Memorandum                    

City of Lawrence

City Manager’s Office

TO:	City Commission
FROM:	Diane Stoddard, Interim City Manager
Date: CC:	June 12, 2015 Casey Toomay, Assistant City Manager Lori Carnahan, Human Resource Manager Marlo Cohen, Human Resource Management Analyst
RE:	2016 Budget – Compensation Issues

As the City Commission continues its discussions regarding the 2016 Budget, I want to emphasize the importance of employee compensation as a key issue.  Compensation and maintaining competitiveness with the market directly impacts the City’s ability to recruit and retain quality employees.  Of course, employees are our organization’s greatest asset and the critical foundation for the quality services that are delivered to citizens.

As explained in the memo addressing the City’s history of adjustments to the pay plans, the City maintains three separate pay plans which again are reflective of our market cities.  These pay plans include a Primary Pay Plan for the majority of employees, a Fire Pay Plan for sworn Fire Medical Department staff and a Police Pay Plan for sworn Police Department staff. 

Market competitiveness:

Annually, our Human Resources (HR) Division examines salaries within our market and makes recommendations for adjustments to maintain competitiveness.  This year, HR Division staff has reviewed city salary data provided by the Mid-America Regional Council.  The general review of this data demonstrates the need for us to address general market adjustments estimated at $70,000 for 2016 for non-MOU employees. Of this amount, approximately $40,000 is related to the General Fund.  Staff would determine the specifics about the allocations of these market adjustments between pay range adjustments (increasing base and top of pay ranges) and targeted position reclassifications by early 2016.

Merit adjustments:

For the past several years, the City has been able to designate about 2% of salary annually for a pool for merit adjustments tied to performance for non-MOU employees.  Some targeted adjustments related to maintaining market competitiveness have also been accomplished in past years through this pool allocation. Our review of the past adjustments provided by several of our market cities confirm that these merit adjustments have been generally in line with amount provided by other cities.

As the Commission is aware, the City is currently engaged in discussions with the two employee groups with which the City has Memorandum of Understanding agreements.  These groups include the Lawrence Police Officers Association (LPOA) and the Lawrence Professional Firefighters (IAFF Local 1596).  As these discussions proceed, it will be an important consideration that the City be attentive to the effect of any increases provided to the MOU groups on the non-MOU sworn command staff with the Fire Medical and Police Departments (salary compression between non-exempt and exempt management staff), as well responsiveness to the needs of the City’s General Pay Plan.

In order to provide the City Commission with an idea of compensation costs, the chart below provides the cost of each 1% adjustment in salaries for each of the employee groups. 

Estimated Cost for Each 1% in Salary Adjustments for 2016

Group	Total	General Fund Impact	Number of FTEs
Non-MOU staff	$320,000	$167,000	603 / 244
Police MOU	$101,000	$101,000	127 / 121
Fire/Medical MOU	$106,000	$106,000	104
TOTAL	$527,000	$374,000	834 Total (469 in General Fund)

It is important to note that the figures above do not include the compression-related adjustments in the non-MOU sworn command staff for the Fire/Medical and Police Departments.  Amounts of these needs will depend upon any agreed-upon salary movement in the highest step for respective MOU positions- specifically Detective in the Police Pay Plan and Lieutenants in the Fire Medical Pay Plan. 

Another consideration is that the cost of the Fire Medical and Police MOU step/merit system, which provides 2.5% or 5% step adjustments annually depending upon merit, on anniversary date for eligible (non-topped out) employees.  The cost of these adjustments are estimated at $167,550. 

If a 2% merit pool were to be created for the Non-MOU staff for 2016, that cost would be a total of $640,000, of which $320,000 would impact the General Fund. Adding to this amount would be the $70,000 in proposed market adjustments, bringing the total to $710,000, of which $360,000 would impact the General Fund.  MOU adjustments and compression adjustments would add to this figure, along with the previously mentioned step/merit system MOU funding.