AGENDA MEMORANDUM

 

 

Meeting Date:           December 12, 2011

 

From:                          Jay M. Evans, City Manager

           

Subject:                      Resolution adopting the FY 2011-2012 Enterprise Performance Incentive Program and Enterprise Performance Evaluations

 

 

Staff Recommendation:

Staff recommends approval of the Resolution adopting the FY 2011-2012 Enterprise Performance Incentive Program and Enterprise Performance Evaluations.

 

Analysis:

On November 22, 2010, the City Commission adopted the Enterprise Performance Incentive Program (EPIP) as the mechanism to tie organizational financial performance to the employee compensation.  For the first time in the City’s history, all employees have a vested interest in the fiscal health of the business unit in which they work.  This is a substantial departure from standard governmental practice where employees are either part of a guaranteed increase (step) program, or they need only be concerned with personal performance through a pure “merit” system.  Now, Leesburg employees in all business units are concerned with the “bottom line”, and are eligible for incentives when justified by fiscal health and performance.

 

Prior to the adoption of EPIP, the City had not provided employee raises since 2008.  It its first year, EPIP demonstrated that raises and bonuses were still not financially possible for most employees.  However, the performance of the Stormwater, Wastewater, Electric, Gas, and Solid Waste enterprises were such that either bonuses or raises were possible.  Those incentives were distributed based on the certain measures of sustainability in their financial performance evaluations.

 

The evaluations have been conducted for FY 2011-2012, the results of which are attached hereto.  Also included is a copy of the revised methodology.  As noted last year, a few changes will be needed in the program as time progresses and the City gains more experience with administering it.  Three changes included this year are: 1) Unrestricted cash now accounts for carry-forwards into the next fiscal year (this ensures available cash does not appear artificially high); 2) employees must have received a “meets expectations” evaluation in FY 2010-11 to qualify for any incentive; and 3) the evaluations are based on unaudited fiscal year end financials rather than the 3rd quarter unaudited financials.  The “exceeds expectations” incentive of “up to” 2% remains unchanged. 

 

Summarizing the attached results, only Gas, Communications, Stormwater, and Solid Waste qualify for raises (4% effective Oct. 1, 2011 if they had a “meets expectations” evaluation; and “up to” 2% if they receive an “exceeds expectations” evaluation in FY 11-12.  The General Fund and Water only qualify for bonuses, but they will also follow the 4%/2% split.  Wastewater had positive performance, but only enough to qualify for a .56% bonus.  Electric now follows the Skill-Based Pay (SBP) system, but due to tighter margins, only $21,765 will be available for SBP expenses (estimated at $87,000).  The Building Department does not qualify for an incentive and the barriers to such are noted in the evaluation.

 

The results of this year’s evaluations again suggest EPIP is working.  Financial reality and personal performance are now the cornerstones for changes in compensation.  Employees are more engaged than ever in searching out new efficiencies and alternative methods of service delivery, as demonstrated in our financial statements. Barriers to current and future incentives have been identified and now present a roadmap to success. This provides employees, management, and the Commission with knowledge of the challenges that lie ahead and the incentive to address them.

 

 

Options:

1.  Approve the Enterprise Performance Evaluations for the FY 2011-2012 Enterprise Performance Incentive Program

2.  Such alternative action as the Commission may deem appropriate

 

 

Fiscal Impact

Fund-by-fund analysis and fiscal impact are provided in the attached Enterprise Performance Evaluations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Submission Date and Time:    12/9/2011 6:38 PM____

 

Department: ______________________

Prepared by:  ______________________                     

Attachments:         Yes____   No ______

Advertised:   ____Not Required ______                     

Dates:   __________________________                     

Attorney Review :       Yes___  No ____

                                                

_________________________________           

Revised 6/10/04

 

Reviewed by: Dept. Head ________

 

Finance  Dept. __________________                                     

                              

Deputy C.M. ___________________                                                                         

Submitted by:

City Manager ___________________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________


 

RESOLUTION NO._______________

 

RESOLUTION OF THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA ADOPTING THE FY 2011-2012 ENTERPRISE PERFORMANCE INCENTIVE PROGRAM AND FINANCIAL PERFORMANCE EVALUATIONS; AND PROVIDING AN EFFECTIVE DATE.

 

 

BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA:

 

1.  THAT the City hereby adopts the FY 2011-2012 Enterprise Performance Incentive Program as outlined in the attached memorandum, inclusive of the attached methodologies and Financial Performance Evaluations.

 

2. THAT the performance incentives provided for by the results of each evaluation be retroactive to October 1, 2010.

 

3. THAT this resolution shall become effective immediately.

 

             

PASSED AND ADOPTED by the City Commission of the City of Leesburg, Florida, at a regular meeting held the _12th____ day of _December___ 2011.

