OFFICE OF THE MAYOR C1T’i~L CITY AND COUNTY OF C ~ C C~-r;~:jj~ 530SOUTHKINGSTREETR00M300*HONOLULUHAWAII 96813

PHONE: (808) 768-4141 * FAX: (808) 768-4242 * INTERNET: www.honolulu.gov 2~12J~!~N3j/1~19:t~9

PETER B. CARLISLE DOUGLAS S. CHIN MAYOR MANAGING DIRECTOR

CHRYSTN K. A. EADS DEPUTY MANAGING DIRECTOR

January 17, 2012

Mr. David Akina, Chair and Members of the Salary Commission City and County of Honolulu ~ -o 530 S. King Street Honolulu, 96813 t’Tl D Dear Chair Akina and Members: We are transmitting the attached report containing the administration’s comments regarding the disparity in pay between the department heads and their respective subordinates, whose salaries are set by collective bargaining and are higher than the head of their departments, per the 2011 Salary Commission’s recommendations.

In addition, this report reiterates the commission’s responsibilities as stated in charter, the chronological history leading up to the establishment of the commission, a summation of past commission findings and recommendations, and last year’s (2011) salary discussions that led to the recommendation of this report. Should you wish, we will be happy to further elaborate and explain the information and recommendations provided herein. Thank you for your service.

Very truly yours,

Douglas S. Chin Managing Director

Attachments

MAYOR’S MESSAGE 11 Report to the 2012 Salary Commission January 2012

The Revised Charter ofthe City and County ofHonolulu 1973 (2000 Edition), Section 3- 122, provides for an independent salary commission empowered to establish the salaries of all elected officials, including the mayor, council members, and prosecuting attorney, and the following appointed officials: the managing director, deputy managing director, department heads, deputy department heads, and the band director. The commission shall also establish schedules for salaries of deputies ofthe corporation counsel and prosecuting attorney. In setting the salaries, the Salary Commission is responsible for ensuring accordance with the principles of adequate compensation for work performed, and preservation of a sensible relationship with the salaries of other city employees. Background 1977 Salaries of appointed officials and administration automatically increased in connection with increases that were negotiated pursuant to the collective bargaining process. Ordinance 77-90 stated that the salary ofall heads ofdepartments shall be 10% above the highest amount payable to an employee at SR-3 1 in the salary schedule applicable to City and County civil service employees. Similarly, the managing director was paid 10% above the highest paid department head, and the mayor was paid 10% above the managing director. This model insured that department heads always received higher wages than the highest civil service employee.

1982 City officials’ salaries began pulling ahead of state officials, so the state legislature approved salary increases for state officials and also enacted Act 129-82 (HRS Section 46-21.5) which: 1) Froze county salaries until the state salary levels could catch up 2) Prohibited any salary increases of certain public officers whose salary was directly or indirectly dependent upon the public sector’s collective bargaining process, and 3) Required counties to return to the state any salary increases made from grants-in-aid from the state if the previous two conditions were deemed invalid for any reason by a court.

The affected counties filed a complaint for declaratory judgment (Civil No. 72604) in circuit court challenging the legislature’s decision. The circuit court ruled that it was an abrogation of home rule and that the decision of how to handle salaries of appointed officials should be the responsibility of the counties. Report to the 2012 Salary Commission January 17, 2012 Page 2 of 6

1983 Mayor submitted an executive salary ordinance proposal (Communication D-863) to establish an independent salary commission to review and establish the salaries of certain elective and appointive officials in the executive and legislative branch (not including council members) to eliminate the tie between executive salaries and collective bargaining increases.

During the city council’s deliberations, the proposal for establishing the salaries of council members emerged in the form of Resolution 84-197; initiating a charter amendment to establish an independent salary commission to review and establish the salaries of the mayor, council members, the prosecuting attorney, and all appointed executive and legislative officials, including appointed officials in the board of water supply. The administration stated that issues surrounding the salaries of legislators and that of government officials and workers are inherently different and should be dealt with separately and that a charter amendment was not necessary.

