Memorandum

City of Lawrence

City Manager’s Office

TO:	City Commission
FROM:	Thomas M. Markus, City Manager
DATE:	June 7, 2016
CC:	Casey Toomay, Assistant City Manager Diane Stoddard, Assistant City Manager Bryan Kidney, Finance Director Lori Carnahan, Human Resource Manager Marlo Cohen, Human Resource Management Analyst
RE:	2017 Budget – Compensation Issues

As the City Commission continues its discussions regarding the 2017 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. The City Commission provided a pool of funding in the 2016 budget to make targeted market adjustments. With these funds, significant strides were made with market competitiveness in 2016. Staff is not requesting dedicated funding for this purpose for 2017. However, a small portion of the merit pool allocation may be used for targeted market adjustments. 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 2017, if needed.

Merit adjustments:

For the past several years, the City has been able to designate about two percent (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. The 2016 budget included funding for a three percent (3%) merit pool for performance adjustments and a total pool of $70,000 for market-based targeted salary adjustments.

In order to provide the City Commission with an idea of compensation costs related to the non-MOU employee group, the chart below provides the cost of each one percent (1%) adjustment in salaries.

Estimated Cost for Each 1% in Salary Adjustments for 2017

Group	Total	General Fund Impact
Non-MOU staff	$407,100	$199,500

If a two percent (2%) merit pool were to be created for the Non-MOU staff for 2017, that cost would be a total of $814,200 of which $399,000 would impact the General Fund. A three percent (3%) merit pool would cost $1,221,300, of which $598,500 would impact the General Fund.

A Note about MOU Agreements:

In 2015, the City entered into Memorandum of Understanding (MOU) agreements with the Lawrence Professional Firefighters/IAFF Local 1596 and the Lawrence Police Officers Association (LPOA). Both of these MOUs are multi-year agreements beginning in 2016. In the case of both of these employee groups, the compensation for 2017 is a contractual obligation. The new compensation related to the Fire Pay Plan for 2017 is $455,400 and the new compensation for the Police Pay Plan is $291,200.