 

 

 

                                                                            __________________________

                                                                             Mayor

 

ATTEST:

 

 

_______________________________

City Clerk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enterprise Performance Incentive Program

 

 

The changes in the U.S. economy have required local governments to re-evaluate priorities, business models, service levels, retirement plans, compensation systems, and methods of service delivery.  The City of Leesburg has been a leader in adapting to the “new normal” and the results have been realized in our financial reports and improved bond ratings.  Leesburg is better positioned than many local governments because of our willingness to make difficult but timely changes.  Simply put, we have been responsive and responsible.

 

Dedication to organizational performance at the employee level is pervasive in the private sector.  Corporate compensation systems are frequently tied to organizational performance, giving each and every employee a stake in company’s success or failure.  This also motivates employees to provide top-quality service in order to ensure future sales.  The more satisfied the customer, the more business for the company, and the more secure the employee’s financial future.

 

Government, on the other hand, has been slow to adopt many of corporate America’s successful practices.  The claim has always been that “government is different,” “government doesn’t exist to make a profit” and “that won’t work here.”  Frequently it is time itself that proves these notions wrong, with defined-benefit pension plans being a perfect example.  Corporate America realized many years ago that these plans were not sustainable, but governments are just now coming to that conclusion themselves.  Organizational performance is proving to be a similar issue, in that local government can no longer sustain a business model that ignores economic realities and rewards employees without regard to the success or failure of the organization.  It is time to change.

 

Giving government employees a stake in the performance of the organization should be part of the new way government operates.  Performance is not defined as simply the bottom line, but also the impact the organization has had on the customer (the ratepayer or taxpayer).  Shouldn’t government employees care about rate increases or increases in taxes?  Shouldn’t they care about the financial health of the organization?   Shouldn’t they care about both the short-term and long-term consequences of staffing, benefit levels, debt levels, life-cycle costs, changes in revenues, expenditures, and so forth?  Should we be surprised at an unsatisfactory outcome when our system provides no incentive to the front-line employee to care about the overall performance of the organization?  It can be different.

 

The Leesburg Enterprise Performance Incentive Program will increase interest in and responsiveness to Leesburg’s success as an organization.  This is a departure from the traditional model wherein Leesburg has granted across-the-board merit increases (subject to the employee’s personal performance evaluation) to all business units equally.  For the purpose of this explanation, the business units (or “funds”) such as the General Fund, Water, Wastewater, Electric, Gas, Stormwater, etc. will all be referred to as “enterprises.” 

 

To begin, the ability of an employee to receive a merit bonus or a raise will be tied to the performance of the enterprise in which they work.  Enterprise performance will be evaluated utilizing adopted methodologies (“Enterprise Financial Performance Tests,” attached hereto).   The methodologies are empirical enough to evaluate the enterprise’s financial health from the past fiscal year, current fiscal year, and the projected fiscal year by way of analysis using the fiscal year end unaudited financials.  The process is flexible enough to allow the Commission to consider anomalies that may have affected financial performance, known threats to future performance, or other conditions that could affect the desirability of providing financial incentives in a given year.  Increases in taxes or utility rates are factors that could negatively impact the incentives, ensuring the customer is the top priority in the program.

 

Under the Enterprise Performance Incentive Program, each enterprise will be subjected to a Financial Performance Test.  The results of this test will determine eligibility for incentives (bonuses or raises) for the employees in that enterprise, and will also determine the amount of funding available for the incentive.  The amount of funding available is a function of financial performance, but would be limited to no more than 7% of payroll.  This amount would be known as the Potential Bonus/Raise, or “PBR”.  Depending on performance, the PBR will be distributed either as bonuses or raises.  Raises will be given only if the performance appears (as demonstrated in the analysis) to be sustainable.  Questionable sustainability will result in one-time bonuses only.  This will help to combat the adverse impact of recurring expenses when sustainability is not assured.

 

For those departments that have not adopted a Skill-Based Pay plan (only Electric has), the incentive will be split into a 4% Enterprise Performance Incentive effective October 1st  (employee must have received “meets expectations” on their previous fiscal year evaluation) and up to 2% would be used as a Personal Performance Evaluation Merit Incentive.  The Personal Performance Evaluations will be conducted on the employee’s employment anniversary date, and the employee will have to “exceed expectations” on their evaluation to be eligible for this incentive.  Sustainability, as demonstrated in the Financial Performance Test, will determine whether the incentives are distributed as bonuses or raises. 

 

For those departments utilizing a Skill-Based Pay plan (again, only Electric has one so far), the incentives are not distributed in the above format, but instead become the financial reward for progress through the Skill-Based Pay plan.  Sustainability still determines the method of distribution (bonus vs. raise), and the entire amount of the PBR is available for use.  Timing is also October 1st

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enterprise Performance Incentive Program

Utilities Financial Performance Evaluation

 

 

 

 

1)       There has been no base rate increase in the current fiscal year (BPCA and indexed increases excluded)

a.     If no base rate increase, proceed to #2.

b.     If yes, City Commission to evaluate the cause of the rate increase to see if bonuses or raises should be withheld or limited.

