[Music] Afternoon everybody. Uh welcome to the work session where we will be covering a lot of compensation and human resource issues. I am going to uh well, first off, Jane Harrison is excused uh and on the road and I believe Mayor Pro Tim Fort is walking in making a grand entrance. Um so I'm going to turn it over to uh Charnell Jones, human resources to present the first uh item. Good afternoon, mayor and city council. Um, we are here to provide a update on benefits and compensation for FY26. In today's agenda, we will cover total rewards. Um, we will also provide an update for employee benefits. The classification and comp compensation study will give an update employee compensation and then talk about next steps. We understand and know that our employees are our greatest asset. And so it's important that we provide a competitive total rewards package that helps us to be able to attract and retain employees. So when we think about total rewards, it's just not paying benefits, but it also includes our employee development, employee recognition, and also work life balance. For today's purposes, we will be focusing on employee compensation, employee benefits, and also an aspect of employee development. So, let's get started with employee benefits. Our medical benefits are our largest expense. Um, if you include the city's portion as well as the employee portion, it is roughly over 58.7 million. And that's just for active employees. Our thirdparty claims administrator provides medical management services and pays our medical, dental, and pharmacy prescription FLA claims. The city is self-funded and so we are responsible for all claims up to that $375,000. Medical benefits, however, are on the rise and are expected to rise between 7 and 7.9% in 2025. But according to understand service and innovate insurance services which is USI the city's broker the city the city on average is trending below that by.9%. And this is contributed to the enhancements in our program design our plan design and also offering additional benefits and wellness offerings which has guided our multi-year health been guided by our multi-year health and benefit strategy. So, I introduced this last year and so this was implemented back in the fall of 2022. And so, if you look on here, this is our multi-year health benefit strategy. All of the check marks shows the things that we implemented thus far in FY25. We will also be launching a benefit survey this summer and also looking at doing a request for proposal for our broker. So for FY 26 and 27, we will focus on continuing to look at our program design, how to enhance plan A, also looking at our employee health center, reviewing our employee premiums, and also our wellness incentives. So our goals as part of the um health benefit strategy is to make sure that we meet the diverse needs of our employees, that we align with best practices, and that we provide financially sustainable benefits. So for FY25, you can see all the things that we implemented. We enhanced our program designs for medical, dental, as well as wellness. We also added a host of benefits and incentives such as leave. Um, we added a part-time benefit 30 package. We added pet insurance, the North Carolina 529 savings plan. We also implemented the continuous service incentive and we did a parking incentive as well for our downtown employees. Last year, there was no increase to employee premiums. So, what are we proposing for FY26, I mean for the 26 calendar year? Um there will be no changes in regards to our dental plan and our vision, but as always, we're continuing to look for ways to enhance plan A to differentiate that from plan B. We will also um have no changes as it relates to our wellness assessment um annual wellness assessment that will stay the same as the previous year. no premium increases for employees for medical, dental, or vision or our voluntary benefits. We are proposing one plan change which will be our tuition reimbursement assistance program. We are wanting to increase that reimbursement and also expand that to cover workshops and certification programs as well. As you know that is a policy change so that we'll have to go to civil service commission and then we'll bring the policy back to you for final review. So what we all been waiting for classification and compensation study update. Our goal with this comprehensive classification and compensation study update has been to make sure that we have classifications that accurately reflect the work that our employees do and that we also have pay structures that are competitive in the market to help us to be able to attract and retain employees. Back in 2024, we kicked off this comprehensive classification and compensation study and we're almost not quite um at the point of implementation for FY26, beginning to phase that in. So, without further ado, I do have our consultants here today to give us an update on where we are with the classification compensation study from Seagull. And I will bring up Patrick Bracken to kick that off. [Music] Good afternoon. My name is Patrick Bracken. I'm a senior vice president with Seagull. Um for those that don't know, Seagull is a national human resources consulting firm. Um we've been uh privileged to be partnering with the city over the last about 14 months now on the comprehensive classification and compensation study. And uh my aim here today is to brief you on partly where we've been um what we found and what the next steps are. For today's agenda, we have a couple items. Um first, we want to orient you to the overall project plan. Then talk with you in a little more detail about the job classification structure. um our market assessment methodology which is the compensation study um the findings that come from that um compensation analysis uh the salary structure design and the guiding principles around those and then close out with next steps. So this project um in totality um was um multifased. We um put together this graphic just to give you a sense of what the path has looked like over the last 14 months or so, but roughly speaking um at the beginning of the engagement, we were um in the spring of 2024, we were on site and meeting with um Raleigh uh project team and stakeholders to scope out some of the key project parameters and um also to kick off what we call the job description questionnaire process, the JDQ process. Um this was a process that was um meant to solicit the feedback from employees directly as to the job functions they perform and help gain stronger insights into the current job classification structure that the city maintains and use the JDQ information to help um reform or improve um the way the classification structure operates and um the way that jobs are both described as well as the um knowledge and skills and abilities that are used to perform those. We then use that information to help us launch into the competition market assessment phase. This um entailed, and I have a couple more slides on this in detail, but a custom survey process um that Seagull conducted and then used that information to help inform our findings and recommendations on uh improvements or suggestions for improvements to the uh compensation structures that the city currently um maintains. So, a little bit more on the job classification structure process. Um as I mentioned earlier um employees were invited to participate in the process um because of the um size of the project and um the um efficiencies associated with the JDQs um what were called job ambassadors or JDQ ambassadors were identified through a collaborative process with um human resources as well as department leadership. um pleased to report that about 95% of the JDQs were completed which is a very strong response rate um and really gave us a good foundation from employees directly as to what is required for their jobs and helped us u um determine what job functions were um appropriate and currently described and which opportunities existed for either refinements or improvements to the classification structure. Overall, our current classification analysis suggested that the city would benefit from an expansion of the number of classifications it currently has, which is approximately 350 to about 485 job classifications. And the primary goal of the expansion of these is to help better define and more accurately define the types and level of work that are actually being performed by employees. It also better aligns with the what we would typically see in terms of a total number of classifications for an employer of this size. Additionally, we identified what we call job families. There are 37 of these that we um helped work in conjunction with the human resources department. These job families are really helpful for organizations to be able to group similarly situated jobs and it can be a useful grouping mechanism for employers. Once we concluded the classification analysis, we then moved on to the compensation study portion which entailed five primary steps. The first step is what we call identification of the benchmark jobs and the comparable peer employers. The identification of the benchmark jobs is an important point and I have a slide on this next so I won't spend too much time on this slide on it. But in conjunction with that, as well as identifying where Raleigh employees are both recruited from and where Raleigh loses employees to, helps serve some of the foundation for the identification of which peers would be surveyed as part of our custom survey process. Once we had those parameters nailed down, we then worked with the city to design a custom survey document that then we uh seagull distributed to the peer employers and we use that information from the peer employers to help inform the market comparisons. Once we had that data in hand, that gave us a sense of how competitive or non-competitive the current pay structures are for the city and that helped inform our options for recommendation um development. A little bit more on the selection of benchmark jobs. When an organization does a compensation study, especially for an an organization of this size, it's not practical or feasible to survey every single job classification. So what is um considered or called benchmark jobs are identified. There's a process that governs the benchmark identification process and we tried to provide a graphic here to help um you all understand what framework we apply to this but the overall goal here is representativeness. So with the 101 benchmark jobs that were identified and there was feedback both from the various working groups here at Raleigh as well as departmental leadership on those classifications. The goal is that those um 101 benchmark jobs can be used as a representative sample to infer infer to the entire workforce at large. So a couple of the key parameters are one, we want to make sure that the benchmark jobs are reflective of the workforce composition. So when we think about that, we think about things like titling groups. Um so for example, analyst, specialist assistant manager etc. That we want to make sure that we're capturing the broad array of job families. So these are things like