photo by: Mike Yoder

Lawrence City Hall, 6 E. Sixth St., is pictured Thursday, July 7, 2016.

After finishing 2020 with millions of dollars more in reserves than expected, Lawrence city leaders say the city is on firm financial footing to add what they say are badly needed positions.

The Lawrence City Commission recently indicated support for a $1.59 million budget amendment for this year that includes the addition of 13.5 positions, most of them administrative. City Manager Craig Owens said the amendment was driven by the goals and commitments in the commission’s new strategic plan and was required to meet shortcomings in critical areas, including accounting, payroll, cybersecurity and community engagement.

“If we’re going to fulfill these commitments, these are the investments that we need to make so that we can get that done or make progress in those areas,” Owens said.

After preparing for worst-case-scenario revenue loss due to the coronavirus pandemic, the city found itself in a better-than-expected financial position — including ending 2020 with about $5.75 million more in reserves than it budgeted pre-pandemic — and city staff has said the additional expenses will not necessarily require a property tax increase. Though about $290,000 of the amendment’s costs will be one-time, the rest represents personnel costs that will be ongoing and will need to be accounted for in future budgets as well.

At a meeting earlier this month, the commission voted unanimously to direct city staff to include the additions in a quarterly budget amendment that will come back for approval next month. Mayor Brad Finkeldei said that if the city was going to ask its employees to do things differently to align with the strategic plan, the additions were necessary to build that capacity.

“Things like HR, finance and IT are basic capacity infrastructure that we need in place so we can build on it and make the changes we’re hoping to come from the strategic plan,” Finkeldei said.

Administrative needs

The vast majority of the positions — 9.5 of them — are administrative positions and are part of an effort to shift some administrative tasks away from city departments. Owens, who came to the city in July 2019, told the commission that in his observation city operations had become very decentralized, and that has created inconsistencies in procedures and policies.

The 9.5 administrative positions are a community engagement coordinator, a media/creative specialist, a payroll manager, a payroll analyst, an assistant city attorney, a purchasing administrator, a buyer to assist the purchasing administrator, a cybersecurity manager, a help desk technician and an administrative technician. Among other costs, city staff is recommending increasing the pay of the city-county sustainability director by $10,000 because of an increase in the position’s responsibilities.

Of the various additions that Owens has said are needed to meet current demand in some critical areas, Owens highlighted accounting and purchasing, payroll, cybersecurity and community engagement needs. He said purchasing for the city had been done by the various departments and accountants and that the new positions would free up those employees and hopefully improve purchasing. Owens noted the serious issues identified in recent annual financial audits and said that in addition to the need for a new financial system, those processes needed to improve.

“We need to have the proper capacity to proactively do purchasing and begin transactions in a way that makes accounting much easier on the backside and therefore also gives better values,” Owens said.

When it comes to the payroll positions, Owens noted the recent misclassification of some employees that required the city to pay nearly $1 million in back overtime. He said that tracking federal laws has gotten much more complex, and the city also has not added capacity to keep up with growing demands on city payroll. More human resources and legal resources personnel, he said, are also needed to work with the city’s employee bargaining groups after the solid waste workers unionized, bringing the number of unionized groups to three.

In regard to the cybersecurity and IT positions, Owens said potential threats and IT needs have continued to grow in recent years, and operating with current staffing is not an option. In discussing the community engagement position, Owens cited the community debate regarding the extension of 27th Street near the dog park and the Stratford water tower replacement and said the city needed to have better methods to proactively engage with the public.

Vice Mayor Courtney Shipley said she thought some positions, such as those in the human resources, cybersecurity, IT and community engagement areas, were overdue, while others were more forward thinking.

“My feeling was that a few of these are things that maybe we should have done earlier, especially in the HR area,” Shipley said, adding that she got the feeling that some departments have needed help keeping up for a while.

Shipley said some duties were handled by multiple positions in the past, but in recent years had been combined into one position. Specifically, she noted that Porter Arneill was originally hired as the city’s arts and culture director but eventually had the duties of city spokesman and other communication responsibilities added to his workload.

Finkeldei said he thought that returning more functions from departments to administrators would allow the departments to focus better on their duties and potentially take on more without the need for more personnel.

“They can focus on what they do best, while our central staff, or our internal services as they call them in the financing world, focus on what they do best,” Finkeldei said.

With those 9.5 administrative additions, the percentage of administrative positions will increase from about 4% of total staff to about 5%, according to information that Assistant City Manager Casey Toomay provided the Journal-World.

Strategic plan

The commission has anticipated the need to make changes to the 2021 budget because the coronavirus pandemic caused financial uncertainty, as well as delays in the completion of the commission’s strategic plan.