In the end, Resolution 84-197 was amended to remove all appointed executive and legislative officials from the scope ofthe resolution.

1984 The Hawai’i Supreme Court reversed the circuit court ruling and found the provisions of Act 129 to be constitutionally valid, as the state legislature claimed that salaries of public officials was a matter of statewide concern.

In November of 1984, a charter amendment was approved by the majority ofelectors and amended by adding a new Section 3-123 to Chapter 1 of Article III which states in pertinent part:

The salaries ofall elected officials including the mayor, councilmembers, and the prosecuting attorney, shall be established by an independent salary commission which shall consist of seven members. The mayor shall appoint three members; the council shall appoint three members; and the seventh member shall be appointed by the mayor and confirmed by the council.

As the passage ofthe charter amendment only authorized the proposed commission to fix the salaries of all elected officials, the city council continued to set the salaries of all appointed city officials by ordinance.

1985 Ordinance No. 85-8 was enacted in response to Act 129 and to the growing sentiment that executive pay increases linked to civil service collective bargaining increases was no longer acceptable. Ordinance No. 85-8 required that executive pay be maintained at the levels ofsalaries in effect on April 1, 1984.

Subsequently, the state legislature repealed HRS Section 46-21.5, thereby lifting the freeze on county executive salaries. Report to the 2012 Salary Commission January 17, 2012 Page 3 of6

1988 Ordinance 88-12 was passed. Instead of establishing the pay of appointed officials in relation to rates paid to civil service employees via collective bargaining, the new formula established the salaries of appointed officials in relation to the mayor. Accordingly, department heads were set at a ratio not to exceed 90% of the managing director (which was 95% ofMayor’s).

1989 The city council approved salary increases for appointed officials ranging from 8.2 percent and 8.5 percent; however, was restricted by Ordinance because the mayor’s salary compressed the ceilings forthe cabinet.

1992 With budgets tightening in the early 1990s, public testimony reflected opposition to salary increases. Because of this, the Charter Commission recognized the difficult position of the city council in having to address salaries due to the economic situation; so in 1992, the charter was amended to give the jurisdiction of setting salaries of the appointed officials (i.e. managing director, deputy managing director, department heads and their deputies, and certain other appointed officials) to the Salary Commission (Revised Charter of the City and County of Honolulu 1973 [1993 Edition] Section 3- 122). The Salary Commission as it currently exists was created.

Since the first Salary Commission convened in 1985, the debate over the commission’s responsibility for the “preservation of a sensible relationship with the salaries of other city employees” arose. While it appears that many commission members and even city administrators believed that the pay of elected and appointed officials had to be raised in order to stay ahead ofthe collective bargaining civil service employees (which was the rationale for many of the salary increases granted by the Salary Commission), a few argued otherwise. Some felt that collective bargaining salaries were too high in relationship to their appointed department heads and elected officials (however, realized that public employees collective bargaining was established by state legislative action, and thus, only state legislative action could rectify the situation); others believed that it should be a privilege to serve the people and that most administrators who work for the city do not come for the salary. Mayor Jeremy Harris, who served as both a managing director and mayor, even expressed arguments for both sides. Despite often wanting to grant salary increases to keep up with the increases received by collective bargaining employees, the Salary Commission was often asked by the administration not to do so, due to fiscal constraints. Having to make such a difficult decision each year, the Salary Commission began looking for resolutions. At one point, commissioners proposed tying salaries of elected and appointed officials to collective bargaining negotiations; however, were Report to the 2012 Salary Commission January 17, 2012 Page 4 of6 reminded that that Salary Commission was established to function independently to avoid any aspects ofa conflict of interest. Later, it was proposed that a charter amendment be initiated to transfer the salaries of the fire and police chiefs and their respective deputy chiefs from the jurisdiction ofthe salary commission to the fire and police commissions, respectively; however, the administration opposed this recommendation as it was believed that the fire and police commissions have broad oversight responsibility for operations and that the Salary Commission’s responsibility was focused on establishing salaries oftop officials. The role ofthe Salary Commission continued to encompass all cabinet-level appointees in the interests of equity. In addition, it was argued that the transfer of such responsibility to the respective commissions could leadto inequities that the current centralized system avoids.

