HomeMy WebLinkAbout2000-05-02 City CouncilBUDGET
’00-’01 City of Palo Alto
City Manager’s Report
TO:
ATTN:
HONORABLE CITY COUNCIL
FINANCE COMMITTEE ’
FROM: CITY MANAGER DEPARTMENT: PUBLIC WORKS
DATE:,MAY 2, 2000 CMR:234:00
SUBJECT:SUPPLEMENTAL INFORMATION ON THE INFRASTRUCTURE
MANAGEMENT PLAN STAFFING ANALYSIS
This is an informational report and no Council action is required.
BACKGROUND
On February 1, 2000, staff presented the Infrastructure Management Plan (IMP) staffing
analysis to the Finance Committee (CMR:406:99). Staff recommended a total of 6.5 new
positions be added to accomplish IMP projects. Staff also recommended these positions
be added in two phases, one position in FY 1999-00 by a Budget Amendment Ordinance
(BAO), and the remaining 5.5 positions in the FY 2000-01 Proposed Budget.
On May 1, 2000 Council will consider a BAO adding a Senior Project Manager position
(CMR:182:00). The additional 5.5 positions have been included in the F¥ 2000-01
Proposed Budget for further consideration by Council. At the February Finance
Committee meeting the Committee requested that several questions be addressed as part
of the budget hearing process. This information report addresses those questions.
DISCUSSION
Question 1 - Is the City doing enough to maintain and improve its infrastructure, and are
the staffing resources recommended enough to handle the City’s needs?
In 1996 the City initiated a comprehensive study to quantify infrastructure needs.. City
facilities were broken into four separate modules for analysis: Buildings and Facilities;
Traffic and Transportation; Parks and Open Space; and Bridges and Parking Lots. A
detailed evaluation of City facilities in the first three modules has been completed. The
studies projected the need for improvements over a ten-year period with a cost of $95
million for the first three modules. Of this total, $74 million in funding sources has been
identified for infrastructure projects over the next ten years. The IMP staffing analysis
used the $74 million figure to establish staffing needs for the program.
Staff believes that an additional 6,5 FTE is sufficient to implement $74 million in needed
infrastructure work over the next 10 years. Staff and a consultant carefully reviewed the
type and quantity of infrastructure work as well as the optimal allocation of staffing to the
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involved divisions and departments. The staffing recommendation outlined in
CMR:406:99, for example, provides flexibility in moving staff from one division to
another should staffing constraints occur.
Additional staffing will be required once $21 million in funding is identified to ramp up
to a $95 million Infrastructure Management Program (IMP), particularly for facilities
personnel. Completion of Module 4, Bridges and Parking Lots, and new infrastructure
projects such as the building of new parking garages, construction of a Public Safety
Building, implementing a Library Master Plan, and instituting traffic calming on City
roadways will require new staff.
To avoid the further decline of the City’s infrastructure and the need for significant
additional resources, it is critical to begin the IMP as soon as possible. Should the scope
of infrastructure work identified to date prove insufficient, staff will return to Council
with amendments.
Question 2 -Is the decentralization of project management staff the correct approach for
implementing the IMP?
Currently, the vast majority of the City’s Capital Improvement Program (CIP), is carried
out by the Public Works Department. Under the recommended staffing plan three new
positions would be added to the Community Services Department, decentralizing the
project management function. These positions in the Community~ Services Department
would focus on CIP projects related to parks, median islands, public landscaping, and
open space. Not all projects originating in Community Services would be managed in
that department. Larger projects for building remodeling, expansion, seismic upgrades or
for new buildings would continue to be handled by Public Works.
One of the primary advantages of decentralization is to give the department that is
already responsible for operating and maintaining the City’s parks and open space the
ability to develop and implement capital improvements and to coordinate the scheduling
of these projects with the day to day activities at these facilities. This will permit the City
to better utilize the expertise of Community-Services in landscape maintenance and park
operations to design and implement capital improvements. Community Services. projects
demand a unique sensibility and public awareness that decentralization will provide.
