' total cash and investment position at month-end follows. The OCIP Notes are shown in the summary, despite their poor liquidity, to keep the Directors apprised of any changes in the future. Balances Estimated CS DOC May 31,1995 Yield State of Calif. LAIF $ 9,300,000 6.01% Bank of America 323,015 4.50% U.S. Treasury Bills Due 6122 308, 110,349 5.71% Debt Service Reserves at Trustees 20,585,652 6.41% $329,649,016 5.76% Garden Grove San District 1,270,411 6.01% Orange Co. Investment Pool 110.722.372 .00% $4501311,799 4.34% --=== J:IWPOOCIFINICRANEIFPC.MTGIFPC95\ITEMS.AGDIAGDITM4 TOTAL CASH & INVESTMENT $500 $400 e .g $300 0 ~$200 :i $100 Dec6 Dec31 Staff Recommendation Information only item. Jan 31 J:\WPOOC\FINICRANEIFPC.MTGIFPC95\ITEMS.AGDIAGDITM4 Feb 28 Mar31 Apr30 May 31 -2- LAW OFFICES OF ROURKE, WOODRUFF & SPRADLIN A PROFESSIONAL CORPORATION TO: MEMORANDUM Chairman and Members of Finance, Administration and Human Resources Committee FROM: General Counsel DATE: June 8, 1995 RE: Agreements re Change of Remarketing Agents This will constitute a status report on the previous action taken by your Committee and the Boards of Directors relative to changing the Remarketing Agents on all three of our current outstanding financing programs. Specifically, Merrill Lynch, the original Remarketing Agent on all three, is being replaced by Paine Webber (as to Series A and the 1993 Refunding), and by J.P. Morgan (as to Series C). Series A has been fully completed, with all documents executed and is in place as of June 5, 1995. Series C is completed and is out for signatures by the several parties. The Agreements and documentation have been approved by all parties, and this will become effective June 12, 1995. The Agreements and documentation relating to the 1993 Series Refunding are complete and approved by all parties, with one exception. That exception relates to a request by Societe Generate to clarify a provision relating to the obligation to pay the Remarketing Agent's fee pertaining to the 1993 Series Refunding Certificates. The present 1993 Series Refunding Remarketing Agreement, provides: "So long as the Swap Agreement is in effect, if all or a portion of the Certificates are converted to a fixed rate mode, the Bank will, in accordance with the terms of the Swap Agreement, pay to the Remarketing Agent a reasonable fee to be agreed upon by the Remarketing Agent and the Bank for the remarketing of such Certificates .... " Societe Generale has requested a modification that provides that if the Certificates are converted to a fixed rate mode at the direction of the Bank, the Bank will pay the reasonable fee. Chairman and Members of Finance, Administration and Human Resources Committee June 8, 1995 Page 2 We believe that it was a drafting oversight by Bond Counsel at the time of the 1993 Agreements, and while a literal reading of the words in the Remarketing Agreement could be construed to say that the Bank has the obligation to pay that fee, whether the conversion is at the direction of the Bank or the Districts, that position is not certain. Most importantly, the Bank itself is not a party to the Remarketing Agreement, and therefore, they could claim to have no responsibility under the terms of such Agreement, and that argument has considerable persuasion. · The options at this time would be: 1. To accept the requested amendment of Societe Generale; 2. Make no changes in the Agreement; or 3. To require the Bank to pay the Remarketing Agent fee, regardless of whether the Bank or the Districts order the conversion of the Certificates. If we do nothing, it could delay the present transaction of changing the Remarketing Agent for the 1993 Series Refunding Certificates, which will of course cause an immediate additional higher expense to the Districts. Secondly, if and when such conversion should ever occur, there could be a delay and a dispute among financial parties and legal counsel as to the meaning of the paragraph, thus resulting in extra costs, and more importantly, delay. It is my recommendation that the request of Societe Generale be approved, in that it is fair and equitable and will also avoid specific costs to be incurred by the Districts, both at this time and possibly in the future. If this recommendation is accepted, then if the Districts order the conversion of Certificates, the Districts will pay the Remarketing Agent's fee; if the Bank orders the conversion, they will pay the fee. Because of the substantive change from the present Agreement, I seek to have the FAHR Committee act upon this request and recommendation. In the meantime, however, all documentation has been prepared in alternate forms and has been circulated to the parties. They will be advised of the Committee's action immediately following the Committee Meeting, and it is expected that the Remarketing Agent change for the 1993 Series Refunding Certificates will be effective Monday, June 19, 1995. cc: Mr. D. F. Mcintyre Mr. G. G. Streed Thomas L. Woodruff General Counsel ' FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR JUNE 14, 1995 ( 5) Consideration of Motion to Approve the Draft Finance, Administration and Human Resources Committee Meeting Minutes of May 10, 1995 Summary Attached is a draft of the Finance, Administration and Human Resources Committee meeting Minutes of May 10, 1995, for approval by the Committee. Staff Recommendation It is recommended that the minutes of the May 10, 1995, Finance, Administration and Human Resources Committee meeting be approved. These minutes were submitted to the Executive Committee at their May 17, 1995 meeting, and no further action is required. J;\WPOOC\FlN\CRANE\FPC.MTGIFPC95\ITEMS.AGD\MFPC8.95 'l DRAFT County Sanitation Districts of Orange County, California P.O. Box 8127 • 10844 Ellis Avenue Fountain Valley, CA 92728-8127 Telephone: (714) 962-2411 MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Wednesday. May 10. 1995. 5:30 P.M. A meeting of the Finance, Administration and Human Resources Committee of the County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California was held on May 10, 1995 at 5:30 p.m., at the Districts' Administrative offices. (1) ROLL CALL The roll was called and a quorum declared present, as follows: Committee Directors Present: George Brown, Chairman Jan Debay Burnie Dunlap James H. Flora John M. Gullixson Wally Linn Thomas Saltarelli Roger R. Stanton, Vice Chairman William G. Steiner Peer Swan Committee Directors Absent: John C. Cox, Jr., Joint Chairman Staff Present: Don Mcintyre, General Manager Blake Anderson, Assistant General Manager Gary Streed, Director of Finance Gary Hasenstab, Director of Personnel Ed Hodges, Director of Maintenance Bob Ooten, Director of Operations Steve Kozak, Financial Manager Others Present Tom Woodruff, General Counsel Kay Chandler, Chandler Liquid Asset Mgmt. Don McClean, Robert F. Driver Co. Ted Davidson, Robert F. Driver Co. Ruthan Moomy, Callan Assoc., Inc. (2) APPOINTMENT OF A CHAIRMAN PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS No comments were made. (4) REPORTS OF THE COMMITTEE CHAIR. GENERAL MANAGER. DIRECTOR OF FINANCE/TREASURER. DIRECTOR OF HUMAN RESOURCES AND GENERAL COUNSEL (a) Report of the Committee Chair George Brown, Chairman, had no report. Minutes of Finance, Ar)' -and Human Resources Commifl Page2 May 10, 1995 (b) Report of the General Manager Blake Anderson, Assistant General Manager, gave a brief update on the status of the OCIP and County Bankruptcies. He reported that the initial 77% disbursements would be made Friday, May 19, 1995, and that staff was arranging to invest the monies immediately. (c) Report of the Finance Director/Treasurer Finance Directorrrreasurer Gary G. Streed reviewed the report included with the agenda package and updated the Committee on the status of the Orange County Investment Pool Portfolio and the Districts' self-managed bank and investment accounts. (d) Report of the Director of Human Resources Director of Human Resources Gary Hasenstab had no report. (5) APPROVAL OF MINUTES It was moved, seconded and duly carried to approve the draft minutes of the April 12, 1995, meeting of the Finance, Admi,nistration and Human Resources Committee. (6) RECONSIDERATION OF COMMITTEE HANDBOOK Committee Chairman George Brown reminded the Committee of how useful the handbook was and urged them to review it routinely. Director Gullixson suggested copies be made available on computer disk. (7) BUDGET CONCEPTS AND ASSUMPTIONS The General Manager, Assistant General Manager, and Director of Finance reviewed the material included in the agenda relative to