2011 Salary Commission The 2011 Salary Commission met several times between January 26, 2011 and April 20, 2011. During the course of its meetings, the police and fire chiefs both initially provided similar testimony in requesting that the commission raise the salaries oftheir respective chiefand deputy chief(s) to either be in parity with or exceed the current maximum salary ofthe assistant chiefs in each department (whose current salaries are higher than that of the chiefs and deputy chiefs). The city administration expressed concerns with any salary increases for elected and appointed officials due to the current economic situation, with the exception of the medical examiner and deputy medical examiner whose current salaries are unable to attract qualified applicants. In addition, Mayor Peter Carlisle stated that prior collective bargaining had indeed allowed subordinate positions to increase above the police and fire chiefs’ salaries; however, this situation is not unique to the fire and police departments, but appears throughout the various City agencies. Mayor Carlisle requested that the Salary Commission not increase salaries in the mean time to allow the current Administration to look into remedying the situation (see attached transcript of Mayor Carlisle’s verbal statement — attachment A). As such, the 2011 Salary Commission approved the following proposals: 1) That the salaries of the Mayor, Council Chair, and Councilmembers, Managing Director, Deputy Managing Director, Department Heads (with the exception of the Medical Examiner), Deputy Department Heads (with the exception of the Deputy Medical Examiner), Band Director, and the salary schedules of the Deputies of the Corporation Counsel and Prosecuting Attorney shall not be increased at this time; Report to the 2012 Salary Commission January 17, 2012 Page 5 of 6

2) That the salary ofthe Medical Examiner be set at $200,016 per annum;

3) That the salary ofthe Deputy Medical Examiner be set at $129,168 per annum; and

4) That the Mayor’s Office provide by no later than January 15, 2012, prior to the first meeting of the 2012 Salary Commission, a report providing how the Administration proposed to remedy the disparity in pay between the department heads and their respective subordinates, whose salaries are set by collective bargaining and are higher than the head oftheir department.

Recommendationsfor 2012 As Mayor Carlisle stated at the March 7, 2011 meeting, “there is a problem with the system that has allowed this [disparity in pay] to occur.” And although Mayor Carlisle believes that it is incorrect for the disparity to exist between supervisors and their subordinates, raising the salaries of the chiefs, department heads and deputy department heads was not his solution. Instead, Mayor Carlisle suggested that the 2011 Salary Commission not increase the salaries of appointed & elected officials (with the exception of the medical examiner and deputy medical examiner) and allow him the opportunity to look into remedying the situation — via a more controlled collective bargaining negotiation process It appears that no quick fix or recommended short-term resolution will satisfactorily resolve the pay disparity. Mayor Carlisle’s statement to the Salary Commission indicated his intent to resolve the issue through legislation and the collective bargaining negotiation process. As it has consistently stated, the city administration believes that its top administrators need to lead by example as long as the economic downturn remains. The mission of the city’s highest leaders is to serve and advance the general welfare, health, happiness, safety and aspirations of the people of Honolulu. The managing director, deputy managing director, department heads and deputies recognize this and have supported Mayor Carlisle’s “shared sacrifice” approach by voluntarily accepting pay cuts in addition to not requesting raises. Aside from the police and fire departments, 13 other departments currently have civil service employees whose salaries exceed that of their department and deputy department head

(some of which exceed by larger percentages than those within HPD or HFD — see attachment B). Mayor Carlisle himself has voluntarily reduced his salary by 15% since July of 2011, bringing his annual salary down from $136,428 to $115,964 (below the salaries ofthe managing Report to the 2012 Salary Commission January 17, 2012 Page 6 of 6 director, prosecuting attorney, police and fire chiefs, and deputy chiefs, all of whom could be considered subordinates ofthe Mayor — see attachment C). The administration commends the members ofthe Salary Commission, past and present, for the outstanding service they have provided and offers this report to assist the 2012 commission in making its findings.