2)       Fund must have positive financial performance

a.     As demonstrated in prior year audited financials

b.     As demonstrated through unaudited FYE financials

3)       Fund must be compliant with the Cash Reserve Requirement

4)       Fund must make required dividend contribution to General Fund

5)       Fund must pass City Manager / Finance Director evaluation of known financial anomalies and future threats, as well as scrutiny of capital spending to ensure infrastructure and equipment are being properly funded.  Narrative analysis and findings to be provided.

6)       If unrestricted cash is greater than 150% of the cash reserve requirement, the amount over 150% is eligible for distribution as bonuses or raises; maximum is limited to 7% of payroll; this amount is referred to as the Potential Bonus/Raise, or “PBR”

7)       If unrestricted cash is less than 150% of the cash reserve requirement, then the prior year contribution to unrestricted cash will be used to calculate the PBR.  Up to 10% of the prior year contribution to unrestricted cash is eligible for bonuses or raises; maximum is limited to 7% of payroll; this amount will be the “PBR”.  1, 2

8)       If PBR < 5% of payroll, then PBR is distributed as bonuses

9)       If PBR > 5% of payroll, then PBR is distributed as raises (bonuses for topped-out employees).

10)  Anticipated financial performance must accommodate amount of PBR

 

 

1                    If unrestricted cash was lowered in the past year due to Special Transfers, the amount of the special transfer will be added to the amount of unrestricted cash for the purpose of these calculations

 

2                    If unrestricted cash was lowered due to expenditures for additional customer connections (service expansion generating additional revenue), the amount of the projected annual revenue may be added to the contribution to unrestricted cash for the purpose of this calculation.  This is designed to prevent penalizing employees for proper service expansion.

 

Enterprise Performance Incentive Program

General Fund Financial Performance Evaluation

 

1)       There has been no increase in the ad valorem millage rate

a.     If no millage rate increase, proceed to #2.

b.     If yes, City Commission to evaluate the cause of the rate increase to determine if the performance incentive should be withheld or reduced.

2)       Fund must have positive financial performance

a.        As demonstrated in prior year audited financials

b.     As demonstrated through unaudited FYE financials

3)       Fund must be compliant with the Cash Reserve Requirement

4)       Fund must pass City Manager / Finance Director evaluation of known financial anomalies and future threats, as well as scrutiny of capital spending, to ensure infrastructure and equipment are being properly funded.  Analysis narrative and findings to be provided.

5)       If unrestricted cash is greater than 150% of cash reserve requirement, the amount over the requirement is eligible for distribution as bonuses or raises; maximum is limited to 7% of payroll; this amount is referred to as the Potential Bonus/Raise, or “PBR”

6)       If unrestricted cash is less than 150% of the cash reserve requirement, then the prior year contribution to unrestricted cash will be used to calculate the PBR.  Up to 10% of the prior year contribution to unrestricted cash is eligible for bonuses or raises; maximum is limited to 7% of payroll; this amount will be the “PBR”. 1

7)       If PBR < 5% of payroll, then PBR is distributed as bonuses

8)       If PBR > 5% of payroll, then PBR is distributed as raises (bonuses for topped-out employees)

9)       Anticipated future financial performance must accommodate PBR

10)  The impact of cost-allocation on the financial health of the utilities must be evaluated and reported.  PBR cost allocation from General Fund cannot cause non-compliance with financial policies in the utilities.

 

If the amount of unrestricted cash was lowered in the past year due to Special Transfers, the amount of the special transfer will be added to the amount of unrestricted cash for the purpose of these calculations.

 

 

 

 

 

 

 

FY 2011-2012 Performance Evaluation – General Fund

 

Metrics:

Reserve Policy Required Balance                                                                                     $  4,566,132

Cash on hand as of September 2011 (UNAUDITED, adjusted for carry-forwards)   $  8,068,994

150% of Required Cash Reserve (Cash Threshold)                                                        $  6,849,198

Over (Under) 150% Cash Threshold                                                                                 $  1,219,796

Change in Unrestricted Cash from 2009 to 2010                                                          $     339,648

Change in Unrestricted Cash from 2010 to September 2011                                     $  1,245,571

10% of Change in 2010-11 Unrestricted Cash                                                                $     124,557

2011 Budgeted Payroll                                                                                                       $20,102,953

7% of payroll                                                                                                                         $  1,407,207

5% of payroll                                                                                                                         $  1,005,148

Change in Cash expressed as percent of payroll 2009 to 2010                                            1.69 %

Change in Cash Percent of payroll 2010 to 2011                                                                    6.20 %

Net income for 2009-2010                                                                                                $  1,643,045

Unaudited net income for 2010-2011                                                                             $  1,542,002

 

Performance checklist

 

1.       There has been no millage rate increase in FY 2010-2011.

2.       Fund has positive performance for two years.  The unaudited FY 2010-2011 net income is $1,542,002 and the audited FY 2009-10 net income is $1,643,045.

3.       Fund is compliant with Cash reserve requirement.

4.      