administrative support, uh public safety operations legal etc. We want to also make sure that our um benchmark jobs are statistically representative of the overall workforce. And we also lastly want to make sure that for the benchmark jobs that we're picking jobs that we think are likely to be found at the other peer employers. So said another way, we don't want to pick an overly specific job that's either a hybrid position or a uniquely defined position at Raleigh if we don't think that that job is going to be similarly um found among a peer employer. I mentioned the peer agencies or peer employers. This is a list of the comparator organizations. Contractually we were um um agreed to up to 12 organizations. You can see that we have organizations here um both from the state of North Carolina as well as outside of um we were pleased to report that of the 12 peer employers um only one the town of Apex um declined to participate. The other ones um are they're color-coded um in such a way that black meant that the peer employer um did not participate directly but part u pointed us to source information either directly provided that to us or information that they have readily available for seagull then to data mine and complete on their behalf. Uh the green are survey responses that we receive directly from the peer employers. Once we receive this information, we work with them very closely to uh validate and clean their information. This includes um various roundroins of emails and phone calls with them to clarify information, clarify job match information um or anything else that we needed to um ensure that the data was of the highest quality. [Music] Um we have a slide here on what we call external comparisons and this is part educational um and part um practical in terms of um some of the other data elements that we used. Um first just wanted to comment a little bit on what we call the job match process. Um, when ever conducting a competition study, it's really important that you, as in an effort to get an applesto apples comparison, you not just focus on job title comparisons, meaning a benchmark job at Raleigh and that corresponding job title, um, to not just look for that job title at a peer employer because job titles can sometimes be misleading or not tell the whole picture. So, as part of our process, we in conjunction with the job title also develop what we call job summaries. These are three to four sentence um paragraphs that also include minimum job requirements in terms of education and experience. And we use that to determine whether or not there is a comparable job at a pure employer. You'll notice um in the text here that Seagull uses a 75% rule. What we mean by that is that um it's very uncommon to find a job that is 100% identical between organizations. So what we focus on is that if at least there's a 75% overlap in terms of duties and responsibilities, we consider that worthy for consideration as a job match. It doesn't necessarily mean that it will make the final cut, but as a starting point, we draw that as a minimum floor. And then we work with an organization to if we need to drill down and ensure that we have a fuller understanding of the position before we then finalize that as a job match or determine that it's not a comparable job match. The second piece of information on the slide here relates to the published survey data. You'll see a table on the next page that talks about this data cut and what this is meant to represent is private sector information. You might ask um why you know can't seagull survey private sector employers directly. um we've tried but in the practicality of things they will not participate usually in a part in a compensation survey especially for a um governmental employer where their information could be subject to FOIA or releasable in any way. So what they do do is participate in large survey exercises and those firms um conduct those usually nationwide surveys and then can anonymize their respon excuse me anonymize their responses. Um, we purchase Seagull purchases licenses to access um, three of the largest firms that are out there that do that work. They're listed here. Economic Research Institute, Pay Factors, and Comp Analyst. And this information was referenced as part of our study to represent private sector compensation levels. And then lastly, just as a technical note, you'll have noticed on the previous slide where I highlighted the peer employers. Some of those peers were located out of state and where we do have out of state employers, Seagull um adjusts for geographic differences and the cost of labor. We have a economic and econometric tool that we um also purchase a license to that enables us to make um geographic differences between varying regions and that helps us normalize again that applesto apples concept when doing competition benchmarking. So with regard to some findings, um this is the first table you'll see with some data on the comparison of Raleigh's compensation structures to the market average. Um just for um education purposes, I'll I'll take the first row of the table um just to explain the the math behind that because then that um rubric applies for the next couple slides when you see compensation data. So when we talk about um first the custom survey data sources that is the peer employer list that we saw the 12 11 I guess um excluding Apex um public sector peer employers that we surveyed. Then when you trace that uh row across you'll see at the top we excuse me we call base pay range midpoint. This is the published pay range for the benchmark jobs, meaning the published minimum, midpoint, and maximum associated with that position. So, just as a point of clarity, these are not actual salaries. These are the pay ranges that are associated with the benchmark jobs. And then the ratios or the percentages that you see on the um row, that is the city of Raleigh's pay range, minimum, midpoint, and maximum compared to the market average. So to take the example of the top left um um what is that square I guess the 85% um what that means is that at the pay range minimum for the benchmark jobs compared to the custom survey data sources Raleigh's pay range minimums are 85% of the market average payrange minimums. Similarly, taking that same logic and extending it across the row, at the midpoint, Raleigh's pay range midpoints are 89% of the market average and at the maximum 93% of the market average. Working one row down at the published data source level, this is the private sector data sources, it's the same um math, meaning Raleigh's pay ranges compared to the um respective market segment. So in this case is Raleigh compared to the private sector 92% at the minimum 97% at the midpoint 98% at the maximum and then taking a blend of those two markets which is Seagull's um methodological approach which is the overall market average you can see that across the entire pay range meaning the minimum midpoint maximum Raleigh's pay range minimums are 86% of the market average minimum 91% of the market average midpoint and 93% of the market average maximum. And then the last point to make on the color co color coding is that anything that is in red is below market. Uh seagull's definition of below market is uh below 95% of the market average. Anything that's between 95 and 105% of the market average is in the market competitive corridor. So that would be considered market competitive. and anything over 105% is denoted in blue and is above market. So with that understanding um with us on how SEAL reports compensation data findings, we then drill down to the um the same data but now arrayed by the peer organizations. So what this table is attempting to show is Raleigh compared to the respective peers. And it's the same ratio math, meaning that the percentages you see are Raleigh as a percent of the market averages. Um and you can see here that um again in red would be below market, black is at market, and blue is above market. Um, and it almost doesn't matter which pier you look at, but you can see that there's a fairly resounding below market finding regardless of which pier you look at. To talk a little bit more about the market data findings, we also did some analytics around what we call pay range width. The pay range width is the distance from the pay range minimum to the pay range maximum. in a percentage calculation. Um what we are um what we found here is that when we looked at the benchmark jobs, the city of Raleigh's average pay range width is 70%. So that means 70% wide from minimum to maximum. And when we look at the market data, the market data is suggesting a 57% market range width. Um, this in and of itself isn't necessarily a problem except that it just helps us understand how the current structures are designed and if there was any opportunities for either alignment with best practices on pay range width or in consultation with the city on the suggested revisions to the current compensation structures. uh just keeping in mind the current range width and if there were opportunities for us to address that or fine-tune that in our um revised structures with regard to salary structure design. This is a phase that we are currently in with the city. Um but for today's purposes, we wanted to provide you with some of the guiding principles that have been governing our work. Um firstly, we wanted to ensure that all of the pay grades and the pay ranges that we are establishing are both internally equitable as well as externally competitive. That's really important for a lot of organizations because you want to ensure that your pay structures are in line with market conditions and that it's they are adequately designed such that you have effective recruiting and retention strategies. But that also internally equitable suggests that there is a an internal hierarchy that makes sense for the organization and that correctly and appropriately identifies the internal worth of jobs to an organization. Having these principles in place can help for both u an career progression so explaining to the workforce um the logic behind how a pay structure is set up and how it operates. It can also ensure that there is an appropriate distance between supervisors and subordinates to prevent or alleviate pay compression. And lastly, um, as I said before, it can also help with external competitiveness. Another principle that we wanted to make sure to keep an eye on was that the administration of the pay plan was um, as easy as possible. So this meant um sort of using the KISS principle, the keep it simple principle because we wanted to make sure that we can explain the pay structure to staff and that managers in day-to-day operation of the organization can also explain it to their team members. And then lastly, it was been uh was important for Raleigh to have any work on the salary structure also align with the total compensation philosophy statement that it's been working very very diligently on. Um and this statement document identifies things such as the labor market and market target pay administration principles. So to close out with next steps, um as I mentioned, we're in the process of finalizing the