[Acknowledgement: Several employees from the department of human resources researched and contributed to the historical background and timeline in preparing this report, with much thanksfrom the administration.] Mayor Carlisle’s Verbal Testimony from the March 7, 2011 Salary Commission Meetini~’:

I’m here to talk, representing the Mayor’s Office. Iknow that there ‘s a couple ofissues that are on the table regarding salaries, and salariesfor I think myselfmaybe one, and I think there ‘s a couple of chiefs that might be involvedas well. And Iwant to speak to you today. Its clear to me that this is not the timefor any ofus to get raises. It would be a terrible terrible thingfor us to set that example when obviously there needs to be cuts across the board. We need to lead by example. And so Iknow that the Fire Chiefand Police Chiefspoke to you to raise an issue that they were concerned about, and that was that their salaries are now lagging distinctly behind some oftheir Battalion Chiefs and they wanted to go on the record to let you know about that disparity and are concerned about it, as am I. But both ofthem had discussions with me today. It couldn ‘t have been moreprofessional and more accommodating on both sides. I think they‘re both very good agents of the cityfor what they ‘re doing right now. They didn ‘t giveyou any monetary figure. They didn ‘t giveyou theirpresence here today. And Ithink it would be fair to determinefrom that, that they are not expecting to get a raise from this particular body. And they realize, Ithink, that the times are very d~fJlcultand that might not be the right thing to do. So I would askyou that across the board, at least in terms ofthose individuals, this would not be a good timefor anybody to say yes to that. Its not expected, the timing is wrong, and we should hold the line at our levels.

With that saiá~there is a problem with the system that has allowed this to occur. And the system has sort ofa 3foldproblem with it. One is the collective bargaining system has allowed these people at a lower level to outpace where it should be in terms oftheirpositions in front of the people who manage their departments and havefar more responsibilities. I’m impressedwith thefact that Battalion Chiefs make more money than Ido, and I thinkprobably having 10,000 people who are employed, at least in theory, with me as their supervisor and a budget of]. 9 billion, I’m not thoroughly convinced that while Battalion Chiefs are critical, that they‘re quite at the same level ofresponsibility that thatprobably carries. So under those circumstances, “why did this happen?” needs to be the question. Who wasn ‘t watching the shop and why did it occur? And the answer is, Iwould suspect its an unfortunate combination ofpolitics and endorsements and collective bargaining andfear ofan arbitration part, an arbitration system that mostpeople think isn’t necessarily going to produce afair result in the long run. So my suggestion is what we need to do is take a look very seriously, and this is probably outside ofthis body ‘spurview, about theproblems that we ‘re talking about with why is it that this has occurred? What was the motivation by thepeople who were sitting in myposition who were going along with it and allowing it to happen? Is it true that the system is rigged at the end so that ultimately having an arbitrator will never be to the benefit ofmanagement? And those are things that I’m very concerned about and believe they can be addressed. Ican tell you right now that Idon ‘t think its correctfor that disparity to exist between the chiefs and thepeople who are their subordinates. And Ithink its been allowed to occur because people wantedendorsements from unions, and Ithink they wanted itfor political purposes, andl think that a lot ofconcern also is, what happens ifyou get an arbitrator? Will they ever befair to the management position? This hasput the chiefs in a very difficult position in terms ofmanaging thepeople who they have workingfor them. So under those circumstances, I would ask thatyou tow the line now and we ‘11 start working on those other problems independently.

