photo by: Chris Conde

Lawrence City Hall is pictured in September 2018.

Pay increases that consultants have recommended for city employees could cost the city an additional $2 million in 2020, but city officials say that doesn’t necessarily mean a property tax or utility rate increase will be required to fund the raises.

When asked about the prospect, Assistant City Manager Casey Toomay said the city is just beginning revenue and expense forecasting for next year’s budget, and that increases in revenues or decreases in expenses could eliminate the need to increase property taxes, utility rates and other user fees that support the salaries of city employees.

“I think that, obviously, it’s an additional expense that we haven’t had in the budget in the past, but there may be other things that offset it,” Toomay said.

McGrath Human Resources Group, which the city hired last year to study the city’s pay schedule, is recommending both immediate and ongoing pay increases for city employees. Earlier this month, the Lawrence City Commission approved $413,000 in pay increases for some employees, which will go into effect later this year. Specifically, commissioners voted to establish a new pay plan structure for city employees and provide pay increases to 140 employees who are not at the minimum of their new pay grades.

For example, under the city’s current pay plan, the minimum salary for a city engineer is about $79,000, whereas the minimum rate under the new pay plan is about $102,000, according to the city pay plan provided to the Journal-World. The current minimum salary for a solid waste operator is about $38,200, whereas the new minimum is about $39,800. Some minimums, such as the approximately $30,400 minimum for custodians, remain the same under both plans; however, the new pay plan — if ultimately funded by the commission — would raise midpoint and maximum pay for various positions.

For 2020, McGrath is recommending that the city discontinue or limit its merit adjustments and instead focus funding toward getting employees in the midpoint pay ranges within the market-competitive rates established by the new pay plan, according to a report provided to the commission. McGrath is also recommending that the city reinstate cost-of-living increases for all employees beginning in 2020, and “highly recommends” that these pay increases should be between 2 and 2.5 percent.

Though final numbers won’t be available until the city begins its budget discussions this spring, preliminary forecasts say salary adjustments for 2020 would cost approximately $1 million and merit adjustments another $1 million, according to a memo from the city’s human resources division to the City Commission. Bringing back the cost-of-living increases, even if offset by the suspension of merit increases, could mean additional increases in funding.

When approving the new pay plan, the commission did not discuss in detail exactly how the pay raises in 2020 and beyond would be funded. When asked if the recently approved changes to the pay plan for 2019 are an isolated decision or whether they indicate that he is in favor of continuing with the recommended pay plan adjustments in 2020 and beyond, Commissioner Matthew Herbert said he thinks it’s some of both. He said that though the recently approved adjustments were meant to address an immediate need, he expects additional funding will be needed.

“We have a lot of people that are highly skilled, highly technical and we’re just not keeping up, so they are getting sort of poached,” said Herbert, noting what he said were especially high rates of turnover in the past six months.

“The reason I say it’s a little bit of both is, I think the decision made that night was probably made in isolation for this year, but the issue is a much bigger picture, and solving it for one year but then not addressing that in coming budgets, it doesn’t really fix the problem.”

Cost-of-living pay increases

The city stopped funding cost-of-living increases during the 2008 recession and has never reinstated them. If the city were to follow McGrath’s recommendation to fund cost-of-living increases for all employees next year, it could cost significantly more than what the city has been setting aside for annual merit increases.

One employee told the commission that he hadn’t received any wage increase in years, noting the lack of cost-of-living adjustments and saying that some employees have also not received merit increases.

Toomay previously told the commission that prior to 2007, the city budgeted both a general wage increase for cost-of-living and funds for merit increases, but that the city made a decision to stop budgeting the cost-of-living increases because of fiscal constraints. She also said the city recognizes that not enough money has been set aside for merit increases in recent years.

For 2019, the city provided $816,000 for merit increases, according to information the city provided the Journal-World. Human Resources Manager Lori Carnahan said employees received an increase between 0 and 5 percent, meaning that not all employees received a raise. Of the 512 employees on the payroll and eligible to receive a merit increase in 2019, 484 employees received one. The 28 employees who did not receive a merit increase this year represent about 5.5 percent of the eligible employees.

If funded, the cost-of-living increase would not be a flat percent increase every year, and Toomay said those amounts would be determined annually based on specific market indications. Toomay said the city hasn’t yet established what market indicators it would use to determine the cost-of-living increases, but that a preliminary estimate is that a 1 percent increase would cost about $383,000.

Using that estimate, if the city were to hypothetically provide a 3 percent cost-of-living increase, it would cost approximately $1.15 million, or over $300,000 more than what was set aside this year for merit increases.

Going forward

In addition to the recommendation that the city provide annual cost-of-living increases to all employees, McGrath’s study states that the city has insufficiently funded merit increases and recommends that if the city is to fund merit raises, it should establish clearly defined performance evaluations.

Toomay said city staff continues to work on a 2020 budget request for employee pay increases, and that request will go to the City Commission for review as part of the budget process this spring. Regarding the pay plan changes approved earlier this month, Carnahan said the city hopes to notify employees of their individual pay changes next week.

Herbert said he thinks it’s too early to comment on whether the recommended pay increases for 2020 will require an increase in the city’s property tax rate, utility rates or user fees, but that he thinks efficiencies within departments and positions eliminated through attrition could help offset the costs. Ultimately, though, Herbert said personnel will always be the city’s highest cost.

“Even before these changes were made, that was the case,” Herbert said. “And for me, good people are worth paying for, and that’s a cost that I think is worth bearing.”