proposed salary structures with the city of Raleigh's project team. Um Seagull and the city will be continuing to um review those analyses as well as developing some cost implementation scenarios for the city's review and um um um an analysis. And then um we also are working on um we identified some some jobs where FLSA is the Fair Labor Standards Act uh exempt non-exempt um designations where we think the city might want to consider some changes there. So we are working that through right now. Um and lastly, Seagull is in the process of drafting uh job descriptions for all of the 485 newly um well, in some cases newly, but in other cases existing proposed classification titles. Thank you. So, let's get into employee compensation before you move. Can I ask a quick question? Sure. May I ask a quick question before you move? Um, when do you anticipate having a final report to Is that what you're gonna say? Okay, my bad. I know we're anxious. I know we're anxious. But let's get into employee compensation. But before we do, for FY26, let's talk about uh FY25, all the things that we implemented. So, for public safety, um, we uh did market adjustments for FY25, the annual pay increase, and the public safety education incentive was roughly around 11.1 million. um for all other employees the market adjustment the annual pay increases um rough was around roughly 12 million. Our incentives that we implemented was the award for service and the new continuous service incentive which was around 3.5 million. And so to date we have um implemented over 26.6 million of investment in our workforce. So under consideration for FY26 um you heard the consultant say that on on average our annual our pay salaries are below market and so our salary range minimums are below on average 14% our midpoint is below 9% on average and our maximum of our salary ranges are below on average 7%. So based on that information we know that our salary structures will be adjusted. So for implementation strategies, we know that we will have to bring employees up to the minimum. We will also have to consider market adjustments as well whether or not annual pay increases um how we go about that process. So putting all of that in perspective, we know a 1% increase is roughly around 3.75 million for all employees. 5% is 18.75 million for all full-time employees. That goes up to 15% 56.25 25 million. And so if we think about on average of us being between 9% and 14% below average, that is roughly around 33.76 million to 52.5 million that we all have to think about our approach to that. And that's not including any other benefit changes. So from the previous slide um we will be analyzing all of the feedback that seagull will bring forward to us from the data from the class and comp study and also implementation approaches as well as our annual pay increase. And so we will be bringing back in April and May recommendations to council as part of the budget process. So next steps is to review our final results from the consultant and the implementation approach for the classification and compensation study. We will also meet and review that approach with our designated stakeholders and we will return in April councilman with final results. And the one last note is that I do want to bring forward because I am very glad and about my talent acquisition team of us really working hard with departments on recruitment strategies to decrease our vacancy rate. And as you can see back in March of 2022, we're around 14.9% and that includes full-time and part-time employees. And as of March the 7th, we were at 10.7%. So, I just want to say thank you to my talent acquisition team, also my classification and compensation team for all the hard work they've done so far with things. Um, also our benefits and wellness. Really, I'm just proud of my whole darn team, I tell you. Um, for all of the work that they've done and really make bringing forward programs and really helping to make um it better for the city and for our employees. So, now we'll go to questions that you may have. Questions? Um, council Jones, I'll start off with the vacancy rate. Um, can you bring that slide back up? And first, thank you. Thank you so much for your work on this. Um, I would like to cl I'd like some clarification because I know we especially within the last year, we've been talking about vacancy rates a lot and it's dropped a lot. So, congratulations. That's phenomenal. How many of that was removing um extended vacancies? How much percentage-wise was that of just eliminating uh long-term vacancies? As of today, we have not permanently eliminated any long-term vacancies as of yet. Um I just got really short. I know there are that pro they're going through that process with the budget process, but that has not been finalized. I think that will come forward with the budget process, the position. So then confirming that this is hiring the staff to fill those vacancies. That's what this number is reflecting. This number reflects um based on all of our full-time and part-time permanent part-time positions that we have that are currently budgeted and that are actual classifications and the vacancies that we have that's taken that we only have I have my notes because I knew I would get asked about it. roughly around 456 vacancies um full-time and 36 permanent part-time um vacancies. Can you tell me at the highest point at that 15.1% how many vacancies that was? I can't tell you that, but I can get that data back to you. I can give you the breakdown for each of the years if you're looking for. Yes. Yes, please. Okay. Um and then another question that I had was I know that we had refer referenced a former compensation study that we've done a while ago. Did we in the past take any of those recommendations? Did we I don't remember if we actually went with that study uh I think it was back in 2017. Um and then did what recommendations did we follow or not? I was here back in 2017 when we went through that process and um we did uh have a phased approach um to that process in regards to implementation and that was implemented I want to say in 2018. So you did implement some of the recommendations from that study. Correct. Yes. From that study. Yes. But it was a phased approach because we were not able to do all of it at one time. Okay. All right. So it was implemented in two years 2018 and 2019. And the reason being um there had not been a comprehensive study in 13 years. And so um we led with um getting folks to the minimum public safety and then the next year we phased in the other components of it. If I I'm sorry just on this point real quick if I may. Did we also back out some of those changes as far as the I remember the step process? Oh yeah. We reconfigured um for public safety. They wanted steps um to be able to see what the degree of um certainty of what each step in the progression of their employment would look like. However, after a couple of years in in those steps, there was a request to change to open ranges. Thank you. You done? Thank you council. Almost a question for you Sean Aller Patatrick. When you look at the salary survey and compare it to other jurisdictions, how is benefits weighed? Uh because I'm assuming that the salary and benefits is the complete package. Was this just salary or you also there's any weight toward the benefits because I can imagine it varies from jurisdiction to jurisdiction. This was purely salary. Okay. And is part of salary surveys? Are the benefits part of that or it's something separate? I'm just trying to understand. I know it's comparing apples and oranges, but you know, certain positions have benefits that make, you know, there's a there's a tradeoff um in terms of someone considering a job. It's both salary but also benefits. So, I'm just trying to understand how that is factored in. It it's a great question. So in this survey, Charnell said it was just base pay comparisons. Um there are methodologies out there that do total compensation studies that typically will look at base pay, look at health premium generally from the employer contribution perspective as well as retirement contributions and then oftent times include paid leave comparisons as well. Go ahead. Hi, this one's gonna be for Charnell, I think, or the manager. Um, last in last year's budget, we did the penny for pay study. That was one of the things we included in last year's budget. So, that was like 11 or I see like signaling to Saudia. Maybe it's a question for Saudia. Um, so that was like 11 million. So, we've kind of got a buffer built in. So, does that mean we have $22 million? We have last year's 11.8 and this year's 11 upcoming 11.8 or so you do so good afternoon Sadia Satar from budget and management services. So remember that the general fund at the end of the year everything goes into one pot and that's where we combine everything together and at the end of the year you see what are called capital reserves. So you don't have anything from last year you have this year. So essentially, as I said in the city council retreat, you have merits built into our base which is um around 9ish million and then you have the 11.4 million which is the penny for comp class and compensation. Yes. So we're looking at just 20ish 21ish million right there. Okay. So in this range that we were just quoted this like 33 to 52 million we have about we have about 20ish 20ish. Yes ma'am. Okay. But that's to be clear that's if we don't do merit increases. So we have only the penny that we committed to implementation for the comp study. So don't get confused and think that there there is a bucket of 20 million. We've got the nine that would cover the traditional merit increases that we do every year. Got it. Okay. Um I have a couple of questions. One this to state the obvious is a big number. Absolutely. And I know you were saying 13 years ago and then we did this other salary study six years ago. So one of the themes I've heard a lot just even the you know since being elected about three months ago is this trying to smooth so that we don't have these convulsive right sort of uh surprises of you need to invest 50 million suddenly because your pay has gotten behind. So just could you speak a little bit to that about getting here knowing we've come through COVID and a high inflationary environment but you know is the thought that we're going to try to do much more frequent salary studies although this and it was a a very good explanation of a lot of work uh from seagull. So clearly even this study took 18 months but is the idea to try and avert these sorts of cataclysmic you know requests for money by doing more frequent studies? Yes and we will have to also make sure that we maintain the salary structures that we have um and that requires us to continue to look at doing market adjustments and adjusting our ranges as appropriate um where that has not necessarily been the case in the past. And so our approach to um maintaining the system has to be different um in order for us to continue to be competitive in the market. Yep. And then um just this is just more of a minor technical point, but it was a little counterintuitive me uh intuitive that we compared