the basic assumptions and the format and content changes proposed for the 1995-96 budgets. Blake Anderson also presented an overview of the capital improvement strategic planning to update "2020 VISION." The Committee indicated they were pleased with the changes and additional information. (8) OLD BUSINESS FPC95-14 Consideration of Motion to Receive and File Report on Continued Monitoring of Variable Rate Certificates of Participation (COP). and Update on Remarketing Agent Transition After brief discussion on this item, it was moved, seconded and duly carried to receive and file staff's report. Minutes of Finance, A<1) and Human Resources Cammi~ Page 3 1 May 10, 1995 FPC95-16 Consideration of Motion to Approve Final Draft Investment Policv Statement Prepared by Investment Advisor Chandler Liquid Asset Management. Inc .. and Callan Associates After discussion on this item, it was moved, seconded and duly carried to recommend approval of the final Investment Policy Statement prepared by Investment Advisor Chandler Liquid Asset Management, Inc., and Callan Associates. (9) NEW BUSINESS FAHR95-24 Consideration of Motion Extending Early Retirement Incentive Program Provisions for all Eligible Districts' Employees After discussion on this matter, it was moved, seconded and duly carried to recommend approval of staff's recommendation to: 1. Support a Board Resolution adopting the provisions of Government Code Section 31641.04 authorizing all eligible Districts' employees to receive two years additional service credit for retirement purposes. 2. Specify that provisions of the Early Retirement Incentive Program would be effective May 1 through June 30, 1995, and that the total cost savings of positions filled at a lower level shall exceed the total actuarial cost of the additional service credit granted and associated paid leave payoff costs. Specify, for reasons of equity, that individuals retiring subsequent to March 1, 1995, who were not entitled to the previous retirement incentive, be credited with two additional years of service, in accordance with this program. 3. For a period of five years, or until such time as the full actuarially determined cost is paid to OCERS, the Districts' Controller will conduct an annual post- audit to verify that the savings exceed the actuarial and associated costs attributable to the additional service credit, and report the findings of that audit to the Finance, Administration and Human Resources Committee. FAHR95-25 Consideration of Resolution Pertaining to Classification, Compensation. and Other Terms. Conditions. Rules and Regulations of Employment After discussion on this matter, it was moved, seconded and duly carried to recommend approval of staff's recommendation to: Minutes of Finance, Aq" -.. \and Human Resources Commit~ "- ' r \ Page 4 , May 10, 1995 1. Adopt Resolution 95-_ consolidating existing "Personnel Resolutions,• on the basis that there are no substantial changes in the level or cost of entitlements over previously adopted resolutions; 2. Amend Resolution 95-_ in its entirety in future Board actions in order to preserve the continuity and completeness of the resolution. FAHR95-26 Consideration of Motion to Select Alternatives for Renewal of All-Risk Insurance (including Fire. Flood and Earthquake Coverage) for FY 1995-96 After discussion on this matter, it was moved, seconded and duly carried to recommend approval of staffs recommendation to maintain existing coverage levels at a premium similar to last year. FAHR95-27 Consideration of Motion to Approve and File Joint Works Budget Reviews Prepared by Staff for the Quarter Ended March 31.1995 After discussion on this matter, it was moved, seconded and duly carried to approve staffs recommendation approve and file staff's report. Summary reports will be considered by the Joint Boards at their May meeting. FAHR95-28 Consideration of Motion to Receive and File Quarterly Staff Summary Report of Training and Travel Costs for the Quarter Ended March 31. 1995. and to Add language to the Districts' Travel and Training Policy After discussion on this matter, it was moved, seconded and duly carried to receive and file staffs report, and to amend the Travel and Training Policy. FAHR95-29 Consideration of External Money Manager Selection After discussion on this matter, it was moved, seconded and duly carried to recommend approval of staffs recommendation to appoint a Money Manager Selection Subcommittee to interview the eight candidates on the Callan Associates, Inc., short-list, and return to the Committee's June meeting with a recommendation. The Committee will include Chairman Brown and Directors Dunlap, Steiner and Swan. Minutes of Finance, Ad·~\ and Human Resources Commitr---\ I ; ' Page 5 1. May 10, 1995 .r--·) (10) CLOSED SESSION The Chairman convened the Committee Meeting in closed session to consider matters of pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.9, 54957 or 54957.6. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employment actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Committee during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of information. (11) OTHER BUSINESS. IF ANY None. (12) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING None. (13) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND A STAFF REPORT None. (14) CONSIDERATION OF UPCOMING MEETING DATES AND ITEMS TO BE DISCUSSED AT THOSE MEETINGS Committee Chairman George Brown requested the Committee refer to the calendar of future meetings on the back of the Notice of Meeting and reminded the Directors that the next Committee meeting is scheduled for Wednesday, June 14, 1995. He recommended the Committee also review the list of future meeting topics. The Committee will not meet in August, November and December 1995 as no Executive Committee meetings are scheduled, and no FAHR Committee recommendation could be carried to the respective Joint Board meetings. (15) ADJOURNMENT The meeting was adjourned at 8:00 p.m. GGS:lc J:\WPDOC\FIN\CRANE\FPC.MTGIFPC95\MINUTES~PCS.95 ' 1 ~ ' \ FINANCE, ADMINJSTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR JUNE 14, 1995 { 6): Consideration of motion recommending approval of the proposed 1995-96 Joint Works Budgets and forwarding them to the Executive Committee as follows: Summary Joint Works Operating/Working Capital Worker's Compensation Self-Insurance Public Liability Self-Insurance Dental Health Plan Trust Self-Insurance Joint Works Capital Outlay Revolving $54,380,000 307,000 272,000 437,000 33,530,000 A proposed Budget for 1995-96 was mailed to the Committee members last week. In the meantime, it has been presented to the Planning and Design Committee and the Operations, Maintenance and Technical Services Committee for their review. If approved by the Finance, Administration and Human Resources Committee, the proposed Budget for 1995-96 will be forwarded to the Executive Committee and to the Joint Boards. In previous years, the Fiscal Policy Committee has approved the Joint Works Budgets in parts, then recommended the total Joint Works Operating, Capital and Self-Insurance Fund Budgets to the Executive Committee. When the Joint Works Budgets were approved by the Joint Boards, they were included in the individual District's budgets which were considered in July. For 1995-96, the entire budget, including the individual Districts, is being presented for consideration in June. A further change is that each Standing Committee will have an opportunity to review the proposal. It remains the responsibility of the Finance, Administration and Human Resources Committee to recommend approval of these Joint Works budgets. Staff Recommendation Staff recommends approval of the proposed Joint Works Operating, Joint Works Capital and Self-Insurance Fund Budgets for 1995-96. "--~· J:\WPOOC\FINICRANEIFPC.MTGIFPC95VTEMS.AGDVIGDITM6.695 -~ ( ) \ June 14, 1995 STAFF REPORT 1995-96 Budget Recommendations COUNTY SANITATION DISTRICTS of ORANGE COUNTY. CALIFORNIA 10844 ELLIS AVENUE P.O. BOX 8127 FOUNTAIN VALLEY. CALIFORNIA 92728-8127 (7141962-2411 A proposed Budget for 1995-96 was mailed to the Committee members last week. In the meantime, it has been presented to the Planning and Design Committee and the Operations, Maintenance and Technical Services Committee for their review. If approved by the Finance, Administration and Human Resources Committee, the proposed Budget for 1995-96 will be forwarded to the Executive Committee and to the Joint Boards. In previous years, the Fiscal Policy Committee has approved the Joint Works Budgets in parts, then recommended