Attachment A TOTAL NUMBER OF EMPLOYEES AND THE SALARY RATES OF THOSE WHICH EXCEED THAT OF THEIR DIRECTOR AND/OR DEPUTY BY DEPARTMENT Mayor’s Salary Rate: $115,964 The Mayor’s salary reflects a voluntary 15% pay cut Managing Director’s Salary Rate: $120,395 The Managing Director’s aslary reflects a voluntary 5% pay cut

Police & Fire Chiefs’ Salary Rate: $136,236 Police & Fire Deputies’ Salary Rate: $129,936 Neither Police nor Fire took a voluntary pay cut % More Than The % More Than The Salary Rates Chief Deputy Honolulu Fire Department $144,312 5.93% 11.06% (Total: 4 Employees) $139,464 2.37% 7.33% $138,636 1.76% 6.70% $136,488 0.18% 5.04% Honolulu Police Department $144,312 (2) 5.93% 11.06% (Total: 5 Employees) $143,340 (2) 5.21% 10.32% $140,436 3.08% 8.08%

Directors’ Salary Rate: $112,427 Deputies’ Salary Rate: $106,692* The Directors and Deputies’ salaries reflect a voluntary 5% pay cut % More Than The % More Than The Salary Rates Director Deputy Budget & Fiscal Services $120,190 6.90% 12.65% (Total: 2 Employees) $111,868 -0.50% 4.85% Customer Services $120,190 6.90% 12.65% (Total: I Employee) CommunityServices $117,432 4.45% 10.07% (Total: 2 Employees) $113,100 0.60% 6.01% Design & Construction $120,190 (2) 6.90% 12.65% (Total: 8 Employees) $115,801 (2) 3.00% 8.54% $114,445 1.79% 7.27% $110,272 -1.92% 3.36% $108,916 -3.12% 2.08% $107,274 -4.58% 0.55% Enterprise Services $117,432 4.45% 10.07% (Total: 2 Employees) $107,730 -4.18% 0.97% Facility Maintenance $114,445 1.79% 7.27% (Total: 2 Employees) $114,126 1.51% 6.97% Human Resources $120,190 6.90% 19.18% (Total: 3 Employees) $117,432 4.45% 16.44% *The Assistant Director of Human Resources is a si 01,027 -10.14% 0.18% civil service employee with a salary rate of $100,848 Information Technology $120,190 6.90% 12.65% (Total: 2 Employees) $108,266 -3.70% 1.48% Planning & Permitting $120,190 6.90% 12.65% (Total: 2 Employees) $117,432 4.45% 10.07% Parks & Recreation $117,432 4.45% 10.07% (Total: 1 Employee) Transportation Services $117,432 4.45% 10.07% (Total: 1 Employee) Environmental Services $120,190 6.90% 12.65% (Total: 7 Employees) $114,445 1.79% 7.27% $110,272 -1.92% 3.36% $109,326 -2.76% 2.47% $108,916 -3.12% 2.08% $107,069 -4.77% 0.35% $106,818 -4.99% 0.12% Emergency Services $111,868 -0.50% 4.85% (Total: 1 Employee)

Salary Rates as of: 12/21/2011 Attachment B COMPARISON OF EXECUTIVE PAY RATES FOR STATE AND COUNTIES

STATE c&c HONOLULU HAWAII MAUI KAUAI

EFFECTIVE SATES EXCEPT AS NOTED~ 7/1/09 rates on anniversary dales ofexeculives 1/1/08 1211)08 5% reductien for all Salaries effective 7/1/1 1 voluntary 5% reduction Salary Commission suspended Step 7I1/1O~ I2I1IO9~ reflected reflected (eff 7/1/11) mxvemenls indetnilely off 12)10/09. POSITIONS 9I16/11** others deferred to 7/1/11 GOVERNOR 117,312 Mayor~ssalary reflects a I 14,420 voluntary 15% reduction LT. GOVERNOR IcC 7/1/111’ MAYOR 136,428 115,964* 109,152 114,030 ‘114,490 M.D.!ADMIN. ASS’T.1 OIR. 114,420 126,732 120,395 103,944 ‘109,900 110,’tST DEPUTY M.D. 120,120 114,114 99,000 w~~1*’~5t