less favorably to public sector comps than private sector. Yeah, that's a good that's a good point. That does jump out. I can go back to that slide if you'd like. Um, but the um the idea there is um and and it does vary depending on the region of the country that you're looking at, but I think there's a popular perception that pay in the public sector always lags pay in the private sector. And it's not always the case in the data we're seeing here. At the minimums, um Raleigh is definitely still below, but at the midpoints and the maximums, again, not 100%, but within that market competitive corridor. Um to the point that was made earlier about the benefits, um that I think is something that is um worthy just potentially further consideration because in the private sector, the benefit structures are typically pretty different than what they are in the public sector. All right. Thank you. Sure. Other questions? Did you want to add? Okay. Okay. Great. Thank you. All right. Thank you for all the work on the study. All right. We have a second item on the agenda and we have Allison Bradshshire to discuss the separation allowance uh study that was done. Yeah. So, good afternoon, mayor and council. Allison Bradshshire with the finance department. Uh, I was before council last summer with a timeline to complete an actuarial analysis and report specific to the cost of a separation allowance for the fire and emergency communication departments and several operating departments including parks and recreation, transportation, Raleigh water and engineering. Uh the process started with the request for proposals which was reviewed by staff from the finance department, human resources department and the city manager's office. Uh Boomershine Consulting Group or BCG was selected as the actuarial firm and after the contract award staff from the city provided the demographic information necessary for BCG to complete the actuarial analysis. Uh today I'm joined with by Greg with Greg Stump. The chief uh actuary and vice president of BCG uh is with us today. And by way of introduction, Mr. Stump is an experienced actuary specializing in public se sector plans and holds several uh certifications in his field and is a member of the American Academy of Actuaries. And with that, I will turn the presentation over to Mr. Stump. button right there. Thank you. So, couple things I want to uh start with. Number one, we're going to talk about this benefit package costs and and other details. Uh I'm not an advocate for or against it. Completely neutral. This is an independent analysis. So my two reasons for being here are one so you all understand if you're going to adopt such a plan that you know what the costs and risks are and number two to answer any questions that you have that will help you uh make a better decision. So we and you can ask a question whenever you want. Um you can wait till the end or or while we're going over this but I want to make sure I answer everything as best as I can. So, we'll talk about the project background and the benefits and uh a little little um tutorial on pension funding background to help put it all in perspective. Summary of the demographics and the analysis for the uh all the groups that Allison just mentioned were split into two studies. So, one is fire and emergency communications that we'll go over all those results separately and the other one is the five select operating departments that were just mentioned. We'll also look at potential funding outlook should a plan be adopted uh and uh and with some conclusions. So the project background is this separation allowance we'll call SA uh it is required by state law for law enforcement uh which you know uh it's not required for other employee groups uh but the city staff have been requested to look into it uh for the groups that we just mentioned. It provides a temporary benefit from retirement to age 62. If you retire after 62, there is nothing. Uh, and the benefit formula is very simple. 085% times number of years of service times the final pay, whatever your last pay is. Um, see, I think Allison went over a lot of this. I'll start with the second bullet point. We collected data as of October 1, 24. Uh, and that was not chosen arbitrarily. We wanted to make sure that we got all the pay increases we just talked about that were put into effect in September. Um, and the eligibility this was modeled after is consistent with the state program, local government program. So, there's two eligibility criterion for the full benefit. Age 60 with 25 years of service or 30 years of service at any age. Uh, and that's important when you try to put some of the results into perspective for the different groups. And we'll go over that. Uh the it's also importantly that third sub bullet there the service for eligibility includes unused sick leave which we have data on. Uh prior service from other North Carolina local governments and prior military service. So all the assumptions uh were developed by us and we worked with the team here at the city uh decided the the most reasonable and consistent approach. So here's the funding background. I don't know if you can I I can't quite see on my screen. There is a number line, a very light blue pointing to the right. So this is the way pension funding works for any pension funding program, the state program, what we're talking about today, retirey healthcare, anything. So it's funded over the course of someone's career. So when someone is hired, you're not expected to have any assets for them because they haven't acred any benefit yet. However, the actuary can come up with an annual cost. In this example, it's $3,000. So, the city's going to start putting away $3,000 a year until the person retires and then they will have, look to the right side, uh, 200,000 in this example. And these are reasonable numbers for this benefit package. Um, at any point during the middle of someone's career, whether it's two years in, five years in, etc., you have that annual cost which is going to increase because everything's determined as a percentage of pay. Pay increases, the cost increases. Um, but the asset target kind of goes from zero to 200,000 over the course of that time. So if you take all the populations, the two different populations we looked at here, and just plot every employee on this number line, it fills the whole thing. You have some people with very little service. You have some people with, you know, 30 plus years of service. So they're all throughout there. So everyone every individual has what we call at the bottom of the screen there normal cost which is the the annual cost and an actuial accured liability which is the assets needed. Those are just the technical actuarial terms. That's what you'll see in actuarial reports. Same same picture. Next slide. The only thing we added here was that red box to to point out that the actual assets of any potential plan are are zero uh because we don't have a plan yet. So all those people that are not on the green part of the number line, you you start out with immediate shortfall. For people that are going to retire next year, you have a larger shortfall. For people that have 5 to 10 years of service, you have some degree of shortfall. So that's where all these numbers are going to come from that we're going to go over here. So summary summary of the analysis, I'm just going to show a snapshot of some of the demographics for this group. um the actuarial costs um the uh projected funding over a course of 20 years and then we'll go to the other group with the five five operating departments and do the same thing. So we we split this group into fire and emergency communications and as of the snapshot date, right? So this is all as of October one. It's the number of employees, average age, average salary, average years of service. That gives you an idea of who we're dealing with here. And one important thing to keep in mind here is that for and and especially when we come to the operating departments, fire has more service and younger than the other groups. not not the emergency communications but the uh operating departments. So that will explain why when we get to the numbers that their cost is is higher per person. So here here are the the actuarial figures. We talked about acred liability. We talked about normal cost. So the new term there is present value of benefits. So present value of benefits is just taking everyone on that number line that goes from the green to the yellow to the red and just go all the way to the end. All right, we need 200,000 for everybody because they're going to eventually earn that. That's the total present value. The acred liability is just based on whatever they've acred to date, whatever point they are in that number line. So for some people it's a couple years, some people it's 10, 15, 20 years. So it's always a subset of the present value. And you can think of it this way, it's roughly halfway, you know, so if you took all the employees in that first group, fire and emergency communications, they're roughly halfway through their career on average. The unfunded amount is the same. having no assets and the normal cost that's that the 3,000 for the the new employee plus the 4,000 for someone 10 years in plus whatever number it is for everybody else. Put all that together and it's about 2.1 million. Uh and as a percentage of payroll that's about 4.2%. That's an important number to keep in mind because that's the cost of the benefit. the actual cost like the contribution to a fund would be much higher than that because you have the cost of the benefit for everybody on that number line plus the cost of all the shortfalls and that's what we're going to look at next. So the total contribution for year one would be about 9.6% of payroll or about $5 million. As we said the 4.2% is the cost of the benefits. The five the rest of it the 5.4% 4% is just a payment towards the shortfall and we used an amortization period of of 20 years. Uh so that is that means that all those shortfalls would be completely paid off at the end of a 20-year period and then the cost would just drop down to the normal cost which is the blue there. However, keep this in mind and for for everything I've gone over so far and will go over everything's an estimate. Everything's based on assumptions. These are all future events. So, we're always dealing with a moving target. Uh, you can't hang your hat on any one single number, but that's these are best estimates. Yes. I'm just going to ask you a really quick question. Um, on the last slide, when you what can you tell me the difference between the 2.1 million, the normal cost end of year, and the 5 million that's on that next slide. I'm a little bit confused. Okay. Yeah, good question. So, the the blue section there is the 2.1 million, and the red section is the amortization payment. So, it's a portion of the 33.2 That's and and that portion ends up being you know around uh what is it 2.8 2.8 2.9 million. So that's what the red section is. So it's paying for these shortfalls. It's the 50,000 plus you know you have people that could retire next year their liability is going to