the total Joint Works Operating, Capital and Self-Insurance Fund Budgets to the Executive Committee. When the Joint Works Budgets were approved by the Joint Boards, they were included in the individual District's budgets which were considered the following month. For 1995-96, the entire budget, including the individual Districts, is being presented for considered in June. A further change is that each Standing Committee will have an opportunity to review the proposal. It remains the responsibility of the Finance, Administration and Human Resources Committee to recommend approval of these Joint Works budgets. As staff has previously reported, the entire format of the budget document has been revised for 1995-96. It is our intent that this format will be more informative and useful for the Directors and others who use the document. Section 4, "Summary -Joint Operating," Section 7, "Self-Insurance Funds," and Section 8, "Joint Capital Improvement Program," are the three sections that contain the budgets the Committee has approved in the past. There is extensive text, and even pictures for the capital projects, in each of these sections. Two new sections have been added for further detail. Section 5, "Division Budgets," includes four pages for each division. These pages show the organizational structure, staffing trends, a service overview, an analysis of the budget changes and a Joint Works Operating expenditure trend. This new level of detail is intended to better explain what services are performed. Section 9, "Staffing," presents the authorized staffing levels for five years for each division by position title. A complete listing of the staffing changes can be found in Section 1 beginning on Page 14. 1995-96 Budget Recorr-.. -~Adations Page2 June 14, 1995 The Self-Insurance Fund budgets and overview are found in Section 7. The following table summarizes the total Joint Works budgets for operations, maintenance and capital improvements for the past two years and the proposals for 1995-96: Approved Approved Proposed 1993-94 1994-95 1995-96 Joint Operating Fund $49,579,000 $49,542,000 $54,380,000 Capital Outlay Revolving Fund 70,032,000 67,805,000 33,530,000 Seff-insurance Funds 4.138.000 904.000 1.016.000 Total $123,749,000 $118251,000 $88,926,000 Percent Change from 1992-93 (6.48%) (10.64%) (32.80%) Percent Change from 1993-94 (4.44%) (28.14%) Percent Change from 1994-95 (24.80%) While this Committee has not been responsible for approving or reviewing the individual District budgets in the past, it is charged with the overall borrowing/financial plan. The proposed budget includes no COP issue for 1995-96, instead we are funding the reduced capital improvement program from reserves. Delaying borrowing until next year allows us to postpone user fee increases to repay the debt and avoid higher required revenue ratios. The effect on budgeted reserve levels is shown below: Approved Approved 1993-94 1994-95 1995-96 Beginning Reserves $420,284,000 $435,401,000 $332,850,000 Ending Reserves 434,900,000 493, 145,000 314,166,000 Future projected borrowings can be seen in Section 3, Page 9, on line 69 of the All Districts Summary Cash Flow Statement, and Reserve balances are on the following page on lines 89 and 99. Staff will review the Joint Works and Self-Insurance Fund Budget recommendations and the rest of the document at the meeting. Recommendation Staff recommends approval of the proposed Joint Works Operating, Joint Works Capital and Self-Insurance Fund Budgets for 1995-96. GGS:lc J:IWPOOCIFINICRANEIFPC.MTGIFPC951STAFFRPT.FPCIBUDREC.SR " \ ' } FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR JUNE 14, 1995 {7}: Consideration of Planning, Design and Construction Committee recommendation PDC(6)(d); and Operations, Maintenance and Technical Services Committee recommendation OMTS95-027 Re: Summary Consideration of Motion to Authorize the General Manager to Approve Expenditure of Funds up to $50,000 for Contracts, Services and Purchase Orders, Excluding Public Works Contracts Governed by State Law and Professional Services Agreements Governed by Board Resolution 95-9. Over the past two years, staff has been fine-tuning a procedure for delegating approval authority down into the organization. This delegated authority, through providing increased responsibility and ownership, will contribute to the improved efficiency and effectiveness of the Districts. The Planning, Design and Construction Committee met on June 1, 1995, and the Operations, Maintenance and Technical Services Committee met on June 7, 1995. Both Committees considered a motion to authorize the General Manager to approve expenditure of funds up to $50,000 for contracts, services and purchase orders, excluding public works contracts governed by state law, and professional services agreements governed by Board Resolution 95-9. By this action, the Directors can more efficiently utilize their time to review and make decisions on the more significant financial and policy issues affecting the Districts. The attached staff report identifies the delegation of authority hierarchy and procedures. PDC and OMTS Committees' Recommendations The Planning, Design and Construction Committee, and Operations, Maintenance and Technical Services Committee recommend that the Boards of Directors authorize the General Manager to approve expenditures of funds up to $50,000 for contracts, services and purchase orders, excluding public works contracts governed by State law and professional services agreement governed by Board Resolution 95-9. Staff Recommendation Staff recommends that the Finance, Administration and Human Resources Committee recommend that the Boards of Directors authorize the General Manager to approve expenditures of funds up to $50,000 for contracts, services and purchase orders, excluding public works contracts governed by State law and professional services agreement governed by Board Resolution 95-9. J:IWPOOCIFINICRANEIFPC.MTGIFPC95\ITEMS.AGOV.GDOITM7.1195 June 1, 1995 Revised 6/8/95 OMTS95-027: INTRODUCTION STAFF REPORT COUNTY SANITATION DISTRICTS of ORANGE COUNTY. CALIFORNIA rnB44 ELLIS AVENUE P.O. BOX 8127 FOUNTAIN VALLEY, CALIFORNIA 92728-8127 (7141962-2411 PDC(6)(d) Consideration of Motion to Authorize the General Manager to Approve Expenditure of Funds up to $50,000 for Contracts, Services and Purchase Orders, Excluding Public Works Contracts Governed by State Law and Professional Services Agreements Governed by Board Resolution 95-9 DELEGATION OF AUTHORITY An effective, comprehensive organization needs an administrative structure with support procedures that make sense, are well documented, are understood by the organization's employees, and that enable timely and responsive administrative acquisition of contracts and services. The organization should also appropriately delegate authority to those persons and units having responsibility for these activities. THE NEED FOR DELEGATED AUTHORITY In an effort to remove barriers that prevent us from performing our jobs at the highest level, a delegation of authority structure will appropriately train our employees and, through providing increased responsibility and ownership, will contribute to the improved efficiency and effectiveness of the Districts. A critical component of the delegation of authority structure is the budget process. The budget process is being improved so that: 1. appropriate and equitable resources are provided to all divisions during the budget development process; 2. an iterative and interactive exchange (including goal setting) is undertaken during the assembly of the budget that actually authorizes expenses when a line item is approved; 3. a realistic budget is developed; OMTS95-027 Page 2 of 11 June 1, 1995 4. a process is established to manage emergency or unbudgeted items; 5. an ongoing auditing program is established to provide checks-and- balances; and 6. managers are held accountable for managing their budget. PROCEDURE FOR DELEGATION OF AUTHORITY GENERAL The attached Tables 1 through 4 list delegated signature authority for four areas: (1) contracts, services and purchase orders; (2) time cards and overtime; (3) hiring, promotions, reviews and disciplinary action; and (4) travel and training, respectively. Each table lists, in the lefthand columns, signature authority from the Boards of Directors down through section and/or shop foremen. Listed on the top row of each table are the functions/services that require signature approval. With the exception of hiring, promotion, review and disciplinary action, delegated authority for that functional management level will be elevated one level in the absence of respective authority. The General Manager (GM) will formally delegate his authority to one of the Assistant General Managers (AGM) in his absence. These procedures establish the framework and boundaries within which a delegatee can operate, and also provide management with a mechanism to evaluate implementation and hold the delegatee accountable for his/her actions. I. CONTRACTS, SERVICES AND PURCHASE ORDERS (Excluding Public Works Contracts Governed by State Law and Professional Services Agreements Governed by Board Resolution 95-9) The following signature authority will be used. The functional authority level listed describes the highest level of signature approval needed. Intermediate management approval between the initiator/requester and listed approval level is also obtained. ) OMTS95-027 Page 3 of 11 June 1, 1995 A. Budgeted Items 1. Items exceeding $50,000 require Boards of Directors approval. 