 

 
The fund must pass close scrutiny from the City Manager and Finance Director to evaluate future resource needs.  Some of which are predictability of recurring revenues, reliance on cost recovery through allocations and dividends from the various utilities, deferred capital projects, capital purchases, and renewal and replacement.  Additionally, the City needs to gain control of escalating pension costs which react negatively to the economy and market conditions.  Policies have yet to be developed to establish funding for governmental infrastructure and renewal and replacement.  Currently there is no funding in place and reliance has been placed predominantly upon Fund Balance and Special Transfers.  Looking forward, the City needs to move Fleet operations into its own separate Internal Service Fund.  Debt service associated with the pay back of the loan for Magnolia Townhomes will begin in FY 2012-2013 totaling $979,000 with the final payment being made in FY 2016-2017.  There is continuing concern in regard to the property valuations of the respective CRA’s which currently have debt service and the potential for obligatory funding from the General Fund through the Covenant to Budget and Appropriate.  To date, retiree health care (known as Other Post Employment Benefits, or OPEB) is still on a pay-as-you-go basis and needs to be pre-funded similar to a pension plan in the near future.  As a result of these sustainability concerns, employee raises are not appropriate at this time.  Any PBR should be distributed as a one-time bonus.

5.       Unrestricted cash of $8,068,994 is greater than 150% of the cash reserve requirement of $6,849,198 by $1,219,796.  This amount may not be more than 7% of payroll, or $1,407,207.  $1,219,796 is 6.07% therefore; it is less than 7% of payroll. 

6.       Does not apply since unrestricted cash is greater than 150% of the cash reserve requirement

7.       Does not apply since PBR (6.07%) is >5%

8.      

 

 
PBR is > 5% of payroll, however, #4 above necessitates bonuses in lieu of raises

9.       The fund enjoyed an increase in unrestricted cash of $339,648 in 2009-2010 and $1,219,796 in 2010-2011.  Based upon the best information available at this time, the financial performance of this fund is expected to remain stable, but must be carefully managed due to challenges identified in #4 above.

10.    The impact of a bonus will not affect the utilities as it will be funded 100% from the General Fund.

 

 

Bottom Line:

The fund has positive financial performance; however, sustainability is not sufficiently demonstrated to warrant raises.  Fund performance qualifies these employees for performance incentive to be distributed as a 4% bonus (employee must have met or exceeded expectations on FY 10-11 evaluation).  A merit bonus is also warranted of “up to” 2% for employees who exceed expectations on their FY 11-12 evaluation.

 

 

 

 

 

FY 2011-2012 Performance Evaluation - Electric

 

Metrics:

Reserve Policy Required Balance                                                                                     $   8,974,159

Cash on hand as of September 2011 (UNAUDITED)                                                       $ 12,460,478

150% of Required Cash Reserve (Cash Threshold)                                                        $ 13,461,239

Over (Under) 150% Cash Threshold                                                                                 $  (1,000,760)

Change in Unrestricted Cash from 2009 to 2010                                                          $   1,737,039

Change in Unrestricted Cash from 2010 to September 2011                                     $       217,648

10% of Change in 2010-11 Unrestricted Cash                                                                $         21,765

2011 Budgeted Payroll                                                                                                       $   3,432,230

7% of payroll                                                                                                                         $      240,256

5% of payroll                                                                                                                         $      171,612

Change in Cash expressed as percent of payroll 2009 to 2010                                            50.61%

Change in Cash Percent of payroll 2010 to 2011                                                                      6.34%

Net income for 2009-2010                                                                                                $   8,020,871

Unaudited net income for 2010-2011                                                                             $   3,579,690

 

 

Pay performance checklist

 

1.       There has been no base rate increase in FY 2010-2011 (BPCA and CPI excluded).

2.       Fund has positive performance for two years.  The unaudited FY 2010-2011 net income is $3,579,690 and the audited FY 2009-10 net income is $8,020,871.

3.       Fund is compliant with cash reserve requirement; however, unrestricted cash is less than 150% of the reserve balance by $1,000,760.               

4.       The dividend payment to the General Fund was paid in FY 2009-2010 and 2010-2011.

5.       The contribution to renewal and replacement funds is $1,000,000 per year.  The current balance of $2,436,969 is adequate to cover projected R&R expenditures of $1,160,000 reflected in the 2011-12 capital plan.  Finance is working with the Electric Department to determine the timing and capital requirements of future years. 

6.       Does not apply since unrestricted cash is less than 150% of the reserve requirement. 

7.       Unrestricted cash is less than 150% of the cash reserve requirement.  10% of prior year contribution to unrestricted cash is $21,765, which is less than the 7% of payroll limit of $240,256.  $21,765 is the “Potential Bonus or Raise”, or “PBR”.

8.       If PBR is less than 5% of payroll, then PBR is distributed as bonuses.  PBR is .63413%, necessitating bonuses in lieu of raises.

9.       Does not apply since $21,765 is not > 5% of payroll.

10.    The fund has enjoyed increases in unrestricted cash of $1,737,039 and $217,648 in 2009-2010 and 2010-2011 respectively.  Based upon the best information available at this time, the financial performance of this fund is expected to remain stable and can support the proposed incentive.

