By Leilani Haywood
The Lee’s Summit City Council reviewed a five-year plan to bring city employee salaries up to a competitive rate at its May 10, 2018 work session. Present were Mayor Pro Tem Beto Lopez, Councilmembers Rob Binney, Bob Johnson, Trish Carlyle, Fred DeMoro, Phyllis Edson and Craig Faith. Councilmember Diane Forte was absent from the meeting.
“What we know is that our employees are paid 10 percent below the market rate,” Mayor Bill Baird told the council. “I know the definition of ‘at market’ has great controversy, but we have to define it and there are other measures we can do in-house with collaboration. We’re going to avoid that word ‘at market,’ we’re going to use that word ‘competitive.’ Our 5-year goal is that we get our employees above market (pay).”
Mayor Baird explained, ”We have this great future ahead of us with consistent sales tax revenue and a bunch of developments coming before us to add to our tax base. We don’t have growth that we enjoyed residentially but we still have growth. Look at our situation and our trends and compare that to our neighboring cities and we’re doing better. We have better sales tax revenue increase than anyone around us. We are we need to take advantage of these times and invest in ourselves. This is much like taking care of our home.”
LS City Manager Steve Arbo reviewed with the council what he presented to the Finance and Budget Committee on April 30, 2018 indicating that the fiscal year 2018-2019 budget had no funds set aside for raises or expansions. The council had set aside $2 million for raises but allocated $400,000 to core general employees in September for two percent cost of living raises. Arbo said $1.4 million to $1.6 million was available for raises going forward.
“Studies indicate that we’re 10 percent under market,” Arbo said. ”So simple math is three percent enough?” The five-year plan includes implementing a virtual credit card system for to process payments from vendors which would save an estimated $200,000. Other potential cost-savings could be recovered from charges for emergency medical services which is $500,000. Overtime budgeted at $700,000 is another area being explored for potential savings.
The council also discussed the possibility of putting before voters a Use Tax which could generate $400,000 and a half-cent Sales Tax for a potential addition of $7.5 million. Arbo said the projected nine percent increase for health insurance premiums is actually going to be 1.9 percent. ”They have made a commitment on our rates effective January 1, 2019, he said. “”Our broker has been indicating we should anticipate a 9 percent increase. We just heard from Blue cross blue shield that our premium will increase by 1.9%.”
Arbo said, ”We have in our five-year model budgeted increases in health insurance at 9% we could lower those increases for those future years and then free up some funds that could go back into salaries. Instead of giving money to the insurance company we would like to give money to our employees instead.”
Another potential revenue source for bringing salaries up to a competitive rate is an inter-fund loan. City Finance Director Conrad Lamb said $16 million was available to the city for an “inter-fund” loan which is a loan from one account to another.
“The city has over 80 funds that we have to keep track of individually,” Lamb said. “The cash we invest on a regular basis is about $100 million. Several years ago, we drafted the inter-fund policy. We capped it at 25% and totally restricted from certain funds such as bond proceeds. Over the years we have loaned ourselves money at the rate that we earn interest on.”
An example of an inter-fund loan is when the City would have to guarantee the debt for a Tax Increment Financing deal. “We financed it (TIF deal) at two percent,” Lamb said. ”We’ve used it for other things such as federal matching funds. We have a capacity we know we’ve got $16 million in an inter-fund loan available. One of the other real hard rules is that that money has to have a defined source of revenue and has to be paid back in five years. So, the general fund would incur interest costs one-and-half to two-percent, and we would treat it like a line of credit.”
Arbo said, “In this plan I would like us to commit to, we’re anticipating the first two fiscal years we will need some type of advance funding. By the end of the fifth year we will have repaid that amount. Growth in salary increases has to reflect the amount being paid back in time. At end of five years employee paid at a better rate and we have no debt to repay to the program.”
Councilmember Phyllis Edson asked, ”What is the amount needed from the inter-fund loan to raise salaries for city employees?” Arbo responded, “Let’s agree on what’s that dollar amount we’re solving for and begin to work towards how we save or increase revenue.”
Councilman Bob Johnson said his goal as the chairman of the Finance and Budget Committee is to finish the City’s fiscal year 2019 budget within 45 days. Councilman Fred DeMoro said, “I think its a good plan. It’s 45 days ahead of us. I like some of the things about it. But any tax has to be well demonstrated to the citizens that we have reduced our expenditures by an accepted amount. I think that’s very important. We can say tonight we want to raise taxes but that’s the easy way out. We need to reduce and trim where we can and keep the city running while we do so.”
Baird said, “I would like a plan we’re all comfortable with. We can throw this in the trash. I don’t want a 5 or 4 vote. Whatever that solution is will come to the table. There has to be a plan. This can’t be a one or two-year plan because we can’t do it all in one or two years.”