be higher. It's paying a portion of that such that at the end of 20 years it's all fully funded. Right. And so it has both it has the people who could retire but it also has the people who are just starting. Yes. Okay. Yep. and and except for the brand new hires, there is no shortfall there. Got it. Thank you. And we have another question. I have a question too. Sorry, you said to ask as you're going, so I figured I'd just ask now. Um you mentioned assumptions. What assumptions did you use when you came up with these figures? Uh there is a full report that goes along with this, but I'll give you the key assumptions. Um 5.5% investment earnings or also known as discount rate. Um 5% salary increases per year. Uh we use a standard mortality table, but I'll be to be honest with you, mortality is not a big factor for this plan because the benefit stops at age 62. The mortality rates for people younger than 62 are very very low. Meaning you didn't assume that anyone would uh pass away before they could No, no, we we use the standard table. It's just that the percentage the probability of dying in those early years is just very very low. And then the other question I had real quick is if I just wanted to get the fire numbers out of this um 550 fire employees, 104 employees. So that's 654 and 550 of 654 based on my quick math is 84%. So just the fire numbers would be 84% of these totals. Or am I doing that wrong? Uh that's a good start, but but I can tell you that it's going to be higher than 84%. Because if you look at this slide, um the average age is 39, the average service is 13 years. So, so they're closer to being able to retire. And by the way, we did not run it separately. You don't have any data just for fire. We had the data, we just didn't run it separately. So, when we run these calculations, there's there's a software package where you feed in all the data, your assumptions, and it gives you the results. We could do it separately. We just have to split the data up. But I can tell you that it'll be higher than whatever the the headcount proportion is. Okay. just just because there's more service. So the the last part for the fire and emergency communications is just taking this and expanding it to all right well not just one valuation date but what would it look like going forward? Well as we pointed out with that number line everything's measured as a percentage of payroll. So naturally the costs are going to increase over time in nominal dollars. percentage of payroll it says pretty close to the same give or take you know actual experience. So the funding and projections just goes over all right how do we expect the fund to grow and this is a little bit of a busy slide but it explains how we would go from the 33 million that's the first purple bar none of which would be funded initially to being fully funded. Now of course over time that 33 million is going to grow and grow and grow because you have uh it's it's getting closer to the total present value which was 60 some for the group now plus you have new hires coming in uh and so the size of the fund just grows over time. So we would expect and again just an estimate best estimate that this fund would be 92 million at the end of the 20 years but would also be 100% funded. So, you stick to that 20-year amateization plan, uh, it's fully funded. And the funding ratios are shown with the dots there. You know, you start at zero, you get to 100. That's also the way that funding works. As I pointed out with the number line, that's how it works for every plan. This is how it works in terms of, you know, funding projections. You're always working towards 100%. So, just another question on that. When you look at our law enforcement, we're not fully funded or even close. Well, that's true. And I we did review that just to to to try to maintain maintain consistency with it where we could. Um and I whatever the funding ratio is or 20 or 30%. It was something relatively low. Might have been higher than that. Um it's expected to be fully funded in 14 years. That's that's what I gather just from reading the report. So So in other words, they started at 20 just like this, but they have 14 left. And then uh just um is this assuming that every firefighter from now stays with the city through the ability not it doesn't account for those who we have a high turnover rate um and there as soon as somebody leaves the department then they we gain money at that point. Yeah, there will be a gain and so yes this assumes everybody's going to get the benefit. However, there's a thing called an experience study. This is going a little off script here, but if you if you establish a plan every 5 years or so, the actuary, whether it's our firm or some other firm, would do an experience study and look at those things. Okay, now that you have this plan, what was the turnover rate over those five years? When what age are people actually retiring at, you know, other other uh factors? But um so then assuming since we do it for police we would have not not you because I I know that you're not there but in theory since uh police has 14 years we should have those numbers of what that turnover rate is for police and how much we've saved and that's what you're saying that yeah and and again it's a moving target. So every time there's evaluation done it's kind of self-correcting in some ways. You know if you had a large number of people leave or or a very large pay increase the next time evaluation's done it's going to catch that in the form of what actuaries call a gain or a loss. Okay. Thank you to the question either be higher or lower than what we thought. You mentioned something about pay increases. How does pay increase impact this? So there's a 5% pay increase assumption built into this. But that's only for 5%. For 5% each and every year, right? So so to the extent that let's say you have a few years where it ends up being lower than that, that would come under the gain category. So the liability is going to be a little lower, the cost is going to be a little lower. or if you have a a period of years where it's higher than 5% that'll be a loss. So things will end up higher. But just having a pay increase is is already built into this, right? Okay. And that's a good question, too, because I get that all the time. What happens if we give a raise? Well, we're already assuming that, but if it's different than what's assumed, then yeah, it'll have an impact. So the other part of this projection on the next slide is the question that that you're probably all wondering which is well okay we're going to get to 92 million what's the cost? So we split it up into uh two components right there's benefits and there's trust fund uh contribution and the total city contribution is just the sum of those two. So if you have a plan with zero assets, you probably don't want to start putting money in and then taking it right out. So there'll be a period of time 10 years, 15 years. There's no right answer and there's no rule about it, but you're probably going to pay the benefits, whatever benefits, we're estimating 1 million in the first year, plus put some into the trust. And then once the trust gets to some critical mass, whatever you decide, 60% 70% funded, then the trust will just work like a pension trust. Put money in, take money out. So that's why we split it this way because it would be a brand new plan. But you can see the five million that we just showed in that pie chart splitting between the the blue and the red grows to 6.6 million. Mostly because it's a percentage of payroll. So as the payroll increases, the nominal dollars increase. To think of it in today's dollars, it's roughly the same number. You know, it's it's 5 million just trended forward 20 years. And the footnote at the bottom right corner is something I said earlier, but after you reach 100% funding. So that pie chart goes from the blue and the red to just the blue, then you can expect the cost to be about 4.2% of payroll and whatever the payroll is in that year because that's the ongoing benefit cost. It does vary a little bit year-over-year. The 4.2 could be four or 4.5, but it doesn't vary a lot. The thing that varies a lot is the shortfall because you have, you know, market downturns, you have uh, you know, bull markets, all that stuff really, really affects the unfunded liability, but it doesn't affect the cost of the benefits. So, that's the end of the first section for fire and emergency communications. The rest of it is is the same numbers. I mean, it's different numbers, but it's the same structure. So, let's look at the uh, real real quick. Oh, sorry. Question. You did this based on 550. So, how does increasing staffing impact meeting that 20-year mark? That That's a great question. And we actually, this is on one of the later slides, but we actually did it on the budgeted positions. So, it's 550 plus whatever other positions are budgeted by the city. Okay. And then you mentioned payout time as far as getting money in the bank, then paying it out. So do you recommend whole like if say we started this next year you wouldn't recommend paying out for what four or five years or I would say probably about a decade you would pay 14 years. Yeah. So so if you look at this this slide here after about a decade you get into the 60% funding range which is is not bad for a brand new plan 10 years in. At that point, you might just decide, well, and again, it would be, you know, up to the city, but so we're in 2036, let's say, let's just put 5.7 million in and let's just start paying the benefits out of the trust each and every year. That last right-hand column still applies, though. But anyone who retired within that 10 year mark just wouldn't be eligible. No, they would. This they just wouldn't receive a payment until No. One thing that's built into this entire analysis is that if you adopt a plan, everyone's eligible, right? You adopt a plan July 1st, somebody retires August 1, they'll get the benefit if they meet the eligibility requirements, right? But you said you wouldn't recommend paying out for 10 years. I'm confused. And what I mean is paying out of the trust. Okay. Yeah. And so what would happen is the city, let's just suppose these numbers were were set. Like we knew these for sure. So, the city would have $1 million in the budget to pay out benefits, another $4 million in the budget to put into the trust. Okay, these are good questions. Uh, you know, please ask as many as we need to. [Music] So, same um layout for the other group, but but one kind of summarizing slide here is that if you look at that 20-year projection and all the costs, there would be about 115 million uh paid by the city. And again, just estimates, best estimates. Uh and you'd also pay out 67 million over the course of that same 20-year period. But the investment income expected uh would give you another 44 million. And that's that is the whole purpose of having a trust fund to to fund these things. And that's how we get to the 92 at the end of the 20 years. So all of those last six slides or so, same information for for the uh select operating departments. All right. So we have five groups in here