 

 

Bottom Line:

Fund has positive financial performance; however, sustainability is not sufficiently demonstrated to warrant raises.  Fund performance qualifies for employee a performance incentive totaling no more than$21,765 (.063% of payroll) to be distributed thru the Skill Based Pay Program.  Note: Electric is the only department on the Skill Based Pay Program.

 

 

 

 

 

 

 

 

 

FY 2011-2012 Performance Evaluation - Gas

 

Metrics:

Reserve Policy Required Balance                                                                                     $   1,243,180

Cash on hand as of September 2011 (UNAUDITED)                                                       $   7,272,693

150% of Required Cash Reserve (Cash Threshold)                                                        $   1,864,770

Over (Under) 150% Cash Threshold                                                                                 $   5,407,923

Change in Unrestricted Cash from 2009 to 2010                                                          $   2,444,764

Change in Unrestricted Cash from 2010 to September 2011                                     $   1,130,519

10% of Change in 2010-11 Unrestricted Cash                                                                $      113,052

2011 Budgeted Payroll                                                                                                       $   1,040,105

7% of payroll                                                                                                                         $        72,807

5% of payroll                                                                                                                         $        52,005

Change in Cash expressed as percent of payroll 2009 to 2010                                            235.05%

Change in Cash Percent of payroll 2010 to 2011                                                                    108.69%

Net income for 2009-2010                                                                                                $   1,645,077

Unaudited net income for 2010-2011                                                                             $   1,265,424

 

Pay performance checklist

 

1.       There has been no base rate increase in FY 2010-2011 (CPI excluded).

2.       Fund has positive performance for two years.  The unaudited FY 2010-2011 net income is $1,265,424 and the audited FY 2009-10 net income is $1,645,077.

3.       Fund is compliant with cash reserve requirement.            

4.       The dividend payment to the General Fund was paid in FY 2009-2010 and 2010-2011.

5.       The Gas utility is adequately funded to meet its capital requirements and the funding of capital projects.  The amount of unrestricted cash was not adversely impacted by special transfers.

6.       Unrestricted cash is greater than 150% of the cash threshold of $1,864,770 by $5,407,923.  The amount over 150% is limited to 7% of payroll which is $72,807.

7.       Unrestricted cash is greater than 150% of the cash reserve requirement.

8.       If PBR is less than 5% of payroll, then PBR is distributed as bonuses.  PBR is 7%.

9.       The PBR of $72,807 is > 5% of payroll, or $52,005, and so the amount may be distributed as raises (topped-out employees will receive a one-time bonus).

10.    The fund has enjoyed increases in unrestricted cash of $2,444,764 and $1,130,519 in 2009-2010 and 2010-2011 respectively.  Based upon the best information available at this time, the financial performance of this fund is expected to remain stable and can support the proposed incentive.

 

Bottom Line:

Fund performance qualifies these employees for a performance incentive to be distributed as a 4% raise (employee must have met or exceeded expectations on FY 10-11 evaluation).  A merit raise is also warranted of “up to” 2% for employees who exceed expectations on their FY 11-12 evaluation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2011-2012 Performance Evaluation - Water

 

Metrics:

Reserve Policy Required Balance                                                                                     $   1,798,190

Cash on hand as of September 2011 (UNAUDITED)                                                       $   3,731,872

150% of Required Cash Reserve (Cash Threshold)                                                        $   2,697,285

Over (Under) 150% Cash Threshold                                                                                 $   1,034,587

Change in Unrestricted Cash from 2009 to 2010                                                          $     (862,154)

Change in Unrestricted Cash from 2010 to September 2011                                     $   1,102,208

10% of Change in 2010-11 Unrestricted Cash                                                                $      110,221

2011 Budgeted Payroll                                                                                                       $   1,857,418

7% of payroll                                                                                                                         $      130,019

5% of payroll                                                                                                                         $        92,871

Change in Cash expressed as percent of payroll 2009 to 2010                                          (46.42%)

Change in Cash Percent of payroll 2010 to 2011                                                                    59.34%

Net loss for 2009-2010                                                                                                       $      (81,803)

Unaudited net income for 2010-2011                                                                             $       88,538

 

 

Pay performance checklist

 

1.        There has not been a base rate increase in FY 2009-2010 and FY 2010-2011 (CPI excluded), with the exception of Royal Highlands and Whitemarsh conservation rates.

2.      Fund has not had positive performance for the past two years.  The unaudited FY 2010-11 net income is  

  $88,538 and the audited FY 2009-10 net loss is $81,803.

3.       Fund is compliant with cash reserve requirement.            

4.       The dividend payment to the General Fund was not paid in FY 2009-2010 due to the loss of $81,803; however based on unaudited net income of $88,538 the FY 2010-2011 dividend contribution will be made.

