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Minutes April 23, 1996CITY OF DENTON CITY COUNCIL MINUTES April 23, 1996 339 The Council attended a dedicationceremony on Tuesday, April 23, 1996 at 4:00 p.m. at the South Lakes Park located at 401 Hobson Lane, Denton, Texas. The Council convened into a Work Session on Tuesday, April 23, 1996 at 5:15 p.m. in the City Council Chambers of city Hall. PRESENT: Mayor Castleberry; Council Members Brock, Miller and Young. ABSENT: Mayor Pro Tem Biles; Council Members Cott and Krueger 1. The Council received a report, held a discussion and gave staff direction on the development of a Redbud Tree Trail and a program to encourage the planting of trees. John Cooper, Chair-Tree Board, stated that the Tree Board was requesting that the Council adopt a formal policy to recommend trees which are adapted to Denton and in particular the redbud tree as Denton had been designated as the "Redbud Capital of Texas". Mayor Pro Tem Biles joined the meeting. Cooper stated that Council would be asked to approve a coverage map, approve a Releaf Denton Program which would feature redbuds and accept a recommendation which would encourage developers to incorporate redbuds in landscaping either as a requirement or a volunteer program. Council Members Krueger and Cott joined the meeting. Cooper continued that a map had been prepared to determine the best places to plant redbuds. The Tree Board would like to make contact with the owners of these properties to see if they would be willing to plant redbuds and to take care of the trees. It was felt that this would enhance Denton as the Redbud capital of Texas. Redbuds had a long life and were quite attractive in landscaping. Council Member Young stated that he was in favor of the program but that there not many streets in his district. He named a list of streets which might be considered in his district. Council Member Brock stated that these trees would not be provided by the Tree Board but would be a program for private owners to plant these trees. Cooper replied correct that this would be an on-going coverage map due to the limited resources for some of the public sites. Mayor Pro Tem Biles asked about the impact of this program on the budget. Cooper replied that there would be no impact on the City's budget. He would be willing to provide his time to keep the project moving. 340 City of Denton City Council Minutes April 23, 1996 Page 2 Mayor Pro Tem Biles asked how the trees for public areas would be funded. Cooper stated that the Tree Board was notasking for funds from the City to plant these trees. The residents would only plant the trees as they could afford the purchasing of the trees. There would be volunteers to help with the planting. It was hoped to receive private donations from the property owners. Council Member Miller asked about the size of the trees, where the trees could be purchased and the cost of the trees. Cooper stated that the residents could purchase the trees from any local nursery. There was no particular location to purchase the trees. The market would set the price and size of the trees. Acting city Manager Svehla stated that Keep Denton Beautiful and the Tree Board would sponsor the program. The city would only be involved in the maintenance on public grounds and certain maintenance areas already receiving such care. Young motioned, Brock seconded to approve the program. On roll vote, Miller "aye", Young "aye", Cott "aye", Krueger "aye", Brock "aye", Biles "aye", and Mayor Castleberry "aye". Motion carried unanimously. 2. The Council received a briefing on the status of the city Hall Renovation Project. Betty McKean, Executive Director for Municipal Services/Economic Development, stated that an inventory and assessment had been completed on the City Hall building as well as a completion of the program and concept part of the project and were ready to begin the design detail part of the project. Council authorized staff to move ahead during the budget process. Objectives for the renovation were to bring the building up to compliance with ADA, safety accessibility and City codes. Another objective was to improve public access to elected officials and to preserve the integrity of design. Brent Byers, Corrigan and Associates, reviewed the proposed basic plan~ fo~ the location of offices in City Hall. One of the more significant changes was the relocation of Council offices frcm the lower level to the ground level. Council Member Young expressed a desire to have the subcontractors be from Denton and Denton County with minority contractors working on th~ project aB much as possible. Council Member Cott asked how long the renovated building would work. City of Denton City Council Minutes April 23, 1996 Page 3 Byers stated that in the future most public functions would be moved out of the building. This would make City Hall an internal building with very little public use. It was estimated that the space would be adequate through the year 2000. Beyond 2010 it would be difficult to predict as the size of the administration of the city would not be known. For example, the size of the Council could change and then the Council Chambers would not be adequate. 