and and as I started to point out earlier, if you compare fire versus all these groups, younger, more service. So that's why when you see the benefit costs, it's it's lower per person and as a percentage of payroll for this group. We did not run any of these separately if anyone was going to ask that, but they're all lumped together. We have the ability to run anything separately. We can run in each individual if we need to. So the present value and and the numbers are very comparable. You know, it's a larger group. You can see from those demographics, but the cost and the cost and the liability per person is just lower. So 66 million in present value if you project everyone to the end of that timeline less than half of it has been acred. So on average that that that population in total is less than halfway through their expected career. Um normal cost a little bit higher than the fire and emergency communications uh in dollars but as a percentage of payroll 1.8%. So uh a bit lower there. The Yes. And just for clarity in the last slide we saw 4.2% 2% of payroll, right? As opposed to the 1.8% of payroll, right? And it's payroll of that group. So, it's 4.2% of the fire and emergency communications payroll. This is 1.8% of that five operating department payroll. Thank you. And the pie chart looks very similar um except that the shortfall payment is actually a little bit less than the normal cost in this case. And all this stuff being a moving target, this pie chart will change year over year too. you you're always working towards that red slice going away eventually and in this case after 20 years. So the uh projection looks almost exactly the same. The numbers are a little different. This fund would be projected to get 100% funded after 20 years and about 100 million in assets. The cost starting at 4.7 million which was you know that year one figure shown in the pie chart growing to about 6.6 million. And it's all the same assumptions. We're we're assuming all the the budgeted positions are filled. Uh we're assuming everybody gets the benefit. And again, same same thing applies here. After you get to 100% funding, you can expect the cost to drop down to 1.8% of payroll. So if the pie chart stays relatively stable, cut cost goes gets cut in half after the 20 years. And the totals for this group, um, again, the numbers are very comparable in total, but $112 million in city contributions, 62 paid out, and a $50 million, uh, investment earnings over that time frame. So, two more slides here, and of course, any other questions, but summary is the total expected city contributions for all the groups is estimated to be 227 million over a 20-year period and then drop down to the normal cost thereafter. So this will accumulate to 192 which of course is lower but that's because you have 129 million in estimated benefit payments that will go out and the initial liability for financial reporting purposes is called the total pension liability. That's the term that goes into the city's financials. That would be about 61 million. That's just the 33 plus the 27 or you know point something you know goes to 61 million. So that's what would be recorded as a total pension liability and a what they call a net pension liability because it's there's zero assets. It would also be the same number as the initial shortfall, also known as the unfunded liability. And that's where the amortization payment comes from the red part of the pie charts. So a few of these things I've already mentioned here, but uh everything's estimates. Uh it's always a moving target. So, the actual funding and costs would differ from what we're we're looking at here. Could be higher, could be lower. Um, any separation benefits uh adopted would entail additional costs and risk for the city. Maybe that maybe the estimates aren't exactly spot-on, but there would be a cost. We know that. Um, so some examples of risk, adverse experience, you expect to earn five and a half percent, maybe we have a major recession, you earn, you know, 1% for for five years. um other adverse experience uh higher pay increases uh and there's also there could be an indirect impact on other benefit programs. We didn't look into this but just if you have a program like this that may have people retiring earlier than they otherwise would have there could be other costs associated with that and again we we don't we're not familiar with the rest of the programs but it is a possibility. So the funding and contributions are subject to fluctuations. Uh and they're always it's always always based on actual experience. So if we assume five and a half% per year and you earn 12 over the first 10 years, that cost comes way down because that's what the cost is going to be based on whatever actually happens. Um along with all the other experience. Uh and the last point is that if you adopt the plan, there would regular actuarial evaluations would be required. Every two years is required. I would say for a brand new plan, you'd probably want to do it every year. Um the financial reporting is definitely required or would definitely be required every year in the city's financials. And and I believe that's the last slide I have here, but uh other questions? Go ahead. All right, thanks for this. Um, can you tell me does a total pension liability factor into considerations like a bond rating? Yes. And I don't know exactly. I don't I'm not an expert on bond ratings, but yes, they do look at that. Yeah. I don't know if this question is for you. Um, I'm wanting to uh reference police and law enforcements. if we have are required, do we have actuals from our previous few years of separation allowance with police or are they not required to do that same reporting that you just referenced? That that would be part of the city's financials. Yeah, it's it's in there somewhere. It has to be. Yeah. So, we do So, we haven't been funding that though, right? Until last year, which where we put the Yeah. So, the funding and the financial reporting are two separate things distinct. Got it. I mean, they're they're kind of related to each other. In fact, to go back to the bond ratings, I again, this not my area of expertise, but I know they will give favorable consideration if you have a plan to pay it off in a certain number of years rather than, you know, well, we just have this great unfunded liability and we don't know what to do about it. Right? So, if we have had it unfunded until last year and we have been being judged on that, then how has that affected our bond rating in the past since we've been doing that for decades? Uh, the separation allows. That's not a question for me. Glad to step in on that one. Yeah. Good afternoon, Alison Brader again from the finance department. Yeah, we have been regularly contribute contributing to our uh law enforcement. Um we do have the same term, so 20 years. Um you know, this was a benefit that was awarded LEO's back in the late 90s, 1987 80s. Uh so we do on an annual basis contribute what our actuaries advise us to. So we do that both on the state ledgers plan. We do that for our postemployment benefits. We also do that for our LEOSA and we also do that in our risk management fund. So to your point, we are not a payo city, right? We are really taking that long-term view and making sure that we're putting aside really that's the equitable thing to do. Um, so how much money is in our um coffers for that un that uh separation allowance where we should be where where are we currently? So if you're just on the LEO plan, we are only 14% funded right now on our LEOS. The total liability officials. Yeah, Council Member Silver. Yes, thank you. Yeah, the the long-term liability um is uh almost $60 million on our just our LEO plan. If you factor in all of those plans that I just described, the long-term liability to the city is $600 million and we are at 14% of that. So, how does that refle? I'm sorry. That's just for LEO. So, the state plan is much more funded. So that's our pension plan that we contribute to um the the department of the state treasurer, right? And we are required to do that. Uh last year our long-term liability there was $215 million and we were 82.5% funded. Uh that contribution just in the 24 uh budget was $38 million just for that one plan. When you look at our OPED or our post employment, our liability is almost $300 million and we are only at 28% funded for that plan. Uh we contributed $22 million into our oped and for LEO and again these are 24 numbers. We contributed $7.7 million which equates to those two columns that Greg showed earlier. Uh that liability is almost 60 million. I'm giving you kind of round numbers and we're only at 14%. Got it. Thank you. Yep. Um Council Lambert Melton, my question is for the gentleman from BCG. Um I would really like to have the the fire only data. Is that something you could run through the model for us as part of this report? Yes. Okay. That that's that's a pretty quick and easy job for us. All the data is there. We just have to split it and run it. I'm going to make a note of that. Go ahead. Um, back back to Allison. Sorry. I have a question for Allison. Oh, okay. Thanks. just stay on these um percent funding given like um so this suggests that you could fully fund your program in roughly 20 years but then some of these benefits have obviously been in place for longer than 20 years and are funded at a lower percent. So what are the contributing factors why that have these ones funded at a lower rate? Yeah, I mean I think a lot of it is sort of those pluses and minuses that Greg was talking about, whether they could have been uh dramatic increases in public safety that were outside of the actuarial estimates. It could have been opportunities where our interest on our investments didn't materialize. So the point of having one of these every year is so we're we're watching that goalpost, but I'll be honest, it moves every year and that's just really the nature of an actuarial study. But we are committed and and have been to make sure that we are funding it on that actuarial basis. So I had a question, but it's actually for Charnell Jones. Um because this is more about from an HR perspective, you know, our law enforcement, all law enforcement have this benefit. So you have a somewhat fluid labor market without, you know, unique incentives. If Raleigh was one of the few cities, only large city in the state to have this, what sort of consequences would that have for I mean, I'm assuming we would have a really high retention, but for example, would we ever want to hire anyone who was a seasoned senior employee because we'd be be then assuming this massive liability? I I'm just, you know, how would that work? Um, well, it would I'm not going to say it's necessarily will help with attracting employees because they're just getting here and have to stay for that long period of time in order to be able to receive that benefit. However, any seasoned employees that come and then choose to stay and retire, they will be eligible for that benefit unless there is some type of parameters put in place. So, that would also put a strain um on our benefits program. If you adopt a program like