5.       The water utility has recognized unusual and extraordinary expenses totaling $498,480 for the disposal of the True Temp building which was demolished earlier in the fiscal year, disposal of an abandoned well and certain purchases reclassified from capital assets to operating expenses.  Excluding these adjustments would have resulted in net income of $587,018.  The water utility has reviewed its operations and has made adjustments to produce positive results going forward.  Those adjustments include the elimination of positions and the transfer of vacant positions to the Wastewater utility, adjustments to the useful lives of certain depreciable assets and the amortization of costs related to the consumptive use permit (CUP).  The Water utility has a current balance of $1,499,048 in its renewal & replacement funds which is expected to be adequate to cover fiscal year 2011-12 costs of $372,800. 

6.       Unrestricted cash is greater than 150% of the cash reserve requirement of $2,697,285 by $1,034,587.  The amount over 150% is limited to 7% of payroll which is $130,019.

7.       Unrestricted cash is greater than 150% of the cash reserve requirement.

8.       If PBR is less than 5% of payroll, then PBR is distributed as bonuses.  PBR is 7%.

9.       The PBR of $130,019 is > 5% of payroll, or $92,871, however the fund did not experience positive financial performance in FY 09-10, therefore; the amount should be distributed as bonuses.

10.    The fund has had changes in unrestricted cash of $(862,154) and $1,102,208 in 2009-2010 and 2010-2011 respectively.  Based upon the best information available at this time, the financial performance of this fund is expected to remain stable and can stable and can support the proposed incentive. 

 

 

Bottom Line:

Fund performance qualifies these employees for a performance incentive to be distributed as a 4% bonus (employee must have met or exceeded expectations on FY 10-11 evaluation).  A merit bonus is also warranted of “up to” 2% for employees who exceed expectations on their FY 11-12 evaluation.

 

 

 

 

 

FY 2011-2012 Performance Evaluation - Wastewater

 

Metrics:

Reserve Policy Required Balance                                                                                     $   2,442,209

Cash on hand as of September 2011 (UNAUDITED)                                                       $   2,690,319

150% of Required Cash Reserve (Cash Threshold)                                                        $   3,663,314

Over (Under) 150% Cash Threshold                                                                                 $     (972,995)

Change in Unrestricted Cash from 2009 to 2010                                                          $       353,288

Change in Unrestricted Cash from 2010 to September 2011                                     $       128,450

10% of Change in 2010-11 Unrestricted Cash                                                                $         12,845

2011 Budgeted Payroll                                                                                                       $   2,262,759

7% of payroll                                                                                                                         $      158,393

5% of payroll                                                                                                                         $      113,138

Change in Cash expressed as percent of payroll 2009 to 2010                                            15.61%

Change in Cash Percent of payroll 2010 to 2011                                                                      5.68%

Net income for 2009-2010                                                                                                $      849,658

Unaudited net income for 2010-2011                                                                             $   1,088,048

 

Pay performance checklist

 

1.       There has been no base rate increase in FY 2010-2011 (CPI excluded).

2.       Fund has positive performance for two years.  The unaudited FY 2010-2011 net income is $1,088,048 and the   

        audited FY 2009-10 net income is $849,658.

3.       Fund is compliant with cash reserve requirement.            

4.       The dividend payment to the General Fund was paid in FY 2009-2010 and 2010-2011.

5.       The Wastewater Utility has a balance of $2,936,237 in renewal and replacement at year end which is expected to be adequate to fund capital requirements of $1,583,000 in the Fiscal Year 2011-12 budget.

6.       Unrestricted cash is less than 150% of the reserve requirement. 

7.       Unrestricted cash is less than 150% of the cash reserve requirement.  10% of prior year contribution to unrestricted cash is $12,845, the use of which is limited to 7% of payroll, or $158,393.  This is the “Potential Bonus or Raise”, or “PBR”.

8.       If PBR is less than 5% of payroll, then PBR is distributed as bonuses.  PBR is .56766%.

9.       The PBR of $12,845 is not > 5% of payroll, or $113,138.

10.    The fund has enjoyed increases in unrestricted cash of $353,288 and $128,450 in 2009-2010 and 2010-2011 respectively.  Based upon the best information available at this time, the financial performance of this fund is expected to remain stable and can support the proposed incentive.

 

Bottom Line:

The fund has positive financial performance; however, sustainability is not sufficiently demonstrated to warrant raises.  Fund performance qualifies these employees for performance incentive to be distributed as a .56% bonus (employee must have met or exceeded expectations on FY 10-11 evaluation). 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2011-2012 Performance Evaluation - Communications

 

Metrics:

Reserve Policy Required Balance                                                                                     $       333,495

Cash on hand as of September 2011 (UNAUDITED)                                                       $       795,279

150% of Required Cash Reserve (Cash Threshold)                                                        $       500,243

Over (Under) 150% Cash Threshold                                                                                 $       295,036

Change in Unrestricted Cash from 2009 to 2010                                                          $         88,643

Change in Unrestricted Cash from 2010 to September 2011                                     $         83,236