3. The Council received a report and held a discussion regarding the status of the electric industry in Texas. Bob Nelson, Executive Director for Utilities, stated that the consultant wanted to present this item to Council several weeks ago, but became ill and could not be present. The consultant was present tonight to give the Council an update. Rick Covenington, Resource Management International, Inc., stated that the electric industry was changing due to several pieces of legislation. Those changes included the deregulation of the electric industry (P.U.R.A. 1995); Project 14045 which dealt with transmission access and pricing; Project 15000 which dealt with electric industry restricting; Project 15001 which dealt with a stranded cost report; Project 15002 which dealt with the scope of a competition report; plus the fact that transmission was opening the door to the competitive market with wholesale and retail customers shopping for power. Other changes included new technology and low gas prices which combined to form competitive alternatives; combined cycle with installed costs of $400-$450 per kW; heat rates which improved to under 8000 BTU per kWh for a combined cycle; and average cost for electricity at approximately $.03 per kWh (excluding transmission). Stranded costs were those costs incurred by utilities under the regulatory framework which would be left stranded as customers moved to lower cost sources of power. Regulators wanted to allow these low cost alternatives to drive down prices while protecting the financial stability of utilities. Historically the electric industry had a regulatory obligation to serve and was built to serve a load with the expectation of recovering prudent costsPlus earn a reasonable rate of return. The process dealing with stranded costs included the filing of a report by the Public Utilities Commission on stranded costs with the 1997 legislature and the Commission estimating stranded costs for that report which would progress to the technical details of quantifying and recovery of stranded costs for implementation. There were three basic positions dealing with the issue of stranded costs which included those who wanted to maximize stranded costs and thus protect utilities; those who acknowledged stranded costs, but who wanted to mitigate the impact, not stifle competition; and those who ~laim~d there were no stranded cos%s and which should be allowed only in emergencies. The Commission acknowledged that there were stranded costs, wanted to mitigate the problem, but also wanted to protect utilities. Four approaches 341 3.4,:2 City of Denton City Council Minutes April 23, 1996 Page 4 were viewed in quantifying stranded costs. The first was the lost revenue approach which was originally meant to be applied as an exit charge and was based on net revenues of existing customers over time. The second was the asset by asset approach in which a charge to all customers would bring the generation costs to market level. This approach would also compare market value to net book value of assets but determining market value was a problem with comparable sales, spin off of assets, and income approach. The third used a discounted cash flow approach and lost revenue approach which were the same if it included all assets and if they included all customers. The fourth proposed approach by Houston Power and Light was to take the total cost of service and back out wire costs to get the generation related embedded cost per kwh, compare this to the market price per kwh, and then the lost revenues would equal the net costs per kwh sales. Issues with stranded costs included (1) including all generation related assets such as fuel contracts, regulatory assets, decommissioning costs, and purchased power; (2) including all assets both economic and uneconomic; (3) estimating market price under competition which would include the short run Houston Power and Light for $.02 in which reliability and stability would not be a factor in the spot market, using existing contracts and in the long run, a tendency towards a replacement cost of $.03 to $.035 cents; (4) including the growth of the system to meet the load; (5) escalating rates; (5) mitigating factors which included increased value of transmission and distribution and increased productivity; (6) setting the rate of return for discounted cash flow which was set by staff at 10% and which the cities were attempting to lower; and (7) the biggest assumption was that all customers could leave the driving costs for all ratepayers to market based costs. There were several issues associated with stranded costs and TMPA cities. The interests for TMPA and the cities were one and the same as the TMPA debt was the debt for the cities. Each $.02 of uneconomic production cost could equal approximately $26 million per year in lost revenues. This would result in an uneconomic asset estimate of $500 million to $1 billion. The annual TMPA debt service increased by 1.7 cents per kWh over the payback period and TMPA rates were expected to increase from 5.1 cents to 7.8 cents by the year 2004. There might be additional stranded costs associated with each cities own generation. When dealing with protecting TMPA, a question was which customers could leave. The primary cities had revenues pledged to the TMPA bonds, and %he whole~ale cities of Bowie, Farmersville and Bridgeport would have to examine what their contracts said with respect to termination. As competition decreased the cost of services, it would be necessary for TMPA to stay competitive but rates would go up because the TMPA debt was heavy ended. The debt payments were higher near the end of the schedule and thus it was not possible to decrease payments. Possible strategies associated with stranded costs included (1) including all generation related assets in the stranded costs; (2) charging customers an exit fee; (3) the higher the stranded costs, City of Denton city Council Minutes April 23, 1996 Page 5 the more incentive for customers to stay; (4) possible backfire of strategy if electric costs were too high and industry was forced to relocate or shift production to areas where plants were able to purchase at market costs; (5) not making~a general assessment to all system ratepayers as it would increase rates and make rates even more uncompetitive; (6) accelerated depreciation of assets could force a decrease in general fund transfers; (7) losing load would hinder economic development, and (8) although TMPA could be protected through stranded cost recovery, a city tax base could be affected if electric rates were too high, causing a loss of customers. A possible strategy involved planning ahead by reviewing the fuel contract in view of coal versus gas costs which could make TMPA more competitive if gas prices increased relative to coal. Cities could reduce costs in other areas to survive an adjustment period to market