this, can you protect against that? Like can you protect against somebody joining and then getting the full benefit even if they haven't? You would you would have to and I will kind of look at legal a little bit because I would have to run that by them. But we will have to put parameters in that policy as regards to when we go to implementation of the time frame an employee would have to be with us in order to be eligible for that benefit if that was the case. But if legal wants to add anything, did I interpret correctly? See, Ryan Bergman, city manager's office. Uh I'm not legal. Um but uh I'll try I'll try to answer that a little bit. Uh presumably because this is not something that's state directed, it's totally a a local initiative that would be put in. You could put parameters into it that would limit the service to Raleigh service to avoid that. But there's a number of to limit people from coming from other jurisdictions. And so you'd say, well, it's only two years of Raleigh service, so that's all that counts, even if they're joining after 27 years or 28 years somewhere else. Um but the initial question about employees, there are of course um employee equity uh issues between groups depending on how it's implemented. Um which would uh probably be one of uh one of the concerns. Okay. Question. Thank you. Um I had councelor Lambert Melton and then uh Branch and then Patton. I just had a follow-up question for you, sir. I'm sorry for driving you crazy from BCG. Yes. Um musical chairs at the post. I know. I I actually think it would be very helpful so we can fully understand the scope of this. C can you model it for each department fire solid weight because right now you have ECC and fire group and then you have the other operating I think align for each one. How much is this just the solid waste services? How much is just fire etc. If you can do that as an addendum that would be super helpful for us I think. Sure. Thank you. I just want to be sure I'm hearing this correctly. We could set up a process where we set a minimum years of service, say 10 years with the city of Raleigh in or before you're eligible. Okay. I think the attorney should be speaking to this to be honest. I'm putting it out. I appreciate you, Ryan, but um I think the attorney should opine on this issue. And I think because it's the city of Raleigh benefit, we have the ability to structure it, but that should be a legal decision, not our not my office. What Ryan said is correct, but I think that again, we have to be careful to make sure that we don't run into run a foul of any other uh discriminatory uh practices in crafting that. Okay, let's see. And councelor Pat um might be for HR. Um I want to confirm my understanding. So one thing that came up in consideration of this last year was that uh law enforcement has to have a four-year degree, which sort of by just by design makes them a little bit older when they begin their career. Is it true that um in in FIRE you do not have to have a four-year degree and that you could start your career at the age of 18? That is correct. Okay. I think it's 19 19. And did it used to be true that you it was 21? Yes. Okay. We reduced it. So I think I would be interested in how we might as as also there are policy considerations for like years in Raleigh to contribute to the benefit. I would also be interested in how we could craft like a like if this is paired with raising the minimum age of beginning your career. I think that contributes to lowering this cost as well. That's more of a comment. Yeah. Go ahead. Awesome. Um this is for Allison. Alison, I'm I'm just clarifying in my brain trying to make this all make sense with the uh what we contributed to law enforcement. So when I looked at it and you said 7.7 million we now that's in addition to the 5 million that we did pay out last year to law enforcement. How much in 2023 did we do we paid out and how much did we put aside? We put aside 7.7 million last year. How much did we put aside in 2023? I I do not have the 23 numbers in front of me, but very similar to um this slide, you know, where you can see that total city contribution is pretty similar here. That's really how our LEOs have been as well. So 7.5, 7.6, it's it's not like it goes from two to seven, right? The design here is to really fund that over the long term and not create those budget spikes. I don't have what was paid out of the but in theory what you're saying even though we don't have the specific numbers is if we did 7.7 million last year then roughly in 2023 we did somewhere around that. Correct. So in this fund every year it's it's going up because just like this chart is going up but last year was seven. So we're thinking it's roughly the same year before somewhere around that. I could get you the exact, but yes, again, very very similar to this. Yeah, I would appreciate seeing that. Thank you so much. You have a question? I do. Um, and I think just, you know, sitting here and kind of listening to the conversation, you know, one of the concerns, you know, I have is that the inequities that could potentially be created within the fire department, but also the inequities that could be created across the entire organization for the city of Raleigh if you start putting limitations on who can receive it and those types of things. Can you I guess as a city attorney or Charell or somebody speak to the risk that we run as a city from no from that perspective. I do think I do think there is a potential for u disparities and it's difficult probably to quantify all of the disparities or potential disparities right here at this table. One of the things that immediately comes to mind for me and I think um mayor or someone touched on this which is you have the potential to discourage experienced uh firefighters if we're just talking about firefighters potentially discouraging experienced firefighters from coming to the organization because you create an inequity. you have a 20-year veteran, say from another department who may not be inclined to come here because they would not be eligible for the benefit that someone who has been here for 20 years would be eligible to receive. That's just one example that comes quickly to mind, but I'm sure that there are others um if we were to have some more time to think about this. I have some questions for uh the fire chief. I'll start as you're walking down, chief. Um, as we talk about numbers, um, I'd love to hear, especially in our recruitment, our turnover rate and what other possibilities that if this is just one idea that we're talking about for recruitment and for retention, what are in your expertise, some other examples, if this is something that we don't go with, what are some other strategies that we can use to both retain and recruit? So, I'll reframe that question. I'm sorry because I was giving you some background as you got down here. Um, just taking the last firefighter, the last maybe twommies, how many did we start with and how many graduated? Good afternoon, Mayor Kyle, Council, Miss City Manager, Herbert Griffin, the fire chief and director of emergency management. Uh, the last class we had in 23. We had 45 start, 23 graduated. This year we had uh 49 41 start roughly a month ago, five have already quit. Five have already quit the first week. Yes, ma'am. due to the unforeseen circumstances. Yes. Do you feel not that they would solve this but do you feel that separation allowance would be a retention factor for those coming on? Absolutely. It's a measure incentive uh as far recruiting and retention. Yes. And if we don't have that, what other uh tools do we have to recruit that we are not currently enabling? We have one recruiter um and a team at our professional development that does recruiting uh inside of Raleigh and outside of Raleigh. Social media is our biggest tool right now when it comes to recruiting right now, but retention is an issue. Uh, roughly every class the last three years, we use lose roughly up to 12% of those academy classes. And that's due to I'm sorry. Go ahead. I'm sorry. Yeah, that's due to the actual um uh inability to pass the EMT portion. The EMT portion. So if I relate this and I translate, so the graphs that we've seen, we may hire a certain amount, but immediately when we leave, we technically benefit from the fact that we're contributing for those those slots that then are not here because they quit. That's correct. Okay. Thank you, Madam Mayor. While you're here, I have a couple questions myself. Would you say amongst your employees, what's the highest priority? um current pay and salary or separation pay. That's a tough question. Um I don't speak on behalf everybody. Um in my 29 years starting out, I would say compensation. Once I hit the 15ear mark, it's separation allowance because I'm looking to the back end of my career now, not the front end. So when you talk about recruit gentleman said, I want to highlight this. He said Bob, he don't expect anyone to pass away. I've been here four years and had five firefighters die already under my command in the first three years. So that number five firefighters have a 22% increased chance of can catching cancer and dying at early age. At the active expected life span for a firefighter 10 years ago is 59.2 years. That's facts. I wrote a white paper on it. Okay. My other question is um what's the average age of folk or what's the average year that folks end up leaving the department? Like if they start year one, how long do they typically stay before they leave? Average age is about 55. No, in terms of years of service, 30. So most of your people come in and they stay until 30 years. Okay. Thank you. I think what our question is, Chief, before you step away, if we had to have a tension point, if you had to notif um signify at what point we're having issues with retention, how many years of service? There's a span for police. What is the span for fire? Number of years. Retention. Yeah. Three to five. Three to five. Yeah. Police, it tends to be 5'7. Y Thank you. Okay. Any other questions for any of the revolving experts in the room? All right. Well, uh, we have I'm sorry. I do. Um, and this may be finance or budget. Um my understanding is that currently we pay out of the general fund in in order to cover the LEO and everything for police. Is that correct? That is correct. Yes. So this money would also come out of there if we were to do it. And starting out it would be roughly about 7 million. Um the number that was shared um was 5.7 I think. But that was for fire and EMT. Yeah. Yeah. Then you have everybody else. So I'm grouping everybody together. Yeah. So fire and ECC that first 5 million you see there is 100% general fund. Um the other departments I mean Raleigh water is an enterprise, solid waste service and enterprise, parks is general fund, transportation and engineering services are all general fund. Okay. So since we don't have those separated, it would be some number of this 4.7 general fun and say seven if you add the two together. Yes, roughly. Yes. I got Ryan. Oh. Uh, one distinction I want to make sure that we're clear on is this was prepared based on a council request last year for specific