10% of Change in 2010-11 Unrestricted Cash                                                                $           8,324

2011 Budgeted Payroll                                                                                                       $       326,994

7% of payroll                                                                                                                         $         22,890

5% of payroll                                                                                                                         $         16,350

Change in Cash expressed as percent of payroll 2009 to 2010                                               27.11%

Change in Cash Percent of payroll 2010 to 2011                                                                       25.45%

Net income for 2009-2010                                                                                                $       416,445

Unaudited net income for 2010-2011                                                                             $       208,386

 

 

 

Pay performance checklist

 

1.       There has been no base rate increase in FY 2010-2011 (CPI excluded).

2.       Fund has positive performance for two years.  The unaudited FY 2010-2011 net income is $208,386 and the audited FY 2009-10 net income is $416,445.

3.       Fund is compliant with cash reserve requirement.            

4.       The cost allocation payment to the General Fund was paid in FY 2009-2010 and 2010-2011.

5.       The Communications utility requires close review due to their debt service and capital requirements related their network infrastructure.  With this in mind, close scrutiny is required before implementing any increases in operating costs.  The Communications utility currently has $329,324 available in renewal and replacement cash which is expected to be adequate to fund capital renewal and replacement costs of $210,000 included in the fiscal year 2011-12 budget.

6.       Unrestricted cash is greater than 150% of the cash threshold of $500,243 by $295,036.  The amount over 150% is limited to 7% of payroll which is $22,890.

7.       Unrestricted cash is greater than 150% of the cash reserve requirement.

8.       If PBR is less than 5% of payroll, then PBR is distributed as bonuses.  PBR is 7%.

9.       The PBR of $22,890 is > 5% of payroll, or $16,350, and so the amount may be distributed as raises (topped-out employees will receive a one-time bonus).

10.    The fund has enjoyed increases in unrestricted cash of $88,643 and $83,236 in 2009-2010 and 2010-2011 respectively.  Based upon the best information available at this time, the financial performance of this fund is expected to remain stable and can support the proposed incentive.

 

Bottom Line:

Fund performance qualifies these employees for a performance incentive to be distributed as a 4% raise (employee must have met or exceeded expectations on FY 10-11 evaluation).  A merit raise is also warranted of “up to” 2% for employees who exceed expectations on their FY 11-12 evaluation.

 

 

 

 

 

 

 

 

 

 

 

FY 2011-2012 Performance Evaluation – Solid Waste

 

Metrics:

Reserve Policy Required Balance                                                                                     $      904,448

Cash on hand as of September 2011 (UNAUDITED)                                                       $   1,482,746

150% of Required Cash Reserve (Cash Threshold)                                                        $   1,356,672

Over (Under) 150% Cash Threshold                                                                                 $      126,074

Change in Unrestricted Cash from 2009 to 2010                                                          $      579,036

Change in Unrestricted Cash from 2010 to September 2011                                     $      273,738

10% of Change in 2010-11 Unrestricted Cash                                                                $        27,374

2011 Budgeted Payroll                                                                                                       $      873,559

7% of payroll                                                                                                                         $        61,149

5% of payroll                                                                                                                         $        43,678

Change in Cash expressed as percent of payroll 2009 to 2010                                            66.28%

Change in Cash Percent of payroll 2010 to 2011                                                                    31.34%

Net income for 2009-2010                                                                                                $      581,569

Unaudited net income for 2010-2011                                                                             $      410,414

 

Pay performance checklist

 

1.       There has been no base rate increase in FY 2010-2011 (CPI excluded).

2.       Fund has positive performance for two years.  The unaudited FY 2010-2011 net income is $410,414 and the audited FY 2009-10 net income is $581,569.

3.       Fund is compliant with cash reserve requirement.

4.       The dividend payment to the General Fund was paid in FY 2009-2010 and 2010-2011.

5.       The utility is adequately funded to meet the needs of renewal and replacement requirements at this time.

6.       Unrestricted cash is greater than 150% of the cash threshold of $1,356,672 by $126,074.  The amount over 150% is limited to 7% of payroll which is $61,149.

7.       Unrestricted cash is greater than 150% of the cash reserve requirement.

8.       If PBR is less than 5% of payroll, then PBR is distributed as bonuses.  PBR is 7%.

9.       The PBR of $61,149 is > 5% of payroll, or $43,678, and so the amount may be distributed as raises (topped-out employees will receive a one-time bonus).

10.    The fund has enjoyed increases in unrestricted cash of $579,036 and $273,738 in 2009-2010 and 2010-2011 respectively.  Based upon the best information available at this time, the financial performance of this fund is expected to remain stable and can stable and can support the proposed incentive.