pricing. The sale of TMPA assets might be another option to consider. There was a need to consider the effects of stranded costs on city budgets as there would be pressure to reduce general fund transfers. Suggested actions on statewide issues included (1) an additional analysis to estimate the full stranded costs for cities such as the estimate of competition, market clearing prices, and the forecast of generation costs for each city; (2) evaluate systemwide vs. Statewide costs; (3) stay involved at the Public Utilities Commission and seek to protect the City's interest even though the Public Utilities Commission did not have jurisdiction, it would impact the cities and therefore must be a player; (4) get involved at the legislative level as that was where the decisions were made and the retail competition would be the next hot issue. Actions to consider on the local utility level were to reduce operating costs by reengineering operations and aggressive fuel procurement; control capital expenditures by solid benefit/cost analysis and evaluating the financing structure; improving customer services by knowing customer needs and tailoring services to specific customers; and adopting a competitive business culture by introducing new attitudes and removing attitudes that would not change. 4. The Council received a report, held a discussion and gave staff direction regarding a proposed change in the ordinance dealing with the hotel occupancy tax to address the 1995 State legislative updates and City collection procedure changes. Susan Croff, Internal Auditor, stated that the Audit Committee had recommended a proposal for Council consideration to change the hotel/motel occupancy ordinance. Section 10-101, the definition section, was updated to reflect what was in the State regulations. In 1993 monthly payments to the State were required and in 1995, tax exempt individuals were no longer exempted bythe hotels/motels but would be refunded by the lo~al gov~nm~nt~. ~h~ r~porting and payment period changed from quarterly to monthly and provided criteria to allow smaller hotels/motels to continue to report on a quarterly basis. Section 10-102 had an added section which 3 413. 344 City of Denton city Council Minutes April 23, 1996 Page 6 included banquet halls in what could be taxed through the hotel/motel tax. Section B was changed to reflect that the only exempt individuals were permanent residents or those with an exempt card. Section 10-103 deleted the one percent administrative fee as the hotels/motels had never taken this one percent. Section 10-104 redefined the payment period to monthly payments instead of quarterly payments. Section 10-109 added that the revenue from the tax had to be expended according to Chapter 351. Section 4 added language that in the case where there might be a conflict between the State law and the city ordinance, State law would prevail. Council Member Brock asked if there was an anticipation of extra staff work with the refunding to exempt individuals. Croff stated that it would be difficult to say at this point in time. There would be additional work as the Comptroller indicated that the agencies of the State would have to ask for refunds on a quarterly basis. The city would have to go through those refunds, determine whether they were proper after the information was submitted on whether or not to pay the refund. Consensus of the Council was to return with an ordinance for formal consideration. 5. The Council received a report, held a discussion and gave staff direction regarding the adoption of a resolution creating an at-will employment policy for the City of Denton. city Attorney Prouty stated that staff had been working for a number of months on a policy which would change the City from a for-cause city to an at-will city. An outside attorney had been used for consultation. Texas was an at-will state with exceptions to at-will being civil Service employees and collective bargaining employees. Some city charters, ordinances or personnel rules might require that employees may be terminated only for cause. Denton's charter did not require that. In 1988, the personnel policy was changed to more of a for-cause policy. The personnel policy created a for-cause employment with the current disciplinary causes being very broad. They were categorized under two broad areas. One was improper performance of duties and the other was personal conduct. Although there were specific causes which were listed under those two broad areas, there were also some very general clauses such as insubordination, engaging in unbecoming conduc~ and a number of others for which an employee could be removed. The current policy included a progressive discipline policy in which an employee was worked through a series of discipline steps. There was an elaborate notice and hearing process in the current policy. There was also a Charter process which indicated that if the city Manager removed any officer or head of a department, after six months service, the employee had the right to receive notice in writing of the reasons why the City Manager was removing him and City of Denton City Council Minutes April 23, 1996 Page 7 also could demand a public hearing before the City Council. It did not mean that the city Council could overturn the city Manager's decision as another section of the Charter indicated that the City Manager would have complete control over the appointment of officers and employees under him and their removal. The Council could not interfere with that. Under the law, cities retained the right to change personnel policies without any time limit. Personnel policies, under the law, were defined as changeable. One way to transition to at-will would be through disclaimers. These were notifications to employees that nothing in the personnel policy would create a contractual relationship or a for-cause relationship. Under the new at-will policy, the City Manager would be directed to modify all personnel policies to implement an at- will policy within six months of the effective date of the