The commission approved a “placeholder” budget for 2021 with the expectation of making quarterly budget adjustments throughout the year. The city originally planned for multimillion-dollar revenue losses due to the pandemic, but that worst-case scenario did not occur, putting the city in a stronger-than-anticipated financial position going into this year.

The commission approved a new strategic plan in October, after delays due to the pandemic and reopening of community feedback to see whether the pandemic had affected community priorities. The plan includes goals related to the economy, safety and strong neighborhoods, among others, as well as commitments the city will adhere to as it pursues those goals. Those commitments include factors such as community engagement, efficient and effective processes, environmental sustainability and equity and inclusion.

Owens said that the budget amendment was guided by the strategic plan goals and the plan’s commitments to how the city does business, which were all developed with input from the public.

“This is driven by the strategic plan that we worked to develop with 3,000 of the community members to help guide where we want to go in the future,” Owens said.

The commission also indicated support for an additional four planning positions, bringing the total number of new positions to 13.5. The new employees will enable the planning division to help more neighborhoods create neighborhood plans, which commissioners saw as part of their strategic plan goal of supporting strong neighborhoods.

Effect on budget

City staff told the commission that the plan was to look for additional expenditure reductions and savings to further offset the impact of the proposed amendment, but if those offsets were insufficient, an increase in property taxes or other revenues might be necessary in the future. However, given the potential offsets and the fact that the city’s finances fared much better than expected amid the pandemic, at least some city commissioners don’t expect a property tax increase will be needed.

Compared with the budget for 2020 that the commission adopted in the summer of 2019, before anyone expected a global pandemic, the city’s revenues fell from about $81.2 million to about $77.4 million, or by about $3.8 million. However, at the beginning of the pandemic, the city adjusted its budget projections to account for the worst-case scenario financially. Under the worst-case-scenario adjustments, the city predicted it would get only about $73.8 million in revenue, so the $77.4 million figure ended up putting the city about $3.6 million above those adjustments, according to unaudited numbers that Finance Director Jeremy Willmoth provided to the Journal-World.

Willmoth said a lot of departments did their best to not outspend their means, and the city spent less overall than expected. City expenditures fell from the $82.1 million originally adopted for 2020 to about $78.2 million, a decline of about $3.9 million. Under the worst-case scenario adjustments, the city projected to spend about $80.9 million, so the $78.3 million figure ended up putting the city about $2.7 million below those adjustments.

Taken together, the city’s original 2020 budget called for spending about $968,000 of reserves, and the worst-case scenario called for spending about $7.1 million. In the end, the city now estimates it spent only about $892,000 of the reserves in its general fund, which essentially functions as the city’s savings account. When it comes to where that leaves the city’s general fund balance, the city estimates it ended 2020 with about $25.7 million in reserves, as compared with the $19.9 million it originally expected to end with and the $19.4 million it projected to end with under the worst-case scenario adjustments.

That means in a year in which the pandemic significantly affected some segments of the economy, the city ended up with around $6 million more in reserves than either its original or adjusted 2020 budget projected. The city ended 2020 with about $2.6 million available for use under its fund balance policy, which aims to keep reserves equal to approximately 25% of expenditures.

The new positions and other additions in the amendment are expected to cost $1.59 million for an entire year, but because the positions will not be in place for the whole year, the city would spend about $1.24 million in 2021, if the amendment wins final approval. Those costs combined with other savings and offsets would require the city to spend down about $537,000 of its general fund balance, bringing it down from about $26.4 million to $25.1 million. That still leaves about $1.65 million available for use under the city’s fund balance policy.

Commissioner Lisa Larsen said before voting to direct city staff to include the additions in the upcoming quarterly budget amendment that she was not interested in any future funding for the changes coming from property tax increases, and that instead the city needed to use the new positions to identify efficiencies in operations or other cost savings. Finkeldei and Shipley also expected the additions would bring efficiencies that would help offset their cost. Neither expected a property tax increase would be needed, and both told the Journal-World that the city was in good financial position to make the proposed changes.

The city’s reserve balance is in good shape even before additional federal coronavirus aid that will be distributed to cities, Finkeldei said, as $1.65 million would remain available for use even after the amendment. He said that was before other cost savings or additional revenues were factored in.

It is not yet clear how much the city might get from the recently approved $1.9 trillion federal aid package, though $350 billion has been allocated for state, local and tribal governments, according to national media reports. Apart from the better-than-expected city finances, the anticipated aid is another reason that commissioners are feeling optimistic that the new positions won’t require a property tax increase.

Shipley said she didn’t think any of her fellow commissioners were interested in raising the property tax rate, and if a tax hike were required, that would definitely change her thinking.

“The numbers are even a little bit better than we thought,” Shipley said, referring to the most recent figures from the finance office. “I don’t anticipate (a property tax increase), and I don’t know that I would have voted for it if I really had thought that was something that would happen.”