AllY GENIPROS ATTY

1ST DEPUTY AG/PA. 99,540 - 106,264 119,376 113,407 99,000 104,900 105,660* DEPUTIES 43,248 - 120,072 (PA) 55,134 . 99,240 53,352 . 104,772°~ up to 101,066’ (PA) AG. Pros Arty S C*rpCOUnsel 55,000 1 18,344’ (CC) ~~10/1/08 up to 94,454 ICCI

DEPT HEADS PUBLICSAEEIY 108,972 140,004°° 133,044 121,644** 135,000* POLICE 114,848* WATER WATER WATER 1011011091 2nd - HEALTH, TRANS. DAGS. 126,900~FIRE COUNTY CLERK COMMERCE. TAX. 110,486 PROS ATTY COUNTY AUDITOR BUDGET 136,236 nasi 102,8205* LIQUOR POLICE, FIRE 114,768 POLICE

INFRASTRUCTURE 107,335 108,100 ENuRONMGT 103,512 116,088 110,284 99,000 PUBLICWORKS ENViRON COUNTYA~ORNEYPLNNNINS, 3,d - HMAN SVCES~LABOR• BAND BAND FINANCE. PUSLICVWS,ARE, PARKS, PLANNING. FINANCE. 105,500 WATER DHRD. DHHL, AGRI, PUBLIC HUMAN RESOURCES POLICE, WATER SAFETY 99,800 PARKS 200,016 190,016 ‘ias.d 101,500 PLANNING MEDICAL EXAMINER MEDICAL EXAMINER 94,284 INFOTECH, LIQUOR, 93,400 TRANS 103,041 RESEANCH & 0EV, PANKS, 99,200 HSING & HC PERSONNEL ECONOMIC 0EV. COUNTY CLERK, LIQUOR, FIOUSING 118,344 112,427 LEGISLATIVE AUDITOR ADMINISTRATION ALLDTHERS ALLDTHERS 101,800 FINANCE 110,486 CORP COUNSEL 99,000 PERSONNEL

DEPUTIES 94,800 .100,248 126,516** 120,190 113,556** PUBLICSAFETY 105,660* 2nd WATER WATER WATER (511S1/S91 128,250° POLICE DEPUTY COUNTY CLERK xi~a,~ 120,4505* FIRE 90,060 .95,232 129,936 109,296 POLICE 104,900 PROS ATTY 98,748 3rd POLICE. FIRE PLANNING, FINANCE. PUBLIC 100,032 FIRE , *R LIQUOR 95 400 WKS, POLICE. WATER. PARKS. 129,168 122,710 FIRE, 1ST DEP COUNTY AnY Mrdlval Esanrlner Medloal Eoamlner 94,284 PUBLIC WORKS. FINANCE INFRASTRUCTURE ENVIRONMENTAL MGT, ABBT PUBLICWAY 112,308 106,692 CORP COUNSEL, 102,400 ENVIRON HUT ALL OTHERS ALL OTHERS PLANNING. HUMAN 98,600 WATER RESOURCES 94,500 PANKS ncui 96,100 PLANNING 89,796 PARKS, RESEANCH & 0EV, 88,400 TRANS COUNTY CLERK 93,900 HSING & HC

ADMINISTRATION 96,400 FINANCE I04,900 coap COUNSEL 94,000 PERSONNEL

1’l’,)S SPEAKERJPRES 53,398 MEMBERS HSEISEN 46,273 7/1/08 7/1/07 12/1.09 CHAIRPERSON 58,596 53,220 . 56,544 71,500 63,879 COUNCIL MEMBERS 52,446 47,928 . 50,928 66,500 56,781 Salary Set by Water Board eff. 7/1/09

11/10/10; 10/14/11 rev Attachment C