2. Items $25,000 to $49,999 require GM or AGM approval. 3. Items $10,000 to $24,999 require Department Director approval. 4. Items $5,000 to $9,999 require Division Manager approval. 5. Items $1,000 to $4,999 require Section Supervisor approval. 6. Items less than $1,000 require Foreman approval. B. Unbudgeted Items For unbudgeted items, approval for the acquisition of goods or services will not occur unless a budgeted item of equal or greater value is given up. No net increase in the Districts' budget will occur as the result of an acquisition of an unbudgeted item. 1. Items exceeding $50,000 require Boards of Directors approval. 2. Items $10,000 to $49,999 require GM or AGM approval. 3. Items $5,000 to $9,999 require Department Director approval. 4. Items $1,000 to $4,999 require Division Manager approval. 5. Items less than $1,000 require Section Supervisor approval. C. Co-signatures In addition to the signature of the Delegated Authority: 1. To ensure that all policies and procedures governing purchase orders and contracts are followed, all contracts or purchase orders less than $50,000 will be signed by the Purchasing Manager. All contracts or purchase orders $50,000 and above will be signed by the Director of Finance after Boards' approval. OMTS95-027 Page 4 of 11 June 1, 1995 2. All purchases for computer hardware, software and communication equipment will be signed by the Information Technology Director or designee. D. Procedural Requirements All policies and procedures governing the procurement of services, equipment or supplies, will apply. These are the following, including updates as appropriate: 1. Resolution No. 90-43 -Professional Services Contracts 2. Resolution No. 86-81 -Purchasing Resolution 3. Resolution No. 95-9 -Professional Services Contract/Change Order to Consultant Contracts 4. Petty Cash procedures. For unbudgeted items prior to the acquisition of goods or services that were not budgeted, either a budget transfer request form must be completed demonstrating that adequate funds are available to cover the acquisition, or the Boards of Directors must authorize a budget amendment, at which time the item being acquired would fall into the budgeted category. E. Reporting The General Manager, Assistant General Managers, Department Directors and Division Managers will receive monthly cumulative updated reports from the Finance Department on all major contracts, services and purchase orders. The Boards of Directors shall receive this report on a quarterly basis. The format, reporting amount and other details will be worked out by the Finance Department. This will include the following: • Authorizing Division • Contract/Purchase Order Amount • Previous Amount Authorized (If Applicable) • Brief Description of Service or Item • Term of Contract • Budgeted or Unbudgeted Item • '"1 _.,--...._ \ J \ j OMTS95-027 Page 5 of 11 June 1, 1995 The Finance Department may develop interim reports that do not contain all of the information listed above during the period that the Financial Management System is being developed. TABLE 1: Contracts, Services and Purchase Orders CONTRACTS, SERVICES AND PURCHASE ORDERS (EXCLUDING PUBLIC WORKS CONTRACTS GOVERNED BY STATE LAW AND PROFESSIONAL SERVICES AGREEMENTS GOVERNED BY BOARD RESOLUTION 95-9} Non Budgeted Budgeted Boards of Directors >50,000 >50,000 GM and AGM ~25,000 to ~10,000 to 49,999 49,999 Department Directors ~10,000 to ~5,000 to 24,999 9,999 Division Managers ~5,000 to ~1,000 to 9,999 4,999 Section Supervisors ~1.000 to <1,000 4,999 Foreman <1,000 - II. TIME CARDS AND OVERTIME A. Procedure for Time Card Approval The direct supervisor can approve time cards and overtime requests/reports for employees reporting to him/her. 1. In the absence of the GM, AGMs can approve each other's timecards, but not their own. OMTS95-027 Page 6 of 11 June 1, 1995 2. In the absence of the AGM, the other AGM or the GM can approve time cards of Department Directors. 3. In the absence of the Department Director, the GM or AGM can approve time cards of Division Managers, within that department. 4. In the absence of Division Manager, the Department Director, AGM or GM can approve time cards of employees within that division. B. Overtime Approval 1. Department Directors approve all overtime requests that are exceptions to the Districts' policy on overtime request. 2. Division Managers or Section Supervisors can approve all other overtime requests that conform with Districts' policy. C. Reporting and Monitoring 1. The Department Directors and Division Managers receive a monthly summary of overtime requests including exceptions. 2. The GM and AGM receive a monthly summary on exceptions to overtime requests. ) OMTS95-027 Page 7of11 June 1, 1995 TABLE 2: Time Cards and Overtime Requests/Reports Time Cards Overtime Reguests Overtime Re~orts GM -Approve AGM and -Receive monthly Executive Assistant 11 Summary Reports of exceptions only -Approve Department -Receive monthly AGM Directors and Executive Summary Reports of Assistant 11 exceptions only Department Director -Approve Division -Approve exceptions to -Receive monthly Managers and Districts' policy Summary Reports with Executive Assistant I exceptions Division Manager -Approve Section -Approve when meeting -Receive monthly Supervisors and Districts' policy Summary Reports with Division Secretary exceptions Section Supervisor -Approve assigned staff -Approve when meeting or Equivalent Districts' policy Ill. HIRING, PROMOTIONS, REVIEWS AND DISCIPLINARY ACTION All hiring and promotions will be jointly signed by highest level of initiating management listed below and the Director of Human Resources. All initiating management levels below the highest level must also provide approval. A. Procedure for Hiring and Promoting 1. Unbudgeted hiring or promotions require approval of the Boards of Directors. 2. Ahead-of-schedule hiring or promotions require the approval of the GM or AGM. No net increase in the Districts' salary and wages budget will occur as a result of ahead-of-schedule hiring or promotions. 3. Budgeted hiring requires approval of the Department Director. 4. Budgeted promotions require approval of the Division Manager. OMTS95-027 Page 8 of 11 June 1, 1995 B. Disciplinary Action 1. Terminations are finally approved by the GM or AGM after consultation with the Director of Human Resources to ensure that the policies have been followed. 2. Suspensions exceeding five working days are finally approved by the Department Director (or higher management level) after consultation with the Director of Human Resources to ensure that the policies have been followed. 3. Suspensions of five days or less are finally approved by the Division Manager (or higher management level) after consultation with the Director of Human Resources to ensure that the policies have been followed. 