resolution. The policy would cover all employees except civil Service employees and employees under contract such as the City Manager, the City Attorney and the Municipal Judge. The policy would be effective immediately as to new employees and would be effective within six months for current employees. Within that six moth period, the city Manager could terminate any employee without cause. The City Manger still had the right to terminate any employee for cause and the causes, under the current personnel policy and the new at-will policy, were very broad. The City Manager could offer employees terminated without cause the option to remain in the position for a period not to exceed six months or, at the employee's option, offer a severance package not to exceed 180 days of salary. The City Manager may offer incumbents and new hires, at the director level and above, written contracts. It was not felt that the at-will policy varied much from the current policy. There would be a disclaimer declaring that Denton was an at-will city. The supervisors were encouraged to continue to discipline employees for the causes listed which were basically the same causes as before. The only difference was that the causes were not exclusive and the supervisor was not limited to those causes. The supervisor could discipline an employee for any other cause or without cause. The progressive disciplinary policy was preserved but the supervisor was not prevented from taking appropriate action and skipping over some of the steps when severity warranted which was already in the current policy. The progressive disciplinary policy was a guideline and was not exhaustive or exclusive. The notice and hearing process was preserved. The main step which was eliminated was the right of cross examination. This made the process less confrontational and allowed the process to work more smoothly and quickly. Department heads and officers had the option to use the notice and hearing process under at-will or could use the Charter provision. There were exceptions to at-will which would still be in place and included a~ discrimination, the Americans with Disabilities Act, Civil Rights Act of 1991, the Family Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act, and the Whistleblowers Act. The intention was to operate not much differently under the new 345 346 City of Denton city Council Minutes April 23, 1996 Page 8 policy. There would be a transition from for-cause to at-will but there would not be a dramatic change. Acting city Manager Svehla stated that the city employees were the city's business. The City provided service and thus it was imperative to treat the employees fairly. That was the goal in writing this policy. Much of the existing procedure was included in these draft policies for Council consideration. The procedure mirrored a great deal the current procedure as the city had a good success rate with the current procedures. Council had been looking at this for quite some time. Council Member Miller stated that the new City Manager did not have a contract but also was at-will. He had ~eceived calls about this policy and there appeared to be a perception that the policy was going to be greatly changed. Because of the news coverage the perception was that considerable changes were being made but that was not the case. There was a commitment from the management of the city that it would continue to treat employees with respect and would continue to follow due process. He understood that going from the present system with-cause to at-will was indicating that employees did not have contracts. If an employee did a job he could expect to continue to be employed. There' were a few employees who felt that they could do what they wanted because of due cause. As a Council Member, he was adamant that as an employer of people in Denton, people should be treated fairly if they did a good job and if action were going to take place, due process would be followed. He did have a problem in offering contracts or employment agreements to certain segments of the employee population. He wanted more information as to why the city would offer contracts to some employees and not to others. He also felt that the real issue of at-will or for-cause was not with most employees but was with those employees who were in responsible positions. He felt that the real change should be for those employees who were highly paid and who were responsible for the work of many other employees. Firing at-will was not the intent of the policy. He felt there was a need to have an open discussion and an agreement on what the policy meant and the impact on employees. Council Member Brock stated that she also knew that there were concerns among employees regarding this proposal. In making this shift, the City was indicating that a City job was not an entitlement. It was not a position automatically due to the employee. There would be similar safeguards and due process which was currently in place and she felt it was unfortunate that there was some perception that this was being done to give the new City Manager a tool to terminate employees. She felt it was important that the Council knew what was going to be adopted, that the public and particularly the employees understood the policy. City of Denton City Council Minutes April 23, 1996 Page 9 Mayor Pro Tem Biles stated that this proposal would provide fine tuning and accountability to the current policy. This was something which the Council had been considering for almost a year. He felt it was inappropriate and almoS~ misleading the way the newspaper article placed this not only from the start of the headline but also the slant of the article. This was not about a method to get rid of employees. Periodic fine tuning was done to personnel policies and the newspaper article was grossly blown out of proportion. At-will provided strong protection to all employees at all levels and would be a uniform policy for all employees. Council determined that when the new City Manager was hired, they would not give any special