Memorandum

City of Lawrence

TO:	Mayor and City Commissioners
FROM:	City Manager David L. Corliss
Date:	October 29, 2009
RE:	2009 Longevity Payments

I am recommending that the City Commission provide longevity payments to eligible City employees this year at the $48.00 per year of eligible service rate.  For 2009 we budgeted $24.00 per year of service.  The historic rate of payment has been $48.00 per year of service, and for reasons outlined in this memorandum and attachments I believe the $48.00 per year is appropriate in 2009.   Additional background on the history of longevity payments is found in the attached memorandum.

Status of 2009 Budget

As the Commission fully appreciates, the management of City finances has been challenging during the current economic recession.  As the attached Third Quarter Report documents, virtually every City revenue source is underperforming the adopted 2009 budget.   Sales tax, interest earnings, fines from traffic and other City infractions, and other revenue sources are all below 2009 budgeted amounts.  With revenues down, we have responded with expenditure reductions.   The attached memorandum from our Budget Manager provides a summary of our response to this situation.  In short, we believe we are on target to meet a revised budget expenditure projection of $59.735 million in the general fund.  With the revised revenue projection of $59.834 million, this will provide for a projected surplus of $99,107.  Obviously, much will depend upon the remaining weeks of revenue in 2009 and our ability to continue to manage our expenditures.

I believe the City Commission and City staff deserve credit for our continued ability to manage expenditures without significantly reducing service levels to our community.  As the attached memorandum highlights, Lawrence is not alone in either Kansas or the nation in having significant budget challenges.  Like other communities, we have made hard choices, including lay-offs, selected hiring freezes, deferral of equipment and other purchases, health care program alterations and limiting employee compensation growth.  We do believe that we are responding to this financial situation with an appropriate level of serious attention to declining revenues and a remaining focus on continued excellent city services.

While next year will be the third year in a row of reduced City workforce numbers, City employees are continuing to provide excellent service, in many cases with fewer co-workers, or added responsibilities, or reduced resources for equipment or materials.  

Justification for Longevity Payment level

Longevity payments at the $48 per year level will cost the general fund an additional $130,000.  (Recall that we budgeted approximately $130,000 at the $24 per year level).  As noted above and in the budget attachments, we are currently projecting a modest budget surplus of slightly less than $100,000 ($99,107).  An additional expenditure of $130,000 may increase the possibility of slightly dipping into our existing general fund balances.  However, I believe that a revenue/expenditure balance below a 1% margin on $59 million in expenditures continues to demonstrate good fiscal practices.  The longevity payments at the $48 per year level will not inappropriately challenge City finances this year, particularly given the City’s – and City employees’ – strong performance in limiting expenditures during this tough economic period.