4. Written or verbal reprimands on employee performance are finally approved by Supervisors (or higher management level) after consultation with the Director of Human Resources to ensure that policies have been followed. C. Co-Signatures All hiring and promotions will adhere to all recruitment and hiring policies of the Human Resources Department; Boards of Directors; Resolutions and Memorandum of Understandings and require co-signatures of the delegated initiating management and the Director of Human Resources with a statement affirming that the policies have been followed. D. Reporting and Monitoring The GM, AGM and Department Director will receive monthly reports on all hiring, promotions and terminations. ) OMTS95-027 Page 9 of 11 June 1, 1995 TABLE 3: Hiring, Promotions and Disciplinary Action Hires and Disciglina~ Action Promotions Boards of Un budgeted Directors Positions GM orAGM Budgeted but Approves (after consultation with Director Ahead of Schedule of Human Resources) terminations and receives report on all hiring, promotions and terminations. Department All budgeted and Approves (after consultation with Director Director Scheduled of Human Resources) suspensions exceeding five working days and receives report on all hiring, promotions and terminations. Division Manager Budgeted Approves (after consultation with Director Promotions of Human Resources) five-day-or-less suspensions and other disciplinary actions. Supervisor/ Approves (after consultation with Director Foreman of Human Resources and Division Manager Manager) written and verbal reprimands. IV. TRAVEL AND TRAINING A. General 1. Travel or training exceeding $500 will be itemized, as well as possible, in the approved budget. It is recognized that some travel cannot be preplanned. 2. All out-of-country travel requires approval by the Boards of Directors. 3. All out-of-state travel requires approval by the GM or AGM . 4. Established approvals must be received prior to arrangements for travel or training being made. OMTS95-027 Page 10of11 June 1, 1995 B. Budgeted (excluding labor hours) 1. Travel or training requests exceeding $2,000 will be approved by the GM or AGM. 2. Travel or training requests less than or equal to $2,000 and exceeding $1,000 will be approved by the Department Director. 3. Travel or training requests less than or equal to $1,000 will be approved by the Division Manager. C. Unbudgeted (excluding labor hours) 1. Travel or training requests exceeding $1,500 will be approved by the GM or AGM. 2. Travel or training requests less than or equal to $1,500 and exceeding $1,000 will be approved by the Department Director. 3. Travel or training requests less than or equal to $1,000 will be approved by the Division Manager. D. Policies and Procedures All policies and procedures governing travel and training such as the use of Districts' forms and justification, will be followed. E. Reporting and Monitoring The GM, AGM, Department Director and Division Manager will receive monthly reports from the Finance Department on all travel and training. The Finance Administration and Human Resources Committee (FAHR) will receive quarterly reports that include the following: • Requesting Division • Dollar Amount • Brief Description • Budgeted or Unbudgeted • Number of Days • Number of Attendees \ ( ) OMTS95-027 Page 11 of 11 June 1, 1995 A~~rove Boards of Directors GM orAGM Department Director Division Manager BPA/ET J :\wp\351 O\opercomm\dofarep.fah TABLE 4: Travel and Training Travel and Training Budgeted Unbudgeted Out of Country Out of State > $2,000 > $1,500 > $1,000 to $1,999 > $1,000 to $1,499 ::;; $1,000 ::;; $1,000 ) \ J -- FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE FAHR95-25: Summary AGENDA FOR JUNE 14, 1995 Classification, Compensation, and Other Terms, Conditions, Rules and Regulations of Employment At the May meeting, the Committee reviewed and approved an omnibus resolution containing in one place all of the terms, conditions, rules and regulations of employment. This was the first time that all of the current information had been available in one place. During the discussion, the Committee asked for a matrix that indicated which provisions were applicable to which employee groups. That matrix has been prepared and is enclosed for the Directors to add to their package from last month. Staff Recommendation Information only. J:\WPDOC\FIN\CRANBFPC.MTGIFPC95VTEMS.AGDIFAHR95.25A COMPENSATION PROGRAM COMPARISON OCEA UNITS 0 AND M UNIT PROF & SUPV EXEC MGMT c 5 Step Plan Step 5 Set at Market t/ t/ 5.5% Anniversary Merit Increase t/ t/ 5.5% at Completion of Probation t/ t/ 5.5% for Promotion t/ t/ Negotiated Range Adjustment Increase t/ t/ MPRP Expanded Range Plan Midpoint Set at Market t/ t/ Annual Adjustment in July Based on Performance Rating t/ t/ Limit of 20% in Top Quartile t/ t/ Overtime Pay Time-and-One-Half t/ Straight-Time t/ Other Bonuses Shift Differential t/ t/ Standby Pay t/ t/ Call Back Pay t/ t/ EMPLOYEE BENEFIT PROGRAM COMPARISON OCEA UNITS 0 AND M UNIT PROF & SUPV EXEC MGMT Time Away From Work Vacation t/ t/ t/ Sick Leave t/ t/ t/ Personal Leave t/ Holidays t/ t/ t/ t/ Deferred Compensation No Match -No Non-Match 1 % Match -2% Non-Match t/ 2% Match -2.5% Non-Match t/1 3% Match -3% Non-Match t/2 Insurance Medical t/ t/ t/ t/ Dental t/ t/ t/ t/ $15,000 Life t/ t/ $50,000 Life t/ t/ ShorULong Term Disability t/ t/ t/ t/ Benefit Option Plan $750 ($250 Tuition Reimburse) t/ $1000 t/ $1250 1 Assistant Department Head Only 2 Department Head Only J I ) FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE FAHR95-26: Summary AGENDA FOR JUNE 14, 1995 Consideration of Motion for Renewal of All-Risk Insurance (including Fire, Flood and Earthquake Coverage) for FY 1995-96 At the Committee's May meeting, staff reported that the Districts' current All-Risk property insurance, including fire, flood and earthquake coverage expires at the end of June. Staff further reported that Robert F. Driver Associates, the Districts' broker of record, had made preliminary inquiries of the major All-Risk insurance carriers in anticipation of our renewal, and in view of current insurance market restrictions, presented two renewal options for consideration by the Districts: The Committee directed Robert F. Driver Associates to proceed to obtain sublimits of $30,000,000 to $35,000,000 of earthquake coverage at an estimated annual premium of approximately $1.3 to $1.4 million. The attached insurance renewal schedule presents summary information about the All- Risk insurance renewal efforts as of June 8, 1995. Our insurance broker has informed staff that final placement commitments with the carriers are expected by next week. The estimated premium cost for FY 1995-96 is $1,309,000. Staff Recommendation Staff recommends that the Finance, Administration and Human Resources Committee approve renewal of the Districts' All-Risk insurance program including earthquake, flood, personal property and business interruption, in the amounts of $200 million All-Risk, and $30-35 million earthquake with deductibles of $25,000 for all perils except earthquake and 5% per unit ($250,000 min.) for earthquake, for a total premium not to exceed $1.4 million. J:\WPOOC\FINICRANEIFPC.MTGIFPC95VTEMS.AGDIFAHR95.26A 14:41 No.026 P.01 • "-I ~ ~ I} I.... j ~. n ·._) ..,,' LJ ·-· ROBERT f. DRTVER ASSOCIATES • COMl'f1:TEJNSl.IRANC1'.'lftONJ>SUMCE. ASSOCIATES June 7, 1995 Mr. Steve Kozak Financial Manager a Di\'i.wm of Rohen F. Driver Co., lnC'. County Sanitation Districts of Orange County P. 0. Box 8127 Fountain Valley CA 92728-8127 Re: All RiSk • 1995 Property Insurance Renewal Program for County Sanitation Districts of Orange C.Ounty Dear Steve: Per our discussions, we outline a schedule of insurance companies with their respective participation within our proposed 1995 renewal program: $ 7,500,000 Primary (Including Earthquake and Flood) s 2,500,000 Excess $ 7,500,000 (Including Earthquake and F1ood) Proposed Lgyer Premium QJmpanl' Participation $ 525,000 Reliance $ 3,000,000 Lexington $ 2,500,000 Pending s 2,000,000 $ 100,000 RLI $ 2,500,000 3636 13/RUI STREI:.'1', SUITE 230. NJ:.Wf'ORT Bt:ACH. CALJFORNIA 92660-2619 (714i 756-0271 • FAX \714) 756-2713 Participation Premium $ 210,000 $ 175,000 $ 140,000 100,000 Mr. Steve Kozak June 7, 1995 Page 2 Wu $ 10,000,000 Excess $ 10,000,000 (Including Earthquake and Flood) $ s.000,000 Excess s 20,000,000 (Including Earthquake and Flood) s 5,000,000 Excess $ 25,000,000 (Including Earthquake and Flood) $ 15,000,000 Excess s 30,000,000 (Excluding Earthquake and Flood) $ 155,000,000 Excess $ 45,000,000 (Excluding Earthquake and Flood) Proposed Total Premium: Layer Premium $ 300,000 ($325,000?) $ 125,000 $ 87,500 $ 90,000 $ 81,500 . $ 1,309,000 JUN ?~ 95 14:41 No.026 P.02 Participation Company Participation Eremlum Agricultural $ 3,000,000 $ 90,000 Royal $ 2,500,000 $ 75,000 Reliance $ 2,000,000 $ 60,000 Associated $ 1,000,000 $ 30,000 Pending $ 1,500,000 $ 45,000 Essex $ 2,500,000 $ 62,500 Pending $ 2,500,000 $ 62,500 Pending Fireman's Fund $ 15,000,000 $ 90,000 Fireman's Fund $ 155,000,000 $ 81,500 r·. ,_, r:• c. r .. 