protection to him and did not give him a contract. The integrity of the policy remained in place. Council was trying to make the policies more accountable to the taxpayers. This proposal created a more efficient personnel policy. Young motioned, Biles seconded to create an at-will employment policy for the City of Denton. Mayor Castleberry stated that the Council had had two discussions regarding the level of employee this would effect - director and up or all employees. Council Member Young stated that his motion was for all employees which was what Mayor Pro Tem Biles agreed to with his second. Mayor Castleberry stated that this change was not at the request of the new City Manager. This was a Council decision which they had had discussions on this issue for many months. Council Member Miller asked if the motion was to recommend the policy as presented. Council Member Young stated that his motion was to bring back the resolution in the agenda materials at the next meeting. Council Member Miller questioned whether Section 3 should stay in the resolution or be removed. Mayor Pro Tem Biles felt that the entire resolution as prepared by the City Attorney should be adopted without change. Section 3 was an aid in dealing with retention and attracting key directors. The City Manager should have that discretion to manage that particular personnel issue. Section 3 was an important section for the policy. Council Member Brock asked for a detail about offering contracts to employees. City Attorney Prouty stated that the Section dealt with severance packages with provisions similar to the other employees appointed by City Council. The city Manager could not make more favorable 347 3'48 City of Denton City Council Minutes April 23, 1996 Page 10 terms in an employment agreement than Council could. Section 1 indicated that the policies attached to the resolution would be fine tuned again because the City ~anager had just been given an instruction to use those rules as a model to return with an at-will policy. The City Manager retained the discretion to make additional changes within the broad framework of that policy. Within that six month period, the City Manager would be fine tuning the policy within the guidelines attached to the resolution. Council Member Brock stated that Section 3 indicated that the City Manager was authorized to offer to incumbents and new hires classified in key positions at the director level and above, employment agreements providing for severance packages with provisions similar to the agreements the City had with employees directly employed by the City Council. Did employment agreement imply a contract. City Attorney Prouty stated that it was the same thing. The key idea was that the City Manager had this authority but that authority could not offer better terms than what the Council would offer to the people it hired. The only concept was that the City Manager would be given some authority to enter into an agreement that provided a severance package to key employees. Brock motioned, Miller seconded to propose an amendment to the motion to eliminate Section 3. Mayor Pro Tem Biles stated that by deleting Section 3, the Council would take away from the City Manager the opportunity to attract key employees. He was opposed to deleting Section 3. Council Member Krueger stated that deleting Section 3 would take money away from economic development. It would take away the ability to promote and retain key employees. This would send the wrong signal. Section 3 sent the message that the City wanted to retain its directors and wanted to recruit for key positions within the organization. Council Member Miller stated that wording indicated was "involuntarily terminated without cause." If an individual were terminated with cause, the City would not have to pay him six months pay. He did not know why the City should be different than other organizations with at-will. Many cities attract key employees at these levels without this type of employment agreement. This tended to set up classes of employees. There was a need to do at-will throughout the organization. Within that frame work there would still be the ability to provide severance pay. Mayor Pro Tem Biles stated that Section 3 did not have anything to do with the at-will employment policy. The City Manager could City of Denton City Council Minutes April 23, 1996 Page 11 349 offer to an employee a contract and at the end of the term of the contract, not renew the contract. By not renewing the contract, the employee was being told that this was the end of his employment. Council Member Miller felt that it had everything to do with at- will. If the Council was not doing at-will, would it be a stand alone policy. The city had been recruiting individuals for many years and not have that type of policy. On roll vote on the amendment, Miller "aye", Young "nay", Cott "nay", Krueger "nay", Brock "aye", Biles "nay", and Mayor Castleberry "nay". Motion failed with a 2-5 vote. Council Member Miller asked for a summary explanation from either the City Manager or the Director of Human Resources as to what was the current policy and what the change would do. Acting City Manager Svehla stated that the City would be going from a set of rules and procedures which indicated that certain things had to be done in a certain order to accomplish discipline. The change would be that that could be done at- will. It was suggested that the way to do that was to use the procedures that basically had always been used. That was progressive discipline as a guideline, to have procedures where an employee could present his side of the issue, to have an appeal process and to provide a fair and equitable basis for employees. On roll vote of the original motion, Miller "aye", Young "aye", Cott "aye", Krueger "aye", Brock "aye", Biles "aye", and Mayor Castleberry "aye". Motion carried unanimously. With no further business, the meeting was adjourned at 8:30 p.m. J~N~IFE~WALTERS C~Y SECRETARY CITY OF DENTON, TEXAS ACC00305 BOB CASTLEBERRY, MAYO~ CITY OF DENTON, TE~ ~