Government Performance and Finance

Committee Minutes
http://www.cityoftacoma. org!councilcommittees
Tacoma Municipal Building, Room 248,747 Market Street, Tacoma, Washington 98402

May 21,2008

Chair Lonergan called the meeting to order at 4:33 p.m.

Council Committee Members Present: Lonergan, Strickland, and Mayor Baarsma.

Council Committee Members Absent: Anderson (participated via teleconference at 4:33 p.m. and
arrived at 4:45 p.m.) and Fey (alternate, arrived at 6:19 p.m.)

Other Council Members Present: Ladenburg (arrived at 4:35 p.m.)

Approval of May 7, 2008 Minutes

Mayor Baarsma moved that the minutes of the May 7,2008 meeting be approved. Seconded
by Council Member Strickland. Voice vote was taken and carried.

Council Member Ladenburg arrived and Mayor Baarsma left here, at 4:35 p.m.

8&0 Tax
At approximately 4:36 p.m., Finance Director Bob Biles stated today's discussion is regarding the
Business & Operating (B&O) Tax and its impact on the general fund.

Mayor Baarsma returned here, at 4:36 p.m.

Mr. Biles introduced Amy Palmer, Assistant Finance Director, Budget and Research, to begin the
presentation. Ms. Palmer discussed general fund revenue sources, stating that approximately
20 percent of the total revenue is from business tax. Ms. Palmer then provided a breakdown, by year,
of general fund revenue sources. She also noted that the percentage from property tax has been
growing over the last few years. Discussion followed regarding the City's B&O tax rate, the ramping
down of rates in the past, other municipalities' taxes, and tax rate increases.

Council Member Anderson arrived here, at 4:45 p.m.

Ms. Palmer introduced Jodie Trueblood, Tax and License Division. Ms. Trueblood reviewed a list of
the local B&O tax rates of several different municipalities and their percentages of revenue by source
and category. Discussion ensued regarding rate increases, how Tacoma compares to other
municipalities, non-profit status, and the taxing of hospitals. Ms. Trueblood reviewed a chart showing
the percentage of total B&O tax by classification from 1997 to 2007, stating that there have been no
true increases except in the international investment category. She then reviewed the actual business
revenue numbers for each year by category. She discussed the growth of the general fund and B&O
tax, tax thresholds, and Consumer Price Index (CPI) increases for other cities. Discussion ensued
regarding CPI increases and the need for indexing to ensure fairness. Ms. Trueblood reviewed the
apportionment provision for the B&O tax that became effective January 1, 2008, stating that so far
Government Performance and Finance Committee Minutes Page 2
May 21, 2008

over 300 businesses apportioned their income. Discussion followed regarding impacts on businesses,
benefits to the city, and budget allocations. Ms. Trueblood then discussed modifying Tacoma
Municipal Code Section 6A.30.065 "Jobs Credit" by adding a requirement for applications within 365
days of hiring a new qualifying position. Discussion ensued regarding refunds and the intent of the
original ordinance.

Mayor Baarsma moved for a "do pass" recommendation to clarify language in the Code to
clarify the original intent of the Jobs Credit. Seconded by Council Member Anderson. Discussion
followed regarding how long this credit will be able to be applied for, livable wage jobs, and benefit
requirements. Voice vote was taken and carried.

Discussion followed regarding the percentage of taxes collected from citizens versus businesses, the
B&O tax structure, the state income tax rate, and the City's competitiveness. Committee Members
then discussed their requests for next steps along with their concerns, including threshold issues,
apportionment, and impacts of adjustments. Council Member Strickland inquired about the findings
from the Service Tax Task Force Committee. Chair Lonergan requested a presentation regarding the
findings from the Service Tax Task Force Committee. Discussion followed regarding thresholds, the
Angelou Economics study, and the square footage tax. Mayor Baarsma requested information on the
different taxes being used in other municipalities and their pros and cons.

Classification and Compensation Study

At approximately 5:42 p.m. Joy St. Germain, Human Resources Director, stated that today's
discussion is regarding performance based compensation. She reviewed a broad definition of
performance based compensation and three examples of performance based pay systems.
Ms. St. Germain reviewed six elements that should be in place to get the City to a performance based
compensation system. Discussion ensued regarding trust, fairness, and acceptance of the system.