1 r . LJ I"\ .l v c. I", H.;:,;:; u '-JUN ,,, , , ':i'.::> 14=4i No.026 P.03 , Mr. Steve Kozak June 7, 1995 Page 3 I All carriers specifically identified in the schedule have offered quotations as specified and can bind (:9Verage accordingly. We further specify as "pending" those layers of the program on which we continue to negotiate terms and conditions. Note that there are several insurers who have quoted a higher price to participate in the primary layer at an overall premium of $750,000, or $225,000 more than proposed. Note further that CNA has offered a quotation of $164,000 for their provision of $2,000,000 within the primary layer, and we may consider binding that coverage after binding Lexington and Reliance in order to avoid an overall $615,000 layer premium. In the meantime, we continue our dialogue with several other insurers to support the program costs as shown in the schedule. There may be some pressure from the participating carriers to ·increase the $10,000,000 excess of $10,000,000 layer premium to $325,000 approximately. We anticipate Essex providing an additional $2,500,000 in the $5,000,000 excess of $20,000,000 layer and are hopeful that Westchester will offer coverage in the $5,000,000 excess $25,000,000 layer. We shall keep you apprised of our progre~ as we strive in this obviously chaotic market place to complete the program as outlined. Sincerely, DHM:rw ) ( FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR MAY 10, 1995 F AH R95-29: Consideration of Motions to Select External Money Manager and Custodial Services Bank for the Districts' Investment Program Summary Recommendations from the interview process conducted by the ad hoc Money Manager Selection Subcommittee will be presented for consideration by the Finance, Administration and Human Resources Committee. Also, results of the RFP process for master trusUcustodial bank services will be presented for consideration by the Committee. Staff Recommendation Staff recommends that the Finance, Administration and Human Resources Committee: 1. Select the firm of Pacific Management Investment Company to serve as the Districts' external money manager, and authorize staff to negotiate a professional services agreement. 2. Select a master custodial services bank, and authorize staff to negotiate a professional services agreement. ·-" J:IWPOOCV'IN\CRANEIFPC.MTGIFPC95\ITEMS.AGDIFAHR95.29A COUNTY SANITATION DISTRICTS of ORANGE COUNTY. CALIFORNIA June 14, 1995 10844 ELLIS AVENUE P.O. BOX B 1 27 FOUNTAIN VALLEY, CALIFORNIA 92728-8127 1714) 962-2411 STAFF REPORT FAHR95-29 Selection of External Money Manager and Custodial Services Bank for the Districts' Investment Program Summary A short-list of external money manager candidates, prepared by Callan Associates, Inc., the Districts' investment advisor, was presented to the FAHR Committee at your May meeting. At the May meeting, the Committee appointed a Money Manager Selection Subcommittee and instructed the Subcommittee to conduct interviews and return with selection recommendations for Committee and Board consideration at the June meetings. ) The Subcommittee interviewed the following finalist firms on May 22, 1995: • Chandler Liquid Asset Management, Inc., San Diego • Pacific Investment Management Company, Newport Beach • Payden & Rygel, Los Angeles • Scudder, Stevens & Clark, Inc., Los Angeles • Western Asset Management Company, Pasadena At the conclusion of the interviews, the Subcommittee determined that Pacific Investment Management Company (PIMCO) was the most qualified firm and should be recommended as money manager for the Districts' two portfolios (Liquid Operating Monies and Long-Term Operating Monies) on the condition that PIMCO reduce its annual fee proposal from 27 to 15 basis points. The Subcommittee also developed an alternative recommendation should PIMCO be unable to accommodate the Subcommittee's request. On May 23, 1995, PIMCO responded to the Districts with an offer of a 15 basis point fee per annum for management of the Districts' investments (see attached letter). FAHR95-29 -Section of Money Manager & Custodial Services Bank Page2 June 14, 1995 Custodial Bank Services On June 2, 1995, the Districts released a Request for Proposals (RFP) for Master TrusUCustodial Bank Services to five banks. The selected custodial bank will provide the Districts with custodial safekeeping for the Districts' securities, and will provide investment accounting and reporting services as an integral part of the Districts' investment program. This will include accounting of the principal and interest earnings amounts for each of the nine Districts. Proposals are due to the Districts on Monday, June 12, 1995, and will be evaluated by Callan Associates and staff. Results of the RFP process will be presented to the Committee at your meeting for selection of a custodial services bank. Performance Monitoring A comprehensive set of performance guidelines and ongoing monitoring is essential to the Districts' investment program. Section 15.2 of the Districts' Investment Policy Statement states, in part, that the Committee " ... shall adopt guidelines for the ongoing review of duration, quality and liquidity of the Districts' portfolio." Staff is working with Callan Associates to develop the review guidelines required by Section 15.2 and to establish an ongoing investment performance monitoring and reporting program. Draft review guidelines and an outline of the monitoring system will be presented to the Committee at your July meeting. Staff Recommendations 1. Select the firm of Pacific Management Investment Company to serve as the Districts' external money manager, and authorize staff to negotiate a professional services agreement. 2. Select a master custodial services bank, and authorize staff to negotiate a professional services agreement. SK:lc J:IWPDOCIFINICRANE\FPC.MTGIFPC95\STAFFRPT.FPC\SRFAHR95.29A .J May 23, 1995 Mr. Gary Streed Director of Finance PACIFIC INVESTMENT MANAGEMENT COMPANY Via Facsimile: (714) 962-3954 County Sanitation Districts of Orange County 10844 Ellis A venue P.O. Box 8127 Fountain Valley, CA 92728-8127 Dear Mr. Streed: John Hague and I want to thank you and the other members of the Districts' Selection Committee for inviting Pacific Investment Management Company (PIMCO) to make a presentation yesterday. We are interested in this management assignment. The reasons go far beyond our respective geographical proximity and our desire to see assets under management grow. As a long-time Orange County-based money manager, we feel an obligation to help local agencies recover from the devastating losses they incurred in the collapse of the Orange County investment pool. The best way that we can do that is to offer our investment management expertise which is among the best to be found anywhere. The nature of the proposed assignment for the County Sanitation Districts of Orange County, with its very restrictive investment guidelines and relatively short-term orientation, is significantly different from our other clients. This gives us some flexibility from a fee standpoint. If PIMCO is awarded the entire assignment, we are prepared to offer a 15 basis point fee per annum for the management of the assets. We have tried to be as accommodative as we possibly can in trying to meet the fee objectives of your committee. In addition, we can offer the following : A well-balanced, experienced, and specialized staff with continuity of key professionals . Full client servicing for your account. A willingness to innovate within a conservative framework, i.e., development of proprietary computer analytics to be able to breakdown complex securities and to understand their performance characteristics in different interest rate environments. A philosophy that gives weight to long-term trends which are fundamental indicators of change and important in identifying turning points in the bond market; by integrating a longer-term orientation with shorter-term cyclical factors, we have been able to avoid the short-term aberrations that produce performance volatility. P.O. Box 9000 840 Newport Center Drive Newport Beach, California 92658-9030 (714) 640-3031 •Fax (714) 720-1376 Page 2 -Continuation Our success in attracting and keeping clients has been largely based on our ability to generate consistent returns over the past twenty years. The strengths listed above have been the key factors behind this record. You can be assured that we will work hard to maintain our record of consistency if we are retained by the County Sanitation Districts of Orange County. The other information that was requested at the meeting yesterday will be sent to you under separate cover today: PIMCO's Derivatives Policy statement, insurance coverages, and a copy of our annual bank custodian survey. Again, thank you very much for your interest in PIMCO. We look