Having dedicated staff for park and landscape improvements would, reduce the
turnaround time on project delivery.
Question 3 - Is the methodology, of using a dollar value per full time equivalent (FTE)
employee an appropriate way to establish staffing requirements?
The primary method used to determine staffing levels was a benchmarking study of
similar city organizations. The study established a dollar value of CIP project completed
per FTE per year. Other cities were compared to historical project data in Palo Alto. As
a result the final figure used for staffing projections was $950,000 of the capital work per
year per productive FTE. A second method was used in the staffing study to verify the
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results. This method used an industry standard of eight percent of the project budget as
the cost of project management staff. This verification produced similar results.
One of the primary concerns with the methodology used is that the size and complexity
of individual projects is not considered as part of the analysis. In staff’s opinion, this
more detailed method of analyzing staffing needs is more appropriate for a shorter
planning horizon of one to three years. The IMP was set up as a ten-year program. Over
this length of time the more general methodology used by the City’s consultant is
appropriate. While it would not be as accurate for individual projects, it is intended to
represent an average over the life of the program.
Question 4 - What is the total cost to the City for adding staff including overhead costs
such as providing office space, utilities, and computer connections?
The estimated cost of adding each position was included in CMR:406:99. This included
the cost of direct salary plus benefits such as retirement, medical insurance and vacation
only. Calculating overhead costs such as the cost for providing office space and utilities
is very difficult. The new staff being added will be housed in existing office space that is
already owned and operated by the City. In one sense, the cost of additional office space
for the new positions is zero. On the other hand, over the years as staffing has increased
incrementally, the City has spent money on additional office space. The Development
Center and Elwell Court are good examples. The ability to add staff at City Hall is a
direct result of moving staff out of City Hall to these locations. In trying to calculate an
overhead rate for a new City staff member the results would vary depending on what
assumptions are made. Another complicating factor is that staffing for infrastructure will
be housed at three different City facilities: City Hall; the Municipal Service Center; and
the Lucie Stern Community Center complex. The cost of office space would be different
at each of these facilities.
Rather than attempting to complete a detailed analysis of overhead rates and to explain all
of the assumptions involved, staff’s experience in negotiating contracts for engineering
services provides useful information to address this question. The billing rate for an
engineering consultant consists of three components direct salary, overhead, and profit.
A consultant’s overhead rate for providing engineering services should be similar to the
City’s indirect cost of adding engineering staff. A consultant’s overhead rate would
include all of the support costs needed to operate the business. These types of costs
would include: employee benefits, office space, utilities, computers, office equipment,
consumable .supplies, postage, supervision, accounting services and office support staff.
Based on staff’s experience the overhead portion of an engineering consultant’s billing
rate is between .1.5 to 2.0 times direct salary.
In the City’s case, the indirect costs of employment should be toward the lower end of
this range because the City does not incur the cost of marketing its services or have
unpaid debts as an overhead expense. While this is considered a reasonable approach to
estimate the cost of overhead for the City as a whole, it would overstate the incremental
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estimate the cost of overhead for the City as a whole, it would overstate the incremental
costs of overhead for the positions being added. For example, the City’s Human
Resources Department is an overhead expense. The IMP staffing recommended no
additional staff or budget to Human Resources..However, if incrementally over several
years enough staff is added from new City programs, staffing in Human Resources may
have to be addressed. Whether or not this would be necessary in the fUture is reviewed
very carefUlly by senior City staff on a case by case basis. Improvements in technology,
or contracting for certain services may allow Human Resources to support many more
City employees with the same staffing levels. The same rationale would apply to other
City support fUnctions such as the City Attorney’s Office, Administrative Services
Department, and the City Manager’.s Office. Given the number of variables and
unknowns, it is simply not possible to more accurately calculate the additional overhead
costs the City will have as a result of IMP staffing.
PREPARED BY: Kent Steffens, Assistant Director of Public Works
Director of Public Works
CITY MANAGER APPROVAL:
HARRISON
Assistant City Manager
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