 

Bottom Line:

Fund performance qualifies these employees for a performance incentive to be distributed as a 4% raise (employee must have met or exceeded expectations on FY 10-11 evaluation).  A merit raise is also warranted of “up to” 2% for employees who exceed expectations on their FY 11-12 evaluation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2011-2012 Performance Evaluation – Stormwater

 

Metrics:

Reserve Policy Required Balance                                                                                     $      385,250

Cash on hand as of September 2011 (UNAUDITED)                                                       $   1,992,563

150% of Required Cash Reserve (Cash Threshold)                                                        $       577,875

Over (Under) 150% Cash Threshold                                                                                 $   1,414,688

Change in Unrestricted Cash from 2009 to 2010                                                          $       356,322

Change in Unrestricted Cash from 2010 to September 2011                                     $       369,893

10% of Change in 2010-11 Unrestricted Cash                                                                $         36,989

2011 Budgeted Payroll                                                                                                       $       158,688

7% of payroll                                                                                                                         $         11,108

5% of payroll                                                                                                                         $           7,934

Change in Cash expressed as percent of payroll 2009 to 2010                                            224.54%

Change in Cash Percent of payroll 2010 to 2011                                                                    233.09%

Net income for 2009-2010                                                                                                $      197,705

Unaudited net income for 2010-2011                                                                             $      239,869

 

Pay performance checklist

 

1.       There has been no base rate increase in FY 2010-2011.

2.       Fund has positive performance for two years.  The unaudited FY 2010-2011 net income is $239,8689 and the audited FY 2009-10 net income is $197,705.

3.       Fund is compliant with cash reserve requirement.

4.       The cost allocation to the General Fund was paid in FY 2009-2010 and 2010-2011.

5.       The Stormwater utility was converted to an enterprise fund in FY 2010-2011.  The fund in its current financial position meets the city’s cash reserve policy when applied. With this in mind this fund meets the requirements for a “Potential Bonus or Raise”, or “PBR”.

6.       Unrestricted cash is greater than 150% of the cash threshold of $577,875 by $1,414,688.  The amount over 150% is limited to 7% of payroll which is $11,108.

7.       Unrestricted cash is greater than 150% of the cash reserve requirement.

8.       If PBR is less than 5% of payroll, then PBR is distributed as bonuses.  PBR is 7%.

9.       The PBR of $11,108 is > 5% of payroll, or $7,934, and so the amount may be distributed as raises (topped-out employees will receive a one-time bonus).

10.    The fund has enjoyed increases in unrestricted cash of $356,322 and $369,893 in 2009-2010 and 2010-2011 respectively.  Based upon the best information available at this time, the financial performance of this fund is expected to remain stable and can the proposed incentive.

 

Bottom Line:

Fund performance qualifies these employees for a performance incentive to be distributed as a 4% raise (employee must have met or exceeded expectations on FY 10-11 evaluation).  A merit raise is also warranted of “up to” 2% for employees who exceed expectations on their FY 11-12 evaluation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2011-2012 Performance Evaluation – Building Permits

 

Metrics:

Reserve Policy Required Balance                                                                                     $        82,445

Cash on hand as of September 2011 (UNAUDITED)                                                       $     (117,662)

150% of Required Cash Reserve (Cash Threshold)                                                        $      123,668

Over (Under) 150% Cash Threshold                                                                                 $     (241,329)

Change in Unrestricted Cash from 2009 to 2010                                                          $            -0-

Change in Unrestricted Cash from 2010 to September 2011                                     $            -0-

10% of Change in 2010-11 Unrestricted Cash                                                                $            -0-

2011 Budgeted Payroll                                                                                                       $      324,193

7% of payroll                                                                                                                         $        22,694

5% of payroll                                                                                                                         $        16,210

Change in Cash expressed as percent of payroll 2009 to 2010                                                     0%

Change in Cash Percent of payroll 2010 to 2011                                                                             0%

Net income for2009-2010                                                                                                 $        (1,284)

Unaudited net loss for 2010-2011                                                                                   $      (67,174)

 

 

Pay performance checklist

 

1.       There has been no base rate increase in FY 2010-2011.

2.       Fund has not had positive performance for two years.  The unaudited FY 2010-2011 net loss is $67,184 and the audited FY 2009-10 net loss is $1,284.

3.       Fund is not compliant with the cash reserve requirement.              

4.       The cost allocation payment to the General Fund was paid in FY 2009-2010 and 2010-2011. 

5.       The cash reserve requirement has not been met according to the terms of the cash reserve policy. Raises and bonuses are not sustainable.

6.       Unrestricted cash is less than 150% of the cash reserve requirement. 

7.       Unrestricted cash is less than 150% of the cash reserve requirement. 

8.       There is no PBR.

9.       There is no PBR.

10.    Based upon the best information available at this time, the financial performance of this fund cannot support an incentive.

 

Bottom Line:

The fund does not qualify for raises or bonuses.  Currently, building division staffing and other expenses are at bare minimums to sustain a viable operation.  The adopted fee schedule is the lowest in Lake County and provides insufficient revenues to cover costs.  This ensures employees will be ineligible to receive performance incentives under this program.  The City Commission should consider treating the Building Division the same as General Fund employees (given that the General Fund must underwrite Building Division losses anyway), or adopt a fee schedule that appropriate covers operational costs.  Staff will be prepared to discuss.