forward to hearing from you when you have made your final decision. In the meantime, please call me at 7141'2# 517e if we may provide further information or assistance. -3 ¥7" Very truly yours, Leland T. Scholey, CF A Vice President cc : Bill Gross, Managing Director Brent Harris, Managing Director ~~4a- Managing Director Bill Thompson, CEO & Managing Director LTS/ljg:Ol5 ' ) FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE FAHR95-30: Summary AGENDA FOR JUNE 14, 1995 Consideration of Motion to Make Revisions to MPRP (Management Performance Review Plan) Performance Incentive Values In October of 1991, the Finance and Personnel Committee submitted a recommendation to the Joint Boards to modify the Management Performance Review Plan (MPRP) in an effort to resolve the salary topping-out problem, enable the Districts to recruit and retain competent management, supervisory and professional staff, and to allow for the reward of exemplary performance. This recommendation included provisions that established a program based more on private sector compensation practices that would increase the spread within the salary ranges from 30 to 40 percent in a phased effort over a three-year period, and established salary ranges to be effective in July of 1991, 1992 and 1993 based on market survey data used to determine the mid-point of the range rather than the top. In the intervening years since 1991, the amount of funding provided for the Merit Pool has been equal to the wage adjustments received by the groups represented by the Orange County Employees Association (OCEA) and Operating Engineers Local 501. The actual increases received by employees represented by OCEA and the Operating Engineers have actually exceeded increases received by employees under the MPRP program as the represented groups also receive adjustments under a traditional five- step program. Staff Recommendation In order to realize the initial objectives of the MPRP program to provide an incentive for consistent meritorious performance, the following multi-phased approach is recommended: 1. Effective in July 1995, authorize funds totalling $173,000 beyond the 3.0 percent of payroll Merit Pool Fund approved last year sufficient to address the more critical range position issues now occurring. J:IWPDOC\FINICRANEIFPC.MTGIFPC95\ITEMS.AGDIFAHR95.30 2. Establish a Target Merit Pool Fund of 5.0 percent of payroll (totalling $453,000) for implementation in July 1996 sufficient to incentivize performance as recommended by Ernst & Young. This fund would be distributed based on performance (see Attachment 1) as in the past, and would be in addition to the already authorized 3.0 percent fund which would be used to provide a cost-of- living adjustment to those employees whose performance at least met expectations. 3. Provide extensive training to all supervisors and managers in proper administration of the program, and particularly the review process as recommended by Ernst & Young. -2- J:\WPOOC\FINICRANEIFPC.MTGIFPC95\11EMS.AGDIFAHR95.30 'l June 14, 1995 STAFF REPORT FAHR95-30 MPRP Performance Incentive Values Background COUNTY SANITATION DISTRICTS of ORANGE COUNTY, CALIFORNIA 10844 ELLIS AVENUE P.O BOX 8127 FOUNTAIN VALLEY, CALIFORNIA 92728-8127 (7141962-2411 In October of 1991, the Finance and Personnel Committee submitted a recommendation to the Joint Boards to modify the Management Performance Review Plan (MPRP) in an effort to resolve the salary topping-out problem, enable the Districts to recruit and retain competent management, supervisory and professional staff, and to allow for the reward of exemplary performance. This recommendation included provisions that established a program based more on private sector compensation practices that would increase the spread within the salary ranges from 30 to 40 percent in a phased effort over a three-year period, and established salary ranges to be effective in July of 1991, 1992 and 1993 based on market survey data used to determine the midpoint of the range rather than the top. In the intervening years since 1991, the amount of funding provided for the Merit Pool has been equal to the wage adjustments received by the groups represented by the Orange County Employees Association (OCEA) and Operating Engineers Local 501 as shown in Table 1 below. TABLE 1. Six Year History of Salary Increases OCEA AND OPERATING ENGINEERS Eff. Date Nov. '90 Nov. '91 Nov. '92 Nov. '93 Nov. '94 Nov. '95 TOTAL AV Inc.% 5.0 5.5 5.5 -0-3.0 3.0 22.0 3.67 PROFESSIONAL AND SUPERVISORY Eff. Date Jul. '91 Jul. '92 Jul. '93 Jul. '94 Jul. '95 Jul. '96 TOTAL AV Inc.% 6.2 6.0 3.8 -0-3.0 3.0 22.0 3.67 The fact that wage increases received by employees repre·sented by OCEA and the Operating Engineers have actually exceeded increases received by employees under the MPRP program (due to the additional impact of step advances) does not support one of the original goals of the MPRP program to " ... allow for the reward of exemplary performance." This, and other factors currently being addressed, has resulted in widespread employee dissatisfaction with the MPRP program as reported in the Ernst FAHR95-30 -MPRP Performance Incentive Values Page2 June 14, 1995 and Young audit of the Human Resource Department, and the observation that" ... the MPRP does not 'incentivize' performance and therefore does not meet its stated goal of providing an incentive for consistent and meritorious performance." (see Attachment 2, an excerpt of Ernst and Young Report). Employees under the traditional five-step merit pay program receive 5.5 percent upon completion of probation as well as a 5.5 percent anniversary adjustment until they reach the fifth step, all in addition to the negotiated range adjustment. While it is true that these employees' performance must at least meet expectations to qualify for these adjustments, most easily meet that requirement. These considerations result in an employee reaching the fifth step in about three and one-half years, with annual increases of typically 8 to 11 percent. While the fifth step is targeted at the market rate for classifications in the five-step program, a perception of 8 to 11 percent annual wage increases is generated without reference to market position. This phenomenon has an important impact on satisfaction within the MPRP program. Employees in the MPRP program receive one wage adjustment each year, varying from zero to about ten percent and averaging the amounts shown in Table 1. Since the middle of the range is targeted to market rates, and not the top step as with employees under the traditional five step merit pay program, the goal for employees whose performance at least meets expectations is to reach mid-point in approximately three to five years, which is normally when an employee becomes fully proficient in performing the essential duties of the job. This is not currently possible, since the average increases are equal to or less than the annual range adjustment, and thus there is no change in the relative position within the range. MPRP employees who supervise employees in the five step program face a unique problem in that their subordinates quickly reach step five of their range, which, because of range overlap and inability of the supervisor to advance into the MPRP range, results in an inappropriate differential between the employee and their supervisor. Recommendation In order to realize the initial objectives of the MPRP program in providing an incentive for consistent and meritorious performance, the merit pool fund must be established in an amount in excess of the cost-of-living and the range adjustment increases negotiated by OCEA and Operating Engineers Local 501, and the amount required to move an employee to mid-range in a three to five year period. Further, individual employees must achieve a salary range position that is commensurate with their level of experience, proficiency and performance, relationship to individuals in similar classifications, and relationship to other positions within the organizational unit. .. .. ) FAHR95-30 -MPRP Performance Incentive Values Page3 June 14, 1995 Staff would propose a multi-phased approach in addressing this complex issue: GH:lc 1. Effective in July of 1995, provide sufficient funds beyond the 3.0 percent of payroll Merit Pool Fund approved last year (and included in the Professional and Supervisory MOU) to adjust the more critical range position issues. 