operating departments, but it doesn't represent all employees in the city that you might consider to be operations. So, adding solid waste and parks uh and a couple of the others would leave out some of the other departments thinking of uh code inspectors and housing or civilians in police and fire. So, if it was citywide, it would actually be even more significant than the two presented here. That's a very good point, um, Mr. Bergman cuz when the budget note was requested last year I think um can't remember who made the request but it was for fire and ECC and then um Mayor Pro Tim Ford asked for the other operating departments because we were having some issues with um attrition and solid waste services and at that time we were not as advanced into the comp study to to to know what the other classifications across all of our departments. So the data that was presented today is the data that spoke to that specific budget note that you all asked for. It does not it's not an all-inclusive. So those numbers would be slightly larger on the employee count. I think councelor Jones and then Silver. Okay. Uh I have two questions. Uh the first one I'm going to say I don't know who but I know we did a safety collaborative and I was wondering if somebody could um come up and speak to the discussion. Did we have a discussion of separation allowance there and how did that go? How did the employees feel? So, it was public safety collaborative. Um Charnell Jones can come speak. Tancy Hayward, the deputy city manager at the time, also worked with fire during that time period. And um my office, Evan Raleigh and myself went to a couple meetings when they originally kicked it off. It was a refresh of what we used to have the employee advisory group, the E A. We classified this one as the public safety collaborative. And so, yes, um this past fall, we did have a meeting in regards to the public safety um collaborative discussing the um separation allowance. Budget came and did a workshop and we kind of talked about the pre other municipalities that do offer it. Um and we talked about a a budget note from that perspective. um and coming back with that as regards to the budget. So, were they in favor of separation allowance? There were some that were not. They said, you know, they would be more in favor of pay versus separation allowance that it didn't necessarily speak, but I'm not going to say all of them agreed and said that pay was number one, but there were some that didn't. How many people were involved in that in the meeting? No, in the public safety collaborative. The collaborative. Yeah. We have four from fire. We have four from police and we also have four from emergency communications. Okay, so about 12 people. Awesome. Um, okay. Thank you so much. Okay. Um, councelor Silver, I have a question. I don't know who to directed to. I know this actuarial was focused specifically on Raleigh, but you know, I am aware there were other jurisdictions in North Carolina that put this in place for fire, put it in place for all employees. Are there any lessons learned from those jurisdictions? Don't know how long they've been in place. I don't know where they are in the 20-year spectrum. Uh but it'd be very helpful to know any trade-offs from those municipalities that actually put that in place. I don't know who Ryan, I don't know who could answer that question, but I think that kind of predates Ryan a little bit. Ryan, you can add on if you want. Last year, council will remember that we did a comparison in one of the manager briefings and the three municipalities that were included um that were providing that services that service at that point, the separation allowance. Raleigh outnumbered all of them combined. So, the total debt liability on our books exceeded all three of those communities because they're much smaller communities. They looked at um the tax rate of each one of those municipalities. We looked at the total general fund. So to prep to put it in perspective for you, um, one was 86 million, one was 70 million, and one was 33 million. All combined, that was their whole budget. So for all three of them, you're looking at 156 um roughly $190 million. And our general fund budget is almost four times that um just on the operating side alone. So it was in comparison because we had received some correspondence from I think the mayor of Mebban and we did an analysis not just on what it would be for Raleigh but every community that currently has the the benefit right now. I think it was Gastonia, Mebban, can't remember the other one, but the outlay for us far exceeded all of those combined. Right. Yeah. I would just add that there's not a good North Carolina comparison for anyone that's done it. Uh, in fact, going a step further, uh, the organizations that we typically compare ourselves to, we call the Big 10, the five big counties, the five big cities. Uh, there's actually been movement over the last 10 to 15 years from several of them to eliminate retirey health care for new employees. So, they're actually talking about eliminating future other post-employment benefits. Uh, whereas we've, uh, we've luckily in Raleigh been able to maintain them. Any other? Yeah, I just wanted to make a comment, not a question. So, if Pat, Councelor Patton, if you have a question. Okay. Yeah. Oh, thank you so much. Um, yeah, for me, I just want to put on here, you know, I I think there's still a lot to talk about. We've been talking about this for a few years now, and um, I don't know that I'm still 100% clear on the information. There's a lot of numbers that are going back and forth. So, I look forward I really do uh Miss Bradshaw would love to have further conversations about our Caffer's report and how that all especially comparative to law enforcement because that's where I'm stuck. I'm stuck because when I'm looking and I don't know what I'm looking at so I definitely need your guidance. How do I make that make sense? Because to me I I thought that I saw and I could be totally wrong that we started doing the additional funding that 7.7 million last year but if not I can't wait to see where that was so I can correct my own uh understanding of it. Um, as I've been talking and and I'm sure all of us have, you know, public safety in general is a huge concern for the community and as we look at our numbers, which we've seen both in police and fire, our numbers are are not great. Um, they're not where they should be for the capital city or for a city that's continually growing and hasn't added positions in 10 years. Um I it concerns me that we have the chief uh fire chief come up here and and say, you know, we're losing 50% of our recruits before they even get on the job. And so if this isn't the answer, then I'd really uh love to learn what other tools we can do. And I'm not saying this is a then we're all going to keep everybody at the same time. But I feel like we need to signal to the community that we hear them and that we are putting public safety uh as a a really big priority because that's how I see my job. My job first and foremost is to make sure the community is safe. Um I hear the equity concerns completely. I hear you. Um I will say and challenge that our public safety are putting their and their lives on the line. We're putting uh a lot of especially fire. They're after retirement coming with cancer and things and how are we making sure that this is a commitment to them. So for me this is a really big thing that I would love to see included in the budget. Um but uh I would love to hear other thoughts and um and how we move forward because I don't want to leave this without some direction. Um Chief, can you come down? I have one question for you and it's it came from me off of Councilman Woman Jones comment about the um retention rate losing that 50%. Can you speak to the causes of losing those recruits? Like why why are we losing half the 23 class like I said uh we lost 23 people that was a combination of changing occupations career moves education they couldn't pass the actual requirements of the education that's the majority of it um every ex interview that comes across I read them the top three were career change compensation and burnout on the industry those were the top three reasons we see the ex interviews, burnout, occupational burnout. So, career change, burnout, and you say compensation from what standpoint? Money or is it benefit? Low pay. Low pay. Yes. Okay. Okay, that's helpful. Thank you. Well, I mean, I'll just make a couple observations, which is I really do appreciate all the work that went into this. when we were all running for office, one of the things I said is let's do an actuarial study because I'm not going to be the ex- treasurer and not know the numbers. And I think you know what we've seen today is uh between 40 and 50 million a year shortfall on comp to get us somewhere. And then you know one question I have is just I think you know uh councelor Jones your question around is it comp or is it retirement you know who are we recruiting if it's younger people it sounds like it may be more comp more seasoned people are going to be thinking more about retirement so what is the age at which we're recruiting in um is an important question um to understand what the best retention tool would be because we know our comp's not great um and then I would also I mean I was just at the police academy graduation and they had lost they had started their academy at 69 and are down to 40. They have separation allowance. So they also are having a lot of retention issues um despite having this. So as you say there's a lot to sort of mull over but I do appreciate all the information and um certainly just thinking about how would we uh fund you know these numbers. Yeah. I just wanted to add that um you know I I also hear the uh the equity concerns. You know I think we have to think about what each individual department or employees may need and so we do know that the police department is already provided this benefit through the state of North Carolina. Um and we know that police officers are putting their lives on the line every day. We've heard from the chief, and I knew some of this information, too, that our firefighters um have higher rates of cancer, lower life expectancy, and so a bridge to retirement for them makes sense to me. I also hear the concerns for like a highly physical job like solid waste services. So, I think there's those folks are out there also very dangerous occupation, also very physically challenging. Um, and so I think there's different needs for each department. I think having the data instead of like ECC and fire and then all the I think having line items would be helpful for us to be making having the information that we would need and then figuring out what benefits are going to work for recruitment and retention, what is fair, what do each department and employees need and then we go from there. Um and so I think that that's where I'd like to see the discussion go. Any other All right. Well, thank you everybody for presenting all of y'all for coming and um that concludes uh today's work session and we are adjourned. [Music] [Music] down.