Chair Lonergan called for a five minute recess at 5:49 p.m. Chair Lonergan reconvened the meeting
at 5:58 p.m.

Ms. 8t. Germain continued to individually review the six elements that need to be in place. Discussion
ensued throughout her presentation regarding building trust, annual performance reviews, and
incentives. Ms. St. Germain reviewed characteristics of limited and broad flexibility pay programs and
examples of each. She then introduced John Hankerson, Milliman Consulting, to discuss pay for
performance. Mr. Hankerson reviewed guidelines for performance pay and principals that should
drive the final pay increase decision. Discussion followed regarding management training, the
different pay flexibility approaches, and changes in market. Mr. Hankerson then discussed a sample
of a general merit matrix and reviewed examples of performance pay.

Council Member Fey arrived here, at 6:19 p.m.

Discussion followed regarding represented and non-represented employees, feedback received from
the unions, the City's existing pay system, retention issues, and performance incentives.
Mr. Hankerson continued discussing pay for performance and pay scale examples. Discussion
ensued regarding what would happen once an employee hit the top step on the pay scale, what other
municipalities are doing, Tacoma Public Utilities' incentive day program, and the risks of a pay for
performance system. Mr. Hankerson then requested feedback from Committee Member as to
whether performance should matter for pay, and if yes, then how much. The Committee Members
agreed it should matter and discussed their concerns and ideas for moving forward. Council Member
Anderson requested Mr. Hankerson come before the Council at a future Study Session to discuss the
feedback received from the Committee. Public comment was heard during this presentation from
Alice Phillips and Brock Logan.
Government Performance and Finance Committee Minutes Page 3
May 21,2008

Contract with Tall Ships

At approximately 7:12 pm. Tansy Hayward, Assistant City Manager, provided a copy of the draft
request for resolution and the draft agreement with Tall Ships for in-kind goods and services and
financial support. She then introduced David Doxtater, Joe Jadwin, and Stan Selden from Tall Ships.
She reviewed the contract, stating that there has been a lot of conversation with Tall Ships regarding
prioritization, funding allocation, and tracking costs. Ms. Hayward stated that for its investment in
Tall Ships the City will be designated as a sponsor, a number of free events will be offered to citizens,
enhanced access for disabled patrons will be provided, and the City will have a booth at the event.
She also stated that coordination between all departments, including Police and Public Works, and
Freedom Fair and Tall Ships has been good. Discussion followed regarding guidelines that will be
outlined in the special event permit and other events on the fourth of July. Mr. Doxtater discussed the
Tall Ships event, stating that between July 3 and July 7,2008, they estimate approximately 700,000
attendees. Mr. Selden discussed the ships for the event. Mr. Jadwin discussed successes of the
event. Discussion followed regarding the fourth of July, Balfour dock, and coordination between
Freedom Fair and Tall Ships, and access to the event. Sergeant Rob Jepson, Tacoma Police
Department, discussed officer costs, staffing for Tall Ships and the fourth of July, the fireworks patrol,
and how cost overages will be billed.

Council Member Anderson moved for a "do pass" recommendation to bring this contract
forward to the full Council. Seconded by Council Member Strickland. Voice vote was taken and
carried.

Other Items of Interest

Mayor Baarsma provided the Committee with a copy of a proposed resolution regarding consolidated
support services for their review. Chair Lonergan stated that this item is scheduled for the
June 4, 2008 meeting.

Topics for Upcoming Meetings

Chair Lonergan stated that the next meeting, on June 4, 2008, will include presentations regarding
the compensation authority of the Tacoma Public Utility Board, consolidated support services, and the
extension of the cable agreement with the Click! Network.

Public Comment
None.

Adjournment
Mayor Baarsma moved to adjourn the meeting. Seconded by Council Member Anderson. On
proper motion, the meeting was adjourned at 7:45 p.m.

Apnl Larsen, Office Assistant, City Clerk's Office