2. Staff recommends 2.0 percent of payroll ($173,000), to be funded through salary savings, in addition to the 3.0 percent now authorized. Establish a Target Merit Pool Fund of 5.0 percent of payroll for implementation in July 1996. This fund would be distributed based on performance (see Attachment 1) as in the past, and would be in addition to the already authorized 3.0 percent fund established in the Professional and Supervisory MOU, which would be used to provide a cost-of-living adjustment to those employees whose performance at least met expectations. Staff recommends 5.0 percent of the 1995-96 payroll for this group, or $453,000, be funded in the 1996-97 budget. 3. Provide extensive training to all supervisors and managers in proper administration of the program, and particularly the review process. Cost is included within the training program and organization proposed in the 1995-96 budget. A:\MPRPRPT.SR D MCKINLEY 5-5-95 MATRIX95 OUTSTANDING EXCEEDS MEETS NEEDS IMPROVEMENT UNACCEPTABLE ATTACHMENT 1 PROPOSED FY1995/96 MERIT MATRIX 1STQ (0%-25%) 10% 8% 6% 0% 0% PAYOUT 2NDQ (26%-50%) 8% 6% 4% 0% 0% 4.91% 3RDQ (51%-75%) 7% 5% 3% 0% 0% 4THQ (76%-100%) 5% 3% 3% 0% 0% Action Plans 4. Improve quality of the Management Performance Review Program (MPRP) S!J ERNST & YOUNG LLP I J ,: County Sanitation Districts of Orange County Human Resources Review Findings • Managers and subordinates express concern that the MPRP does not "incentivize" perfonnance and therefore does not meet its stated goal of providing " ... an incentive for consistent and meritorious performance." The pool percentage is viewed as an entitlement at the low end of performance and is not viewed as significant enough to impact performance at the high end of performance. In addition, percentage spreads are not seen as large enough to differentiate top from bottom performers and thus are not effective performance drivers • There is widespread employee dissatisfaction with the MPRP. Employees express in focus groups and inter- views inequity concerns relative to the step process, market rates and the stated intent of the program. Weiden- tified that zero percent of employees were in the top salary quartile in the 1993 and 1994 performance years. Some portion of outstanding employees should reside in the top quartile to effectively ~eward performance • Fiscal year 1993-94 reviews were completed haphazardly because they were not initia~ly tied to a salary increase • Certain MPRP procedures have not been communicated since the roll-out of the revised program in 1991 e.g. pro-rated procedure for new hires. In addition, overall MPRP policies and procedures do not exist in any acces- sible format, though they are referenced to in the MOU • There has been no training on the MPRP since the revised program was rolled-out in 1991 • Comments to support review ratings generally reflect job responsibilities rather than performance outcomes. This pattern is seen at the top levels also. Department Head reviews are typically narrative essays which do not reflect specific and measurable performance objectives • There is variability across the districts in the way managers are reviewing their subordinates. Reviews are not being calibrated across supervisors, making them invalid selection tools for promotions • Though promotional postings indicate position requirements, guidelines for what individuals can do to achieve promotion are unclear • See Appendix B for flowchart of the MPRP 23 _) County Sanitation Districts of Orange County Human Resources Review Solutions • Ensure reviews are completed and given annually for all exempt personnel regardless of monetary increase • Redesign process to allow employee input prior to finalization of review. Add self-appraisal worksheet to prompt dialogue during performance discussions • Increase emphasis on ongoing feedback • Develop instruction booklet for supervisors and employees including: • Program philosophy • Critical dates • Program design • Examples of specific and measurable performance objectives • Ratings definitions • Discussion of ratings errors • Provide supervisory training on the following: • Program design How to write specific and measurable performance objectives • How to provide meaningful employee feedback • Mechanisms for ongoing feedback • Evaluate video training alternative for modelling performance feedback • Institute a quality control mechanism to monitor the consistency of ratings across supervisors and ensure that performance feedback is job-specific and outcome versus responsibility-based • Build accountability for quality and timeliness of MPRP feedback into managers' performance reviews • Utilize computerized tracking and reporting system to facilitate review issuance and compliance f'" ..... 'lNST & YOUNG LLP 24 County Sanitation Districts of Orange County Human Resources Review • Place MPRP forms on disk to facilitate timely completion of reviews • Validate performance expectations against job descriptions • Establish linkage to promotions • Relate ratings definitions in performance dialogue to concrete examples of the performance results and behav- iors required to achieve various ratings so that employees know how to reach the next highest rating level • Include career planning component and link development plan to career planning • Recognize constraints of union environment in development and implementation of action plan. Union mem- bership approval would be required for all substantive program changes i.e., involving more than changes to administrative procedures. In instances where substantive changes are proposed, develop a plan to achieve union approval • Consider setting standard percentage increases by rating category and announcing the percentage ranges at the beginning of the performance year. The following is an example: 8 -10 percent Outstanding 6 -8 percent Exceeds Expectations 4 -6 percent Meets Expectations 2 -4 percent Improvement Needed 0 -2 percent Unacceptable In the above example, all employees rated outstanding _could expect to receive the same percentage increase, which could range from 8 to 10 percent. In addition, consider making the percentage spread wide enough to differentially reward performance at the top and low ends. Although these changes could not be implemented until the 1997-8 fiscal year and would require passage by union membership, the proposed changes would motivate performance and thus achieve the stated goals of the MPRP Costs/Benefits Costs • Resources to develop instruction booklet and supervisory training course including possible video component. Cost estimate for footage and editing for a half hour training video is $3,000 to $5,000 El/ ERNST & YOUNG LLP 25 al' ..... ,NST & YOUNG LLP County Sanitation Districts of Orange County Human Resources Review • Staff time to deliver and undergo supervisory training related to the MPRP • Staff time to provide ongoing coaching and counselling, set goals, solicit employee input, monitor review qual- ity and negotiate substantive changes to the MPRP • Significant funding to allow the differential percentage spread necessary to motivate performance. This issue would need to be addressed by the Board Benefits • Enhanced perfonnance motivation • Improved quality of reviews • Accuracy • Meaningfulness • Timeliness • Lessened legal risk through improved documentation • Valid selection tool • Reduced inequity concerns Implementation Framework Timeline: Proposed Project Leader: Proposed Team Members: Six months Gary Hasenstab General Manager Department Heads Chair of Union MPRP Review Committee Committee of Division Managers ~6 --, I FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE (14) Summary AGENDA FOR JUNE 14, 1995 Consideration of upcoming meetings and items to be discussed at those meeting. The calendar of future meetings is on the back of the Notice of Meeting each month. The next Finance, Administration and Human Resources Committee meeting is scheduled for Wednesday, July 12, 1995. Some of the potential major non-routine items the Committee will be reviewing, considering and acting on over the next few months follow. Some items will carry forward to future months, but are listed only once at the start of a process. MONTH ITEM JULY Personnel Policies and Procedures OCEA Grievance Deferred Comp Plan and Policy Changes Financial Advisor Services Ernst & Young Performance Audit AUGUST As there is no Executive Committee meeting scheduled in August, the Committee is likewise not scheduled. SEPTEMBER Fourth Quarter Training & Travel Report Employee Handbook Financial Information System OCTOBER Independent Financial Audit for 1994-95 1994-95 Management Letter Staff Recommendation Information only item. J:IWPOOC\FIN\CRANE\FPC.MTGIFPC95\ITEMS.AGO\AGO!TM14.